Survivors Become the Strong(양장본 HardCover)

"The Korean economy is a history of challenge that has blossomed amid hardship and crises. You have always stood at the forefront in facing challenges. During the 2008 global financial crisis, you led the Korean economy as Minister of Finance to rise from the crisis. You were unskilled at persuasion, but didn't give up or circumvent. Time passes by, but policies with soul last. Your devotion will be long remembered. We, the press corps who criticized sometimes and defended other times, present you today with this small plaque of appreciation."



This was what was written on the plaque of appreciation presented to the author on November 15, 2012, several years after retirement from the Minister of Finance post, by the members of the Press Corps at the Ministry of Finance during the time of global financial crisis. As a journalist recalled, "I have worked as a journalist for 18 years, and I have written more articles during this one year than I did for the past 17 years", 2008 was a year marked by a continuous series of numerous countermeasures to overcome the global economic crisis, while the author, in the center of this turmoil, had to bear the heavy burden. The path taken by the author, perhaps one of the only officials to confront two crises in the fierce and harsh field, battling the 1997 Asian financial crisis as Vice Minister of Finance and tackling the 2008 global economic crisis as Minister of Finance, chronicles path that the Korean economy has traveled.

This book provides a gripping record on the two crises, Asian financial crisis and global economic crisis, that have changed and shaped Korea, with detailed first hand accounts on the causes of the crises, turbulent times during the crisis, and political and diplomatic negotiations in the process of tackling the crisis. It is a must read if one wishes to gain a true insight on the Korean economy, decisions that had to be made in times of crises, how decisions were made, and what resulted from such decisions.



■ FORM THE BOOK



"In 2008, foreign media sarcastically described Korea's economic situation as '1997 rewind', 'heading for black September', 'Asia's Iceland', and 'as risky as Poland'. However, they quickly switched to plaudits the next year when Korea began recovering at the fastest pace in the OECD. Bloomberg ran a column, 'Hats off to officials in Seoul' on July, 2009. Financial Times said that Korea was no more a loser, the economy was as big as India's with a population 20 times larger than Korea's, and the exports was bigger than that of the UK on February, 2010. On August, 2011, the IMF praised that the Korean government's fast and decisive measures set a textbook example on how to stimulate an economy in recession."



"We became stronger and got seven achievements in tackling the 2008 turmoil with the "get-up-and-go" spirit and by turning the crisis into an opportunity. They were; the fastest recovery in the OECD; rise as the world's seventh largest exporter; the world's highest R&D investment relative to GDP; switchover to capital exporter; highest credit rating in Asia; transformation into a rule making country; and transition from a recipient to a donor."



"In this new era, it is increasingly true that the strong don't always survive but survivors become the strong. Zero interest rates and quantitative easing were phenomenon of a new form of currency war, and we do not know where it is heading. They may be adding fuel to the bubbles that sparked the crisis, deepening the problems even further."

