The Asian Financial Crisis

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The Asian Financial Crisis

Many economists have said that the growth experienced by Southeastern Asian countries during the 1980s and early 1990s was a "miracle." Japan, Malaysia, South Korea, Indonesia and other countries in the region experienced annual growth rates of over 7 percent. Along with this rapid growth, these countries also saw very little unemployment and an almost invisible wealth gap between the different social and economic classes of citizens.

Circumstances have dramatically changed, however. In the summer of 1997, Southeast Asia experienced a time of great financial and economic turmoil. At first, the economic crisis was isolated in Thailand's financial sector, but it quickly spread to Malaysia, Indonesia and South Korea as well.

The Prosperous Times
It seems that Southeast Asia has always been able to turn bad times around and recover to end up as some of the strongest economies in the world. South Korea, for instance, was very weak and vulnerable after fighting a civil war with North Korea in 1953. However, between 1960 and 1990, the country experienced remarkable economic growth and recovery, and soon the world's 11th most powerful economy.

Many other Southeast Asian countries had similar experiences. South Korea, Hong Kong, Taiwan and Singapore were previously known as the "Four Tigers" because of their fast and aggressive entry into the global marketplace. Other examples include Japan, Malaysia, Indonesia and Thailand, each of which experienced rapid growth and prosperity in relatively short periods of time.

In the U.S., the "Asian miracle" stirred up both awe and fear. This was especially so in the 1980s when Asian products became fierce competition for American products. Japan’s automobiles and electronics were rivaled U.S. products and caused much fear among producers in these U.S. markets. This competition, in part, led to a U.S. trade deficit. U.S. congress reacted by passing a number of trade regulations aimed at protecting U.S. industries.

Southeast Asian governments engaged in acts that promoted certain industries and businesses. They provided them with tax credits or subsidies. These policies allowed Asian government leaders to pick the leading industries and helped to ensure their success rather than allow the free trade market to dictate such decisions. Thus, these countries had a power to control and dictate th...

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...g-term effects are likely to be positive, at least when society as a whole is considered. As with all things, there will be winners and there will be losers. The hope of society is that the losers lose less than the winners win, and that the winner’s gains can be reciprocated to all involved.

Bello, Walden. "The End of the Asian Miracle." The Nation. January 12/19, 1998: 16.

Butler, Steven. "New Attitudes in Asia." U.S. News & World Report. December 29, 1997/January 5, 1998: 17.

Hornik, Richard. "The Myth of the Miracle." Time. December 8, 1997: 40.

Lacayo, Richard. "IMF to the Rescue." Time. December 8, 1997: 36.

Lee, Charles. “The Next Domino?” Far Eastern Economic Review. November 20, 1997: 14-16.

Richburg, Keith. "SE Asians Call for Help as Currencies Plunge." Washington Post. December 16, 1997: A1.

Internet Sources What Caused Asia's Economic and Currency Crisis and Its Global Contagion? Nouriel Roubini The East Asian Financial Crisis: A Reflection on its Causes, Consequences and Policy Implications. IDS Discussion Paper 367. Stephany
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