More Evil than a Korean Conglomerate
I never thought I'd give chaebol, or Korean conglomerates, a kind word. Yet, Dani Rodrik links to and highlights an argument for fair play.
'One might have expected a louder hue and cry against hedge funds that were speculating in financial markets and obtaining credit at easy terms from lenders when the current crisis unraveled. Instead we have witnessed unprecedented liquidity being pumped into the markets at non-distress rates, essentially blurring the difference between illiquidity and insolvency. We have seen the world's central banks provide enormous amounts of credit to avoid larger scale collapse. What is not so clear is the real economic benefit that the speculating hedge funds were generating. At least in the case of Korea, there were real economic benefits to be generated, employment to be created, and international markets to be penetrated. This is not to absolve some chaebols of their misdeeds -- pledging poor collateral, cross ownership among chaebol affiliates, use of cheap government credit and the like -- yet there does seem to be a double standard in the way the international community is dealing with the current crisis caused by excessive and under-regulated leveraging and the way in which Korea was pilloried in the aftermath of the 1997 crisis.'
As I'm in the process of reading Stiglitz's insider account of the '97 IMF debacle, this conclusion has a good deal going for it.
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