Moments that made the year: A Far East crisis that could hit Western growth

Tigers tamed

In terms of its speed, unexpectedness and its potential effect on the lives of people all over the world, the East Asian economic crisis was the crisis of 1997, and it is certainly not over yet. What began in July with the collapse of the Thai baht ends the year with the continuing plummet of the Korean won having, in between, caused varying degrees of mayhem in Thailand, Indonesia, Malaysia, the Philippines, Japan, Singapore and Hong Kong.

Despite $100bn of promised aid from the International Monetary Fund (IMF), the plunge of the region's currencies shows few signs of bottoming out, but the response to the crisis outside the region has fallen into two distinct phases.

For the first few months of the crisis, much foreign comment treated it as a spectator event, an object of fascinated, but abstract, interest and more than a little schadenfreude.

It appeared to confirm a fashionable argument, most trenchantly argued by the economist Paul Krugman - that the "Asian tiger" model of high growth and aggressive investment is unsustainable in the long run.

But since November, when the contagion spread to South Korea and Japan, the focus has shifted from the theoretical to the practical: what effect is Asia's pain going to have on the rest of the world?

For those without specialised business interests, a weak Thai baht means little more than cheaper holidays in Phuket. As Indonesia followed and, to a lesser degree, Malaysia and the Philippines, so did cheap holidays in Bali, Penang and Mindanao.

But when the contagion spread to Korea, it was a different matter. People don't take package tours to Pusan. And the pain of the squeeze on South Korea, the former eleventh largest economy in the world, is being felt around the world. The stifled sniggering at the difficulties of the tigers was silenced this week with a prediction by the IMF, that the Asian crisis will cut 1 per cent off growth next year throughout the world.

Korea's credit rating has sunk below those of Croatia and El Salvador, making it impossible for companies to fund their ambitious overseas plans.

In Britain alone, the huge Samsung and Daewoo conglomerates announced the "postponement" of billions of pounds' worth of plants and jobs. And the crisis is not purely an economic one: what began as a series of events in the financial markets, is also throwing up political problems.

Despite their eclipse by the chaos in the markets, Asia's political tensions remain, and they are exacerbated by financial insecurity - if the reunification of North and South Korea looked a tricky and expensive proposition before, it appears doubly so now, with the South's economy on its knees.

The financial uncertainty also distracts attention from other urgent political issues. But the bigger problem is the psychological effect of the collapse of the Asian tigers, and the tremendous blow they have suffered to their self-esteem.

Responsibility for managing this tension will fall in large part to Britain, as new European Union president, and host of the second Asia-Europe Meeting (Asem) in London next spring.

The shock of sudden collapse has understandably strained nerves and tempers, and there have been ugly and sinister outbursts made worse by the West's gloating.

The insinuations by the Malaysian prime minister, Mahathir Mohamad, that the whole thing was part of a Jewish conspiracy orchestrated by the speculator George Soros did nothing to restore the faith of investors in his country.

In Korea, demonstrators have accused the IMF, and its American and Japanese backers, of economic "imperialism" in making conditions for the bail-out of their country.

The world has seen nationalist movements flourish before on the back of economic collapse. It seems, for the moment, a distant fear - but then a year ago, so did the present state of affairs. Either way, the history of the 1997 crisis will not be clear until well into next year.

Life and Style
love + sex
Voices
A propaganda video shows Isis forces near Tikrit
voicesAdam Walker: The Koran has violent passages, but it also has others that explicitly tells us how to interpret them
News
people
Arts and Entertainment
Victoria Wood, Kayvan Novak, Alexa Chung, Chris Moyles
tvReview: No soggy bottoms, but plenty of other baking disasters on The Great Comic Relief Bake Off
Have you tried new the Independent Digital Edition apps?
Life and Style
ebookNow available in paperback
ebooks
ebookPart of The Independent’s new eBook series The Great Composers
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs General

    Recruitment Genius: Outbound Sales Executive - B2B

    £18000 - £22000 per annum: Recruitment Genius: A great opportunity has arisen ...

    Recruitment Genius: Online Sales and Customer Services Associate

    £14000 - £16000 per annum: Recruitment Genius: Full time and Part time positio...

    Ashdown Group: IT Manager - Salesforce / Reports / CRM - North London - NfP

    £45000 per annum: Ashdown Group: An established and reputable Not for Profit o...

    Recruitment Genius: Sales Ledger & Credit Control Assistant

    £14000 - £17000 per annum: Recruitment Genius: A Sales Ledger & Credit Control...

    Day In a Page

    War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

    Baghdad fights to win back Tikrit from Isis – but then what?

    Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable
    Katarina Johnson-Thompson: Heptathlete ready to jump at first major title

    Katarina Johnson-Thompson: Ready to jump at first major title

    After her 2014 was ruined by injury, 21-year-old Briton is leading pentathlete going into this week’s European Indoors. Now she intends to turn form into gold
    11 best gel eyeliners

    Go bold this season: 11 best gel eyeliners

    Use an ink pot eyeliner to go bold on the eyes with this season's feline flicked winged liner
    Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

    Climate change key in Syrian conflict

    And it will trigger more war in future
    How I outwitted the Gestapo

    How I outwitted the Gestapo

    My life as a Jew in wartime Berlin
    The nation's favourite animal revealed

    The nation's favourite animal revealed

    Women like cuddly creatures whilst men like creepy-crawlies
    Is this the way to get young people to vote?

    Getting young people to vote

    From #VOTESELFISH to Bite the Ballot
    Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

    Poldark star Heida Reed

    'I don't think a single bodice gets ripped'
    The difference between America and Israel? There isn’t one

    The difference between America and Israel? There isn’t one

    Netanyahu knows he can get away with anything in America, says Robert Fisk
    Families clubbing together to build their own affordable accommodation

    Do It Yourself approach to securing a new house

    Community land trusts marking a new trend for taking the initiative away from developers
    Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

    David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

    The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
    Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

    Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

    Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
    With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

    Money, corruption and drugs

    The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
    America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

    150 years after it was outlawed...

    ... America's first slavery museum is established in Louisiana
    Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

    Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

    The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all