Re: [A-List] IMF: Korea and elsewhere

["Christian Gregory"<christian11@xxxxxxxxxxxxxx>]

Year  GDP     %ch  %wage  unemp FDI

1996 418479.0 11.7  11.9   2.0  3203
1997 453276.4  8.3  7.0  2.6  6971
1998 444366.5  -2.0 -2.5  6.8 8852
1999 482744.2  8.6  12.1  6.3 15541
2000 521959.2  8.1  8.0   4.1 15690
2001 545013.3  4.4  4.1

The general critique of the IMF goes without saying, but I wonder if the case
isn't more complicated for Korea. Unlike most developing nations on which IMF
"help" is foisted, Korea had a strong (though vulnerable) banking system and
an excellent manufacturing base. So, while unemployment is still double what
it was before the crisis, the current account surplus is now huge, as are the
foreign reserves. (At $102 billion, about 1/4th of GDP.) Wages are growing,
and in $ terms, GDP is back to roughly 1995 levels, having grown about 40%
from the low point of 1998. (Some of the downdraft from the high point of 96
has to do with the unhinging of the won from the dollar, certainly a good
thing for Korea's exporters.)

While this is clearly not great, it's not Brazil either. The increase in FDI
could be a good or a bad thing, depending on your point of view. Although it
might be taken to indicate the ease with which Korean assets were snatched up
by foreigners after the crisis, at the end of the day you have to wonder about
the lamentations of foreign ownership of capital. So what? It is hard to see
how this is worse than being subject to short-term inflows, which Korean banks
were awash in.

The problem with IMF dictats is that they treat all crises as deriving from
excess demand (as would happen in an industrialized country); Korea was lucky
enough to have an industrial base capable of "working," as it were, in IMF
constraints.

Christian