[FOUNTAIN]Once bitten should mean twice shy“There is only a very slim chance that Korea could experience a currency crisis like Latin America or Thailand,” Alfons Vicomte Verplaetse, the president of the Bank for International Settlements, said on Sept. 19, 1997.
Many newspapers published his comment as their lead story. Mr. Verplaetse said that Korea’s economy was healthy and robust, and that the won was fundamentally different from Thailand’s baht.
Two days earlier, newspapers carried a similar comment by the International Monetary Fund managing director, Michel Camdessus. In an interview with the JoongAng Ilbo, he assured his listeners that the Korean economy was not facing a crisis. He forecast that Korea would be able to maintain 6 to 7 percent annual growth easily. The JoongAng Ilbo ran the interview with Mr. Camdessus from Washington D.C. as its lead story.
In retrospect, both assessments were overly optimistic, if not wishful thinking.
Only three months later, Korea’s foreign currency reserves were drained and the country asked the International Monetary Fund for a bailout.
After a series of bankruptcies by business giants, the currency exchange rate against the dollar was approaching 1,000 won for the first time. The government emphasized that the economy was solid. The occasional supportive comments such as those by Mr. Camdessus or Mr. Verplaetse backed up the government’s optimism. Optimism and a sense of urgency coexisted as the Korean economy was sinking.
The financial situation today is much different from seven years ago, but we can see similar confusion. Last week, scholars criticized the Roh Moo-hyun Administration’s blunders in its economic policy at a seminar hosted by the Korea Institute of Finance.
But the presidential policy adviser Lee Joung-woo flatly said that the fears were groundless. While some raised concerns that the Korean economy could fall into a prolonged recession like those seen in Japan or Latin America, Mr. Lee said critics were offering no alternatives.
That may be partly true. Newspapers seem to be printing more emotional complaints than sober analyses. But groundless optimism could dull our sensitivity to a crisis. Look at those seven-year-old clippings.
by Nahm Yoon-ho
The writer is a deputy city news editor of the JoongAng Ilbo.