The Asian financial crisis and South Korea's IMF crisis

What structure did the "East Asian miracle" stand on? {south-korea} {thailand}

After the Second World War many developing countries started with import substitution industrialization, producing at home the manufactures they had imported. Whereas Latin American countries largely stayed on that path, Taiwan and South Korea turned their development outward in the 1950s and 1960s and adopted a strategy of export-led growth. Governments channelled subsidies and cheap credit to exporting industries and kept their currencies low, and together with Hong Kong and Singapore these four economies were called the "Four Asian Tigers". In South Korea the regime of Park Chung-hee, which took power in a military coup in 1961, launched the first Five-Year Plan in 1962, and from 1970 to 1996 the economy grew by an average of 8.4 percent a year, passing a per capita income of $10,000. 1 2 3 4

In the late 1980s and early 1990s high growth spread to Southeast Asia. Thailand grew by more than 9 percent a year on average in 1985–96, the fastest of any country at the time, and Indonesia and Malaysia recorded growth of 8–12 percent. The International Monetary Fund (IMF) and the World Bank praised this as the "Asian economic miracle". The region accounted for a quarter of world output but half of world growth in the 1990s and almost two-thirds of world capital spending. Right up to the crisis these countries had low inflation and budget surpluses or small deficits, and the IMF and World Bank were still praising the region's governments, the Korean authorities included, in September 1997. 5 6

South Korea's high growth rested on the combination of the state and the chaebol. Because chaebol affiliates could finance one another and cover deficits through intragroup transactions, the groups borrowed easily, and before 1997 huge debts, many of them hidden, had accumulated. In 1996 the liabilities of Korean manufacturing stood at 317.1 percent of net worth, 30.3 points higher than a year earlier, almost double the US figure (159.7 percent in 1995) and almost four times Taiwan's (85.7 percent). Government-led economic management was also criticised for fostering collusion between politics and business, inefficient allocation of resources and imbalances between classes, industries and regions. 7 8 4

What did the capital liberalisation of the 1990s and OECD entry change? {south-korea}

In the 1990s South Korea opened its capital and financial markets. The Kim Young-sam government announced the second stage of interest rate liberalisation in November 1993 and concluded the Uruguay Round negotiations in December 1993, opening goods, finance, construction, distribution and services to foreigners. In January 1995 it launched a Globalisation Promotion Committee under the banner of segyehwa ("globalisation"), the same year Korea joined the World Trade Organization, and in December 1996 Korea became the second Asian member of the Organisation for Economic Co-operation and Development (OECD) after Japan. Exports passed $100 billion for the first time in 1995, but the trade deficit widened and growth slowed, falling below 7 percent in 1996. 9 10 11

With the financial liberalisation that followed OECD entry, Korean firms and banks issued large amounts of short-term dollar debt to finance long-term domestic projects. In 1994 the short-term finance companies were converted wholesale into merchant banks, whose number rose to 30; they brought in cheap three-month foreign loans and lent them to big business as five-year, high-interest loans. From 1996 the reserve requirement, which had been above 9 percent, was also cut sharply to 1–5 percent. At the end of 1997 Korea's external liabilities exceeded $200 billion, and 58.8 percent of them were short-term loans payable within a year. 12 13 14 8

The same current ran through Southeast Asia. Capital liberalisation measures in Thailand in 1992 brought a flood of foreign capital, but much of it flowed not into industry but into real estate and the stock market, driving up property and share prices. Private capital inflows into Indonesia, Malaysia, South Korea, Thailand and the Philippines rose from $41 billion in 1994 to $93 billion in 1996. In the mid-1990s Thailand, Indonesia and South Korea had large private current account deficits, and fixed exchange rates encouraged more foreign borrowing, exposing both the financial and corporate sectors to excessive foreign exchange risk. 4 15 5

