If It Walks Like a Duck: Park Administration’s Privatization

On March 7th, Dae-Han Song, the ISC Policy and Research Coordinator, visited Jejun Joo the Executive Director of the National People’s Movement to Block the Privatization of health Care and Strengthen its Public Character to interview him about the current efforts by the Park Administration to privatize public corporations – in particular hospitals – and the anti-privatization struggle.

President Park’s Reasons for Privatization
First, Korean public corporations are actually carrying a lot of debt. This debt skyrocketed during the Lee Administration. During his administration, he pushed through the massive 4 River Project. In addition, because of the 2008 Subprime Mortgage Crisis, the economy was doing poorly and inflation was rising. To stop inflation, the Lee Administration forced utility prices low. Thus, debt started to accumulate in the public sector. It went from 249 trillion won in 2007 to 493 trillion won in 2012. It is expected to rise to 570 trillion won in 2017. Compared to our slightly over 1 quadrillion won GDP, 570 trillion won is huge. That’s just the debt from the public corporations. If we include government debt, then it exceeds GDP. If we include household debt then we are talking about over 2 quadrillion won in debt. If we were a household, we’d long be bankrupt. So this debt needs to be addressed. Second, by beating up on the management and employees of these public corporations by accusing them of poor management and getting paid too much, the Park Administration wants to create an image of being reformist. Third, it wants to weaken unions and get rid of all those who oppose her policies. 

So what’s the solution?
In order to solve the public debt problem, you need to address its causes. It doesn’t make any sense for the Park Administration to solve the debt problem by stripping worker benefits that don’t even make-up 5% of the debt, while doing nothing about the 90% of debt. The main reason for the deficits had to do with failed government projects [37.2% of the debt] like the Incheon Airport railroad and the Development project around Yongsan Station. Even if these projects are ineffective and costly, the public corporations still take them on. The heads of these public corporations are directly appointed by the president and act as rubber stamps. To decrease the debt, we have to first stop this practice of parachute appointments. When confronted with a bad project, the head of these public corporations needs to say no. Yet, while the Park Administration says it promotes reform, it continues to directly appoint those that enact its policies unquestioningly.

Privatization of Health Care and South Korea’s Current System
There are three pillars to Korea’s public health care system. First, all medical treatment must be non-profit. This means that whatever surplus is generated must be reinvested in the hospital whether through wage increases and/or expansion and improvement of facilities. Second, all Koreans are enrolled in the national health insurance. Finally, all hospitals must accept national health insurance.

It’s because of these three pillars that health care is relatively affordable in Korea. If we actually compared Korea’s health care system to that of other OECD countries based just on the proportion of beds in public hospitals and the proportion of the government’s health care spending, we would be at about the same level as the United States. In fact, South Korea has a worse ratio of hospital beds in public hospitals than the US does. The only reason why health care is cheaper than in the US is because of these three pillars.

Extraction of Profits, Foundation for Privatization
Korea already has a Samsung Hospital and a Hyundai Hospital. They are two of the five largest hospitals in the country. They have the potential to make several billion won. But, under the current system they can’t. That’s what’s so frustrating to these chaebols [Korean style conglomerates]. Currently, they can establish for-profit subsidiary corporations for some non-medical treatment services and products such as a funeral parlor, the cafeteria, or parking services. Park Geun Hye wants to expand this to include vital hospital elements such as the hospital building and equipment. For example, Lee Kun Hee, the Chairman of Samsung Electronics, could establish a subsidiary corporation to build hospital facilities and then rent these facilities to his hospital. The subsidiary company would then serve as a vehicle by which to extract profits from the hospital through rent since he would control both the subsidiary corporation and the hospital. Hospitals would effectively be for-profit. Prices would skyrocket and service quality would deteriorate. You would then see the rise of mega hospitals. Finding investors wouldn’t be difficult given the high potential for profit. Eventually, these hospitals would demand the abolishment of the universal acceptance of national health insurance: the national health insurance’s strict guidelines limiting medical treatment and medicine prices would limit potential profits. If these two pillars collapsed, then it would destabilize the third pillar, the national health insurance. Once all three collapsed, then the public nature of the health care system would disappear negatively impacting the lives of common people.

New Markets for a Capital in Crisis
From the point of view of capital, the opportunities to make profit have worsened. Before, the chaebols could make great profits by manufacturing and exporting cars, electronics, shipbuilding, and petrochemicals. Now with the world economy getting worse, except for automobile and electronics production, profits have all fallen. The economy doesn’t look like it will be getting better any time soon. So then what will capital do? It will look for new markets where profits can be made: the service sector. This is their way of overcoming their crisis.

Impact on Health Care Workers
There’s a misconception being propagated that when a mega hospital is created lots of great paying jobs will also be created. But what you will see is the collapse of small neighborhood hospitals. What of the doctors and nurses in these small hospitals? The creation of large mega hospitals may benefit the 1% of doctors and nurses but will have a negative impact on everyone else.

Current Struggle
One characteristic of the Park Administration is its unwillingness to engage in discussion with the National Assembly regarding issues and policies that will deeply impact the lives of people such as railroad privatization. This is because the National Assembly contains nearly 140 opposition party members opposed to the privatization of the railroad or health care. It’s not a majority [the National Assembly contains 300 seats], but is a significant enough force; to avoid such confrontation, the Park Administration is bypassing the National Assembly and working through the executive. Unlike Lee Myung Bak who tried to enact wholesale privatization through legislation, she is trying to privatize little by little through presidential decrees and orders to the ministries. Given that the municipal and regional elections are going to happen in June, we can expect the Park Administration to resume its attempts at privatization after that election. The Association of Doctors will go on strike for one day on March 11th and then for six days from March 24th to the 29th. The strength of these strikes will be important in pressuring the Park Administration.

How Can This Be Stopped?
The most important thing is the media black-out on this issue. The media is not covering this issue on its entirety. None of them are criticizing the Park Administration; rather they are all focusing on only her positive aspects. So, we need to let the people know what is really happening. We need to let people know that the Park Administration health care policies are taking us on a road to a US style health care system: the if-you-don’t-have-money-then-you-just-have-to-die system.

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