IMF 20 Years On: S. Korea’s Never-ending Crisis

IMF 20 Years On: S. Korea’s Never-ending Crisis

Steven Borowiec
Steven Borowiec

Near the end of the service, Pastor Huh Woon-ho asked the packed tent of congregants a question he already knew the answer to: “What happened 20 years ago?”

The churchgoers instinctively knew what Huh was getting at, and responded in low-voiced unison, “The IMF crisis.”

Before that, the worst financial crisis in South Korea’s history and arguably the most traumatic event since the Korean War, Huh helmed a church in an actual building in Seoul, instead of this drafty tent. But when many of his congregants lost their jobs in the financial crisis and donations dropped, he could no longer afford the rent. Ever since then, he has held mass a few times a week in a makeshift space outside Seoul Station, an area notorious for large numbers of homeless people.

“Whose life was upended by the IMF crisis?” Huh then asked the crowd of several dozen people seated on plastic stools, prompting several hands to go up.

Many of those who attend the church — all middle-aged or elderly — can trace a direct line from their present destitution to the crisis of 1997. Jung Seung-il, 77, was one of those who raised his hand when Huh asked whose life went downhill that year.

In 1997, Jung ran a chain of restaurants that specialized in dakgalbi, a spicy chicken dish and popular dinner item. When the crisis hit, few people could afford to dine out, and his business collapsed. He had spent his whole career working in hotels and restaurants, but couldn’t find work after the crisis. He never re-entered the formal economy, and has ever since scraped by on meager government benefits and assistance from his son. “I suffered through the IMF crisis and have never really recovered. Throughout my life since then, I’ve come to realize how scary it was,” Jung said.

“When I was young, 50 years ago, people would fall down but get back up, but now…you can’t get back up if you fall.”

We talk about the economy mostly in cyclical terms. There are booms followed by busts, recoveries that come in the wake of recessions. These terms generalize about the state of the economy as a whole but tell us little about the conditions faced by particular individuals or groups.

Perhaps once in a generation, there is an economic event so significant that it effects a permanent altering of a country’s economic landscape. And even if the country as a whole recovers as those cyclical indicators turn positive again, for some people the disaster drags on indefinitely.

The 1997-98 Asian Financial Crisis, known invariably in South Korea as the ‘IMF Crisis,’ was such an event. Over the 20 years since the nominal end of the bad times, the legacy of the crisis is a reorientation of the country’s systems of employment and a growing increase in inequality. It also affected a psychological change: People here no longer make the same assumptions about lifelong stability and employment at family-like companies.

While South Korea’s economy has, on the whole, long since recovered from the crisis, for some folks like Jung, who lacked high-level education and didn’t have sturdy jobs at big companies, the crisis never ended.

How it happened

In the late 1990s, South Korea was one of several fast-growing economies in East Asia. Much of that growth was driven by chaebol, family-run conglomerates that had grown strong on government support in the 1960s and 70s, and had extended their reach throughout the economy. In 1997, several large chaebol were pushed to bankruptcy triggered by overborrowing and sloppy management.

A foreign exchange crisis was already underway in Thailand, and confidence in South Korea plummeted, leading foreign investors to pull out. South Korean companies couldn’t pay their debts and the government didn’t have the foreign exchange reserves to bail them out, leaving the government with no option but to seek a bailout from overseas.

The front page of a major daily on Dec. 11, 1997: a picture of an exhausted dealer at KEB Bank, after hearing the Korean won exceeded the 1,500-mark to $1; headlines about South Korea receiving food aid from the U.S. (Source: Donga Ilbo, on Naver News Library)

The International Monetary Fund was formed in the U.S. in 1944, with the expressed purpose of preventing financial crises and maintaining stability in the international monetary system. In December 1997 the South Korean government accepted a $58 billion bailout package from the IMF — at the time, the biggest ever doled out by the organization — on the condition of instituting austerity policies and sweeping restructuring measures meant to reduce debt and prevent another crisis.

