Silviase/jgov_v1.4_full_ann huggingface dataset:
Many Korean leaders and analysts accepted that a labor system that includes the possibility of lay-offs is indispensable in helping domestic firms restructure in times of prolonged economic slumps and so regain international competitiveness. Most citizens, though, were more concerned with the social costs of mass lay-offs and lost jobs, and workers had grown accustomed to the security of the existing system. Public opinion generally did not support lay-offs and felt that management should and could find alternative solutions such as reduced work hours. Because of the success of Korean companies in recent decades, many workers felt that the business groups, having made plenty of money in previous years, should bear the burden of addressing the current difficulties. The Korean labor movement had grown strong beginning in the latter half of the 1980s and enjoyed considerable public support. Overall national sentiment was that the economy would support its workers, even if it meant going down with its workers in support of collective action.

Overall and importantly, then, well before the crisis in 1997, Korea had already recognized some of its fundamental its structural vulnerabilities and tried to introduce reform packages that were very similar to those later imposed by the IMF. Although Korea had some vulnerabilities such as high real foreign exchange rates and high levels of short-term debt that would not have been addressed by the reform measures specifically, these factors would have been minimized as Korea more fully adopted market mechanisms.
### I V. Conflict between Individualism and Cooperativism/Collectivism

Over its long history, Korea has assimilated influences from other cultures. Traditional Korean culture reflected the influence of China and other countries. Most recently, following World War II, Korea adopted capitalism, developed a market economy, and has begun to assimilate a “western” culture based on individualism. The financial crisis accelerated several aspects of the cultural transition of traditional values towards individualism. On the social axis, East Asia has retained a considerable degree of cooperativism/collectivism, stressing egalitarianism and human relations, whereas western culture is associated with individualism, attaching importance to professionalism and tolerating inequality as an incentive system.

## I ndividualism and Cooperativism/Collectivism

Public attitudes are commonly the subject of sociology and anthropology. These fields adopt a dichotomy between individualism and collectivism to analyze cultural effects of public opinion. Korea traditionally has a cooperativist/collectivist culture where the self is defined in terms of in-group memberships in which shared values and norms, common goals, and utilitarian relationships are highly regarded. In contrast, western societies have an individualistic culture where the self is defined in terms of autonomy, personal liberty, and the supremacy of self-interests over those of the group (Earley and Gibson, 1998). In economic terms, in western societies individualism emphasizing each individual's freedom to choose and his responsibility is a basic idea underlying western market economies. In cooperativist/collectivist societies, however, the group assumes a share of responsibility along with individuals, and collective welfare is often considered to be more important than individual rights (Chow 1997). Individual efforts are often intended to maximize common welfare.

A variety of fields including sociology and economics have investigated the effect of cultural values, particularly individualism versus collectivism, on output and productivity on both the microeconomic and macroeconomic level. At the microeconomic level, some
studies found support for the proposition that the group can be more effective (Guzzo, Yost, Campbell, and Shea, 1993) and “team spirit” contributes high productivity (Bandura 1997). However, Sosik and Jung (2002) found that individualists attained higher levels of group performance than did collectivists when they empirically tested the performance of American and Korean students.

Similar mixed conclusions have been found at the macroeconomic level as well. A wide range of researchers have considered how a country's culture, particularly the degree of collectivism versus individualism, influences and is influenced by economic development. Cultural attitudes shape individual behavior and social institutions that in turn shape economic development. It is agreed that differences in collectivism versus individualism are highly correlated with per capita income in contemporary societies, with most of the developing countries exhibiting a relatively collectivist culture and developed countries a more individualist culture. The precise role of these characteristics in development and the direction of causality are not fixed, however.

For example, Franke et al. (1991) and Hofstede (1991) studied survey data from IBM employees in 53 countries and university students in 20 countries and found that national wealth is closely correlated with individualism. More individualistic countries tend to be wealthier, and countries tend to shift towards individualism as the economy develops. The studies found several exceptions, though. The East Asian countries, such as Japan, Korea, Taiwan, Hong Kong and Singapore, succeeded in achieving high rates of economic growth while conserving considerable collectivist elements in family, school, and workplace relationships.

