WARNING: The following review contains spoilers. If you have not yet seen Default (국가부도의 날) and wish to do so without having the plot given away, then do not read this.
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The IMF is Cast as the Villain, Unsurprisingly
At the end of October, when I read that there was going to be a movie made about the Asian Financial Crisis, my first instinct was to be concerned. To this day, many South Koreans refer to the Asian Financial Crisis as the IMF Crisis. The fact that it’s called the IMF Crisis shows that South Koreans view the IMF - the International Monetary Fund - as the villain. However, the IMF was what saved South Korea. It wasn’t the villain at all.
As economic bubbles started to burst from Thailand to Indonesia to Hong Kong toward the last days of 1997, the South Korean economy began to nosedive. South Korea suffered an acute shortage of foreign currencies (such as the U.S. dollar) and the economy was in bad shape. Standard & Poor’s downgraded South Korea on October 24th, 1997, from AA- to A+, on November 25th, 1997, to A-, on December 1st, 1997, to BBB-, and assigned South Korea on December 22nd, 1997, a speculative-grade sovereign credit rating. A speculative-grade sovereign credit rating is a fancy way of saying that a national economy is worthless.
The South Korean economy was saved by the IMF. While it’s true that the conditions that the IMF put on the loan - US$58.4 billion, which was the largest aid package that the IMF had provided up to that point in time - that it had given to South Korea were punishing, they led to reforms that allowed the South Korean economy to grow stronger than ever before.
However, it’s also true that the Asian Financial Crisis was so severe that there are still people to this day who have not yet recovered. And it’s likely those people never will. People forget that pre-1997 Korea was a very different place where lifetime employment was guaranteed for nearly every worker. After South Korea received the IMF’s bailout, however, one of the conditions that the South Korean government had to accept was a change in labor laws to make it easier to lay off workers, replace them with temporary/irregular workers, and thus allow businesses a way out from having to provide health insurance and co-paying for their workers’ pensions.
When people look at the entire economy with a bird’s-eye view, and look at it with an objective and educated point of view, it’s clear that the IMF was a bitter pill that South Korea absolutely needed for its survival. However, most people don’t understand economics, and the only metric they have for the health of an economy is the amount of money they have in their checking accounts. As such, while it may be understandable for people - from South Korea to Greece - to view the IMF with apprehension, it doesn’t change the fact that those people are wrong.
The Movie’s Characters, Plots, and Details
So I was concerned about this movie. I knew it was going to play on people’s emotions as there is practically no one in the country who wasn’t affected by the economic crisis. I also knew that it was going to cast the IMF as a villain. And I knew that pre-IMF Korea was going to be portrayed as some kind of once-glorious romantic past. And I was proven right when I went to watch this movie - 국가부도의 날 (Gukga-budo-eui Nal) or Default as it’s called in English - last Saturday.
As the movie starts, a black screen reads that while the events are based on historical facts, the personalities and stories are fictional. What the movie doesn’t say is how fantastical the fiction is going to be.
Though there were many different characters that were in the movie, the movie can be divided into three different groups.
The first group is led by the movie’s main protagonist Han Shi-hyeon (Kim Hye-soo). Miss Han is a talented and intelligent senior financial analyst at the Bank of Korea (BoK) who struggles with having to deal with incompetent bosses. She leads a dedicated and passionate team of analysts who try to warn the public about the impending crisis (her bosses want to keep it quiet to avoid a financial panic), and she later becomes the single voice that stands up for the average South Korean citizen and forcefully speaks out against accepting a bailout from the IMF, which would threaten the livelihoods of small businesses and infringe upon South Korea’s sovereignty and autonomy.
The main antagonist that Miss Han Shi-hyeon has to face against is Vice-Minister of Finance Jae Moo-guk (Jo Woo-jin) - a man who keeps the impending crisis a secret from the public. He only shares that information with a few wealthy individuals - corporate titans - so that they can profit from the national tragedy. He pushes everyone else in the government to agree to accepting an IMF bailout even though he knows that South Korea doesn’t need it - South Korea has other options that it can pursue besides getting bailed out by the IMF. His reasoning is based on wanting to create a “new” Republic of Korea that is more capitalistic and free from the grip of labor unions.
