Saturday, May 15, 2010

Greece and South Korea:A Comparison...双国故事:希腊与韩国....ギリシャと韓国:二つ国の物語

With the World Financial Crisis continuing to affect the US and Europe ever more pressingly even in 2010, its timely to compare Greece and South Korea, and in an even larger way, the Oriental way and the Western way.

In 1997, more than a decade before the 2008 World Financial Crisis speahearded by the collapse of the Lehman Bros in the US, Asia-Pacific was rocked by the Asian Financial Crisis. Back then, I still remember vividly reading in the newspaper of how Thailand's stock market had spiralled out of control, and how shortly, HK's stock market crashed subsequently as well. Thus, started a domino effect, with Malaysia, Singapore, Indonesia, and Japan all becoming embroiled in the crisis. Of cos, the country affected the most by far, was South Korea. Til then, the economies of the Asia-Pacific had been going strong and growing by admirable figures. Then it all came crashing down with the expose of the failings and weaknesses of the Asian banking and financial sector. There was painful reforms which almost all the Asian economies had to go thru and this is why with the 2008 Financial Crisis, Asian economies were not affected as badly (although still very badly during the worst period in late 08-mid 09 with countries like Singapore and Malaysia slipping into recession) and now rebounding back at an amazingly rapid pace and growing with impressive figures-Singapore, for example, is forecast to grow by over 5% GDP this yr in 2010. Other Asian economies are forecast to have comparable GDP growth rates too.

South Korea back then crashed, and the government had to borrow from the IMF a bailout package as large chaebols (South Korean corporations) crashed and many South Korean companies shut down and became insolvent with the unemployment rate hitting the hundreds of thousands. As part of the IMF bailout terms, the government of South Korea had to bring in extremely painful austerity reforms/measures calculated to bring the South Korean economy back into shape and also restructured its banking and financial sector properly. What touched me then was how media and news reports reported that many South Koreans started donating gold to the government to help the country stand back on its feet. I rem vaguely seeing housewives and citizens donating out of their own free will personal gold jewellery and personal gifts on the tele and was amazed at their patriotism and sense of sacrifice.

Contrast this with the situation of Greece currently. The country has mounting debts in the billions of euros and the IMF has come up with a huge bailout plan. This has had to be paid for by its larger European neighbours such as Germany which have demanded strict austerity measures to be brought in to reign in the spiralling debt problem engulfing the Greek government and economy at large. However, instead of following South Korea's commendable example back in 1997, and one could term the 'Oriental way'by sacrificing, the Greeks have turned to large demonstrations and rallies, destroying and defacing public and commercial buildings and holding strikes protesting the much needed austerity measures needed to bring Greece back on its feet. This is what could be called the 'Western way', discussion of individual interests and rights and the unwillingness to sacrifice for the nation's and ultimately, everyone's long-term well-being. The Greeks have shown that they are unwilling to face the responsibility of their own doing by living the life and enjoying the benefits which were never sustainable in the first place. I saw on the news that the Greeks had been fudging the figures and reports to the EU annually and taking advantage of being in the Euro zone without responsibility. They employed 1 million unproductive civil servants out of a population of 11 million. Pensions and work benefits were numerous and unjustifiable. Now, with the country in a wreck, instead of facing up to all this and cutting back, they are acting like spoilt kids, used to enjoying unsustainable luxury, and steadfastly, unwilling to face the consequences of their spending. Instead of sacrifice which brought South Korea's economy back from ruins in 1997 and accelerating such that it now has the biggest GDP growth rate in the OECD developed nation's club for 2009/10 and has thriving big brand corporations such as Samsung and LG and Hyundai, when merely a decade or so ago, big corporations were closing down, the Greeks have chosen to make their national economy worse, with strikes and protests with would inevitably bring down the economy even more.

Maybe, these lessons show that Europeans, and Westerners have a thing or two to learn from Asia as well, in that, the Western way, or the emphasis on individualism or personal interests is not the only nor best approach all the time and that the Oriental way, with emphasis on collective responsibility (which the Greek people refuse to take for their economic mess currently) and collective sacrifice (which the Koreans did back in 1997) may be the better way ahead.

PS: I also heard that some Greeks were shocked and felt betrayed that the EU didn't act fast enough to approve the enormous bailout package to assist them. Well, since the bailout is being financed by other European economies which have barely pulled out and are still on the road to economic recovery, why should they have to help the Greeks so fast? And I think they're especially kind to help the Greeks especially with all the Greek protests/rallies/strikes going on showing their unwillingness to change their ways...(i know they have to help the Greeks given the need to sustain the Euro. Actually, this entire Greek crisis has shown the weaknesses of a common currency, the Euro.)


aimlesswanderer said...

Greeks don't want to face reality - their government not only dodged the figures to get into the Euro zone, but has also massively overspent. Now the chickens have come home to roost... and it isn't pretty.

Personally if I was a politician in one of the strong Euro economies I'd be frantically going through the EU treaties trying to figure out how we could boot out Greece. You may not have to, but it'd be good to know just in case...

hcpen said...

aimlesswanderer: I know. I think the cleanest and easiest way would have been to boot them out but politically, it isn't feasible as that'd weaken the European Union as a group whereby any country can easily be kicked out and also destabilise the currency.

aimlesswanderer said...

While booting them out might weaken the EU and create a precedent, if the enormous bailout fails or if other countries need bailing out too, the whole EU might collapse - there simply isn't enough money (or good will) to bail out all the weak economies. Clearly there is a pressing need for much stricter monitoring of the fiscal health of members and would be members.

Not helping the attempt to salvage the Greek economy are the delusional ideas among many Greeks who are unwilling to make sacrifices so their country doesn't go broke. Those same people gleefully avoid paying taxes and accepted the extra government spending. I am not entirely sure about what might happen if the government defaults on its debts and is booted out of the EU, but I'd be willing to bet that it'd be worth getting 20% less wages/pension to avoid that.

My uncle visited there and said that they are "living in the past", harking back to the "golden age" nearly 2 thousand years ago. Since then they haven't achieved much... You can't live solely on the glories of the past.

And Thailand is edging towards authoritarianism, chaos and bloodshed. Land of smiles no more. Fun or all.

hcpen said...

aimlesswanderer: I hear you. That's why the EU is worried that if Greece fails it'd have a domino effect with Spain and Portugal also having similar problems financially...the EU cannot possibly bail out such a huge economy like Spain so i guess they're helping Greece to help the rest of Europe's economy.

I don't think they would let Greece out though as like I said, politically it's not possible at this stage..although that may be an option if Greece defaults on all its debt and go into bankruptcy like Iceland.

Thailand, or rather Bangkok, is definitely in danger of becoming a civil war's dragged out for longer than I thought it would.

Chris said...

U study econ anf finance last time?

hcpen said...

Chris: No lah, just my personal view..haha..

aimlesswanderer said...

They are attempting to bail out the weakest link in order to stem the panic and stop the contagion from spreading to the other weak, heavily indebted countries.

If this doesn't work, then the EU may have no choice but to either boot them out or see the EU unravel. That would have a huge effect on the world.

From what I can see, the greatest threat to the bailout is actually the Greek people. If they continue to protest on such a wide scale, and especially if the government loses its nerve or falls, then the whole situation is going to go into meltdown.

hcpen said...

aimlesswanderer: I totally agree. It's true, i think they face serious public debt and financial problems. Greece's biggest problem is it's own people's unwillingness to compromise and make the necessary sacrifices. Europe's economy is actually in big trouble anyway with Spain and Portugal being the worst and UK and France being pretty bad as well.