January 31, 2017
JoongAng Daily
Emanuel Pastreich
Recent data suggests that in terms of unemployment, bankruptcies and declining exports, Korea’s economy is in worse shape today than it was before the 1997 IMF crisis.
But this time around, the United States and other Western countries have far weaker economies and growing economic nationalistic agendas suggest that getting a bailout will be difficult. Any large-scale loans, judging from what happened in Greece, will come at tremendous cost to sovereignty.
If we look at the question of liquidity, it seems that a foreign bailout would most likely come from China — and at the very moment that China is enraged with Korea’s decision to deploy the Thaad missile defense system. That would be a tough deal to reach, even for the best Korean negotiators.
But there is also the distinct possibility that there will not be any foreign bailout that is politically acceptable to Koreans. That might mean Korea will have to create its own capital and its own reform.
But to my amazement, there is no discussion in the Korean media about how Korea is going to respond to this crisis. The time has come to break the taboo and start an open discussion about what Korea will do and how we will reform the entire Korean economic system.
First and foremost, banks should be highly regulated, very predictable and extremely boring. Speculation and quick profits should be actively discouraged by law. Elaborate financial instruments make regulation difficult and they open the door to manipulation.
We need to make sure that regulators of banks are capable, inspired and highly motivated men and women — and that they have the authority to make sure that banks follow strict rules on the use of their reserves. We need to create a new class of regulators, and I hope that they will be young and ambitious and free to make decisions without their elders pressuring them. We need to go back to the original Confucian system and have young people take exams as a form of higher service to the nation. The exams should not test facts but demand the taker provide solutions to difficult problems based on ethical principles. We need civil servants who are proud of their high standards and are not easily corrupted by the large amounts of money flowing through the system.
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