The Korean Christmas Crisis

While the Indonesian crisis was the most intractable of the Asian mishaps of the late 1990s, the Korean crisis was the most dangerous. It did not last long, but caused great anxiety, not only in Asia but across the globe. The Korean economy was the eleventh largest in the world, considerably bigger than those of Thailand and Indonesia. It was also an important trading partner, not only of Japan and other countries in the Far East, but also of the United States and Europe. Its banking system was quite advanced and was closely connected to important financial centers. A financial and economic meltdown in Korea would not only have created severe problems in East Asia, but carried a large potential for further contagion elsewhere in Asia, as well as in Eastern Europe and Latin America. It was even feared that the burgeoning Chinese economy, which was becoming an important engine of economic growth in Asia and beyond, would be seriously affected. Finally, an economic collapse of South Korea could have endangered the geopolitical balance on the Korean peninsula, possibly emboldening the rogue North Korean regime to launch an attack on Seoul.