The author had arrived a few months earlier in August 1997 as a liaison between an American and a South Korean university hoping to establish a joint language education center. Ironically, before coming to Korea, I had been working for the same American university in Malaysia, where in July of that year its currency, the ringgit, had been attacked by speculators led by George Soros after the fall of the Thai baht. I sometimes joked that I had brought the currency crisis with me.
I had accepted the assignment in Korea in hopes of paying off my student loans. Watching my salary reduced to half its value in dollar terms in a matter of weeks was not a pleasant one. To make matters worse, the currency was collapsing during my fourth month in country, which is when the first wave of culture shock generally sets in.
"May you live in interesting times," says the pseudo-Chinese proverb. They were interesting times to say the least. I was fortunate to have had been working as a proofreader for a Korean economist at my university, and I was a part of one of the first books to emerge from the crisis. The international press was reporting that the Korean economy had "collapsed." I had had no prior experience to living in a collapsed economy, and I asked a visiting Korean-American economist what I could expect. He responded, "You mean to ask, ‘When will they be hanging foreigners from the streetlights?"
I survived the crisis un-lynched. In fact, had I not had access to the media, I might not notice anything had happened. The letters "IMF" did appear everywhere, advertising sales and new discount businesses. Unlike the Koreans among whom I had come to live, I had no savings or investments in the local economy which were decimated in a matter of days. "Korea Will Rise Again" ─ rather, "Let's Rise Again, Korea" ─ was a popular bumper sticker. The phrase "overcome the IMF" was on everyone's lips.
Korea did rise again and overcame the IMF. It's per capita GDP ─ and happily my share in it ─ has increased three-fold since the dark days that ended 1997. Still, people are not happy with the last ten years of neo-liberal rule. The $57 billion chaebol bailout was paid back by the Korean taxpayer. Korean-Americans even lent a hand by sending their gold. The funds from taxes and gold donations were fed back into the chaebol system, lining the pockets of the corporate fat cats.
For years, in my ignorance, I bristled at the Korean use of term "IMF Crisis" to describe these times, fooled as I was into believing that the IMF was the savior from, not the instigator of, the financial turmoil of 1997. It was not until I discovered the Austrian Economics and stopped drinking from the poised well of Keynesianism that I began to see the light.
In The IMF Crisis, a Wall Street Journal editorial dated April 15, 1998, the author states authoritatively, "The IMF tripped this crisis by urging the Thais to devalue, then promoted contagion by urging everyone else to do likewise." The editorial concludes, "As long as the IMF prowls the central banks of the planet, fanning moral hazard and urging currency debasement, there will be plenty of self-made problems to employ the IMF." In that same year, Prof. Bong Joon Yoon, associate professor of economics at the State University of New York at Binghamton, wrote an article entitled The IMF Bailout in Korea: A Socialist Poison, in which he concluded that "the IMF bailout violates the fundamental principle of the market: removal of failed businesses."
Later, Dr. Ron Paul wrote in an article entitled Get Us Out of the IMF on March 2, 2002 that the IMF is "based on a flawed philosophy that says the best means of creating economic prosperity is through government-to-government transfers," calling the organization "corporate welfare disguised as compassion for the poor." On September 28, 2004, in an article entitled The IMF Con he said, "The real purpose of the IMF is to channel tax dollars to politically-connected companies," which is just what happened in Korea. He observes: When capital remains in private hands, it is allocated to its most productive uses as determined by the choices of consumers in the market. Placing capital in the hands of politicians and bureaucrats inevitably results in inefficiencies, shortages, and economic crises, as even the best-intentioned politicians cannot know the most efficient use of resources. This is precisely why, after ten years of improving statistics, the average Korean is not happy with his family's economic situation. The IMF demanded restructuring, to be sure, but not of the corporate welfare system. Rather, the one palpable change in the post-IMF era has been the end of lifetime employment, an element of Confucian capitalism that had never been mandated by law but by custom and convention. Thus, while the chaebol were not expected to compete on a level playing ground, individual workers and employees were thrust into a dog-eat-dog world of survival of the fittest.
"To prevent future financial crisis, the Korean economy should rely on market forces" because "it is the big government, which is the root cause of the current crisis," concluded Prof. Bong. Let's hope the next president of the Republic of Korea follows his advice and that of the Austrian School Economists.
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Mr. Joshua Snyder, American Catholic son-in-law of Korea, lives with his wife and two children in Pohang, where he serves as an assistant visiting professor of English at a science and technology university. He blogs at The Western Confucian
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