ABSTRACT
The immediate trigger for the 1997-8 Korean crisis was the collapse of the Malaysian, Indonesian and Thai economies. These events, however, only brought forward the inevitable. As we have made clear throughout the book, the fundamental cause of the crisis lay in the weak profitability of domestic firms. It is only a slight exaggeration to say that major Korean firms made no money in the years immediately prior to 1997 and that these firms had in any case only a passing interest in actually improving their profitability. It had never really been necessary for Korean firms to make a profit in order to survive and prosper. Rather, up until the 1980s firms’ success had been dependent upon their ability to meet government-defined targets and objectives. Economic liberalisation freed the chaebol from these obligations and allowed management to pursue quixotic expansion plans without concerning themselves about governmentdefined targets or anything as mundane as profitability and solvency. As Korean firms and financial institutions came to enjoy increasing unfettered access to global markets it was inevitable that their acute financial vulnerabilities would be exposed and the entire regime of accumulation would collapse. This is precisely what happened in late 1997.
