IMF’s Bitter Medicine Brought Growth, But Also Inequality

The IMF austerity recipe for growth after the Asian financial crisis prompted protests; South Korea has seen growth since, but is still wracked by inequality, corruption and protests

Moon Jae-in became South Korea’s president in 2017 and the wake of a corruption scandal and impeachment of his predecessor. He has made addressing inequality a priority. “He is responding to a growing despair in South Korea that ordinary people cannot get ahead, small- and medium-sized companies cannot compete with the few large conglomerates dominating the economy, and the small number of well-paid, stable jobs mostly go to young adults from well-connected families who could afford to attend expensive private schools,” explains journalist Steven Borowiec. Corporate profits grew as lifelong jobs became temporary positions and wages went stagnant. “The president is therefore plotting ambitious moves to redistribute wealth and level the playing field of South Korea’s business landscape.” Many South Koreans blame a bailout, restructuring and labor reforms imposed by the International Monetary Fund after the 1997-98 Asian financial crisis. South Korea paid off its IMF debt ahead of schedule, and the path taken by Moon corresponds with IMF recommendations for reducing inequality including increased tax rates on top earners, a universal basic income, and public spending on education and health. – YaleGlobal