Global Governance and Financial Crises

By Meghnad Desai; Yahia Said | Go to book overview

6

Crises, recovery and reforms in East Asia

Jomo Kwame Sundaram

While there has been considerable work critical of the East Asian record and potential, none actually anticipated the East Asian debacle of 1997-98 (e.g. see Krugman 1994). Although some of the weaknesses identified in this critical writing did make the region economically vulnerable, none of this literature seriously addressed one crucial implication of the greater role of foreign capital in Southeast Asia, especially with international financial liberalisation, which became more pronounced in the 1990s. Dominance of manufacturing - especially the more technologically sophisticated and dynamic activities - by foreign transnationals subordinated domestic industrial capital in the region, allowing finance capital, both domestic and foreign, to become more influential in the region (Jomo 1998).

In fact, finance capital developed complex symbiotic relations with other business interests as well as policy makers, now dubbed 'cronyism' in the political aftermath of 1997-98. Although threatened by full international financial liberalisation, Southeast Asian financial interests were also quick to identify and secure new possibilities of capturing rents from arbitrage as well as other opportunities offered by gradual international financial integration. In these and other ways (e.g. see Gomez and Jomo 1999; Khan and Jomo 2000), the economic and political weaknesses of Southeast Asian industrialists facilitated the ascendance and consolidation of financial interests and other politically influential rentiers.

This increasingly powerful alliance between international finance capital and domestic interests that expected to gain from international financial liberalisation was primarily responsible for promoting international financial liberalisation in the region. (This process seems to have been accelerated by the policy reforms expected of membership of the Organisation for Economic Co-operation and Development (OECD), which South Korea joined in the mid-1980s.) Meanwhile, domestic financial liberalisation was especially sought by the politically well-connected nouveau riche who sought to consolidate and expand their interests through minimally regulated financial activities. However, in so far as the interests of domestic financial capital did not entirely coincide with international finance capital, the actual progress of international financial liberalisation was necessarily partial. The processes were necessarily also uneven, considering the variety of

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Global Governance and Financial Crises
Table of contents

Table of contents

  • Title Page v
  • Contents vii
  • Figures viii
  • Tables x
  • 1 - Introduction 1
  • 2 - Financial Crises and Global Governance 6
  • 3 - Asset Price Bubbles and Monetary Policy 19
  • 4 - The International Monetary Fund 43
  • Bibliography 68
  • 5 - Regulating Global Finance 70
  • 6 - Crises, Recovery and Reforms in East Asia 83
  • 7 - Mexico, Korea and Brazil 120
  • Notes 153
  • Index 159
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