A New Economic Order and the Perspective of Growth in Korea after the Global Crisis
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This study presents the key point of changed economic order of Korea after the economic crisis in 1997. On the basis of this changed economic order, the perspective of further growth of Korea is examined, and the present system problems are illuminated. Until 1997, Korea's economic order had two fundamental elements. First, the korean businesses worked under the perfectly competitive market, namely in the world market, despite lack of domestic competitive market. In the end, the successful businesses of Korea are not merely picked by the government, but by the market as "winners," so they are strong and competent in the world market. Second, the korean finance system was backward and not fully developed. Credit was provided to businesses with special favour by the government, via banking system controlled by the government. Banks did not evaluate the profitability, but from the viewpoint of industrial policy of government. This led to permanent over-leveraging of businesses, and at last to financial collapse and economic crisis. And then in face of the crisis, Korea made reforms in financial system. Banks began to operate in search of profit and risk-defensive. Businesses reduced debt-to-equity ratio drastically. The consolidated Financial Supervisory Agency began to regulate financial sector prudently. Through privatization of many public enterprises, the fiscal position of the government became robust. Thanks to these reforms, Korea overcame negative impacts of the global crisis relatively fast. Of course, there are new system problems grown out of these reforms: Long lasting unemployment due to mass layoffs and ruin of SMEs, discrepance between big businesses and SMEs, deteriorating income inequality etc. To secure stability of market order, these problems must be resolved with policy of economic order. The limit of this paper remains, because it could not investigate and verify all the detailed parts, but this work can be a next task.
Abstract
This study presents the key point of changed economic order of Korea after the economic crisis in 1997. On the basis of this changed economic order, the perspective of further growth of Korea is examined, and the present system problems are illuminated. Until 1997, Korea's economic order had two fundamental elements. First, the korean businesses worked under the perfectly competitive market, namely in the world market, despite lack of domestic competitive market. In the end, the successful businesses of Korea are not merely picked by the government, but by the market as "winners," so they are strong and competent in the world market. Second, the korean finance system was backward and not fully developed. Credit was provided to businesses with special favour by the government, via banking system controlled by the government. Banks did not evaluate the profitability, but from the viewpoint of industrial policy of government. This led to permanent over-leveraging of businesses, and at last to financial collapse and economic crisis. And then in face of the crisis, Korea made reforms in financial system. Banks began to operate in search of profit and risk-defensive. Businesses reduced debt-to-equity ratio drastically. The consolidated Financial Supervisory Agency began to regulate financial sector prudently. Through privatization of many public enterprises, the fiscal position of the government became robust. Thanks to these reforms, Korea overcame negative impacts of the global crisis relatively fast. Of course, there are new system problems grown out of these reforms: Long lasting unemployment due to mass layoffs and ruin of SMEs, discrepance between big businesses and SMEs, deteriorating income inequality etc. To secure stability of market order, these problems must be resolved with policy of economic order. The limit of this paper remains, because it could not investigate and verify all the detailed parts, but this work can be a next task.
참고문헌 (15)
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