The second group is led by Yun Jeong-hak (Yoo Ah-in). He is a former investment banker who realizes that more and more businesses are going bankrupt and that within a week, the entire South Korean economy would implode. So he quits his job, takes his severance pay, and gathers two of his clients from when he was an investment banker to use their artificially inflated South Korean won to buy U.S. dollars.
During the 1980s, like many other Asian countries had also done at the time, South Korea adopted what is called the Multiple-Basket Pegged Exchange Rate System (MBPS). In March 1990, the MBPS was itself replaced by the Market Average Exchange Rate System (MARS). Simply put, the South Korean won was pegged to the U.S. dollar, which meant that the won was valued much higher than it was actually worth.
In November 1997, the South Korean won was valued at approximately ₩800 to US$1. At its worst after the South Korean economy collapsed, the South Korean won was valued at approximately ₩1750 to US$1. So if you were around in 1997 and bought dollars prior to the won’s collapse, and used those dollars to buy back wons after the won had depreciated the way it did, you would have made a killing.
Going back to the movie, considering the fact that one of Mr. Yun’s clients - a 24-year-old trust fund baby from Apgujeong - has about ₩10 billion to spare, which was valued at US$12.5 million prior to the won’s implosion, that means that if they got the timing just right and maximized their returns and bought back wons at the won’s weakest, they’d have more than doubled their initial capital and ended up with ₩21.8 billion.
The third group is led by Gab-su (portrayed by the immensely talented character actor Heo Joon-ho). Mr. Gab-su represents the average citizen. He owns a small factory that makes steel bowls. A father of two children, he goes deep into debt when the economy collapses. He signs a contract that would allow him to provide his bowls to a department store. This is great news because he would be able to provide for his two children and lessen his wife’s worries about the future. However, his joy is short-lived. When the economy collapses, the department store that he signed a contract with goes out of business, which leaves him with a bounced check. Unable to pay his workers’ wages, realizing that selling his home would net him less money than when he paid for it, and hounded by creditors, he contemplates suicide.
Heo Joon-ho is the only one who made this movie watchable. He puts his heart and soul into portraying this tragic character, and is the only one who feels human in a movie about the second most traumatic event that occurred in South Korea’s history.
French actor Vincent Cassel also appears in a small role in the movie as the Managing Director of the IMF. The role that he was given was a small one, and Cassel didn't have much to work with. He was entirely forgettable in the role, but that is not an insult to his acting abilities. Considering the overall bias and tone of the movie, it would have been all too easy for M. Cassel to portray his character as cartoonishly evil. However, he played his character as a disinterested professional who is simply doing his job. For that, M. Cassel deserves credit.
Anti-American Messaging
In a climactic scene in the movie during the bailout negotiations, the IMF’s Managing Director is accosted by Miss Han Shi-hyeon, a scene which would likely get every red-blooded Korean’s heart pumping with patriotic rage.
Among the conditions of the bailout, the Managing Director insists that South Korea allows foreigners to engage in hostile takeovers of financial firms, and to allow foreign investors to own up to half of Korean businesses. However, Miss Han Shi-hyeon discovers that one of the U.S. Treasury Department’s undersecretaries quietly joined the Managing Director’s entourage, is staying on the same floor in the hotel as the Managing Director, and is providing him with instructions from Washington D.C.
Livid at this discovery, she accuses the IMF’s Managing Director of attempting to violate South Korea’s autonomy and sovereignty, and helping to further American interests at the expense of South Koreans who have lost everything. And in a highly unrealistic scene, despite the fact that she is a financial analyst and is in a room with the Minister and Vice Minister of Finance, she takes over the negotiations and tells the Managing Director that she cannot accept his conditions. Never mind the fact that she has no legal authority to accept or reject any of the IMF’s conditions.
Dramatic as that scene may have been, however, no one actually knows what went on in these negotiations. In reality, these meetings took place in private, and no one from the press was allowed to cover the discussions. No one knows how many people took part in the meeting, or who they were, or what was discussed. In fact, the inspiration for the entire movie was based on a single line from a news report - IMF 대책반이 있었다. There was an IMF task force.