The bailout worked as intended, injecting sorely needed liquidity into the economy. South Koreans were also encouraged by then-President Kim Dae-jung to change their habits from saving, which had been customary, to spending. The weak currency caused a flurry of cheap exports that got production humming again. By 1999, the South Korean economy was back to double digit growth, a recovery that defied even optimistic projections.

Economists, activists, community workers and regular people who lived through the crisis interviewed for this article say that the crisis and the conditions imposed by the IMF bailout paved the way for a less equal, more individualistic South Korea, where employment isn’t guaranteed, smaller companies can’t compete, and if the economy turns against you, you’re mostly on your own.


The lasting impact of the 1997-98 crisis is conspicuous in Seoul’s Yeongdeungpo district, a post-industrial area along the Han River in the city’s west. At the time of the crisis, newly unemployed people heard that there might be work in Yeongdeungpo factories and workshops, and came in large numbers. Many left behind their families, ashamed at how they could no longer provide.

Some of them are still there. Park Jin-shik, 58, was laid off from his job as a boiler repair man in 1997, and took the train to Seoul from his home in North Chungcheong Province. Today he lives in a goshitel, a musty room about the size of a queen sized mattress.

Park’s tiny living space is filled with his belongings: several sets of clothes, packets of instant noodles and a hot plate for cooking. Goshitel are meant to be short term accommodations, but Park has lived in spaces like this for the past 20 years. He has decorated the walls with photos of natural landscapes cut out of newspapers, green spaces of trees and mountains.

“I want to escape into nature,” he says.

He has never found a way out of his post-crisis poverty. “It was a lonely time,” Park says of the height of the crisis. He described spending his days in crowds of jobseekers, yet feeling alone the whole time. “We usually wouldn’t talk to each other. We were all ashamed; no one wanted to be here.”

That anguish has faded, but not gone away completely. A report released earlier this year by the Korea Development Institute on the twentieth anniversary of the crisis found that 57 percent of respondents said the crisis was the worst event over the last 50 years of South Korean history, while 64 percent claimed it had caused them psychological distress.

Lee Je-min, a professor emeritus of economics at Yonsei University, ties the trauma of the crisis, and the instability it caused, to South Korea’s stubbornly low birthrate. “As the economic growth rate stays low, the birth rate stays low, too,” Lee told Korea Exposé. “People were shocked by the crisis and have since had fewer children.”

Park was in his 30s when the crisis hit, and says that the downturn may have been the reason he never found a wife or had children. He says that while he would welcome a larger income, he doesn’t crave riches, he just wants to be stable. “I never know who might help me, or how I’m going to survive.”

But he’s skeptical about wealth. “I saw on TV that even people who won the lottery weren’t happy. Greed causes envy. I have no choice but to be content.”

Kim Hyung-ok, a manager of a homeless shelter, has worked with homeless people in Yeongdeungpo for more than 20 years. He remembers the crisis as a time when shelters saw a massive influx of new residents, many of whom had lost jobs and then had family problems as a result. “The middle class was hugely affected. Those with more education or professional certifications were able to move on, but those who were older or had less education, they live here. They’re still here,” Kim told Korea Exposé in an interview at his office.

Kim said that many of those who lost stable blue and white collar jobs were left with limited employment options beyond low-wage labor. After the crisis, irregular jobs became far more common in South Korea, as under pre-crisis labor laws it was almost impossible to fire workers. In its reform package, the IMF used its best Orwellian language to explain that the relevant laws would be “strengthened to facilitate the redeployment of labor, in parallel with further steps to improve labor market flexibility.”

What this amounted to was a steep rise in the number of temporary positions, which didn’t provide benefits such as health insurance or employer contributions to pension plans, and paid lower wages. Last year even the IMF itself commented on the complicated legacy of its own policies, writing, “there are aspects of the neoliberal agenda that have not delivered as expected,” and that when it comes to austerity policies, “the costs in terms of increased inequality are prominent.”

