The Korean government's role on developing the economy was more pronounced during the earlier years of the republic. This was particularly during the period of Park Chung Hee's rule. During this time, the government instituted reforms that bore the hallmarks of state capitalism and free market economy. The result can be considered successful as this pushed the Korean economy to modernization and progress. However, in the succeeding years, the national governments that ruled the country after Park introduced measures that made the economy freer from state intervention. The policies of liberalization were carried onwards to these current times by the incumbent administration of President Lee Myung-bak.
However, the Korean economy was not immune to crisis. In the late 90's, the country suffered an economic turmoil, which led to the closure of several of its key industries. Many economists view it as a result of the vestiges of the protectionist policies initiated by the Park administration in the 60's the 70's. However, there were opposing views also by other economic experts. They insist that protectionism of Park is not the culprit in the crisis but the economic dependence towards the world market and the reduction of government role, both in the name of liberalization. Nevertheless, the government at that time, under Kim Dae-Jung, started out reforms in the country's financial sector, which include borrowing heavily from the International Monetary Fund. Before the end of the 90's, particularly in December 1999, Kim declared the crisis as over. In 2007 until 2009, roughly ten years after, another crisis hit the economy. The debate between analyses of what can be the root cause of the late 1990's crisis was again revived. Those who insist that Korea's economic liberalization is problematic are now raising a new but related argument. They believe that the economy's vulnerability to the global crisis is due to its overdependence on foreign markets. They assert that there are no basic differences in the crisis of the late 90's and the current on wracking the economy. Therefore, they push for reforms that are also much different to those introduced by the Kim administration. Currently, the Lee government has yet to institute any significant steps toward solving the new crisis.
As solutions that will make a long-term positive effect on the economy are still to be found, it is necessary to fuel such debates and to seek out the best ideas that can come out of it. These ideas may be better extracted if a thorough comparison of the previous crisis and the current one is made. This paper aims to present an objective comparison between the crisis of the 90's and the current crisis of the Korean economy. This also aims to provide an in-depth analysis on the root factors of both crises. In so doing, it hopes to introduce suggestions on how the current crisis should be addressed. The method is based on the idea that by understanding the lessons of past problems and the solutions pushed, new and more effective remedies may be discovered for the present crisis.
II. A Background of the Korean Economy
In order to understand best the