Filed Under: Economy, South Korea, Trade, U.S.-ROK relations

On April 13, 2010, Sam Jaffe and Myung Oak Kim, co-authors of the recently released book, The New Korea: An Inside Look at South Korea’s Economic Rise, discussed how South Korea differed from the United States in its responses to the current recession, and what lessons the United States can learn from South Korea’s handling of the global financial crisis.

In their presentation, Sam and Myung Oak proposed that the true miracle about South Korea was not the rapid economic growth it experienced in the last few decades, but rather the cultural transformations it underwent in the process, changing from an autocratic, inward-looking, ethnically homogeneous society into a democratic society that has embraced multiculturalism and opened up to the outside world.

The traumatizing effect of the 1997 “IMF crisis” taught South Korea some valuable lessons that it was later able to apply successfully to the most recent economic downturn.  Jaffe explained that the terms “rubber ball” and “dead cat” bounce are used by Wall Street traders to describe different stock performances. South Korea is like a “rubber ball” because its economy has shown resilience during the current recession. The recent performance of the US economy, however, is described as a “dead cat” bounce because it is still struggling to recover from the crisis. Jaffe argued that there are three main reasons for South Korea’s superior economic performance following the downturn. First, Korea’s culture of job security and aversion to layoffs led Korean companies to implement job-sharing programs, in which instead of one employee being fired and another retained, two people shared the same job and split the hours and wages. Second, the South Korean government drastically devalued the won (the South Korean currency) in order to boost exports and quickly improve the economy. Third, during the IMF crisis, Korean companies focused on strategic long-term planning rather than worrying about the short-term effects of the crisis, which allowed them to not only emerge from the crisis, but to also enjoy tremendous success today. Jaffe stated that he believes that these are all lessons that the U.S. can learn from South Korea in dealing with the current (and future) economic recessions.

DOWNLOAD

Transcript | “The Rubber Ball and the Dead Cat Bounce: Why South Korea and the U.S. Reacted So Differently to the Global Recession” (April 13, 2010)

Slideshow | “The Rubber Ball and the Dead Cat Bounce,” as Presented by Sam Jaffe & Myung Oak Kim