Government Action and Transparency

First, it is essential to investigate the connections between the government actions preceding the economic collapse in each state. Transparency in government is an issue relevant to the discussion of both Argentina and South Korea. The government of Argentina purportedly reported surpluses in economic matters before the crisis, while a deficit truly plagued the economic structure of the state. If government officials were more up front about the state of the economy in Argentina, a crisis on this scale may not have occurred. South Korean government officials were similarly deceptive before the crisis of 1997. For instance, the government assisted large industries and bailed out banks without any public knowledge. Chaebols were allowed to dominate certain industries with government consent and active approval. Inefficiencies in production occurred as a result of continued government support to industrial monopolies. Again, transparency in government dealings is truly important to maintaining economic and political stability.

Exposure to foreign trade is also a pressing issue in the comparison between Argentina and South Korea. Argentina was faced with the problem of excessive imports and very limited export potential. Complete dependence on foreign markets can either boost a nation's economy or bring the nation to shambles as a result of capital flight or decreased interest in the particular market. Along with increased imports come more loans and national debt. Burdened by a huge debt, the Argentine government eventually succumbed to financial collapse. Correspondingly, in South Korea dependence on foreign investment contributed to economic collapse as well. After the United States lost interest in the South Korean market following the end of the Cold War the government began to struggle with economic stability. Losing a large portion of its financial support, the economy of South Korea needed foreign investment to support the largely export-based, chaebol-owned, economic enterprise. Without the support from abroad, overproduction became rampant and the economy of South Korea slipped into recession.