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JULY 21, 2000 VOL. 26 NO. 28 | SEARCH ASIAWEEK Meltdown Revisited Five books recount and rip apart the Asian Economic Crisis By Ricardo Saludo If one may cut to the chase, so to speak: those who want to read just one book on the Asian Economic Crisis, go for Meltdown: Asia's Boom, Bust and Beyond, by Business Week editors Mark Clifford and Pete Engardio (Prentice Hall Press, Paramus, New Jersey, 2000; 322 pages; $28). The authors are even-handed in dishing out blame, avoiding the Western tendency to dump it all on Asia. Moreover, the well-researched, well-reported tome is rich in insider detail and vibrant personality, lending flesh and blood to a maelstrom that, three years after it began, some other books tend to discuss mainly on the plane of ideas and argument. Chapters 2 to 7 of Meltdown cover the years before the financial contagion, which is recounted in Chapter 8. That may seem a long prelude to the real action, but it is, in fact, quite instructive. Those six chapters relate the key stages of Asia's boom and how they all eventually led to the bust. These episodes also profile national leaders, Asian tycoons, multinational financiers and executives, and other key players in the years before and during the Crisis, giving the reader real actors and actions to ponder and learn from. Thus, the book addresses the main question any Crisis book has to answer: What mistakes did East Asian countries and global leaders, lenders, investors and experts make to turn miracle into meltdown? First among these boom-and-bust factors is the region's export-powered, technocrat-piloted economic development. While it has become the fashion in many quarters to dismiss what the World Bank famously dubbed "the East Asian miracle" as a myth, Clifford and Engardio rightly declare: "Certainly, something extraordinary, something unprecedented, happened between 1960 and 1997 . . . Countries with different cultures, natural and human resources, ideologies, and historical circumstances emerged from the chaos of wars and revolutions and deployed the right mix of macroeconomic discipline and growth-generating policies." The authors also avoid the tendency among many democrats to totally denigrate East Asia's authoritarian leaders. Instead, Meltdown credits this "hard-nosed, repressive, but visionary breed" for being pragmatic enough to discard policies that didn't work, let technocrats run the economy, harness the private sector, promote exports and savings, and channel funds into infrastructure and education. Among the countless profiles that help fulfill the book's aim of being "evocative," is that of the late Park Chung Hee, the first of Asia's modernizing strongmen. He kicked off his drive to industrialize South Korea by arresting business leaders and seizing many of their assets soon after his 1961 coup. The book shows the same balance in analyzing the roots of the Crisis. It tells tales of top-level cronyism, overinvestment in everything from Bangkok condominiums to Korean car plants, mismanagement and outright fraud, and the denial that blinded most Asian leaders to the seriousness of the Crisis and the need for speedy action. But Meltdown blames the IMF as well for worsening the slump, especially with its austerity programs and its demand for subsidy cuts and sweeping anti-crony measures in Indonesia. The book also deplores Washington's inaction in the Thai and Indonesian troubles, and its opposition to Tokyo's proposed $100-billion fund to shore up Crisis-hit economies in late 1997. Western investors, lenders and analysts are criticized for failing to see the warning signs (among the notable misreadings: a 1996 J.P. Morgan report citing "the lack of widespread social discontent in Indonesia"). Their governments helped set the stage for the Crisis by pressuring Asian nations to liberalize their financial markets, giving companies direct access to cheap overseas credit. Predictably, businesses overborrowed, especially with Asian authorities lacking staff and expertise to monitor the loan buildup. The book spotlights some prescient figures who have been otherwise ignored. In May 1996, Tarrin Nimmanhaeminda, who was ousted as Thai finance minister when the first Chuan administration fell in 1995, warned of mounting foreign-currency debts of Thai companies. They eventually triggered the regional collapse. One of the few who paid heed was Citibanker William Rhodes. He promptly instituted a regionwide program to cut the bank's costs and exposure, while boosting its crisis management, including debt collection. Rhodes later played a key role in containing the contagion when he orchestrated a debt moratorium by South Korea's foreign creditors from January 1998. Clifford and Engardio round out their work with a list of prescriptions for Asia to avoid another crushing debacle. First, finish financial reform, particularly debt workouts and bank restructuring, so credit can flow again and stimulate growth. With hardly any