How did dollar pegs and the "reverse Plaza" set up the crisis? {usa} {japan}

The Thai baht was pegged at 25 to the US dollar, and other Southeast Asian currencies were in effect tied to the dollar too. According to the "impossible trinity" of international economics, a country cannot have a fixed exchange rate, free capital movement and an independent monetary policy at the same time. A country that had opened its capital market while fixing its exchange rate had no means of holding out when foreign capital left, other than raising interest rates or spending its reserves. High short-term interest rates had meanwhile served to attract speculative short-term money, "hot money". 5 16

In the mid-1990s the external environment changed. As the US economy recovered from the recession of the early 1990s, Alan Greenspan's Federal Reserve raised interest rates to head off inflation, making US bonds more attractive and pushing up the dollar. The yen, which had soared after the Plaza Accord of 1985, now fell, the Chinese renminbi was devalued and semiconductor prices dropped sharply. Southeast Asian currencies tied to the dollar rose with it, their exports became more expensive, and the region's export growth slowed dramatically in the spring of 1996, worsening current accounts. 5

Walden Bello, presenting the analysis of the Marxist economic historian Robert Brenner, called this fall of the yen the "reverse Plaza Accord". In the mid-1990s the Clinton administration let the dollar rise against the yen to help spark an export-led recovery in Japan; if the Plaza Accord had been a rescue of US industry by Japan and Germany, the reversal was a US-engineered bailout of Japan. In Bello's account the reverse Plaza Accord failed to revive the Japanese economy but played a key role in undermining the competitiveness of the Northeast and Southeast Asian economies whose currencies were tied to the rising dollar, and when those economies collapsed in 1997–98 the global crisis of overproduction intensified. 17

How did the collapse of the Thai baht spread across Asia? {thailand} {indonesia} {malaysia}

In Thailand the property bubble began to deflate from 1996, as growth faltered. On 14–15 May 1997 the baht was hit by massive speculative attacks, and on 30 June Prime Minister Chavalit Yongchaiyudh said he would not devalue. But lacking the reserves to defend the peg, the Thai government floated the baht on 2 July 1997. The baht lost more than half its value, reaching 56 to the dollar in January 1998; the Thai stock market dropped 75 percent and Finance One, the largest Thai finance company, collapsed. On 11 August the IMF unveiled a rescue package of more than $17 billion, conditional on bankruptcy laws and other reforms. 5 4

The crisis soon spread to neighbouring countries. The Philippines raised overnight rates from 15 to 32 percent, but the peso fell from 26 to 46.50 to the dollar. In Malaysia overnight rates jumped above 40 percent, the Kuala Lumpur stock index fell from above 1,200 to under 600, and the ringgit fell from 2.50 to under 4.57. Indonesia widened its currency band from 8 to 12 percent and then floated the rupiah freely on 14 August; on 5 November the IMF announced about $10.1 billion of its own money, a first line of about $23 billion with other support, and the closure of 16 banks. The rupiah fell from 2,600 to the dollar to over 14,000 in January 1998. 5 18

On 20–23 October Hong Kong's Hang Seng index fell 23 percent. To defend the Hong Kong dollar's peg the Hong Kong Monetary Authority raised overnight rates from 8 to 23 percent, briefly to 280 percent. Malaysian Prime Minister Mahathir Mohamad accused George Soros and other currency traders of ruining Malaysia's economy, and ASEAN foreign ministers voiced their concern in a joint declaration on 25 July. Bank lending to Asia actually reached a record in the third quarter of 1997, which shows how little warning there was. After the Hong Kong crash on 23 October and the S&P downgrade, Korea's external financing deteriorated sharply. 5 6 19

Why did South Korea fall in November 1997?

