Globalizátion: The irrational fear that someone in China will take your job

Chapter 5. International Finance in a Global World: Home Field Advantage

In early 1997, Kwan Ju was happily established as a middle manager for a major South Korean Bank. His standard of living was unprecedented by historical South Korean measures, and he had little anxiety about the future. The South Korean economy had been growing rapidly for over 40 years with only a few bumps along the way, and it was continuing to thrive despite a nagging deficit in its external balance of payments that it financed largely with debt from abroad. The principal topic of public discussion was a potential rapprochement with North Korea.

On May 14 and 15, Thailand's currency, the baht, was sold off by speculators and dropped significantly. In June, the central bank of Thailand announced that there would be no devaluation. That policy lasted until July 2, when Thailand was forced to devalue the baht by from 12 to 15 percent. By August, with its economy melting down and the finance minister resigning, Thailand had been forced to go cap in hand to the International Monetary Fund for a $16 billion rescue package. It presented an austerity budget required by the IMF that sharply reduced government spending. But so far, these problems in Thailand seemed too distant from Kwan Ju's life in South Korea to cause any concern.

Still, the Malaysian ringgit had also come under attack and declined sharply, as had the Indonesian rupiah. In July, Malaysia ceased to support its currency and, like Thailand, began to ...