Arguments can be made on either side as to whether a collectivist national culture facilitates or impedes economic growth (Ball 2001). In countries where economic markets and formal institutions for resolving social conflict (e.g. courts) are absent or ineffective, collectivism can substitute for institutions in the maintenance of social and economic order and so facilitate growth and development. For example, collectivism can provide enforcement mechanisms based on social norms to encourage parties to honor
business agreements and can serve as an alternative to formal insurance markets. On the other hand, collectivism can place a drag on economic development to the extent that jobs and resources are allocated based on social norms and relationships rather than economic efficiency. Search costs for personalized exchange are higher than for anonymous market exchange, and social enforcement mechanisms tend to be less efficient than institutional mechanisms. Paradoxically, though, a well-functioning collectivist culture may impede the creation of formal institutions and commercial markets that are necessary for a competitive modern economy. To the extent that the division of labor is a necessary condition for long run sustained economic growth, formal institutions that support anonymous exchange facilitate economic development (Greif 1994).

The influence of collectivism versus individualism on economic development likely depends on the initial conditions in a country. Collectivism can maintain order and encourage growth in a country that does not have formal institutions, but as wealth increases, incentives to deviate from cooperation and engage in opportunistic behavior also increase. As persons deviate from the social norms, the norms begin to erode and persons move toward individualism. Ideally, the country will have introduced alternative, more individualistic mechanisms to maintain order. If not, economic performance can suffer if neither collectivist nor individualist institutional structures are functioning. If more formal mechanisms are in place, the diminishing role of collectivism in the economic sphere that accompanies the development of markets will likely spill over and lead to decreasing collectivism and increasing individualism in other areas. $ ^{14} $

In the case of Korea, the country has adopted a market economy but, to a considerable extent, has maintained its cooperativist/collectivist culture. In particular, historically it has frequently relied on cooperativist/collectivist-style measures to share burdens and risks as the country coped with economic difficulties. During the 1997 crisis, however,
Korea started to realize that such measures were not optimal in a modern industrial economy. Economic globalization appears to be promoting convergence towards individualism and away from collectivism (Barber 1995).

## Cultural Background of Cooperativism/Collectivism in Korea

Korean culture dates back to at least 2,000 years ago. Like other Asian countries, its development reflects a historical and philosophical tradition that differs in several fundamental aspects from the western tradition.

## Harmony Rather Than Competition

Harmony is a key concept of East Asian philosophy. One of the classic books of Confucianism, I Ching, in describing the cosmological principle said that the universe is formed by harmony between different dispositions or materials. It explained the principle of changes as the movement between the cosmic forces of Yin and Yang, meaning “shaded” and “sunny.” Yin, for example, represents dark, moist, receptive, earthy, and female elements, whereas Yang is bright, dry, active, heavenly, and male. Their movements are symbolized by a circle divided into two sections and a whirlpool. They are opposite and compete against each other. They are, however, complementary. This means that Yin cannot exist without Yang, nor Yang without Yin.

The balance between the two is very important. For instance, Chinese doctors believe that sickness results from an imbalance between Yin and Yang. The doctor determines which part is insufficient and supplements it. Balance should be achieved by harmonization between the two forces rather than by conflict. This is in contrast to western philosophy. For example, Hegel’s Dialectic Progress explains that a concept gives rise to its opposite and as a result of the conflict between the two, a third view, the synthesis, arises.
East Asian philosophers have been absorbed in investigating ways to smoothly reach harmonization without conflicts. Confucianism studies how to reach harmonization between humans and society; Taoism, between humans and nature; and Buddhism, between the present life and life after death. East Asian religious and philosophical scholars in the past reached the conclusion that egalitarianism and familism will help to achieve harmonization without conflict. Social harmony can be woven from egalitarianism and Confucian hierarchical social order.

## Egalitarianism

Buddhism particularly stresses egalitarianism. Buddhism was founded around the 6th century B.C. by Siddhartha, an historical person, and a prince of Sakyas in Northern India. India in those days was dominated by the Brahmans' caste system, a system based on class distinctions that did not allow mobility out of the position to which a person was born. Siddhartha's enlightenment, emphasizing that a person is noble and valuable regardless of race, class and gender, was a revolution in terms of human equality.

Siddhartha has been generally called a Buddha. “Buddha” is a title meaning “the Awakened One.” The Buddha is not a god in the strict sense, but a holy existence that is close to a god. The ultimate goal of a Buddhist is to reach “emancipation” (Vimoksa) which means freedom from desire and suffering, or “extinguish” (Nirvana) which means a state of tranquility when fire-like anxiety is extinguished - and then to become a Buddha. This unrestricted and undisturbed state can be reached through self-development. Siddhartha taught that each person has the capacity to reach this level because all humans are noble, whether they belong to the wealthy or lower castes. All humans can advance, even if born in humble circumstances, if they continuously strive to grow by following Siddhartha’s enlightenment $ ^{15} $ . It is a central tenant of his egalitarian ideology that
everyone, irrespective of class, position, gender, wealth, and race, can become a Buddha, the nearest level to god.