Korea's crisis began, before Southeast Asia's, with a chain of chaebol bankruptcies. In January 1997 Hanbo Steel of the Hanbo Group, the fourteenth-largest chaebol at the end of 1996, defaulted; in the investigation that saw chairman Chung Tae-soo arrested, President Kim Young-sam's second son Kim Hyun-chul was implicated and arrested. Big firms such as Sammi and Jinro followed, and on 15 July the bankruptcy of the Kia Group, the eighth largest, was suspended. Reckless bank loans to Hanbo and Kia, allowed amid collusion between the Kim Young-sam government, the ruling party and business, became ₩5 trillion and ₩10 trillion of bad debt respectively. The domino of bankruptcies resulted from excessive investment in particular industries financed by external borrowing, together with falling profitability in a prolonged slump, and at the end of September 1997 the bad loans of financial institutions stood at ₩32 trillion, 7 percent of GDP. 10 20 14 4

In January labour's resistance also exploded. When the ruling New Korea Party rammed through a revised labour law including redundancy dismissals in December 1996, the Korean Confederation of Trade Unions (KCTU) and the Federation of Korean Trade Unions answered with a general strike, the first major event in the class struggle since the mass strikes of July–September 1987 and the first political strikes. President Kim Young-sam drew fierce criticism when he declared at his New Year press conference on 7 January that the labour law revision must be implemented. Pushed back by the strikes, the government and ruling party rewrote the law with a clause deferring redundancy dismissals by two years. An analysis of the Korean workers' movement in the British Marxist journal International Socialism in March 1998 saw the root of the crisis in a profitability crisis of an export-led economy: net profits of listed firms fell 55 percent in 1996, and a "compound slump" of industrial and financial crisis weakened the banks. 21 10 8 22

From late October foreign financial institutions began refusing to roll over the short-term foreign loans of Korean banks. As rolling over some $100 billion of short-term debt became difficult, official reserves fell sharply, a large amount being used to repay the short-term debt of Korean banks' offshore branches. President Kim Young-sam reportedly paid no attention to how serious the currency crisis was until a telephone call from Deputy Prime Minister for the Economy Kang Kyung-shik on 10 November. After foreign exchange trading seized up on 18 November, Kang was replaced by Lim Chang-yuel on the 19th and the limit on the won's daily band was effectively removed. On 21 November, after meeting IMF First Deputy Managing Director Stanley Fischer, Lim formally requested IMF assistance. The stock market fell 7.2 percent on 24 November, and on 18 December usable reserves fell to $3.9 billion. 19 14 9 5

What did the IMF agreement of 3 December demand? {south-korea}

On 3 December 1997 Deputy Prime Minister Lim Chang-yuel and Bank of Korea Governor Lee Kyung-shik signed a letter of intent addressed to IMF Managing Director Michel Camdessus. The letter explained that the "legacy of government intervention has left an inefficient financial sector and a highly leveraged corporate sector". On 4 December the IMF Executive Board approved a three-year stand-by credit of SDR 15.5 billion (about $21 billion) for Korea, 1,939 percent of its quota. With $10 billion from the World Bank, $4 billion from the Asian Development Bank and a second line of defence of more than $20 billion pledged by the United States, Japan and others, the total package came to some $55–58 billion. 19 23 5

The conditions followed the IMF's standard model. The letter promised that money market rates "will be allowed to rise sufficiently", and the government would offset the cost of financial restructuring with fiscal tightening of about 1.5 percent of GDP. Nine merchant banks had already been suspended on 2 December, and the closure of insolvent institutions and stronger prudential supervision to international standards were promised. The ceiling on foreign ownership of shares would rise from 26 to 50 percent by the end of 1997 and to 55 percent by the end of 1998; in practice it was soon lifted to 100 percent. The agreement also stated that "labor market flexibility will be enhanced by easing dismissal restrictions under mergers and acquisitions and corporate restructuring" and that temporary employment agencies would be allowed. The general character of such prescriptions is covered in the terms for the IMF and structural adjustment. 19 23 5

The IMF held that high interest rates would stabilise the currency; First Deputy Managing Director Stanley Fischer and Managing Director Camdessus argued that a country losing capital had to raise rates to hold on to investors. But the won kept falling after the agreement. Moody's cut Korea's rating from A1 to A3 on 28 November and to the junk grade B2 on 11 December; the won passed 1,700 to the dollar on 11 December and 2,000 on the 23rd, and Dongsuh Securities collapsed on the 12th. The won, which had been around 800 to the dollar before the crisis, ended up losing more than half its value. 5 9

How did the Kim Dae-jung government take over the crisis?

