Excusing the press
It’s already been 18 years since Korea was battered by the financial crisis. I was covering the Ministry of Finance and Planning, which oversaw economic and financial policy. Major corporate names fell one by one — Hanbo, then Sammi, Jinro, Daenong and Hanshin Construction. Financial institutions struggled with mismatched assets. They suffered backlash after borrowing three-month loans from advanced economies and lending them in longer maturities of one to two years to Southeast Asian countries.
The International Monetary Fund held a conference in Hong Kong in September 1997 when the currency value of Southeast Asian countries had been tumbling and the major Korean company Kia Motors had gone bankrupt. The government assured foreign investors that the Korean economy was relatively safe. Investors weren’t convinced and some ridiculed Seoul officials for being naïve. Bureaucrats and Korean journalists sat defeated in the conference room after the meeting ended.
They had to face the music: Korea was headed for an international bailout. Bureaucrats silently knew there was no other way and journalists could feel the inevitability of the prescription. But they could not outright write that their economy was doomed. They delivered the news calmly and objectively without indicating hopelessness. Pessimism wouldn’t help anyone. Some went on to claim the country was doomed, but to do so was yellow journalism.
Kang Kyong-shik, the deputy prime minister for the economy at the time, pitched throughout that fall that Korea’s fundamentals were well. He could not say otherwise. World Bank President James Wolfensohn also backed Seoul. But on Nov. 21, Seoul sought a bailout from the International Monetary Fund.
The media came under fire afterwards for neglecting its duties. The government was bombarded with accusations of being incompetent, oblivious and deceitful by telling the people that all had been well on the economic front. But how could it tell the people that they should jump ship because the economy was sinking?
Steve Marvin, then a chief researcher at Jardine Fleming Securities in Seoul, became famous for warning of a banking crisis in Korea months before. Because he didn’t have to worry about raising panic like the government or media, he straightforwardly told investors to pack out and leave Korea. He instantly became a star in Korea, while the government and media were in contrast portrayed as cowards. Korea has never overcome the traumatic experience. Potential crises are seen in slight signs of volatility. The market swung on every upset and people lost confidence.
There has been talk of the arrival of another crisis in September, and if this month passes there will be another prediction for next month. The current economic conditions are poor. The country’s biggest trade partner China has been showing alarming signs. The United States is poised to raise short-term interest rates for the first time in nearly a decade. But blind panic does no one any help. Choi Kyung-hwan, the deputy prime minister for economy, was lambasted recently by saying the jitters in China won’t affect the Korean economy that much. He was accused of being too relaxed. He would, however, be equally upbraided if he raised a fuss about the economy being in trouble. Authorities must calmly defend and watch over the economic front without raising too much alarm.
The global economy has shriveled after the global-wide financial epidemic in 2008. Large economies like the United States, the European Union and Japan have been sustaining themselves through unprecedented quantitative easing programs. But they have failed to revive effective demand. A slow-moving economy has become a new norm for the Korean economy along with a low fertility rate and profits. We have entered unfamiliar, tumultuous waters.
But we cannot move on if we are all panicky and fearful. The economy runs on sentiment. If it gives way to pessimism, it can lose any opportunity and hope of recovery. Overblown forecasts to grab attention won’t be of any help. The media and pundits must be more discreet and refrain from using sensational language. They must tell the truth, but not exaggerate. I still believe the media was right to be prudent in reporting during the 1997 financial crisis.