Miss Han Shi-hyeon, the movie’s main protagonist, was created out of thin air. When Choi Kook-hee, the movie director, was asked about the character, he simply replied “There might have been a person like that in the task force.”
No one can accuse Choi Kook-hee of distorting the truth. He admits from the very beginning of the movie that while the events are based on historical facts, the personalities and stories that are depicted are fictional. What he is doing, however, is selling an anti-American and anti-capitalist narrative that is based purely on fabrications.
The Capitalist Straw Man
Vice-Minister of Finance Jae Moo-guk is corrupt, deeply misogynistic, and treats the financial crisis as an opportunity to enrich himself and his friends while reshaping the country into his image despite the fact that people are losing their livelihoods and literally jumping off bridges. On top of all that, he is smug. Jae Moo-guk is a character who is easy to loathe.
Before meeting with the IMF Managing Director, the IMF task force meets together to decide how to best deal with the impending financial collapse. At this point, even though the government is publicly denying that there is a problem with the economy and also denying that it is seeking a deal with the IMF, the fact that the Korean economy is in deep trouble is now the world’s worst kept secret. Businesses are filing for insolvency - even Daewoo, one of South Korea’s largest corporations. Foreign investors are fleeing the country. In fact, the very first scene in the movie shows an anonymous financial analyst from Morgan Stanley sending an email to all investors to take their money out of Korea “right now.”
During this meeting, Miss Han Shi-hyeon is shocked when the Vice Minister of Finance suggests that getting bailed out by the IMF would be an easy solution to solve South Korea’s problems. She saw what had happened to Thailand and Indonesia after they were bailed out by the IMF. They had to instate austere economic policies as dictated by the IMF, which made life even harder for the average citizen.
When the Vice Minister demands to know what she suggests if she is so dead set against an IMF bailout, Miss Han says that South Korea can pursue other options. She says that South Korea can borrow loans from the United States, Europe, and Japan to help pay off South Korea’s more urgent debts.
Hearing her answer, the Vice Minister does the cliche villain laugh - unnecessarily long, hollow, and devoid of any humor. He accuses Miss Han of not taking the situation seriously, and he also points out that it is odd for her to behave this way seeing how she was the one who was warning everyone else to take things seriously earlier. He admits that an IMF bailout is a drastic measure, but says that it is a necessary remedy to a drastic situation. He then asks Miss Han what she proposes they do after they use the loans from those foreign governments to resolve the more urgent problems. The economy would still have been in free fall and investors would have still been fleeing.
It was a legitimate question that our heroine could not answer. She couldn’t answer that question because he had her in a corner. The solution she was suggesting was akin to a doctor prescribing aspirin to a patient who is suffering from a heart attack.
However, Choi Kook-hee could not simply allow his movie’s villain to derail his protagonist’s narrative with a single rhetorical question. So although the Vice Minister has a perfectly valid point, as soon as he makes that point and our heroine is left speechless, he immediately reveals his misogyny by saying “This is why we can’t have women in positions of power. Women have no ability to use reason.”
When one of Miss Han’s staffers, a young woman (portrayed by Park Jin-joo) tries to object to the Vice Minister’s sexist comment, he doubles down and tells her to be a good girl and get everyone some coffee. As soon as the Vice Minister says that, the valid points he raised are completely forgotten. From that point forward, he simply becomes a bully for the audience to loathe.
The Real Reason Miss Han’s Idea wasn’t going to Work
When Miss Han suggested that there are other options available - like borrowing money from the U.S. and Japan - several of the audience members at the movie theater audibly sighed. Many people who left the theater asked among themselves what South Korea would have looked like now had the government not accepted an IMF bailout.
However, in reality, no such option was available for South Korea.
Of the different governments that South Korea could have requested for aid, the safest bet would have been the United States. However, the United States was in no position to help anyone at the time. To know why, we need to talk briefly about Mexico.
The United States Treasury Department has an emergency reserve fund called the Exchange Stabilization Fund. In theory, the United States could have used this fund to help stabilize the South Korean economy. In reality, however, it couldn’t because of the Mexican peso crisis of 1994. The causes of the Mexican peso crisis is long, but long story short, the United States could not afford to have its southern neighbor’s economy go up in flames. It would have exacerbated illegal immigration and there was widespread fear that economic panic could also spread to the United States.