global action to temper the wild swings of world capital, Asia must also adjust to the hot-money flows, including possibly imposing controls on short-term funds, as Chile does. The book also urges a rethink of the export-led growth model and the Asian stress on corporate sales instead of profits. Lastly, it cites the need to welcome foreign investment and business, and open up the political system. One won't agree with everything Meltdown says, but as a tale of Asia's years of economic agony, it's hard to beat. Several other books have their own insights to offer readers pondering the Crisis on the third anniversary of the baht devaluation that ignited it. The Years of Living Dangerously: Asia — from Financial Crisis to the New Millennium, by Hong Kong-based British author, journalist and businessman Stephen Vines (Orion Business Books, London, 2000; 276 pages; 18.99), also devotes most of its chapters to events and issues beyond the Crisis proper. Among them: the pre-1997 hype about Asia's unstoppable boom, the so-called Asian miracle, Asian values, corporate governance and corruption. One apparent aim of Living Dangerously is to debunk perceptions that once puffed up Asian hubris, and that it does with gusto. From the Asian values pronouncements of Malaysian and Singapore leaders to Asia-boosting books and analysts' reports, the bullish bandwagon gets peppered with verbal arrows from Vines. If his views seem less than balanced, that's exactly how he wants them: "I cannot claim to be a clinical, neutral observer . . . By all means, make allowances for this lack of objectivity, but do not expect me to apologize for it." At one point, Vines castigates the ADB and ASEAN for inaction, though the bank did contribute funds and ASEAN backed Japan's rescue fund. Still, if you want your Crisis analysis to have plenty of bite and a dash of bile, relish Living Dangerously. Another British journalist with a Crisis-related tome is Victor Mallet, who covered Asia for London's Financial Times for most of the 1990s. The Trouble with Tigers: The Rise and Fall of Southeast Asia (HarperCollins, London, 1999; 332 pages; 19.99) presents the economic debacle as one of several critical problems the region faces after decades of rapid development. In addition to the Crisis, Southeast Asia is grappling with challenges to traditional values, demands for greater democracy, social ills like drugs and illicit sex, environmental degradation, and regional security tensions and threats. Mallet, who has transferred to Johannesburg, argues that all these problems will plague Southeast Asia for years to come, even after it has recovered from the recent financial trauma. Most of the issues Mallet expounds on are widely known and much written about, but Tigers brings them together in one volume and provides probably the most recent reportage and analyses on them. The chapter on Asian values offers a defensible view that much of what falls under the rubric are actually pre-industrial mores not unlike those in England and America before most of their people lived in cities and worked in factories and offices. Chapter 7 is likely to be the best read, especially by Southeast Asians themselves; in it Mallet discourses on each of the 10 countries in the region. Perhaps the greatest value of the book, however, is the attention it gives to the non-economic concerns, which have tended to be neglected in the wake of the Crisis. The last two books on offer are both compendiums of articles by different academics. Surviving the New Millennium: Lessons from the Asian Crisis, with contributions by five associate or assistant professors from the National University of Singapore (McGraw-Hill Book Co., Singapore, 2000; 276 pages), started as three papers presented at an NUS Business School seminar on managing during crises, with two more studies added later to fill some gaps. While the writing may be too dry for the lay reader, the graphics say quite a bit about the key topics: macroeconomic causes of the Crisis, lessons for businesses gearing up for the future (example: "Crisis Marketing for Consumers and Businesses"), and how well restructuring and reform are proceeding in the region. Still, the book would be of greater use for the businessman and economic policymaker than the general reader. The Politics of the Asian Economic Crisis, edited by University of Washington professor T.J. Pempel (Cornell University Press, Ithaca, New York, 1999; 284 pages), includes 10 articles by 10 professors from six leading American universities as well as National Taiwan University. The articles are particularly strong in analyzing the decisions and deliberations of national leaders, government officials, tycoons and executives. The "politics" in the book's title is, in several articles, another word for leadership and management -- which is probably where the biggest failure transpired in the Asian Economic Crisis. Write to Asiaweek at mail@web.asiaweek.com
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