Outlook: Responsibility in the Far East

THE BANK for International Settlements in Basle is about as grey and sober an institution as they come, run by bankers for bankers. Its annual report, packed with figures and charts, is not a document for the sensation-seeking. But for all the austere and measured language, this year's edition packs a strong punch. Its bottom line: the Asian crisis is far from over, and the riotous financial markets that gave birth to it have not been changed by the experience either.

There are two ways of looking at what happened in the Far East. One is to regard it as essentially a crisis of capitalism, proof positive that capitalism with its tendency towards the extremes of boom and bust is fundamentally flawed. Nor are those who see it this way confined to old- fashioned left-wingers eager to see capitalism at last sowing the seeds of its own destruction. Jeffrey Sachs at Harvard University could hardly be described as left-leaning yet he argues powerfully that the stresses the markets have imposed on countries like Indonesia and Malaysia would have tested any economy, the UK included, to the point of destruction.

However, for staunch defenders of the free-market faith there is another way of looking at it. Asia's problem can be diagnosed as a narrow crisis of crony capitalism, rather than a broader setback. After years of being told that the eastern version of capitalism was superior to the classic western one, this is certainly a rather pleasing way of looking at the whole thing. Blatant political corruption and the very weak financial systems of the countries concerned have given this view powerful ammunition.

The BIS report is a timely reminder that such black-and-white interpretations are rarely valid. Andrew Crockett, a former Bank of England apparatchik and now general manager of the BIS, paints a much greyer but probably rather truer version of events. Neither interpretation is wholly correct, the BIS argues.

Yes, some parts of Asia's banking system and capital markets have turned out to be utterly inadequate. Their political and economic institutions have also proved unequal to the task of coping with the full force of financial markets. On the other hand, the herd-like tendency of banks and investors, their ability to ignore clear warning signals and take excessive risks, amounts to a clear structural weakness within the free market system.

New crisis-prevention measures have focused on getting the Asians to buck up their act, with improved transparency and reformed banking systems, and on beefing up reaction and response from the International Monetary Fund. But the implication of yesterday's report is that the big private sector players who make up the markets have to play their part too. It is next to impossible to force responsibility on financial markets, but they had better start doing it of their own volition if they want to survive. Otherwise the next crisis could indeed be one of capitalism.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA special investigation by Andy McSmith
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.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Software Development Manager

£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Day In a Page

Isis hostage crisis: The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power

Isis hostage crisis

The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power, says Robert Fisk
Missing salvage expert who found $50m of sunken treasure before disappearing, tracked down at last

The runaway buccaneers and the ship full of gold

Salvage expert Tommy Thompson found sunken treasure worth millions. Then he vanished... until now
Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Maverick artist Grayson Perry backs our campaign
Assisted Dying Bill: I want to be able to decide about my own death - I want to have control of my life

Assisted Dying Bill: 'I want control of my life'

This week the Assisted Dying Bill is debated in the Lords. Virginia Ironside, who has already made plans for her own self-deliverance, argues that it's time we allowed people a humane, compassionate death
Move over, kale - cabbage is the new rising star

Cabbage is king again

Sophie Morris banishes thoughts of soggy school dinners and turns over a new leaf
11 best winter skin treats

Give your moisturiser a helping hand: 11 best winter skin treats

Get an extra boost of nourishment from one of these hard-working products
Paul Scholes column: The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him

Paul Scholes column

The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him
Frank Warren column: No cigar, but pots of money: here come the Cubans

Frank Warren's Ringside

No cigar, but pots of money: here come the Cubans
Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee