Asian Financial Crisis

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Asian Financial Crisis

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 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. Japans 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 the market, much more so than other Western powers.
Supporters of the Asian system argued that such gover...

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