Global Policy Forum

by Seo Jee-yeon

A World-renowned economist Joseph Stiglitz said yesterday that Korea has recovered from the 1997 financial turmoil with dramatic speed and has become one of the nations most benefiting from the globalization process. ``Globalization has various dimensions and Korea is one of the biggest beneficiaries of globalization in terms of export expansion", said, a professor at Columbia University and winner of the 2001 Nobel Prize in economics.

His remarks were made at a press meeting yesterday of the World Knowledge Forum being held Oct.15-18 at the Seoul Grand Hilton.

When asked to briefly evaluate Korea's economic recovery from the 1997 financial crisis, he said Korea's recovery was impressive and quick, and he lauded the nation's reform efforts in the corporate sector.

Stiglitz, a former World Bank chief economist, who is famous for his criticism of global financial institutions such as the International Monetary Fund (IMF) and the World Bank, again criticized the IMF's prescription for Korea in 1997 as he argues in his latest book ``Globalization and Its Discontents".

The Korean economic turmoil was caused by problems in the macro economy of the world, so when the global economy improved Korea also recovered, he said.

``Besides problems in the micro economy, back then, there were also problems related to chaebol, including their corporate governance and transparency, that many Korean people had recognized long before the crisis. They have tried to do something about them but they had always met with resistance. And what the crisis did was to energize the political process to allow those reforms to occur. So I give the credit not to the IMF but to Korea and to the crisis, which forced the nation to face up to the problems in ways that other countries did not do", said 2001 Nobel Prize winner.

He noted the improvements in the corporate sector are important for the nation's long-term growth, but he made it clear that those problems were not the reason for the financial crisis.

When it comes to finding a solution for rising levels of household debt, the latest hot potato in the management of the nation's economy, he advised a review of the ratio of high debt to household incomes and the creation of a more flexible mortgage structure to allow households to better manage their debt.

Stiglitz was negative about the benefits of a possible U.S. attack of Iraq, criticizing the Bush Administration's mismanagement of economic affairs.

``Most of the recently uncertainties in the global economy are obviously arising from U.S. threats of a war against Iraq", said Stiglitz.

He went to say that there is could be positive scenario emerge from a U.S. war on Iraq if it was ended quickly and oil could then flow in greater volumes and stimulate the economy, but he warned of the significant probability of an opposite scenario, a prolonged invasion leading to a oil price hike and conflagration of turmoil in the Middle East, that would be likely to hit the world's economy hard.

``Despite an array of benefits, the single thing about the nature of globalization that he is most discontented with is the imbalance that is seen between the developed and developing nations".