Two weeks after the IMF agreement, on 18 December 1997, the fifteenth presidential election was held. The ruling Grand National Party lost under the blame for the currency crisis and the threat of national default, and the opposition candidate Kim Dae-jung was elected with 40.3 percent of the vote. Thanks to the split of the ruling conservatives between Lee Hoi-chang (38.7 percent) and Lee In-je (19.2 percent), he won by 390,000 votes, the closest margin ever, and power passed to the opposition. The president-elect cooperated with the outgoing government and ruling party to pass stalled reform bills, and in particular gave substantial powers to the newly created Financial Supervisory Commission, greatly strengthening the government's ability to rein in the chaebol caught up in the crisis. Lee Hun-jai, a former Finance Ministry official who had worked as an executive at Daewoo affiliates, became the commission's first chairman in 1998. 14 24 25

The gold-collecting campaign is remembered as the symbol of overcoming the crisis. On 20 November 1997 the central federation of the Saemaul Women's Association proclaimed a "patriotic ring collection" campaign in the spirit of the National Debt Repayment Movement of 1907, which the government welcomed as a desirable civic activity. When KBS launched its gold-collecting campaign on 5 January 1998, the movement changed from donation to a scheme in which the gold handed in was exported and its dollar value later repaid in won. By its official end in March some 3.51 million people had taken part, collecting about 227 tonnes of gold (165 tonnes in January alone), worth $2.17 billion at the prices of the time. That sum, however, was about a ninth of the $19.5 billion Korea borrowed from the IMF. 26 14

Within a month of taking office the Kim Dae-jung government brought in $21.4 billion under its agreement with the IMF, and it proclaimed "four-sector reform" of finance, corporations, labour and the public sector. The president obtained a five-point agreement with the chaebol heads on management transparency and restructuring; through tripartite consultation the Labour Standards Act was amended to introduce redundancy dismissals and the dispatch of workers; free zones for foreign investment were set up and entry restrictions on foreigners were relaxed. Korean Wikipedia summarises these reforms as neoliberal economic policy. An analysis in a British Marxist journal in March 1998 saw the president-elect as trying, through the tripartite commission, to barter structural reform of the chaebol in return for the unions' acceptance of mass sackings. 27 11 8

How did the tripartite compromise create the redundancy dismissal system?

On 15 January 1998 the first Tripartite Commission of labour, business and government representatives was launched. Chaired by Han Kwang-ok, it agreed after an all-night negotiation from 5 to the morning of 6 February on a "social pact to overcome the economic crisis". At its core, the two-year deferral of redundancy dismissals written into the 1997 law was deleted, and dismissals were allowed under reasonable and fair criteria when there was an urgent managerial reason such as a transfer, acquisition or merger of a business. Worker dispatch was also to be introduced, with permitted jobs listed for professional work and everything except prohibited jobs allowed for simple work. In return, union political activity was to be legalised and teachers' unions allowed from July 1999, and the fund for unemployment measures was to be raised to ₩5 trillion. 28 22

The agreement put a provision on "dismissal for managerial reasons" into the Labour Standards Act. Today's Article 24 keeps its framework, providing that "an employer who intends to dismiss workers for managerial reasons shall have an urgent managerial necessity; in this case a transfer, takeover or merger of a business to prevent deterioration of management is deemed an urgent managerial necessity", and requiring efforts to avoid dismissal, reasonable and fair criteria and prior consultation with the union. In the same February the National Assembly enacted a new Act on the Protection of Dispatched Workers, whose stated aim was "to increase the flexibility of firms' manpower management", and dispatch work came into force in July. The press counted redundancy dismissal and worker dispatch as the representative measures of labour market flexibility. 29 30 31

