Let's review the Korean government homework list given by the IMF.
Lee, in his 2011 report, summarized the IMF reform agenda and framework as follows:
1) a tighter austerity economic policy
2) transforming the financial sector to be more transparent and market efficient
3) removing political influences on business decisions
4) stimulating "Free-Trade"
5) LIBERALIZATION OF CROSS-BORDER CAPITAL TRANSACTIONS
Under the pressure of Globalization around the world in the 1990s, there must have been justifiable political and economic reasons for accelerating the reform. However, this agenda seemed to have been implemented with only short term goals in mind. Particularly, with respect to IMF-led neo-liberal structural reform (Crotty and Lee, 2002), there were widespread worried voices in the media and academia criticizing their approach as too radical and ill-advised. Probably, the new president, Kim Dae Jung, who was newly elected right after the crisis had overly ambitious targets in order to please the IMF. Chang (1998) condemned IMF policy in that the Anglo-American direction would not be effective for the Korean economy in the long run. the main problems surrounding this enthusiastic IMF approach would be the sequence and speed of implementing liberalization, not the extent of deregulation (Caprio et al., 2001).
Lee, in his 2011 report, summarized the IMF reform agenda and framework as follows:
1) a tighter austerity economic policy
2) transforming the financial sector to be more transparent and market efficient
3) removing political influences on business decisions
4) stimulating "Free-Trade"
5) LIBERALIZATION OF CROSS-BORDER CAPITAL TRANSACTIONS
Under the pressure of Globalization around the world in the 1990s, there must have been justifiable political and economic reasons for accelerating the reform. However, this agenda seemed to have been implemented with only short term goals in mind. Particularly, with respect to IMF-led neo-liberal structural reform (Crotty and Lee, 2002), there were widespread worried voices in the media and academia criticizing their approach as too radical and ill-advised. Probably, the new president, Kim Dae Jung, who was newly elected right after the crisis had overly ambitious targets in order to please the IMF. Chang (1998) condemned IMF policy in that the Anglo-American direction would not be effective for the Korean economy in the long run. the main problems surrounding this enthusiastic IMF approach would be the sequence and speed of implementing liberalization, not the extent of deregulation (Caprio et al., 2001).
I reluctant to say that I am against globalization, yet I support the opinions of Crotty and Lee (2002) that the reform was like a 'Big-Bang' restructuring rather than gradual evolution. Even though open-market trends are an inevitable phenomenon, it doesn't necessarily apply to everywhere to the same degree. In my opinion, every economic traditional framework has its own way of healing its problems.
In fact, when we are looking back at the effect of neo-liberalism on many developed countries, including the U.S. itself, it seems not quite a foolproof plan, after all.
The graphs below show the increase in foreign direct investment in the Korean economy and the stock trading activity of foreign investors in the Korean stock market.
Well..Did the Korean economy welcome them too much...?
[FOREIGN DIRECT INVESTMENT IN KOREA]
[Value of Stock trading by foreign investor]
[Volume of Stock trading by foreign investor]
Data Source: Bank of Korea http://ecos.bok.or.kr
Caprio, G., Honohan, P., Stiglitz, J.E.(2001) Financial Liberalization: How Far, How Fast? New York: Cambridge University Press.
Crotty J. and Lee, K. (2002), 'A political-economic analysis of the failure of neo-liberal restructuring in post-crisis Korea', Cambridge Journal of Economics, 26, 667-678.
Lee, K.S. (2011), The Korean financial crisis of 1997 : onset, turnaround, and thereafter, The World Bank and the Korea Development Institute
Picture is from the Book cover, "Buy Korea" written by Korean novelist, Kim Jin Myung
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