End “Extend and Pretend” and Confront a Fake Recovery

Korea went through the 1997 financial crisis, which devastated the entire nation.

On the surface, Korea has recovered.

Its recovery and prosperity have been based on debt leverage and robust trade balance.

Korea’s export machine has been working, but it is in trouble. Korea’s major trading partners, China, the U.S. and Europe, all have serious problems of their own.

Korea has been outsourcing its industrial base since the 1990s. As a result, its manufacturing jobs have disappeared.

Korea hasn’t really tackled its structural problems on many fronts (e.g., zombie banking sector, skewed industrial structure, too much dependence on exports, increasing income disparity, and bloated public sector). It has not really got it over with its financial crisis.

All in all, it would be fair to say it has been a fake recovery, engaging in the extend and pretend game, although this is not limited to Korea. The U.S., China and Japan have pursued the extend and pretend approach as well, as discussed. Again, who has been the beneficiary of this approach?

The consequences of this approach would impact a way of life for many generations. This is most disheartening.