President Bill Clinton tried to give aid to the Mexican government by going through Congress. He wanted Congress to pass his Mexican Stabilization Act, but it failed. At the time, the United States had just had midterm elections, and the 1994 midterm elections were also known as the Republican Revolution. Newt Gingrich was the new Speaker of the House, the Republicans ran on his Contract with America, and he was determined to make President Clinton’s life a living hell.
In an effort to work around Congress, President Clinton used the Exchange Stabilization Fund, which did not require Congress’ approval, to provide US$20 billion in currency swaps and loan guarantees to Mexico to keep its economy afloat. Naturally, Congress responded. Republicans were livid because this was a violation of the law. The Exchange Stabilization Fund was for short-term currency transactions to bolster the U.S. dollar - not to rescue cash-strapped foreign governments. So Congress passed the the Mexican Debt Disclosure Act of 1995. This bill required the submission of semi-annual reports by the President of the United States concerning presidential certifications of all international credits, currency swaps, guarantees, and loans through the Exchange Stabilization Fund to the government of Mexico.
Due to the Exchange Stabilization Fund already having been used to prop up the Mexican economy, Congress had tight control over the fund, and there was no way that the Republicans were going to allow President Clinton to pull the same stunt again just a few short years later - this time, to save South Korea.
Getting an economic package from Japan at the time was also a laughable idea. It was called the ASIAN Financial Crisis. At the time, if South Korea could be compared to a patient who suffered a serious heart attack, Japan was a coma patient.
Prior to 1995, Japan was the largest source of foreign direct investments to other Asian countries. However, two things happened to change that. The first was the Kobe earthquake, which caused huge damages within Japan and caused the Japanese government to look inward rather than outward. The second was the Daiwa banking scandal and the decline of the yen against the U.S. dollar between 1996 and 1997. In November 1997, Japan’s tenth largest bank - Hokkaido Takushoku Bank - collapsed. Earlier that year, another large bank - Nippon Credit Bank, now known as Aozora Bank - needed to be bailed out by the Japanese government.
The Japanese government was in no position to help out anyone else either. They had to get their own house in order first.
I am glad that Miss Han Shi-hyeon is a fictional character. If her character had been based on a real senior financial analyst from the Bank of Korea who was that ignorant, South Korea would have likely been in much bigger trouble than it was actually in.
Strange Character Developments
Heo Joon-ho’s Gab-su was the only character who showed any kind of believability in his character’s development. At the start of the movie, a contented and naive Gab-su thinks that he’s got the world on a string, but as the economy plummets and he loses his livelihood and he sees people around him committing suicide, he too falls into deep despair and almost jumps off from his apartment window. Twenty years later, when the movie’s epilogue takes place, an aged Gab-su still runs his small factory, but he’s wiser and more business-minded.
At the beginning of the movie, all of his employees are Koreans. But when we see his factory at the end of the movie, there isn’t a Korean worker in sight. Korean workers are too expensive to employ, and most younger Koreans today don’t want to work in the manufacturing industry, much less in small factories. In perfect grouchy ajeossi fashion, Gab-su yells at his South Asian worker, Hassan, “일 빨리 하라고!” I said work faster.
In a phone call with his grown-up son who is on his way to a job interview, Gab-su tells his son not to trust anyone. Not just those who appear to want to help as his son asks. He tells his son to trust only in himself and no one else. An economic collapse is more than just numbers falling. It has a devastating and permanent effect on a people’s psyche. Heo Joon-ho captured that perfectly.
His other two co-stars, however, weren’t given good material to work with.
Going back to Miss Han, although she sees the economic collapse coming at the beginning of the movie and understands its severity, the writers do a lazy job of researching and as a result, turn her into a naive fool. Instead of agreeing that the country needs to be bailed out by the IMF, she suggests non-existent solutions.
Furthermore, her character is a senior financial analyst from the Bank of Korea. While it’s true that one of the underlying causes for Korea’s economic crisis was banks over-lending (to dangerous levels) to corporations, it was the Bank of Korea’s job to properly regulate those banks. The people who were running the Bank of Korea were either asleep on the job or they were complicit in the whole damned thing.
