Economic Crises and Political Change: Indonesia, South Korea, and Malaysia

By Freedman, Amy L. | World Affairs, Spring 2004 | Go to article overview

Economic Crises and Political Change: Indonesia, South Korea, and Malaysia


Freedman, Amy L., World Affairs


In 1997 and 1998, Asia was hit with a severe economic crisis. Most countries in the region were faced with massive currency fluctuations, banking crises, and plummeting stock markets. Economic problems were compounded by political turmoil. Given past experiences in Asia of massive financial difficulties coupled with political upheaval--specifically in Thailand, South Korea, Indonesia, and Malaysia--I begin with a broad question: What is the relationship between economic crises and political change, specifically democratization?

In Thailand and South Korea, democratic elections were held, and opposition parties came to power for the first time since political liberalization. In Indonesia, Suharto's long period of authoritarian rule came to a crashing close when riots and demonstrations forced him to become more politically isolated, finally compelling him to resign. In Malaysia, the ruling coalition was able to maintain power, but a new sense of political activism developed in the wake of Prime Minister Mahathir's firing of his popular deputy, Anwar Ibrahim. When parliamentary elections were held in Malaysia in fall 1999, the ruling party faced two challenges: a new political party was formed based on the call for greater social justice, and, more significant, the Islamic party, Partai Islam Se Malaysia (PAS), won an unprecedented number of seats at the state and national levels. This brings me to my next question: How can the variation in political change in Asia be explained as a result of the economic crisis? To answer this question, I consider the conditions leading up to the political transformations, the institutional differences (such as elite coalitions and party structure), the nature of political protests (from whom were calls for change coming, were demonstrations peaceful, and so on), and the conditions imposed by the International Monetary Fund to try to understand the impact on political changes.

In Indonesia and South Korea, challenges to entrenched political leaders and practices brought hope that a new era of greater openness and accountability would continue. Five years have passed, additional elections have taken place, and new issues have replaced the economic crisis as the most important agenda item. Have changes persisted? Have greater levels of democracy been achieved? The answer is a qualified yes. Changes that occurred in the political landscape have not been overturned, but the new elites are not necessarily the harbingers of decency and openness that people desired, and it is not clear whether liberalization has been institutionalized in either country. As for Malaysia, the United Malays National Organization's (UMNO) apparent weakness in the 1999 elections has vanished. Skillfully using the aftermath of September 11 and the global war on terror, Prime Minister Mahathir capitalized on negative images of political Islam to regain support that once was directed toward PAS. (1) Is the situation in Asia unique, or does the theoretical work on economic crises and regime change describe the current dynamic in the region?

Earlier literature on economic crises and political change seems to fall into two distinct camps. Some scholars have found that economic problems lead to political instability and an end to democracy, and other studies show that fiscal crises can help consolidate democracy. What can the turmoil in Asia tell us about the link between economic conditions and political change, and what does this tell us about the larger theoretical debate? In this article, 1 argue that the economic crisis in Asia generally has strengthened democracy. Where my research departs from earlier work on crises and political change is my finding that political change comes as much from shifts in political preferences and coalitions of elites as from the demands of a frustrated citizenry. In this article, I attempt to bridge two slightly different sets of literature, one on the links between economics and politics, and the other addressing political change more generally. …

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