South Korea, 1997–1998
Prior to its crisis in 1997, South Korea was one of the great economic success stories in history. In 1960, after the Korean War, the country was extremely poor, with an annual income per person of less than $2,000 (in today's dollars).1 During the postwar period, South Korea pursued an export-oriented strategy that helped it become one of the world's major economies. With an annual growth rate of nearly 8% from 1960 to 1997, it became one of the leaders in the “Asian miracle,” as what were once desperately poor countries embarked on a period of rapid economic growth. By 1997 South Korea's income per person had risen by more than a factor of ten, qualifying it in 1996 for membership in the richcountries club, the Organisation for Economic Co-operation and Development (OECD).
South Korea had embraced globalization, and the process was putting the country on the road to wealth. But then globalization went wrong. South Korea's story is one of tragedy and triumph. The unfolding of the Korean crisis has many features in common with the story of the Mexican crisis. As in Mexico, financial liberalization and globalization were perverted by powerful business interests. What distinguishes the Korean crisis from the Mexican one is the extremes to which these business interests perverted the process, and particularly the bizarre policies that governed how the economy was opened up to foreign capital. This perversion led in turn to a banking crisis, a currency crisis, and finally a full-fledged financial crisis.
The Korean crisis has its villains: the family-owned conglomerates called chaebols and their allies in the precrisis Korean government. The Korean cri-