Within the labour movement the agreement provoked fierce opposition. KCTU president Bae Seok-beom had accepted redundancy dismissals in exchange for the right of public servants and teachers to form unions, but the KCTU congress of delegates passed a vote of no confidence in him for accepting restructuring and dismissals. The new president Lee Yong-gap declared that he could not support a decision forcing one-sided sacrifice on workers and withdrew from the commission, after which consultation continued with only the government, the Federation of Korean Trade Unions and the Korea Employers Federation. The KCTU itself became a legal organisation under the Kim Dae-jung government in 1999, and the permission for teachers' unions led to the legalisation of the Korean Teachers and Education Workers' Union. 21

What did working people go through?

In 1998 Korea's growth rate fell to -8.7 percent in the third quarter, and the average number of firms going bankrupt each day had reached 128 at the end of 1997. Unemployment rose to 1.78 million, and the jobless rate peaked at 8.9 percent in February 1999. In 1998 nominal wages rose only around 1.5 percent while prices, pushed by the exchange rate and tax increases, rose almost 7 percent, so real wages fell and consumption shrank. After the crisis the idea of a job for life disappeared from Korean society, and "honourable retirement" schemes ruined countless middle-class households. By one estimate 10,400 people in Hong Kong, Japan and South Korea took their own lives as a result of the crisis. 14 27 5

The first big test of the new dismissal system came at Hyundai Motor. When the company notified 1,538 workers of "employment adjustment", the union struck six times from 27 May, ending in a 39-day strike. Instead of sending in the police as in the past, the government and ruling party mediated, and on 24 August management and union agreed that 277 workers would be dismissed for managerial reasons and the other 1,261 placed on 18 months' unpaid leave. By the company's count the strikes cost ₩905.6 billion in lost production, ₩1.6414 trillion including suppliers' losses, and some 300 parts suppliers had already gone bankrupt. As mediation cut the dismissals to little more than 15 percent, business complained that "economic logic was overwhelmed by political logic". 32 33

The crisis became the starting point for the growth of non-regular work. At the end of 1997, just before worker dispatch was legalised, 3,573 dispatch agencies were already supplying 225,000 workers, 1.7 percent of all wage earners, at 79 percent of regular workers' wages. Firms could now minimise regular staff, whom they found hard to dismiss, and use labour only for the periods they needed. Lee Won-duk, vice-president of the Korea Labor Institute, said that with the legalisation of dismissals and dispatch, firms could cut the share of regular workers while also using the other flexibility measures, such as selective and discretionary working hours, introduced in the 1997 revision. What followed is covered in the term for non-regular workers. 31

How were banks and chaebol restructured, and why did Daewoo collapse?

Financial restructuring was fast and rough. On 29 June 1998 the government closed five banks, Daedong, Dongnam, Donghwa, Kyunggi and Chungchong, and handed them to Kookmin, Housing, Shinhan, Hanmi and Hana banks; on 11 August four life insurers were suspended. 787 insolvent financial institutions had been closed or merged by June 2003, and the government spent ₩64 trillion of public funds on clearing up failed financial firms and companies. Interest rates, which had soared into the 30s, fell to single digits from October 1998. With the foreign investment ceiling gone, the number of financial institutions with foreign investors grew rapidly, New Bridge Capital's takeover of Korea First Bank being a prominent example. 14 5 27

The chaebol system was badly shaken too. Of the 30 largest chaebol, 11 collapsed during the crisis, and the survivors narrowed their focus; of the seven major car makers before the crisis, only two remained intact. Daewoo, which had risen to become the second-largest group, had expanded aggressively since proclaiming "global management" in 1993 and, even during the crisis, acquired SsangYong Motor, while dragging its feet on the government's restructuring demands. By March 1999 its debt ratio was well over 400 percent, and when both the "big deal" swap of Daewoo Electronics for Samsung Motors and talks with GM failed, twelve Daewoo affiliates were put into creditor-managed workout on 26 August. Daewoo was declared bankrupt on 1 November 1999 with debts of about $50 billion. Chairman Kim Woo-choong fled to Vietnam, was arrested on his return in 2005, charged among other things with masterminding ₩41 trillion of accounting fraud, and in 2006 was sentenced to ten years in prison for fraud and embezzlement. 7 34 35

