The IMF Era Revisited
The Marmot's Hole reports that "it appears like the IMF is trying to make amends for some difficulty it may have cause in 1998" — IMF to Korea: “We’re [Kinda] Sorry”. Two years ago, I wrote of my personal experiences from when "South Korea was undergoing what came to be known locally ─ rightly so, I was later to learn ─ as the IMF Crisis" — I Survived the IMF. An excerpt:
- For years, in my ignorance, I bristled at the Korean use of term "IMF Crisis" to describe these times, fooled as I was into believing that the IMF was the savior from, not the instigator of, the financial turmoil of 1997. It was not until I discovered the Austrian Economics and stopped drinking from the poisoned well of Keynesianism that I began to see the light.
In The IMF Crisis, a Wall Street Journal editorial dated April 15, 1998, the author states authoritatively, "The IMF tripped this crisis by urging the Thais to devalue, then promoted contagion by urging everyone else to do likewise." The editorial concludes, "As long as the IMF prowls the central banks of the planet, fanning moral hazard and urging currency debasement, there will be plenty of self-made problems to employ the IMF." In that same year, Prof. Bong Joon Yoon, associate professor of economics at the State University of New York at Binghamton, wrote an article entitled The IMF Bailout in Korea: A Socialist Poison, in which he concluded that "the IMF bailout violates the fundamental principle of the market: removal of failed businesses."
Later, Dr. Ron Paul wrote in an article entitled Get Us Out of the IMF on March 2, 2002 that the IMF is "based on a flawed philosophy that says the best means of creating economic prosperity is through government-to-government transfers," calling the organization "corporate welfare disguised as compassion for the poor." On September 28, 2004, in an article entitled The IMF Con he said, "The real purpose of the IMF is to channel tax dollars to politically-connected companies," which is just what happened in Korea. He observes:
- When capital remains in private hands, it is allocated to its most productive uses as determined by the choices of consumers in the market. Placing capital in the hands of politicians and bureaucrats inevitably results in inefficiencies, shortages, and economic crises, as even the best-intentioned politicians cannot know the most efficient use of resources.
This is precisely why, after ten years of improving statistics, the average Korean is not happy with his family's economic situation. The IMF demanded restructuring, to be sure, but not of the corporate welfare system. Rather, the one palpable change in the post-IMF era has been the end of lifetime employment, an element of Confucian capitalism that had never been mandated by law but by custom and convention. Thus, while the chaebol were not expected to compete on a level playing ground, individual workers and employees were thrust into a dog-eat-dog world of survival of the fittest.
"To prevent future financial crisis, the Korean economy should rely on market forces" because "it is the big government, which is the root cause of the current crisis," concluded Prof. Bong. Let's hope the next president of the Republic of Korea follows his advice and that of the Austrian School Economists.