Economic Crisis, Financialization and Debt Financing in South Korea

Thursday, 14 July 2016
Location: Hörsaal II (Neues Institutsgebäude (NIG))
Distributed Paper
Kwang-Yeong SHIN, Department of sociology, Chung-Ang University, South Korea
Ju KONG, Department of Sociology, Chung-Ang University, South Korea
This paper explores the rapid financialization and the rise of debt financing after the economic crisis in 1997 in South Korea. The total debt ratio to the Gross National Product  has been alsmot tripled since the economic crisis amid the fear of debt crisis. 1997 economic crisis in South Korea took place due to the solvency problem with the corporates' large debt from international financial institutuions. In the 2000s debts of individual households have rapidly increased due to the extensive financialization by which borrowing money becomes much easier and risk management was perceived less important due to the lower interest rate. This paper also interrogates differential impacts of financialization on social classes in South Korea, revealing that debt financing by households is most common among the poor. Excess financial deregulation that was introduced by the IMF for a remedy of the economic cirisis in 1997 has  sharply increased the volatility of the national economy and the risks of households on the brink of debt crisis in the 2010s.