Lessons Learned, South Korea Makes Quick Economic Recovery

During the 1997-98 Asian currency crisis, the International Monetary Fund forced tough medicine on South Korea with a tough bailout package and strict conditions. The nation endured high interest rates, massive company and bank closures, and yet recovered quickly by clearing bad debt and investing in education. Its economy now ranks 15th in the world. Now, some analysts suggest the US should examine the South Korean model of financial reform – rather than Japan’s – and stop propping up struggling banks, explains Martin Fackler for the New York Times. South Korea and the US have major differences: For example, the current US crisis stems from individual debt and an inflated housing market while South Korea’s problem was corporate borrowing. Still some decisive, structural changes – closing excess banking capacity, reducing borrowing and restoring public confidence – could prevent long-term economic damage. – YaleGlobal