Recovery was quick. Growth turned positive in the first quarter of 1999 and reached 13.8 percent in the third quarter, and reserves, $3.9 billion on 18 December 1997, approached $80 billion by May 2000. In 1999 the sovereign rating returned to investment grade. President Kim Dae-jung declared on 4 December 2000 that Korea had completely emerged from the IMF crisis, and on 23 August 2001 Korea repaid all $19.5 billion of its IMF borrowing three years ahead of schedule, ending the IMF programme. But unemployment stayed around a million until the end of 1999, and reckless credit card policies to revive domestic demand, the problem of non-regular work and youth unemployment followed. Foreign ownership of chaebol shares rose steeply; in 2025 foreigners held 73 percent of Samsung Electronics. 14 27 7

Why did Suharto fall in Indonesia, and why did Malaysia take a different road? {indonesia}

In Indonesia the crisis brought down the regime. In exchange for $43 billion in liquidity aid, Suharto signed three letters of intent with the IMF between October 1997 and the following April, and on IMF advice interest rates were raised to 70 percent a year in February 1998, deepening the contraction. When he moved to set up a currency board on the proposal of Steve Hanke of Johns Hopkins University, both US President Bill Clinton and IMF Managing Director Camdessus told him he would have to drop the idea or forgo the $43 billion. Evidence that Suharto's family and associates were being spared the IMF's most stringent requirements further undermined confidence. Indonesia's GDP shrank by 13.5 percent in 1998. 36 37 5

When the government raised fuel prices by 70 percent in May 1998, riots broke out in Medan. Sparked by events such as the Trisakti shootings, student protests escalated into riots targeting the government and ethnic Chinese communities, sweeping Jakarta, Medan and Surakarta. Suharto resigned on 21 May 1998, ending his 32-year New Order dictatorship, and Vice President B. J. Habibie succeeded him, opening the Reformasi era. 37

Malaysia refused the aid offered by the IMF. At first the government cut spending and raised interest rates as the IMF urged, which only worsened the economy, and GDP fell 6.2 percent in 1998. In September 1998 Prime Minister Mahathir defied the IMF's recommendations, pegging the ringgit at 3.80 to the dollar, banning offshore trading of the ringgit and imposing capital controls that limited outflows of portfolio investment. The controls were found effective in containing the damage, and the IMF's 1999 Article IV consultation report acknowledged that the capital controls and peg, initially met with scepticism, had produced better results than expected. In the same year, however, Mahathir's dismissal of his deputy Anwar Ibrahim sparked the Reformasi movement, and he was criticised for authoritarianism. 38 39 5

Why did the crisis reach Russia and Wall Street? {russia}

As the Asian crisis cut the demand for and price of crude oil and non-ferrous metals, the reserves of commodity-exporting Russia were badly hit. Russia was already struggling with a high fixed exchange rate, the cost of the war in Chechnya and a chronic budget deficit, and in June 1998 it held on by raising rates on its short-term treasury bills (GKO) to 150 percent. On 13 July the IMF and World Bank approved a $22.6 billion package, but on 17 August the Russian government and central bank devalued the ruble and defaulted on their debt. 40 5

Russia's default brought down the US hedge fund Long-Term Capital Management (LTCM). Founded in 1994 by John Meriwether, formerly of Salomon Brothers, with Myron Scholes and Robert Merton, who shared the 1997 Nobel Prize in economics, on its board, the fund had equity of $4.7 billion at the start of 1998 and had borrowed over $124.5 billion, a leverage of more than 25 to 1, with derivative positions of about $1.25 trillion notional. When the Asian and Russian crises cost it $4.6 billion in under four months, the Federal Reserve stepped in, fearing that its collapse would damage the whole financial system: on 23 September 14 financial institutions agreed a $3.65 billion recapitalisation under the Fed's supervision. Although the Fed injected no capital itself, some observers worried that its show of support for the financial system could create moral hazard, encouraging institutions to take more risk; this is the problem later called "too big to fail", and the crisis then moved on to Brazil and Argentina. 41 5

