An Assessment of the East Asian Crisis: A Crisis of Neo-Liberal Globalisation?

Abstract

What caused the still unfolding East Asian crisis? Was it the outcome of 'home-grown' factors resulting from improper domestic macroeconomic policies? Are excessive lending and borrowing practices by international investors and domestic banks, and imprudent, risky, at times corrupt deployment of funds to non-performing investments the causes of the crisis? Have international financial institutions played a part in the collapse of these regional economies? Are the alleged deficiencies of the global financial architecture responsible for the crisis? Notwithstanding purely economic explanations of the crisis, this paper argues that the current economic turmoil in East Asia needs first to be interpreted as the outcome of excessive and uncontrolled economic liberalisation in response to the increased integration of global financial markets. In this sense, the East Asian crisis poses serious challenges to the prevailing trend of economic liberalisation based on the neo-liberal ethos, which has been referred to as 'economic globalisation'. This fact also throws up several questions about the future of the international financial architecture. For many, it is imperative at the national level that economic liberalisation (as a development strategy) and prudent regulation (accompanied by strict enforcement) should go hand in hand. At the international level, the existing financial institutions monitoring the functioning of the international financial system should be subject to a considerable reconstruction.