Nineteen years ago, South Korea came precipitously close to bankruptcy.
The Asian financial crisis had spread like a virus. Thailand, Malaysia, Singapore and other Southeast Asian countries were all affected, inciting fears of a global economic meltdown if the crisis couldn’t be contained.
Before 1997, South Korea had been held up as a textbook example of economic reversal and resilience.
Once a poor colony, the country underwent an unbelievably rapid transformation in the second half of the 20th century, propelled by smart policy reforms and heavy investment in education. Many called it the “Miracle on the Han River.” By the end of the century, Korea had grown to become the world’s 11th largest economy. Residents had the incomes to enjoy comfortable, “Western” lifestyles.
But in the summer of ‘97, the bug arrived in Seoul. Businesses began to fail. Left with nonperforming loans, banks collapsed, while others discontinued fresh lending. The won was in freefall. Liquidity dried up. Foreign investors yanked nearly $18 billion out of the country. Hundreds of thousands lost their jobs.
Korea’s only recourse was to seek help from the International Monetary Fund (IMF), and in December, the lender approved a gargantuan $58 billion bailout package, the largest in history. The deal required Korea to liberalize trade and its capital accounts, reform its labor market, restructure corporate governance and more.
A new crisis emerged, then, which native Koreans still refer to as the “IMF Crisis.”
The government wasted no time in raising the funds to pay back the loan, and on January 5, 1998, a national campaign was launched that today stands as one of the most moving shows of patriotism and self-sacrifice the world has ever known.
The Drive for Gold
At the time, it was estimated that South Korean households held roughly $20 billion in gold, in the form of necklaces, coins, bars, trinkets, statuettes, medals, pendants, military insignias and more. Most of it carried strong personal and familial significance, far beyond its monetary value.
Gold, after all, has typically played an auspicious role in Koreans’ personal milestones. Many families celebrate an infant’s first birthday in a tradition known as doljanchi, during which gifts of 24-karat gold rings are customary. Gold jewelry and watches are routinely given to newlyweds, as we also see in India, Turkey and elsewhere. Companies often award retirees with gold keychains.
This is the Love Trade I speak so frequently about, responsible for driving a huge percentage of the demand and price of gold. In many parts of the world, gold jewelry is more than just beautiful ornamentation—it’s also prized as an important form of financial security.
Koreans know this all too well. Ninety years earlier, in 1907, the Korean Empire owed Japan 13 million won, equivalent to an entire year’s budget. To help pay it off, men quit smoking while women sold their cherished wedding jewelry.
Gold again came to Korea’s aid in 1998.
Nearly 3.5 million people, almost a quarter of the entire country’s population, voluntarily participated in the campaign. Queues of people—young and old, rich and poor—stretched for blocks outside special donation points, all of them answering the call to help their country. Yellow ribbons proclaiming “Let’s overcome the foreign currency crisis by collecting gold” could be found pinned to people’s shirts.