226/YOUR MONEY OR YOUR LIFE!
the exchange rate. The problem was - and the same goes for other
countries - that the market was functioning abnormally due to the
excessive influx of dollars. When dollars flood into your economy,
your currency is probably overvalued.' Further on, Bautista engages
in self-criticism. 'We should have applied much stricter measures
over the last two years, to control the enormous influx of American
money. We could track portfolio investment more closely, we should
also encourage these funds to make a longer-term commitment to the
country by penalising short-term speculative operations.' But for the
moment, the IMF remains hostile to such measures.
The IMF and the South Korean Crisis
The crisis thundered into South Korea in November 199 7. In its
October 1997 quarterly bulletin on economic prospects for the
coming two years, the IMF makes absolutely no mention whatever
of the crisis that would hit the world's eleventh most powerful
economy a few days later.
After the fact, the IMF did exactly the same thing as the army of
neo-liberal editorialists and economists. Having praised South Korea
to the heavens until 1996, it changed its tune overnight. The South
Korean system, it now said, was based on too much overlapping
between state employees and institutions, financial establishments
and industrial houses. These financial and industrial establishments
form huge conglomerates - the chaebols - that finance political
leaders in exchange for continued economic privileges.
The neo-liberals also criticise South Korea for maintaining a highly
protectionist arrangement, an overly strong public sector and a social
welfare system seen as too favourable for workers.
Is it true that the South Korean government opposed liberalisa
tion? Definitely not. For proof, one need go no further than a report
filed by an IMF mission sent to the country in November 1996 and
the minutes of the debate between IMF leaders that followed the trip.
Here are some excerpts:
- On the question of the elimination of tariff barriers and other
obstacles to imports. 'Since 1994, the authorities have progres
sively dismantled obstacles to imports and reduced tariffs in
accordance with the Uruguay Round agreement. The granting of