The East Asian crisis

The East Asian financial crisis has been seen as a condemnation of the Asian model of economic development which, until mid‐1997, was considered the model for development worldwide. Although the crisis, like that in Mexico and Argentina three years before, was a consequence of foreign capital volatility, the responses to it recommended by the IMF were based on neo‐liberal domestic economic restructuring. It can be argued that, although serious problems of corporate transparency and accountability do exist, macro‐economic management in Asia has been competent. The proposed cure may, therefore, be worse than the disease. This is particularly serious for Japan, although China will weather the storm relatively unscathed. International oil markets will face difficulties, at least in the short‐term, but the effect on Western economies may well be slight.