Korea’s Biggest Worry Is Internal

The pictures of Secretary of State Madeleine Albright decked out in a personalized cap and peering mistily across the demilitarized zone into North Korea brought back memories of Dean Rusk or Robert McNamara staring down the Cold War. They also symbolized a worrying characteristic of the Clinton administration’s approach to Asia: a predilection for yesterday’s problems to the detriment of those on the horizon.

With North Korean tanks massed a mere hour’s drive from Seoul and North Korean agents carrying out assassination attempts in Seoul’s suburbs, it may seem irresponsibly premature to make light of the threat from Pyongyang. Of course, the doomsday scenario still applies. No one should let down his guard.

Once they have delivered themselves of their ritual panic warning about North Korea, however, most South Korean leaders will reveal their real concern. They are much less concerned about contamination from North Korea’s bankrupt ideology or invasion by its threadbare military than from anonymous accountants in New York. Their most pressing fear is that the number-crunchers from Moody’s will downgrade South Korea’s credit-worthiness and send the economy into a tailspin.

Their fears are built on real facts. The combination of the weak Japanese yen, the collapse of semiconductor prices and high labor costs (exceeding European levels in some industries) have made many Korean exports uncompetitive. The consequent slowing of growth has begun to cast doubt on many of the economy’s underlying assumptions, most worrisomely, the implicit guarantee of lifetime job security. People are asking whether the Korean miracle is finished. With directors at Hyundai dimming the lights in the executive suite as an economy measure, it is tempting to conclude that it is.

Against this difficult background, a tumultuous battle is unfolding for what a scholar at Seoul’s Sejong Institute calls South Korea’s political and economic “rules of engagement.” Independently of the North Korean problem, South Korea’s leaders are desperately worried about whether Seoul can manage its own transition from Third World upstart to self-confident membership in the developed world. Opinions diverge widely about how to achieve this. Conventional wisdom among officials at the presidential Blue House and the Ministry of Finance is that Korea must follow Japan and make the leap from a “hardware” to a “software” society. Others, including members of the influential Presidential Commission on Globalization, take a very different tack. They argue that Korea must stick to its traditional strengths in manufacturing and appliances. Samsung’s decision to move into the automobile business suggests that South Korea’s industrial conglomerates agree.

The urgent need for economic modernization comes at a time of grave political weakness. President Kim Young Sam enjoys barely more than single-digit support and, with more revelations from the Hanbo steel mill bankruptcy in prospect, has probably not yet reached bottom. Government apologists argue that the Hanbo scandal gives an opportunity for a fresh start. They cite the government’s determination to press ahead with labor law and financial reform as evidence that the system is bankable. Others, including many foreign observers in Seoul, are outspokenly skeptical.

The one source of optimism is that Koreans of all political persuasions and from all walks of life talk of something called the “Korean character,” formed by the ability to absorb punishment and prosper from adversity. A slender reed on which to lean, perhaps.

For U.S. policymakers, the key implication of the seething domestic situation is that South Korean leaders are terrified at the potential costs of reunification. The enormous expense is the lesson officials at the Ministry of National Reunification cite from their observation of the German experience. With the South Korean economy at present unable to absorb these costs, any forcing of the negotiating pace with North Korea would require massive underwriting by the international community, alias the United States.

Given the patent U.S. unwillingness to accept this burden, as evidenced by its minor and grudging financial contributions to the arrangements to revamp North Korea’s nuclear power industry, the most sensible U.S. course is to wait until South Korean political and economic recovery allows a solid U.S.-South Korean partnership to reemerge. The German experience is once again applicable. There, the Bush administration overrode British and French phobias to form the tightest possible link with Germany. South Korea deserves the same.

As the U.S.-North Korea silence is officially broken in talks in New York, the U.S. must not let itself be romanced into cutting side deals that ultimately will undermine a peaceful future for the Korean peninsula.