Egalitarianism implies that social actors must consider themselves more or less the same in order to feel of equal value. It teaches, first, not to disregard the humble or poor class; and second, any human can advance if he strives to grow. Egalitarianism fosters a spirit of nondiscrimination and incentives that stimulate self-advancement.

Egalitarianism can be found in Taoism due to the exchange of knowledge exchange with Buddhism. A Taoist textbook, Dao De Jing (or Tao Te Ching), said “Soften the glare, equalize the dust,” (Chapter IV) meaning to tone down the brightness in order to better harmonize and resemble the equality of dust. This expression is also used by Buddhism. Imagine a parking lot where splendid and luxurious cars are parked along with inexpensive, nearly worthless cars. If the wind blows, all the cars are covered with dust; the dust falls on the cars without discrimination (Kim 1999). Thus, nature is close to equality.

Buddhism spread from India into a number of Asian countries, including Sri Lanka, Tibet, Laos, Cambodia, Vietnam, Burma, China, Korea, and Japan. Buddhism mixed with and adapted to the countries' native cultures, and slightly different types of Buddhism evolved in each country, such as Thailand, Buddhism, Tibetan Buddhism, Japanese Buddhism, and Korean Buddhism. Further, within each cultural sphere, many different paths, lineages, and sects emerged.

In Korea, the Paekche Dynasty (18 B.C. – 660 A.D.) first adopted Buddhism as the state religion in 384, and it became the dominant system of thought in the Silla (57 B.C. – 935
A.D.) and Koryo (918-1392) Dynasties. As the religion was revered and practiced by all the people, from the king to the populace at large, Buddhism played a vital role in the intellectual and cultural life. During the Koryo Dynasty, Confucianism began to dominate aristocratic society, and the influence of Buddhism started to fade. During the Chosun Dynasty (1392-1910), the rulers suppressed Buddhism, but Buddhism has continued to coexist with Confucianism and other religions and been incorporated into Korean culture.

The basic spirit of Buddhism that teaches nondiscrimination still lives in Koreans' minds, whether they are formally Buddhists or not. The premise that a person's standing in human society, whether a high position or a humble position, is only an illusion has influenced Koreans' implicit cultural tendency toward egalitarianism.

## Familism Based On Human Relationships

Compared with Buddhism, Confucianism is relatively practical and secular. Importantly, it establishes a hierarchical division of society. The main topic of Confucius' study was to find practical wisdom to establish a harmonious society. Confucius stated that human society consists of five relationships that prescribed social order precisely: parents and children, ruler and subject, husband and wife, older sibling and younger sibling, and friend and friend. All relationships are based on authority and subordination except the last. Confucians believe if people perform their role in these relationships, society will be peaceful as well as better.

These relationships not only form the social order but also impose a set of responsibilities: between father and son, affection is needed; between ruler and subjects, righteousness is needed; between husband and wife, recognition of their separate functions is needed; between old and young, their recognition of proper order is needed; and between friends, faithfulness is needed (“Sangang Wulun”). These Confucian social relations are intended to integrate individuals harmoniously into a collective society rather than to stimulate individuals’ activities and creativity through competition. This hierarchy is not inherently fixed and people naturally advance to a higher position as they
advance in years. High ranked persons have a high moral duty to those less highly ranked. In practice, the doctrine emphasized hierarchy in human relations and self-control for the individual. Lifetime employment and the seniority-priority system reflect these principles in the workplace.

The dominant subject in Confucius’ teachings is how to become a good person, a so-called “superior person,” by improving one’s own character. Confucius’ main method for attaining these virtues is education. Confucius said, “Man is born equal, and there should be no discrimination in education.” However, without effort none can reach this goal of self-improvement. The principles of Confucianism are contained in nine ancient Chinese books $ ^{16} $ handed down by Confucius and his followers.

These philosophical traditions underlie the Korean culture that evolved over the centuries and led to a social system based on cooperativism/collectivism rather than the individualism of the West. In the modern era of international economic competition in global markets, Korea’s collectivist tradition has begun to move closer to individualism in the interest of the country’s economic progress.

## Measures Influencing Cultural Transition

The evolution in Korean culture has been accelerated by implementation of changes in a variety of practices and workplace traditions. These changes have had a profound impact on Korean society and in some cases led to turmoil as centuries-old practices fall to the pressures of 21 $ ^{st} $ century life.

