A year ago, the present situation in East Asia would have sounded like science fiction - in Japan, banking collapses; in Thailand, an appeal by the government for donations of gold jewellery from its own citizens; South Korea surviving solely on the good will of foreign banks. But this is where the world's most dynamic economic region finds itself today - remarkably, it is being seen by some in the West with something approaching relief.
In some ways, the relief is understandable enough: before Christmas, it appeared possible that, despite its promised bail-out by the International Monetary Fund, South Korea's banks would default on massive overseas debts, potentially triggering an international financial collapse. At the last minute, foreign governments came up with a pounds 6bn ($10bn) line of credit to ease the debt crunch and the European and American banks agreed to roll over the imminent debt repayments.
In Washington, where the rescue was brokered, there is relief verging on self-congratulation. But beyond the fact of avoiding a financial meltdown, does the world have reason to be confident about East Asia? Is the worst over?
The broad way to recovery throughout Asia seems clear - restructuring of inefficient industries, liberalisation of labour markets, and an opening up to the bracing winds of foreign competition. The question is whether the leaders have the will and the nerve to manage the economic slowdown and social unrest which inevitably entail.
Foreign players, especially the IMF, will remain convenient bogeymen, but last week saw a change of emphasis. Dr Mahathir, and his counterparts in Thailand and Singapore - who before blamed the West for their problems - spoke more practically of the hardship that their countrymen must expect in the year ahead. South Korea's new president elect Kim Dae Jung, has won over sceptics with his acceptance of the need for lay-offs and painful industrial restructuring.
Indeed the talk among certain Western analysts is that the crisis may turn out to be a blessing in disguise, a trigger for reforms which would otherwise have taken years to put into action.
Japan's economic growth bubble burst in the early 1990s but only now, and with much hesitation and internal opposition, are deregulation measures being heaved into place. Vested interests and labour unions inevitably oppose measures which expose them to foreign competition and to the risks of redundancies and wage cuts. If such changes can be effectively forced on south-east Asia and Korea fast, the argument goes, the results will be benefit everyone.
The argument is even extended to politics - just as Kim Dae Jung has succeeded his moribund presidential predecessor, so the crisis may force out nationalists leaders like Dr Mahathir in favour of forward-looking technocrats. "If the first reaction to the economic crisis by many Asian leaders has been denial," says Christopher Wood, of Peregrine Securities, "the need to attract foreign capital will eventually force a more rational response. That transition may result in a change of generation of leadership in several countries."
This is post-Cold War, laissez faire capitalism taken to its extreme: let them stew, and eventually they will see the error of their ways - and become more like us. Such implied triumphalism is offensive to Asians less sensitive than Dr Mahathir, and gloatingly naive, ignoring both the risks of an unstable Asia, and its habit of refusing to conform to Western expectations.
Quite apart from the effects on the global economy (reduced growth, the suspension of investment) the humiliation felt in the afflicted countries (especially Thailand, Indonesia and South Korea, the three driven to ask for help from the IMF) should not be underestimated in a region where high economic growth is only a generation old and a source of intense national pride, a sentiment felt by ordinary people of all ages, not just by a handful of out-of-touch leaders.
The assumption that nationalist politicians will be weakened by economic restructuring is another questionable one, hardly born out by - for example - comparable economic hardship in Germany during the 1930s. In many ways, followers of Dr Mahathir have been vindicated by the crisis - he has long called for the formation of an East Asian Economic Caucus, lead by Japan, as a regional guarantor of financial stability, independent of, and in competition with, Europe and America.
The events of the last few months need to be seen, not as a vindication of any Western model, but as a failure of global economics that rings alarms around the world. The chief anxieties of 1997, after all, were supposed to have been about communism - the hand over of Hong Kong to China, and the continued decline of North Korea. Asia's problems have indeed escalated in the last 12 months, but the instigators and the victims are not the region's communist countries, but its most committed capitalists.Reuse content