The Korean Economy Beyond the Crisis

The Korean Economy Beyond the Crisis

Edited by Duck-Koo Chung and Barry Eichengreen

Providing an integrated analysis of the event and its consequences, the chapters in the book consider the causes of the crisis, the response of the US government and International Monetary Fund, adjustments in the Korean monetary and fiscal policies, and the success of financial and corporate restructuring. The concluding chapters bring the story up-to-date, describing the aftermath of the crisis and assessing whether there has been sufficient reform to facilitate the country’s recovery and growth.

Chapter 4: US policy towards the crisis

Young-Kwan Yoon

Subjects: asian studies, asian economics, economics and finance, asian economics, financial economics and regulation

Extract

4. US policy toward the crisis Young-Kwan Yoon INTRODUCTION Since 1998, numerous books and articles have been written on the causes of the Korean crisis. They have considered the pros and cons of the International Monetary Fund‘s prescriptions for the Korean economy and the social impact of the crisis, among other topics. By comparison, less attention has been devoted to and less progress has been made in understanding US policy toward the crisis. This is unfortunate, for the United States was the major actor which almost single-handedly orchestrated the international response. The crisis in Korea came as a surprise to most US policy makers. The Korean economy was the eleventh largest in the world and the fifth largest trading partner of the United States. The standard economic indicators had not been sending out warning signals. To all appearances, the geostrategic importance that the US policy makers attached to Korea caused much concern among key high-level officials about the impact of the crisis. As Secretary Rubin observed, ‘we have a tremendous national security interest in maintaining a stable South Korea and not creating the kinds of problems we have in that peninsula in the context of instability.’1 This chapter focuses on the following questions. What were the main goals of the US government in responding to Korea’s crisis? In particular, was US policy motivated mainly by security interests, as the preceding statement by Secretary Rubin seems to imply, or were economic considerations actually paramount? In answering these questions, I...

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