By South Korean President Lee Myung-bak writes that the world has a lot it can learn from Korea’s experiences during the 1997 Asian Financial Crisis and offers a six point plan to solve the current economic crisis in today’s Wall Street Journal:
When world leaders met at the G-20 summit in Washington, D.C., last November, our hope was that by the first quarter of this year we would have largely overcome the financial crisis. At that time, leaders were primarily concerned with macroeconomic stimulus — primarily fiscal stimulus — to shorten the severe global recession.
Unfortunately, we are still struggling to deal with the financial turmoil, and financial institutions have yet to regain investors’ confidence. The U.S. government recently announced its expanded plan to buy troubled assets that have been burdening banks. While I join others in hoping for the success of this plan, I believe that a true recovery requires all countries to do everything they can to stabilize the economy. If world leaders fail to come up with creative ways to deal with the current difficulties, credit will not flow.
For this reason, when the G-20 leaders meet in London next week, solving the financial meltdown — with a special focus on removing impaired assets from the balance sheets of financial institutions — must be our priority.
In the late 1990s, Korea was hit by a financial crisis, and having successfully overcome it, we have valuable lessons to offer. By committing to the following basic principles based on the Korean experience, world leaders will be well prepared as they create a plan to remove impaired assets. [Wall Street Journal]
Click the link to read President Lee’s full plan, but he definitely sounds like he knows what he is talking about.
Some key things to notice is that he recommends raising a large public fund to pay off impaired assets as well as providing capitol for financial institutions from this fund. He also lobbies against protectionism, which is something that the current US President keeps charging Korea with while at the same time implementing protectionist policies of his own. No where in Lee’s plan do I see him recommending creating record deficits and increases in social programs.
As much as I criticize former Korean President Kim Dae-jung something I always felt that he didn’t get enough credit for was how he handled Korea’s recovery from the Asian Financial Crisis. Against all odds Korea paid off early its IMF loan and fully recovered its economy which has kept Korea as one of the most economically successful countries in the world.
12:29 am on March 27th, 2009 1
I'm weak on economic issues, but I'd say to this — what South Korea and the Asian markets had in their favor was — the massive US bailout.
It's a little different when the cash cow is the one actually falling apart.
Who has the cash to bailout the United States? — We've seen Clinton with hat in hand in China.
That is the scary part.
2:01 am on March 27th, 2009 2
"Who has the cash to bailout the United States? "
The US and China. They can just print more money and they can increase borrowing from China, like they've been doing.
6:43 pm on March 27th, 2009 3
I don't know how many here were in Korea during the IMF period, but it was a severe restructuring of the economy. While it's easy to say that "the IMF bailed them out", the reality was that the IMF put very strict measures on the country, far more than the US is willing to put on itself. The term "IMF" was posted everywhere, meaning a bankruptcy sale, or close to it.
These measures were successful in avoiding a prolonged stagnation, but many people suffered from the economic shock as banks and chaebols were rapidly dissolved. The government and opposition parties had to work hard to avoid strikes and civil unrest as many people lost their jobs.
I can say even 11 years later that some never got their jobs back.