haggard - the political economy of the asian financial crisis (2000)

[...]... on the need for reform Initiating policy change is one thing; implementing it is another To explore the political economy of reform in more detail, chapters 4 and 5 examine the two issues that will define the nature of the region’s development model in the future: the restructuring of the financial and corporate sectors and the redefinition of the social contract A central feature of the Asian financial. .. less profound However, the crisis contributed to the collapse of the Suharto regime, the installation of new governments in both South Korea and Thailand, and the birth of a new political reform movement in Malaysia The crisis has also forced reforms that have profound longer-term implications for the role of government in the economy and society The Arguments in More Detail Chapter 1 sets the stage... ultimately had international political roots in the transformation of the Soviet Union, the economic crisis of the 1990s in the former socialist countries of Europe has had wideranging consequences for political alignments in that region as well The Asian financial crisis does not rank with these other three economic cataclysms in either its depth or duration; therefore, its longer-term political significance... discouraging judgments on the extent of financial and corporate reform are misleading in one crucial regard: They underestimate the longer-term consequences of the legal and regulatory changes and liberalization measures governments adopted in response to the crisis These changes include strengthened financial regulation and rules on 12 THE POLITICAL ECONOMY OF THE ASIAN FINANCIAL CRISIS Institute for International... 1993) The events of 199 7-9 8 were the third in a cycle of lending and investment booms dating to the 1960s, each of which was followed by financial crisis The most recent of these occurred in the wake of the heavy and chemical industry drive of the 1970s, when a rapid expansion of credit from state-owned banks resulted in significant surplus capacity in a number of sectors Under authoritarian auspices, the. .. problems of moral hazard veered the farthest into political territory, but their analysis also begged a number of important questions Why was the financial sector weakly regulated? Was it the result of sins of omission, simply the lack of administrative capacity and know-how? Or was it in fact due to sins of commission, in the form of forbearance to favored parties? If the latter, the source of vulnerability... from a lower base than the other three crisis countries A striking feature of the financial profile of the Asian corporates was the bias in the maturity structure of their debt toward the short term.1 Not only did short-term debt increase during the decade, but it also began from a very high level The numbers in table 1.3 capture both domestic and foreign short-term obligations The fact that foreign... Indonesia in 1992, the top 10 groups accounted for half of the total turnover of the top 100 companies in the country, and 80 percent of the assets of the country’s top 300 groups were controlled 22 THE POLITICAL ECONOMY OF THE ASIAN FINANCIAL CRISIS Institute for International Economics | http://www.iie.com Table 1.5 Ownership of South Korean business groups by insiders (percentage of common shares... With the exception of the implicit political economy of those emphasizing moral hazard, the striking feature of the debates among economists just outlined is the absence of systematic political analysis.6 The arguments 6 A number of political scientists and political economists did enter the intellectual fray, but their analyses had little apparent influence on the debates among economists on the causes... determine the implications of the crisis for the ‘ Asian model,’’ of which there is in any case clearly more than one But this preliminary review of the crisis suggests cautious optimism that goes beyond the swift economic recovery the region witnessed beginning in 1999 On the social front, the crisis has not spawned the backlash that many feared, but has at least generated debate over the need to revise the . 1 Introduction: The Political Economy of the Asian Financial Crisis The Asian economic crisis of 199 7-9 8 was a singular event in the region’s postwar economic history. Adverse external shocks had struck the. define the nature of the region’s develop- ment model in the future: the restructuring of the financial and corporate sectors and the redefinition of the social contract. A central feature of the Asian. THE POLITICAL ECONOMY OF THE ASIAN FINANCIAL CRISIS The central arguments of the book can be stated briefly: Ⅲ Close business-government relations that had proven an asset during the period of