What eurozone countries can learn from South Korea
- 9 July 2012
- From the section Business
It's hard to believe that just 15 years ago South Korea teetered on the brink of bankruptcy.
Seoul's commercial district today is alive and busy, but in 1997, its businesses were vastly indebted, its banks were over-leveraged and its financial system was on the verge of collapse.
The Asian Financial Crisis had hit and South Korea was determined to find a way out, fast. And it was successful.
Firstly, it obtained a massive $58bn (£37bn) loan from the International Monetary Fund (IMF), and then it swallowed the tough conditions attached.
Long-time Seoul resident, Mike Breen, who was working here as a journalist during the crisis, says many Koreans today are astonished that the Greeks when faced with a similar situation are "giving two fingers to their saviours".
"The Koreans took on conditions that they didn't like," he says. "So much so that they called it the 'IMF Crisis', as if it was caused by the IMF.
"But within three years, they turned it around - quicker than any other country - and then they paid [the loan] back."
Two things about the way South Korea faced the Asian Financial Crisis were remarkable.
One was the speed with which the country rebuilt its economy. The second was the fact that South Koreans so willingly helped them do it.
Seoul resident Choi Gwang-ja lives in a high-rise apartment with a view of the city's glitzy southern district. Here, apartments go for $1m a piece and are a symbol of South Korea's success.
As Choi Gwang-ja watches her nine-month-old grand-daughter play with a toy keyboard, she explains it is a tradition for families in Korea to receive gold rings on the birth of their children.
But Choi Gwang-ja doesn't have the ring she was given for her own daughter's birth; because, like many other South Korean women, she sold her gold jewellery to help dig the national economy out of the financial crisis.
"To think of all the gold and the memories that we had to give away," she says. "It's really heartbreaking. And it makes me fill with tears even now, because each piece of jewellery had a story - it was my wedding ring, my husband's wedding ring, it was the ring given to me when my daughter was born," she says.
"But at the time, it was the only thing we could do. People were saying that the whole country was going bankrupt."
Urged on by the main TV networks, millions of households reportedly turned up to gold-collection centres across the city.
Other campaigns urged people to buy local products and donate spare foreign currency to the government.
These campaigns ran alongside draconian restructuring programmes. And in a country where trade unions are seen as militant - there were job cuts. So how did the government do it?
At the Finance Ministry offices, the memories of that time are stark.
"It was frightening, because there was a feeling of panic," says Lee Chan-woo, the ministry's deputy director of economic policy during the Crisis. I asked him what the secret was to getting the public on board.
"Burden-sharing," he said. "Every economic player should take their fair burden of the economic restructuring - so asset holders and major shareholders, they cut their stakes in the companies or passed on their assets.
"Managers and workers agreed to accept salary cuts and layoffs. The consensus among the people is a key ingredient, so we asked our people to take the bullet. And they did."
Though Mr Breen said it wasn't simply that South Koreans trusted their government more.
"They are as self-interested and disunited and mistrustful as any European," he says. "But combined with that, they have a recent experience of poverty, and what it took to bring them out of it, and they did that through nationalism - by the individual sacrificing for the whole," he says.
"So when the nationalistic or the patriotic card is played by government in a convincing way, then everybody rallies round.
"And, in a lot of European countries, I'm not sure that many people are convinced there actually is a crisis - they just read about it in the papers.
"It's very complicated, and there's a lot of chattering about what's causing it and who's responsible. It's just a load of noise," he says.
"For the Koreans, the noise stopped."
Another factor, says Mr Breen, is welfare: Koreans didn't have much to fall back on during the financial crisis, and so "they knew what it meant".
Even now, South Koreans seem alive to the impact of the eurozone crisis. This is an export-led economy, and Europe is one of its largest customers.
Choi Gwang-ja says she doesn't understand why Europeans react so differently to the threat of bankruptcy.
"I know the financial crisis in Europe is different to ours, but if they came together like we did, they could overcome it too," she says.
"Any country can do it if there's a national movement to organise people. Korea is such a small country, and families in Europe are much richer, so I would think they would have even more gold sitting at home."
In fact, the jewellery-collection campaign in Korea was more of a psychological than financial boost to the nation. Nevertheless, says Mr Breen, it might do Europe good to try it.
"Europe has had a very nasty experience - in living memory - of nationalism, and Europe's a very sophisticated place, so sometimes the appeal to that unity seems a bit naff," says Mr Breen.
"You know how [Europeans] sometimes regard Americans as too optimistic and simplistic John Wayne-y: it's a pity, because actually you need that."
That kind of unity in South Korea today though is sometimes difficult to feel.
The growing gap between rich and poor, old and young, and between politicians from all sides can emphasise division rather than cohesion. Welfare is expanding, people are getting richer, and the memories of poverty are slowly dying out.
The question of how Koreans would respond to a crisis now is one many people are pondering.