Brokers are jumping off hotel balconies in Hong Kong. In Thailand, the government has put out a mental health alert. Suicide hotline switchboards are jammed in Korea. Currencies have become worthless (the value of the Indonesian rupiah against the dollar plunged 80 percent in four months) and stock markets are reeling. Amidst the carcasses of East Asian tigers, there is a frantic search for someone to blame.
Op-ed pages are suddenly spiked with we-told-you-so pundits. And the biggest of these self-righteous sources of unsolicited advice is the International Monetary Fund whose high priests till as late as June last year were praising Thailand for getting things right. When, under speculator pressure, the Thai baht tumbled in July and the contagion spread to neighbours, the same guys shook their heads and cluck-clucked. From Seoul to Jakarta, on the hour every hour, we watched on CNN Caucasians in heroic ties and suits offering multi-billion-dollar bailouts to sheepish central bank chairmen.
There was no attempt anymore to suppress the victory dance of Western triumphalism – first Communism, and now those upstart tigers that were threatening us with all their talk of the Pacific Century. The IMF has only one pill- it prescribesaspirins for both headaches and hernia. prise anyone if it did not put the interests of its OECD masters above everything else. The Fund has only one pill – it prescribes aspirins for both headaches and hernia. The conditionalities the Fund has demanded and got from Indonesia, Thailand and Korea could actually make it harderfor them to rebound. Their agony will in all likelihood be prolonged.
What the Fund told the South Koreans to do in return for 60 billion dollars is exactly what it told the Mexicans four years ago, even though the situation in the two countries couldn´t be more different. The Rx is the same: balance your budget, raise interest rates, restore price stability, raise taxes, deregulate and limit money supply. Koreans are thrifty, diligent and efficient, and they are being treated as if they are Latin American laggards.
The Asian “miracle” was not a miracle, it was a result of many decades of hard work, strong and often visionary leadership and development priorities that emphasised investments in human resources. It was also the result of a strong government role in pushing export-led growth. Washington is out to prove that this model, practised in Japan, Korea and Taiwan, is inferior to its own dog-eat-dog market system. Washington poured oil on the East Asian fire by preventing Japan from acting early to stop the Asian slide – for geopolitical reasons it wanted a multilateral IMF-led approach.
The East Asian meltdown was caused by economic reforms not being accompanied by prudent norms and financial supervision. Another factor was that a disproportionate share of financial capital inflows were in the form of short-term foreign exchange spot transactions. Just as the Asian miracle was hyped – most vociferously by Western votaries of unbridled market – talk of its crisis is also overblown. This is a crisis of currency convertibility and should not detract from East Asia´s development achievements. In 1962, Thailand was at the same level of economic development as some South Asian countries with 57 percent of its population living below the poverty line. Today, that figure is down to five percent. In Indonesia, the world´s fourth most-populous nation, the poverty reduction has been even more dramatic So, let us not dismiss Southeast and East Asia. There is a lot that they did which we South Asians should emulate:
- An early commitment to basic health and education.
- Investment in agriculture and rural activitity which raised purchasing power and deterred uncontralled urbanisation.
- Opening up tha markets. open trade and unshackling tha economy with safety nets intact.
- Making the private sector the hub of development.
The tigers did go astray. notably by not controlling cronyism and incestuous government-business collusion , and because of authoritarianism , lack of transparency and lax bank rugulatioins. the cruch , however , came with their economies being left wide open to short-term currency speculators.
south Asia will be affected: wait till our migrant workers start being deported from Malaysia, thiland and korea . but for now. what saved us this time was our relatively ungloblised economy. Provety builds its own resilience. if you don´t rise, you don´t fall.