Transformation Theory and Korea’s Rise After the Asian Crisis
South Korea underwent dramatic change in the last one and a half decades, from being considered a “tiger in trouble” (Jomo 1998) in the wake of the Asian crisis to a showcase of economic development. The judgment of 1998 was itself a complete reversal of previous enthusiastic reviews of world record-high growth for several decades, from the 1960s to the 1990s. Korea, once considered a shrimp between two mighty whales, Japan and China, as neighbours, veritably made a jump to become a tiger. And, after the steep decline of 1998, this tiger again showed its claws, a miraculous transformation, as the following comparison of Korea 1998 and 2011 shows. In 1998, South Korea suffered from a severe recession, triggered by the cur- rency crisis it experienced a year before. After two years of growing macroeco- nomic imbalances, in particular growing current account deficits, as well as a contagion from the spreading currency crisis in Southeast Asia since the summer of 1997, by the end of the year Korea had a record low of usable foreign reserves of barely more than 7 billion USD. The South Korean won had to be floated and drastically depreciated, and South Korea’s sovereign rating was lowered, which made repaying debt more costly and caused the stock market to crash. In 2011 the South Korean economy marked for the first time a trade volume of more than 1 trillion USD. The expected nominal per capita GDP will be, according to the IMF World Economic Outlook, a...
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