In post-crisis South Korea, many of those who lost stable jobs but had savings opened their own businesses, the type of low barrier to entry operations, like fried chicken joints and convenience stores, that line the streets of any South Korean city.

Kim Yong-ha, a professor of economics at Soonchunhyang University, says that the IMF crisis took a bite out of the middle rungs of the economy that hasn’t grown back. “Companies that could compete internationally survived, whereas those that couldn’t disappeared. Job stability decreased, leading to the current situation where Korea has a lot more self-employed people than other countries, and it has become increasingly difficult for them,” Kim told Korea Exposé. As of 2016, 25 percent of South Koreans were self-employed, compared to 15 percent in Europe and six percent in the U.S.

TV broadcasts throughout 1997-98 show big businesses in South Korea declaring bankruptcy one after another.

Of course, the after-effects of the IMF crisis are not the only factors behind growing inequality in South Korea’s economy today. One Yeongdeungpo street food vendor, a middle-aged woman surnamed Kim, said things are worse for street level businesses now than they were during the 1997-98 crisis, with there now being far more malls and online options for eating and shopping. “If we sold ten then, it would be two now,” Kim said.

“I have to hang out with other beggars”

Throughout the 1990s, before going into business for himself, Jung Seung-il, the churchgoer, worked for a man who owned a chain of more than 100 dakgalbi restaurants. Jung was in his 50s and tired of toiling every day so someone else could make the big money, so he decided to open his own dakgalbi joint. He believed that since he was capable of bringing in money for his boss, he could do just as well for himself.

After launching his own dakgalbi venture, Jung began reading in the newspapers about this thing called “IMF” and how life had become difficult across South Korea. “We didn’t really understand it, because we had never been through something like that before.”

His decision to go into business for himself meant that he had no safety net when it hit. Yes, South Korea had been poor before, but never before had there this kind of collapse of a previously thriving economy. And there hasn’t been one since. Though South Korea was initially hit hard by the global financial crisis that started in 2008, a government stimulus package prevented a prolonged recession.

Despite stubborn low growth conditions, the economy is now better positioned to avoid a major crisis. Jang Bo-hyung, a researcher at the Hana Institute of Finance, said the country has learned some lessons through the crisis. “South Korea won’t be blown away again like in 1997. Companies are a lot stronger now, the country has much larger foreign exchange reserves,” Jang told Korea Exposé.

Jung is still struggling. His wife passed away ten years ago, and he was left with her debt, 15 million won ($14,000) of which he has yet to repay. He says one of the hardest things of his fall from financial comfort was the psychological pain of losing social status. “Everyone at the church is…to be mean, they’re all beggars. I used to live a pretty good life. I worked hard and I was part of the social elite, but ever since my business went bankrupt I have to hang out with other beggars.”

Huh’s church doesn’t just teach Christian scripture, it also spreads South Korea’s gospel of effort, the belief that any problem can be solved by working harder. Upon arriving for the service, congregants are given a flyer with the week’s program, which includes a translated quotation from American writer Stephen King.

Under the heading, “Effort makes success,” the quotation reads, “Talent is cheaper than table salt. What separates the talented individual from the successful one is a lot of hard work,” the implication being that hard work can improve the fortunes of the destitute people at this church. But many of them are elderly with health problems and not a lot of energy left to reinvent themselves.

The twentieth anniversary of the crisis comes at a time when South Korea’s youth are feeling that this gospel of effort is unfair, as it blames individuals for any failures while not critiquing structural inequality and the lack of stable jobs since the late 1990s. South Korea still lacks a strong social safety net for people who can’t provide for themselves. For the old folks left on the sidelines of the economy for the past 20 years, and the young people seeking to establish themselves, being told just to work harder is little help.


Korea Exposé intern Rachel Oh contributed to this report.

Cover image: Behind the glittering lights of 21st-century South Korea, the traumatic effects of the IMF crisis 20 years ago still remain. (Source: hangidan via Flickr, CC BY SA-2.0)

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