Instead of being treated as an intelligent figure who can think rationally and objectively, she’s turned into a populist demagogue. During the bailout negotiations, one of the conditions that the IMF Managing Director lays out is that eleven of the country’s merchant banks had to be shut down (in reality, it was actually fourteen merchant banks). This is when Miss Han loses her cool. She says that this will affect the poor and small businesses and (unrealistically) declares that she will not accept those terms.
Had she been written more realistically, and not as some fictional populist hero, she would not have objected because she would have known that the reason the IMF insisted on the closure of those merchant banks was that those banks were no longer solvent and they were unable to pay their loans, which were estimated at a combined ₩1 trillion (at the time US$700 million).
Not only would have keeping those merchant banks opened failed to help average people have access to money, it would have also caused further financial panic and uncertainty.
I cannot stress this enough. The heroine, Miss Han, may have been warm-hearted, compassionate, and patriotic, but she was also a raging idiot.
But at least Miss Han is an easy character to understand. She is stupid. Yoo Ah-in’s character, Yun Jeong-hak, on the other hand, is just confusing to watch.
At the start, Yun is a smart analyst who sees the financial collapse coming. However, unlike Miss Han, he doesn’t have any influence in the upper echelons of the government. No one has any reason to take him seriously. In fact, with the exception of two of his clients, everyone else ignores Yun’s warnings at their peril.
In the middle of the movie, when the economy has crashed and everyone goes to their banks to demand their money, people are told that there is no money to give them. Pandemonium breaks out in the banks as people punch and kick each other, furniture gets thrown, people run from each other, some inconsolably cry in despair, and banners get ripped.
The banners are a familiar motif in the movie. South Korea officially became an OECD member in December 1996 - a full year before South Korea needed the IMF bailout. Banners congratulating Koreans for their hard work that allowed the country to become an OECD member are frequently seen in the movie - juxtaposing the hubris of the past to the despair of the moment.
When Yun and his two clients go to a bank and see the bank, its employees, and customers in complete despair, one of Yun’s clients - the trust fund baby from Apgujeong - begins to celebrate. He is joyous over the fact that the economy is in ruins because that means that he has become much wealthier than before. After all, most of the ₩10 billion than Yun used to buy U.S. dollars was his money.
When Yun sees his client behave that way, Yun slaps his client’s face repeatedly. Even though Yun is proven right, he takes no pleasure at the human suffering he sees, and he says to his client “Never brag about how you got rich in front of me again.”
After saying that, while continuing to look at the despair he says to his other client, an older and more sober-minded gentleman, that this is the time for them to do something great and meaningful. However, they never do anything great or meaningful. In fact, despite having slapped his client for tastelessly celebrating his newfound wealth, they do the same thing again - this time Yun included - a few scenes later when they drink and sing in a nightclub where they are the only patrons.
His compassion and empathy for the unfortunate also only seem like a one-time thing. Despite the reaction he showed at the bank, he shows a very different reaction later. When apartment prices plummet, Yun uses the money he has made to buy up entire apartment units. In one of the apartments that he has bought, he and his two clients discover the former apartment’s owner’s body. The previous owner presumably had no choice but to sell his home, but after getting paid much less for it than when he bought it, he hanged himself in his empty former apartment.
The trust fund baby discovers the man’s body first and runs screaming. He says they have to get out, but Yun, looking at the man’s body, says coolly “Why should I leave? After all, this is my home now.”
Even at the movie’s epilogue scene, he still hasn’t done anything “great.” He has set up his own financial consulting firm, and he charges people ₩500,000 to have lunch with him for 60 minutes, and ₩1,000,000 to have dinner with him for 90 minutes. So he obviously becomes very wealthy at the end of the movie, but he doesn’t really do anything “great,” at least according to what I suspect to be Choi Kook-hee’s moral standards.
Conclusion
The movie’s run-time is a little under two hours. If you are looking to watch a movie that is light on details and ignorant of the facts, but has a strong anti-capitalist and anti-American narrative, and you have an itch for a subprime Korean version of The Big Short (see what I did there?), then this movie is for you.
If, however, you like your movies based on historical facts to be factual, then I suggest that you skip this movie.