## I ntroduction of Lay-offs

The implementation of lay-offs has begun to change the practice of lifetime employment. The financial sector was particularly hard hit by layoffs following the 1997 crisis and
subsequent reforms. Starting with the closures of 12 ailing merchant banks in February 1998, 548 financial institutions, equivalent to 29 percent of total institutions, disappeared during the crisis. The number of financial institutions in Korea fell from 2,101 at the end of 1977 to 1,553 in November 2001. Even those institutions that survived underwent significant restructuring reforms, including massive lay-offs, as a condition of capital injections and purchases of non-performing loan using public funds. Cho Hung Bank, for instance, released 700 of its 9,000 employees in the first half of 1998 through “honorary retirement programs” and then was forced to lay off an additional 2,949 employees in subsequent months. Korea Exchange Bank was asked to cut its 7,420-member workforce by 2,197 (Korea Herald, September 23, 1998).

It was a shock to the Korean population that at least one in three workers in the financial industry was let go in such a short time. Jobs in financial institutions, particularly in banks, had been regarded as among the most secure, one of the strongest examples of lifetime employment, along with chaebol and public sector jobs. During the reforms, the financial sector inevitably implemented massive lay-offs that changed the old regime of workplace practice.

Hyundai Motors announced plans for massive layoffs in May 1998. This was the first massive job-cut by a chaebol since the change in policy toward layoffs in February. Hyundai management announced its intention to layoff about 20 percent of its 45,000 work force in order to overcome sluggish sales and overcapacity. For more than 30 days the labor union protested fiercely, and tensions between riot police and workers ran high at a number of demonstrations and factory occupations. The Hyundai confrontation was settled peacefully in August, although the number of workers to be laid off was reduced to 277, far below the announced plan. However, the Hyundai Motors layoffs established a precedent, and many chaebol began to fire large numbers of employees according to their restructuring plans as the labor movement lost public support.

Following the onset of the financial crisis, the unemployment rate started to climb dramatically from around 2 percent to over 8 percent. It soared from 2.1 percent in
October 1997 to 8.6 percent in February 1999 (Figure 7). In 1999 the rate gradually started to fall and stabilized at around 3 percent in the second half of 2000. The number of unemployed persons rose to nearly 1.5 million in 1998, a large jump from less than 0.5 million in 1996. These numbers reflected both the business downturn and the massive lay-offs. Because of the tradition of lifetime employment, Korea's social safety net was not fully prepared to absorb the impact of the sharp rise in unemployment. In response, though, the government has continued to extend unemployment insurance as a major social safety net for the unemployed.

Figure 7 Unemployment Rates

Source: National Statistics Office (2002)

## Revisions of the Financial Guarantee Systems

Following a serious credit crunch that resulted from the difficulties in the financial sector, including the very high interest rates that resulted from the IMF-imposed requirements, the traditional financial guarantee system based on the relationships of family, friend, community, and company were serious damaged. Customarily, security for loans such as real estate or joint liability was requested and provided based on personal relationships. Unfortunately, liquidity troubles of one individual or company can be easily spread to
others through the practice of joint liability. The collapse of the traditional guarantee system undermined the traditional solidarity based on human relationships.

In traditional small communities, it was the custom to help each other by providing guarantees. In rural areas, residents of entire villages suffered from financial difficulties due to joint liabilities on loan guarantees when one household and then another fell into bankruptcy. A series of bankruptcies led to the replacement of the traditional joint liabilities based on human relationships with an institutional guarantee system using the Agricultural, Forestry and Fishery Producers' Credit Guarantee Fund.

The construction industry also had relied on cross guarantees. Construction companies were secured by other builders who served as guarantors and were jointly liable. The severe credit crunch drove many financially sound construction firms into difficulties due to bankruptcies of other builders for which they had pledged surety. The government abolished a rule that had required construction companies to secure other builders as guarantors liable jointly and encouraged use of an institutional guarantee system where the guarantee fee depends on the company’s credit rating.

As part of the reform efforts, cross guarantees were phased out in steps. Initially, the Fair Trade Law prohibited firms affiliated with the top 30 groups from guaranteeing the debts of sibling firms in excess of 100 percent of their capital, with the possibility of fines for those groups failing to meet the limits. By March 31, 2000 chaebols were required to eliminate cross guarantees among affiliates entirely.

Cross debt guarantees by which profitable parent companies assisted affiliates to gain easier loan terms was used to expand the business of Korean chaebols, along with cross shareholding and intra-group transactions. But this system of linkages could contribute to the bankruptcy of an entire group. The collapse of Kia Group was an example. As of April 1997, Kia Motors provided guarantees of about 2.24 trillion won, accounting for 88.4 percent of the group's total guarantees that were valued at 2.54 trillion won. Due to the guarantees, Kia could not promptly restructure itself or cut off ailing affiliates. After