In 35 years, it went from poverty to riches. The financial news will give you a fuller picture of what went wrong, and the possible consequences, than I can here. Judging by the early resistance that Korea's government, business, and labor leaders are showing to the changes proposed by the IMF, the Korean model will haunt us for some time longer. To try to relate what we all see in shipping to what happened to the Korean economy, I offer you some excerpts from a Wall Street Journal article of November 24,1997. The cozy relationship between industry and government in South Korea was started under the long time dictator, Park Chung Hee, who claimed the presidency in a 1961 coup and ruled through 1979.
Real power resides in the hands of vast family-run enterprises called chaebols.
At first, the system worked but, say the economists, the model has long outlived its usefulness. While Western multinationals specialized in core businesses, Korean companies kept diversifying. The country's nationalistic government made sure the banks kept pumping money into the companies. The result was that the chaebols became monsters, competing against each other to collect assets, reasoning that more assets meant more collateral for bank loans, which would buy more assets. The resulting pyramid game has, especially in shipping, hurt everyone including the Koreans.