Jennifer Ann Dwyer
Introduction 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
nvicted of embezzling funds and pressuring banks to make illegal loans to a South Korean corporation. The firm's executives had bribed politicians for special government assistance to keep their firm, which had large amounts of debt, afloat. It was said that this type of scandal was typical of the corrupt business practices in many Asian countries. Pressure for Change Many argue that by manipulating the financial sector and coddling business conglomerates with special assistance, Southeast Asian governments promoted risky and foolish business practices that have imperiled the economy. They blame the governments carelessness for the Asian Financial Crisis. They say that the extreme growth in the 1980's and 1990's was due to a large accumulation of bad debt and excessive government intervention in their economies. This is demonstrated in Richard Hornik, European business editor for Time magazine, words: "The financial crisis facing Asia today is merely a symptom of a much deeper! ors in international markets. Trouble Begins In late June of 1997 sixteen Asian financial companies collapsed which alerted investors to the stresses the economy was currently facing. . By July money market traders believed the government could be forced to abandon its pledge to link the currency unit of Thailand, the Baht, to the US dollar. They felt that the dollar was much stronger than the Baht, and thus pegging the value of the Baht to the value of the dollar greatly overestimated the value of the Baht. On the second of July the Thai government announced a managed float of the Baht. They then called on the International Monetary Fund (IMF) for technical assistance. That day the value of the Baht fell approximately 20 percent in comparison to the US dollar. Many investors were concerned that the baht would become unstable and suddenly decline in value. So, large numbers of investors exchanged the currency for dollars. They felt the value of the dollar on the international ! lism. Under this system, market forces alone would determine the successes and failures of economies, as well as prices for goods and services. Other forces would have little or no effect. Criticisms of Reform The push to reform Southeast Asia's economic model has met with some resistance, particularly within the region itself. There seems to be a general consensus that some reforms are needed to improve Asia's financial system, but many Asians are very hesitant to support the demands placed upon them by the IMF. They fear that many of these changes will reduce Asia's power to determine its own economic policies and could result in severe financial hardship. Many economists agree with these fears in the short-term. They have stated that that IMF reforms in Asia will mean increased bankruptcies, more bank closures and higher prices for consumer goods. Many say, however, the long-term result will justify these short-lived effects. On the other hand, some analysts also caution ab! ------------------------------------------------------------------------ problem. The social and political assumptions on which the Asian model was founded are terribly outdated. The global economy is far too complex and fast paced for any bureaucrats to control. The only miracle in Asia is that this approach worked as long as it did. Some analysts have criticized Japan's economic system, since it has been the economic model for other nations in the region. "Japan is the villain," according to James Glassman, a fellow at the American Enterprise Institute, a conservative think tank in Washington, D.C. Glassman says that Japan's "command-and-control capitalism" is a disaster since investment decisions are determined by government officials rather than by the free market. If the normal mechanisms of a free market had been allowed to operate in Southeast Asia, he says, the region's current problems could have been avoided." The deals the IMF struck with Southeast Asia largely supported the view that t
Some common words found in the essay are:
Southeast Asia's, South Korea, Fund IMF, Weaker Asian, Southeast Asia, Indonesia Thailand, IMF Asian, Southeast Asian, Stock Exchange, Hong Kong, south korea, asian countries, southeast asia, hong kong, economic growth, southeast asia's, asia's economic, asian financial, financial crisis, free market, asian financial crisis, south korea indonesia, monetary fund imf, asia's economic model, southeast asian governments,
Approximate Word count = 2764
Approximate Pages = 11 (250 words per page double spaced)
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