Overcoming Myopia...

Picture from the Blog : http://teeth.com.pk/blog/2009/07/13/the-myth-of-independence-economic-imperialism    additional touch by Soojin Lee

Perhaps, by taking  political economy stands and pure macroeconomic views into consideration, we can think of a range of contributors to the instability of the Korean financial system and the root of these repeated financial crises. Among other things, I wanted to discussed the aftermaths of the Korean market liberalization brought by the IMF reform in 1998-2000, and  what the tides of foreign capital have done to the Korean financial system. As Lee and Crotty (2002) criticized, the hasty recovery right after the IMF regime was incomplete and short sighted. In fact, the failure of IMF-led neo-liberal restructuring by ignoring the coordination with the traditional fundamentals (Lee and Crotty, 2002) led to the growth of much more severe problems, which turned out to be true exactly a decade later. Chang (1998) also regarded the IMF bailout program as ill-managed financial liberalization and poor exchange rate management which all together deepened the crises. At the center of the causes, as both Chang (1998) and Lee and Crotty (2002) pointed out, there were oversights of increasing foreign borrowing and under-regulations for foreign capital and their opportunistic conducts.  

Looking back over the last ten years and realizing the detailed story behind the crises, many doubts remain. 

What could have the Korean economy done differently? 

What if the Korean economists had suggested mixed reform approach considering the Korean traditional economic model and slowed down the speed of restructuring? 

And, what if the Korean ministers and president had more political power when they negotiated with the IMF? 

Then, would the Korean economy have been better than now? 

Well.. no one can present absolute answers to that; however, it would be worthwhile to consider, especially, when there may be another yet potential financial swing waiting to conquer the Korean market and many other economies. 

With regard to such a broad topic of the Korean financial crises, I could have collected more balanced thoughts in this blog. Thus, I acknowledge that my view points may be viewed as presumptuous due to my  limited knowledge and understanding.  Having said that, I hope viewers of this blog will get the gist of my theme - not to show mere Anti-Anglo Americanism or to be against neo-liberalization, but to present different angles when implementing foreign institutional model instruments into the rough grounded domestic environment. 

Chang, H. (1998), 'Korea: The Misunderstood Crisis', World Development, 26 (8), pp. 1555 -1561.

Lee, K. and Crotty, J. (2002), 'A political-economic analysis of the failure of neo-liberal restructuring in post-crisis Korea,. Cambridge Journal of Economics, 26, pp. 667-678