Is Financial Liberalization Good for Developing Nations? The Case of South Korea in the 1990s
Author(s)
Crotty, James R.; Lee, Kang-Kook
Abstract
Korea’s state-led, bank-based, and closed financial system helped generate its impressive development record from 1961 until the 1997 crisis. However, an ill-conceived liberalization process in the early 1990s eventuated in an IMF (International Monetary Fund) takeover in late 1997. Post-crisis neoliberal restructuring, which moved Korea towards a globally open, capital market-based financial system, has thus far failed to generate a sustainable economic recovery. It threatens to significantly lower Korea’s long-term rate of capital accumulation. Korea would be well advised to reject neoliberalism, and adopt a modernized and radically democratized version of the traditional model, incorporating a state-led bank-based financial system with capital controls.
