Proponents of this scenario saw a gathering storm between the United States and the European Union, the world's two most advanced, internationally active and least complementary trade blocs, about the rules and regulations that would govern world trade. That storm simmers still and could yet break. But in the last months of the old year it was thoroughly eclipsed by what the US Secretary of State called in an unguarded moment the risk of "Asian meltdown": a local crisis with global implications in which economics and politics were inseparable. Nowhere was this more apparent than in Washington, from where efforts to limit the damage were coordinated.
At the headquarters of the World Bank and the International Monetary Fund, lights burned late. Senior bankers and diplomats made secret visits to the afflicted countries; the most sensitive were to South Korea in the week before its government appealed for outside help. In a textbook exercise in panic-suppression, US politicians remained in the background, aware that anything they said or did publicly could make a bad situation worse. The season was on their side: preoccupied with shopping, parties and the weather, people had other things on their mind.
Behind the scenes, though, the politicians were not idle. At the White House, it transpires, Christmas parties alternated with crisis meetings in the Situation Room, the secure underground briefing centre endlessly reproduced in films as the world's emergency room. Six years before, the subject would have been the imminent demise of the Soviet Union. Ten years before that, the Soviet invasion of Afghanistan, and so on back to the Cuban missile crisis and beyond.
Last month's meetings were also about the survival of the world as we know it. Only the nature of the threat was different. Where once the threat was military power, now the threat was economic vulnerability. At stake were jobs, living standards, but also peace. What if South Korea's banks defaulted on their debts? What if Japan - the world's second largest economy after the US - followed suit? What if international institutions ran out of money to cushion the fall? What would happen to the world trading system, to currencies and to the world's most flourishing economy, that of the US?
In times past, the New York Times observed, the walls of the Situation Room would have been hung with charts and maps; now there were television sets tuned to CNN and computerised economic models. Then, the CIA's brightest and best would have come up from Langley to discuss their latest intelligence reports; now, there were financial consultants from JP Morgan. But the most senior figures from the departments of State and Defence were there too: bailing out Korean banks - or not - held implications for foreign relations, for national security and - with the mood in North Korea seemingly more volatile than for many years - international security as well.
As ever, assembling the information was only half the battle; interpretation and forecasting were of the essence. It may be years before the decisions taken at these meetings can be fully assessed. They included agreement to work only through the IMF, to offer additional support (but not primary) funding, to increase the initial amount pledged to Korea, and to refuse, but then to permit - twice - emergency advances from the promised loan.
Questions about the effectiveness of US action have studded the American media since the onset of the Korean crisis, and while the main tumult may have been weathered - South Korea did not default, nor did Japan, and the IMF did not run out of money - the questions continue, and US experts remain divided.
Optimists maintain that the US economy is so strong and the economic failures in Asia so well contained and so relatively simple to rectify that life will go on as before. Some believe that the chain of crises may even have been salutary in teaching profligate governments, bankers and investors to be more circumspect, to observe the happy median between the out-and-out free market and government regulation that the US itself observes.
Pessimists, however, contend that the Asian crisis will reverberate more widely and more strongly than has yet been appreciated and that the US economy will be damaged, both from limitless obligations to bail-outs and from an influx of cheap Asian goods. Embedded in this view is fear that the medicine of stricter financial regulation prescribed by the US- dominated IMF could be inappropriate or even harmful to some Asian economies, including Korea's. Economic collapse and civil unrest could be the result.
If the optimists are right, the world can breathe easy and adapt to the American rhythm. The US economic model that Americans like to describe as free-market capitalism (but which entails considerably more government regulation and subsidies than either term would suggest) is vindicated and the ideological victory over communism has only to be consolidated in the economic arena. This was the view trumpeted by US officials before the Group of Seven summit in Denver last year. The Korean crisis, widely blamed on an excess of free market and a shortage of democratic government, is its first real test.
If even some of the pessimists' concerns are borne out, however, certain truths that Americans have held to be self-evident, at least for the past decade, could suddenly appear less so. There would be no reason why other countries should feel obliged to follow the American way of economics. The border between government and free market need not be drawn always and everywhere precisely where it is currently drawn in the US. And even if America's own prosperity were not seriously endangered, its all-conquering post-cold war confidence could be.
For now, Washington's leading role behind the scenes of the IMF and the strict conditions that limit each Asian recipient's freedom to govern have made the United States into a global economic patron, a sort of imperial power for the new century. Already, though, the natives are growing restless. The Asian beneficiaries are resisting demands for economic rigour. The US right is vowing to block more money for the IMF. And at the point where economics and politics intersect, inviting the JP Morgans and their ilk into the Situation Room may not be the solution. For the new dominos of Asia, their power was part of the problem.Reuse content