Lee wants to save his country by nudging it right and toward the U.S.—but his people may not cooperate.
The congregation at Somang Presbyterian, a Seoul megachurch, has very fond memories of the parishioner who became South Korea's president on Monday. Lee Myung-bak, now 66, joined the church back in 1977, when he was the young head of Hyundai's construction company, and he didn't take long to leave his mark. Shortly after he arrived, Lee took charge of a project to build a massive new sanctuary for the fast-growing congregation. Within a year it was completed, and Somang's 70,000 members haven't forgotten.
Many are now pulling for Lee as he takes the country's helm this week and tries to steer its once mighty, now faltering, economy back on track. "We think he can get it done," says church manager Chung Jung Mook. "We'll be praying for him."
That's good news for Lee, who will need all the help he can get—divine intervention included. A cosmopolitan, business-friendly ex-CEO who's an unabashed friend of Washington, Lee will face formidable challenges as he tries to return South Korea to the upper ranks of the world economy. In an exclusive interview with NEWSWEEK last week, Lee emphasized his determination to strengthen South Korea's business fundamentals and external ties. After 10 years of leftist rule marked by skyrocketing social spending, weak economic growth and strained relations with the United States, Lee thinks he has the solution: to court foreign investment, make nice with old allies and step up English-language education—a plan he bills as "Global Korea"—while dramatically cutting taxes, spending and regulation.
But is South Korea really ready for a Sarkozy-style pragmatist who embraces Washington, the English language and big business while opposing what Park Myung Ho, a political scientist at Seoul's Dongguk University, calls the "liberal idealism" of his predecessors? For one thing, the country has a profoundly ambivalent attitude toward the rest of the world. Its export-driven economic miracle ensured the country's fate was inextricably linked to other nations'. Koreans, moreover, think nothing of sending their kids to summer camp in the U.S. or college in France. But there's also a deeply ingrained historical sense of humiliation by the foreign powers that repeatedly invaded and colonized Korea throughout its history. Small wonder, then, that the national psyche tends to swing violently between cosmopolitanism and xenophobia.
Sure enough, Lee's agenda ran into trouble before he was even inaugurated. Environmentalists and the powerful Korea Confederation of Trade Unions have blasted his pro-globalization proposals, which they see as a threat to national pride and an attempt to push a U.S.-style neoliberalism that emphasizes development over all else. To underscore his commitment to Global Korea, Lee has gone so far as to offer to bring foreigners into his cabinet—but this move, too, has drawn fire from nationalists. Recent turbulence in world financial markets hasn't helped, either, forcing Lee to back off campaign pledges to deliver growth levels not seen here for years. Still, in the interview last week, the then president-elect stressed that he hasn't lost the faith.
"We achieved [economic] development through globalization," he said, and further internationalizing remains the country's best shot at recovery.
On the surface, South Korea seems primed for such an approach. Lee, a former Hyundai president and Seoul mayor, won the election by a landslide in December. Many Koreans blamed the country's recent economic stagnation on the policies of his predecessors, Roh Moo Hyun and Kim Dae Jung, who emulated the Northern European social model, raising the welfare budget by an average of 18 percent a year. The public sector mushroomed, taxes soared and private enterprise struggled under increased regulations. Roh in particular emphasized redistributing wealth to Korea's have-nots, and his pro-labor, anticonglomerate stance discouraged investment. Last year, an Organization for Economic Cooperation and Development report warned that South Korea's economy remains "relatively isolated" and noted that foreign direct investment had been falling steadily since 2005. Economic growth slowed from 7 percent in 2002 to 5 percent last year— a rate that feels like a recession in South Korea—and youth unemployment hit the double digits (having doubled in five years). Economically speaking, the Kim-Roh era represented "10 lost years," says Gong Sung Jin, a lawmaker in Lee's Grand National Party.
Lee hopes to fix this by closing or merging overgrown government agencies, cutting corporate and property taxes and slashing regulation. He's dreamed up a huge nationwide canal project linking rivers in the north and south that would facilitate cargo transport, spur tourism in the hinterlands and create new jobs. He's also courted investment from local and foreign business leaders. In January, Lee wowed an assembly of U.S. and European investors in Seoul by treating them to a slick PowerPoint overview of his reform plans—accompanied by a commentary in fluent English. (Roh, whose formal education didn't extend beyond high school, spoke only Korean—and a notoriously coarse version of it at that.) Lee has surrounded himself with foreign-educated scholars and globetrotting business executives and even named a British banker co-chair of a special committee on national competitiveness. Sagong Il, the committee's other co-chair and a former Finance minister, says Lee wants to make the sort of changes that reformers aspire to in the United States, Germany and France.