PROLOGUE



CHAPTER 1 _ CRISES REDUX



01 Boom and Bust Cycle

Recurring crises

1997 Asian crisis: Temptation and mismatch

2008 global crisis: Imbalance and burst bubble

Crises in Korea: Trial and error



02 Bubbles Eventually Burst

Investor or speculator

Greed and speculation

Inevitable burst of bubble



03 Crises like Typhoons

Misjudgments by authorities

Fearful tranquility

Tariff and currency wars: Beggar-my-neighbor

Birth of IMF and GATT





CHAPTER 2 _ 1997 ASIAN FINANCIAL CRISIS



04 Liquidity Mismatch

Typhoon from Southeast Asia

Capital flood and currency appreciation

Sudden outflow of foreign money

Forced change: IMF program

Wounds of crisis

Asian cooperation: Chiang Mai Initiative



05 Korean Economy in a Nutcracker

Pre-crisis missteps

Nut in nutcracker

Overvalued won and flat tariff rate

Cracked nut: Deterioration in current account balance

Failure in customs management

Steps to improve competitiveness



06 1997 Foreign Exchange Crisis in Korea

Economic health indicator: Current account balance

Crisis prevention measures

Kia Motors: Too big to fail

Escaping trap of flat tariff rate

Overcoming trap of overvalued won

Fuse of a crisis: Merchant banks

Sharp withdrawals of short-term funds

Failed financial reforms

Efforts coming to naught



07 Forced Changes: IMF Bailout

Requesting IMF help

Strategies of negotiation with IMF

IMF economic program

Presidents' talk: Finish in one day

Consensus on economic program

Side letter: Tough negotiations

Birth of consolidated supervisory body

Record bailout: US$58.3 billion

Negotiation for debt rollover

Agreement in New York

Birth of a leftist government





CHAPTER 3 _ LEGACY OF CRISIS



08 Repaying of Borrowed Income

Eagerness and ignorance

Crisis wounds: Massive job losses and closures

Survival tools: Exchange rate and foreign reserves



09 Crisis Lessons: No Friend in Need

Crisis repeats itself

External balance should be prioritized

Exchange rate is a matter of sovereignty

Foreign exchange reserves are life line

R&D supplies edge



10 Legacy of Leftist Government

A half blessing in disguise

Low investment

Return to current account deficit

Inadequate R&D investment

Labor market setback

Strengthened financial base



11 Elections and Platforms

Election economics: Good policies are bad pledges

Vision of Top 7 Nation

Pledges: Toward advanced country and community of hope

Presidential transition committee





CHAPTER 4 _ 2008 GLOBAL ECONOMIC CRISIS



12 Unprecedented Global Crisis in 2008

Imbalance and burst of bubble

Progress of crisis: Too connected to fail

Unprecedented responses: All means mobilized

Unprecedented currency war: Open the safes

Results of crisis management: Long road ahead



13 Reflection of 2008 Economic Crisis

Obese economy: Excessive consumption and investment

'Diet' economy: Work hard, save more, and invest more

Inconvenient truth: Troubles in financial system

Leadership and cooperation: Birth of G-20



14 Economics of Restraint

Lessons from crisis: Restraint and reform

Dilemmas of economics: Keynes, Friedman, Hayek and Schumpeter

Experiences of Korea: Conflicting choices and policy mix

Economics of managed restraint: Toil and sweat





CHAPTER 5 _ KOREA'S RESPONSES IN 2008



15 Caught in Turmoil

Already limping in three traps

Subprime crisis on horizon

Managing crisis first



16 Strategies against Crisis: Get up and Go!

Ride out with get-up-and-go

Crisis is opportunity

Preemptive, decisive, and sufficient measures



17 Urgent Measures: Survivors Become the Strong

First move: Normalizing exchange rates

Second move: Lowering oil tax and tariff rates

Third move: Tax rebates of 240,000 won

Fourth move: Cutting interest rate and injecting liquidity

Fifth move: Korea-US currency swap

Last move: Guaranteeing bank debt with US$100 billion



18 Investment Environment: Maximizing Potential

Tax cuts: The best tool

CRET change: Ending political violence

5% of GDP in R&D: Topping the world

Quality improvement: Work-study regime

Regulatory innovation: Regulation Equity System

Expansion of labor supply: Early employment and overseas Koreans



19 Management Environment: Best in the World

Fiscal expansion: Offense brings victory

SOC investment: Four rivers development

Forex controls: Stopping 'hot' money

Sovereignty over forex rates: G-20 Seoul Summit agreement

Financing for overseas projects: Fostering mega-banks

Social capital build-up: Trust decides 20% of growth

Mobilizing externally: Korean diaspora and FTA



20 We Survived Stronger: Top 7 Exporter

Fastest recovery in OECD

World's seventh-largest exporter

World's highest R&D investment

Switchover to capital exporter

Asia's top credit rating

Rule maker: First non-Western chair of G-20

First shift from recipient to donor 432





CHAPTER 6 _ POLITICAL ECONOMICS TO ADVANCE



21 2015 Peak vs. 2050 Richest

New abnormal and Asian century

Economics of conflicts: Much food, many problems

Raging populism on the rise

Legacy of tragic history



22 Political Economics for Advanced Nation

Beyond polarization and conflicts: Risks and opportunities

Path toward a first class nation: Growth, balance, and open-up

Political economics of spirited minds: Never up, never in



23 Way Forward: Let the Outcomes Speak

The unforgettable 2008!

Fate of public officials: Do duty, expect criticism

Last bastion of the nation: Populism, no future



EPILOGUE

Man-Soo Kang 저자 Man-Soo Kang has tackled two economic crises, Asian financial crisis in 1997 and global economic crisis in 2008, as vice minister and minister of finance, and senior economic advisor to the President of Korea. He also has served as Commissioner of the Customs, Vice Minister of Trade and Industry, and Chairman and CEO of the Korea Development Bank. Major achievements during his career include negotiation for bail-out program with International Monetary Fund and reshuffling Korea's central banking and regulatory system in 1997. He also implemented overall revision for tax system including introduction of value added tax in 1977. In 2008, he exercised foreign exchange and tax-cut policies for overcoming the global economic crisis. He wrote "Eye-witnessed Documentary on 30 Years of Korean Economy" dealing his experiences on fiscal and financial policies in the government. He attended Seoul National University for law and New York University for economics.