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Toward a banana republic

June 18,2019
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Chung Jae-hong
The author is an editorial writer at the JoongAng Ilbo.

Famed American writer O. Henry coined the term banana republic to describe the fictitious Republic of Anchuria in “Cabbages and Kings,” his 1904 novel made up of short stories inspired by the six months he spent living as an expatriate in Honduras. The setting was an extremely stratified and unstable country with an economy overly dependent on limited resources, like bananas or minerals, which would be exploited by collusive multinationals and ruling elites. In short, it would be a society set for a doom under a corrupt government, labor exploitations and monopolies.

Yet what can pan out in such a fictional setting does happen in Korea today. Korea’s steelmaking majors — Posco and Hyundai Steel — have been ordered by their host local governments to unplug their blast furnaces for 10 days in an unprecedented administrative suspension on steelmaking. Three provincial governments where the steel mills are located slapped on the sanctions for emitting pollutants. The decision was made following complaints by environmental organizations accusing steelmakers of leaving the bleeders, which allow pressure to escape from the furnaces, open without anti-pollutant equipment.

If blast furnaces are off for four to five days, the steel could harden and become fissured. The Korea Iron and Steel Association (KISA) strongly protested the administrative orders as a 10-day suspension in a blast furnace could take three months of repair work and cause an estimated damage of 800 billion won ($675 million) by reducing output by 1.2 million tons during the period.

The KISA argued that steelmakers globally have conducted maintenance work with the bleeder valves open for safety reasons for more than a century. If they do not regularly discharge gas or water vapor through bleeders, furnaces can catch fire or explode. With current steelmaking technology, there is no other way to run furnaces. When the air goes out, the furnace lets out gas roughly equal to a car driving eight hours for 10 days.

The suspension of the furnaces is the same as forcing the steelmakers to stop steel production for 10 days. When steel is not produced, the country’s industrial sites, including those of shipbuilders, automakers and electronics companies, would be affected. Environmental organizations and local governments are pushing ahead with the suspension out of environmental fundamentalism. Posco’s union said, “The action is an order to kill furnace workers.”

Some policies under the Moon Jae-in administration are perplexing. Nuclear reactors account for 30 percent Korea’s energy supply. The government plans to reduce the current 24 reactors to 18 by 2031 and to 14 by 2038. The share of renewable energy would be raised to as much as 35 percent by 2040, from the current 7.6 percent.

Most experts call the energy plan absurd and uneconomical under Korean conditions. Because of its small area and distinctive four seasons, Korea cannot rely on solar and wind power. Renewables’ generation is also expensive. The cost for producing 1 kilowatt hour from renewables is 173.38 won, nearly triple the cost of nuclear power. State utility firm Kepco — which used to make multi-billion-dollar profit — incurred an operating loss of over 1 trillion won last year because of reduced reactor activity. It expects another loss of over 500 billion won this year. The ballooning loss will inevitably lead to higher electricity bills.

Phasing out of nuclear energy also goes against the international trend. Governments around the world are increasing nuclear to reduce carbon emissions and save costs. According to the International Energy Agency, power output from nuclear reactors of OECD members rose 0.6 percent on year in 2018.

Japan increased power generation from nuclear reactors by a whopping 71 percent last year after reactivating four reactors.

The ideology-led minimum wage hikes and universal 52-hour workweek have taken a heavy toll on the Korean economy. Many are worried about the economy. Confucius once said, “If you make a mistake and do not correct, this is a mistake.” The government must undo the mistakes if it does not want to turn the country into a banana republic.

JoongAng Ilbo, June 17, Page 27