Financial Crisis in South Korea

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Finance & Accounting
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Martin Hart-Landsberg and Paul Burkett's “Economic Crisis and Restructuring in South Korea Beyond the Free Market-Statist Debate” offers an analysis of the causes, nature and consequences of the restructuring process of post- Asian crisis South Korea. In the process of identifying the causes, the authors discussed the various aspects of restructuring and reforms which will be reviewed here. …

Introduction

Researchers proposed financial-crisis models as long-term solutions for South Korea and as tools to forecast economic conditions. There were two models: the weak-fundamentals view and the financial-panic view. Based on the weak-fundamentals perspective, a country’s weakness in macroeconomic or financial fundamental triggers the abrupt backflow of capital. This called for radical reforms and support to see things through. On the other hand, the weak-fundamentals view predicted a slow recovery because it took a while before creditors and other financial institutions were able to complete the auditing and accounting process and recognition of losses was not made instantly. However, economists claimed that neither of the two views above proved helpful in the Asian-crisis recovery.
The fast recovery of Korea since the economic recession misrepresents the observed social and political developments. The election of Kim Dae Jung to power symbolized the bureaucracy’s adoption of a politically neutral institution. The state has manifested social maturity by valuing loyalty to the institutions of governance as opposed to loyalty to the institutions of the few privileged groups. ...
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