Economic Performance in Post-Crisis Korea: A Critical Perspective on Neo-Liberal Restructuring

This paper evaluates the neoliberal economic restructuring process implemented in Korea following the 1997 Asian financial crisis. We first argue that the austerity macroeconomic policy of late 1997 and early 1998 was the main cause of the economic collapse in 1998, and that the decision of the IMF and President Kim Dae Jung to impose a radical neoliberal transformation of financial markets and large industrial firms in the depressed conditions of 1998, though defensible on political grounds, made the failure of these reforms virtually inevitable. A detailed analysis of the macro economy, labor markets, financial markets, and nonfinancial firms in Korea in the past three and one-half years shows that neoliberal restructuring has created a vicious cycle in which a perpetually weak financial sector fails to provide the capital needed for real sector growth, investment and financial robustness, while real sector financial fragility continuously weakens financial firms. Neoliberal policies may have pushed Korea onto a low-investment, low-growth, development path, one with rising insecurity and inequality. Meanwhile, the removal of virtually all restrictions on cross-border capital flows has led to a dramatic increase in the influence of foreign capital in Korea's economy. The paper concludes by arguing that Korea should reject radical neoliberal restructuring and instead adopt reforms designed to democratize and modernize its traditional state-guided growth model.Globalization; Korean crisis; neoliberalism; economic restructuring; Korean economic model

Was the IMF's Imposition of Economic Regime Change Justified? A Critique of the IMF's Economic and Political Role in Korea During and After the Crisis

As late as October 1997 the IMF declared that the Korean economy was experiencing a temporary liquidity squeeze, not a solvency problem. Yet in December 1997 Deputy Managing Director Stanley Fischer declared that Korea suffered from a systemic “breakdown of economic relations” so complete that only radical economic restructuring could restore prosperity. The IMF attached what it called “extreme structural conditionality” to its loan agreements with Korea, demanding a complete and rapid transition from Korea’s traditional East Asian economic model to a globally integrated neoliberal model. We subject the IMF’s assertion that the allocative efficiency of the Korean economy had collapsed by 1997 to a number of empirical tests, including time series and cross-section analyses of capital productivity and corporate profitability, and firm and industry level econometric tests of the proposition that investment spending was excessive and misallocated in the pre-crisis period. This evidence does not support the IMF’s systemic breakdown claim. We conclude that the IMF’s imposition of “extreme structural conditionality” on Korea is best understood as an illegitimate and antidemocratic exercise of power designed to meet the needs of the IMF’s key constituents rather than those of the majority of Korea’s people.

The Effects of Neoliberal "Reforms" on the Post-Crisis Korean Economy

In December 1997 the IMF offered Korea loans to help alleviate its financial crisis. These loans were accompanied by what the IMF called “extreme structural conditionality.” Korea was required to replace its traditional East Asian economic system with a neoliberal model. We review economic performance in the neoliberal era. Growth has slowed, poverty and inequality have risen, and investment spending has stagnated, while foreign ownership of Korean firms and banks has skyrocketed. We argue that foreign investment has not helped Korea. For example, by leading a shift from corporate to consumer lending, foreign control of Korea’s financial markets has constrained capital accumulation and helped create an excessively indebted household sector, while making it harder for the government to adopt progressive economic policies. We conclude that the eight year experiment with radical neoliberal restructuring has turned out well for foreign capital and wealthy Koreans, but has been a failure for the majority of Korea’s people.

UBVI CCD Photometry of the Open Cluster NGC 4609 and Hogg 15

UBVI CCD photometry is obtained for the open clusters NGC 4609 and Hogg 15 in Crux. For NGC 4609, CCD data are presented for the first time. From new photometry we derive the reddening, distance modulus and age of each cluster - NGC 4609 : E(B-V) = 0.37 +/- 0.03, V_0 - M_V = 10.60 +/- 0.08, log tau = 7.7 +/- 0.1; Hogg 15 : E(B-V) = 1.13 +/- 0.11, V_0 - M_V = 12.50 +/- 0.15, log tau <= 6.6. The young age of Hogg 15 strongly implies that WR 47 is a member of the cluster. We have also determined the mass function of these clusters and have obtained a normal slope (Gamma = -1.2 +/- 0.3) for NGC 4609 and a somewhat shallow slope (Gamma = -0.95 +/- 0.5) for Hogg 15.Comment: 12 pages, 14 figures, JKAS, in pres