Like France's President Nicolas Sarkozy, Lee is also determined to improve ties with the United States, which were badly damaged under Roh. Roh sought greater independence from Korea's traditional ally while pursuing reconciliation with the North. Relations with the White House grew especially strained over Kim Jong Il's illicit nuclear-weapons program: Washington favored sticks (such as sanctions), while Seoul insisted on carrots (greater aid for Pyongyang). Now, says Lee, the North won't enjoy any more largesse without first making decisive progress on the nuclear issue. "The South and North should seek joint prosperity while maintaining peace," says Lee. "[But] we cannot seek that kind of relationship, and unification, if the North keeps its nuclear weapons." It's a shift that could well bring Seoul and Washington back into synchrony.
Lee has made it clear in other ways that Washington, not Pyongyang, will remain Seoul's best friend; he says that South Korea would never have boomed or become a democracy without American help. His affection hasn't gone unnoticed: the U.S. House of Representatives recently passed a resolution congratulating him on his election (a first for a Korean leader). To further his vision of a Global Korea, meanwhile, Lee has come up with a revolutionary English-education plan, under which thousands of English teachers would be hired to make average Koreans fluent in the language.
But these ambitious projects have run into stiff opposition, which could increase now that he's taken office. Part of the problem is that Lee's mandate was never as clear as it seemed. True, he won twice as many votes as his liberal opponent, Chung Dong Young, who carried the progressive torch for the term-limited Roh. But that margin may have been mostly the result of the chaotic and confrontational Roh's unpopularity (he had a single-digit approval rating by the end of his term). "People didn't like [Roh]," says Prof. Hahm Sung Deuk of Korea University. "[But] a substantial number of people disapprove of Lee's policies." To further complicate matters, Lee won't be able to ram through reforms without solid support in Parliament—and for the moment, it remains dominated by the liberal opposition. This means Lee may have to place many of his initiatives on hold until the legislative elections in April. That will leave plenty of time for his opponents to throw wrenches into the works. His enemies are numerous and not confined to the left: a new right-wing party founded by Lee Hoi Chang, a former Lee associate who is even more conservative, could siphon crucial votes and jeopardize Lee's chances of winning a legislative majority.
While the president's approval rating is still high thanks to the honeymoon effect, it dropped from the mid-80s to the mid-70s in recent weeks due to a series of entirely avoidable missteps. His English education program was roundly criticized as unreasonably ambitious (at one point, the plans included starting to conduct many high-school classes nationwide in English) and an affront to Korean pride. His decision to reform the machinery of government before taking office triggered a row with the opposition that could slow confirmation for his cabinet. Liberal groups like the opposition United Democratic Party have accused him of planning to pursue harsh U.S.-style, winner-take-all economic policies. Arguing that Korea's welfare spending (measured as a portion of the total budget) is still just half that of countries like Sweden, they've contested his proposed cuts and his canal project, which critics charge is ecologically dangerous. The new president "is obsessed with development," says Song Young Gil, an opposition lawmaker. "Our time needs different values, such as welfare, culture and the environment."
And in a country where 48 percent of those in their 20s and 30s voice anti-American sentiment (according to a Seoul National University poll), Lee's pro-Washington stance and his hawkishness toward the North seem likely to run into serious trouble. The past few years have seen a nationalistic backlash against foreign investors who swooped in after the 1997 financial crisis, scooping up troubled assets at rock-bottom prices. Of course, the angry Korean reaction to these "vultures" overlooked the fact that they helped many local firms, such as Daewoo Motors, avoid bankruptcy. Yet tempers remain high.
Another potential problem: Lee's relative lack of political experience. His only stint as a national policymaker—unless you count his four years as Seoul's mayor—was a single term as a junior member of Parliament back in the 1990s. Critics warn that as president, Lee will find it much harder to exercise the kind of CEO leadership he practiced at Hyundai and in city hall. "There's a big difference between governing a city and governing a country," argues Hahm, who says that Lee's distaste for the grubby give-and-take of day-to-day politics could prove crippling if he tries to rule by command.
But don't count the president out just yet. Lee's biography reveals a serious talent for getting things done under the most adverse circumstances. In 1965, as a poor youngster from the sticks who had paid for college by collecting garbage, he joined Hyundai as a construction manager, building roads in Thailand. Twelve years later he was a rich man and president of the huge conglomerate—earning him the nicknames "Korea's most successful salaryman" and "the bulldozer." Lee Choon Lim, the president's old boss at Hyundai, remembers him as a "workaholic determined to fight poverty." Later, as mayor of Seoul between 2002 and 2006, Lee showed remarkable sensitivity to concerns such as environmentalism. His biggest achievement was not to build, but to tear down an elevated highway—Seoul's main traffic artery—in order to uncover a stream beneath, restoring nature to the urban core. The project has turned out to be a huge success, with the river becoming a beloved Seoul landmark. Even his most ardent supporters will concede, though, that that's still a far cry from managing the world's 11th largest economy and a volatile country with a seriously prickly sense of national pride. Yes, Lee has won all his big battles so far—but his toughest campaign is just beginning.