Whose fault was the crisis? Crony capitalism, financial panic, the Wall Street-Treasury-IMF complex, and Korean left readings {south-korea}

The first reading blames defects in the Asian economies themselves. Paul Krugman wrote in 1998 that the problem began with financial intermediaries "whose liabilities were perceived as having an implicit government guarantee, but were essentially unregulated and therefore subject to severe moral hazard problems". Their risky lending created inflation not of goods but of asset prices, and the bubble burst once it became clear that the government would no longer stand behind them; in this context he used the phrase "crony capitalism". The IMF's letter of intent for Korea, explaining the crisis as a "legacy of government intervention", took the same view, and the diagnosis led to the prescription of financial liberalisation and reform of the chaebol and the labour market. 42 19

The second reading sees a financial panic. In their 1998 paper Steven Radelet and Jeffrey Sachs observed that "financial history, it seems, is written by the creditors": a loan agreement always has two parties, yet in a crisis only the debtors are blamed. Sachs and Joseph Stiglitz likened the speed of the crisis to a classic bank run prompted by a sudden risk shock, and Sachs said that "instead of dousing the fire, the IMF in effect screamed fire in the theatre": its insistence on closing banks without deposit insurance encouraged runs, and its cuts in demand and liquidity bankrupted efficient, profitable firms along with the rest. Stiglitz, formerly chief economist of the World Bank, argued in Globalization and Its Discontents (2002) that the IMF had pushed premature capital market liberalisation without financial regulation, drawing in short-term speculative capital, and then, once the crisis came, imposed fiscal austerity and high interest rates that spread bankruptcies. 43 5 6 44 45

The third reading asks whose interests stood behind the prescriptions. In "The Asian Crisis: The High Debt Model Versus the Wall Street-Treasury-IMF Complex", published in New Left Review in 1998, Robert Wade and Frank Veneroso pointed out that, unlike Latin America in the 1980s, most East Asian debt was private and the macroeconomic fundamentals had looked fine until the crisis. They summarised the IMF's solution as domestic austerity to restore the capacity to repay foreign debt plus radical institutional change including further financial liberalisation, presented the critics' view of a crisis of liquidity more than solvency, and called for an international debate as important as the Bretton Woods conference. Their title set East Asia's high-debt development model against the interlocking interests of Wall Street, the US Treasury and the IMF. The economist Jagdish Bhagwati wrote the same year that the gains from free capital mobility had been asserted, not demonstrated, and named those who had created the myth the "Wall Street-Treasury complex", after Eisenhower's military-industrial complex. Stiglitz noted that the IMF's Stanley Fischer and Treasury Secretary Robert Rubin both left for jobs at Citigroup. 6 15 44

Fourth, the left in Korea and elsewhere read the crisis as a crisis of capitalism and an opportunity for neoliberal restructuring. The 1998 analysis in International Socialism argued that global overproduction in heavy and petrochemical industries and the declining competitiveness of Korean capital had produced a profitability crisis of an export-led economy, and that a "compound slump" of industrial and financial crisis led to the IMF bailout. It held that the general strike of January 1997 had shown that workers could resist mass sackings, and criticised union leaders for avoiding struggle under the pretext of "sharing the suffering" while President-elect Kim Dae-jung sought to trade chaebol reform for mass dismissals. Brenner and Bello saw the collapse of East Asia, undermined by the reverse Plaza Accord, as deepening the global crisis of overproduction. In these readings the IMF crisis is remembered as the moment that shifted the balance of power in the labour market through redundancy dismissals and the spread of non-regular work. 8 17 11