Korea has never really received the credit it deserves for its 30-year march to economic development and prosperity. In many ways, it surpasses even Japan's remarkable achievement. In 1960, per capita income was $80. Today, it is over $10,000. It is an astonishing feat made possible by a command-and-control domestic economy operating within a free international marketplace that absorbed Korean exports.
But as the U.S. found in the '80s and Japan in the early '90s, success can breed failure. What worked in the past doesn't always work in the future. For Korea, the future has arrived with a vengeance. The current crisis requires a restructuring of the chaebol-dominated economy. A command-and-control system where government bureaucrats use a docile banking system to parcel out credit to favorite chaebols is not flexible enough to meet the changing market demands of an international economy. Korea's economy has become too industrial and high-tech to be directed from the top down.
For proof, look at the disasters throughout the economy. With cheap, unlimited capital, chaebols have diversified far from their core products with terrible results. There are too many car factories, chip plants, and steel facilities. If the chaebols had to pay market rates for their credit, they would never have built the overcapacity that destroyed their profits. The market would have stopped them.
Korea can no longer march, military-style, into the economic future. It needs the flexibility to change as the world economy changes. To do that it needs to open its society to market forces. Many countries in the past lost their footing just as they were poised to break into the top ranks of nations. Korea should not join them. It has worked too hard.