The first sign of the present crisis in the capitalist bloc of South-East Asia was seen in Thailand with its currency crisis of July 1997. Thanks to the rise of casino capitalism in the wake of globalisation, the currency and financial market is today controlled by speculators who in pursuit of hot money can increase or decrease the value of a currency to suit their own short-term gains. Once these speculators started selling off the Thai currency - Bhat - it value in relation to hard currency, especially American dollar, slided down which the government in Bangkok could not control. This instantly affected neighbouring Indonesia, Malaysia and South Korea whose governments reconciled themselves with devaluation of their currencies. Once the value of currencies declined their export trade naturally experienced considerable loss, causing a huge negative balance in international balance of payments. There also occurred a flight of foreign capital from this region. These states were thus plunged into an acute economic crisis.

But how has the economic miracle in the four states of South-East Asia been overturned? The answer lies both in the particular process of economic development these so-called Asian Tigers adopted, and certain developments in contemporary international political economy.

It needs to be emphasised that although all the four affected South-East Asian states adopted the philosophy of free market economy, there were considerable variations in their patterns of growth. Despite IMF-World Bank prescriptions to the contrary, the state in South Asia played a prominent role in the development of the country’s economy. In South Korea the state had been directly involved in banking and heavy industries and regulated foreign investment to protect national capitalism. Here the state also invested in social capital, especially health and education, and undertook land reforms which helped the creation of an internal demand. But in the wake of the current spate of globalisation South Korea had to ensure virtual unrestricted entry of foreign capital and dereguralisation of the financial sector. Once the banks were denationalised, capital investment had to come from foreign non-Bank sources. Not only national banks became dependent on foreign capital, the government itself had to take recourse to borrowings from foreign financial institutions. The field was thrown open to the financial speculators which led to the currency crisis in South Korea.

On the other hand, the economic growth in Thailand, Indonesia and Malaysia was unassociated with either land reforms, state participation in industrialisation or creation of a substantial internal market. Instead, the economic upsurge in these countries was based on western reliance. The trade war between Japan and the USA in the early 1980s had also contributed to economic boom in Thailand, Malaysia and Indonesia. But once an economic balance between Japan and the USA was created these countries lost an important advantage. Besides, the specter of economic growth in Thailand, Malaysia and Indonesia was dependent not on productive investment but on finance capital and on share market trading. When these states joined the bandwagon of globalisation their financial market came under control of speculators which directly led to economic crisis.

Another common factor creating the crisis situation in South-East Asia was its particular relationship with the United States of America. In return for providing Washington with a base of operations against Communism, entry of South Korean, Thai, Malaysian and Indonesian products into American market was facilitated. Consequently, economic growth of these states - except South Korea to a certain extent - became preeminently depended on exports to the American and Western European markets. The currency in the region was too tied to the American dollar. But once international capitalist economy itself was affected by a crisis an economic downturn for the South-East states was inevitable. Besides, for securing friendly regimes in these countries, the USA deliberately propped up dictatorial and conservative ruling cliques. But this stultified potentials of progressive political forces in this region which could have projected alternative paths of economic progress.

The economic crisis plaguing South Korea, Indonesia, Thailand and Malaysia from July 1997 was rapidly transformed into a political crisis. Popular discontent resulted in massive political protests, causing changes of ruling regimes. South Korea had its first civilian president in December 1992 in the person of Kim Yang Sam who had to hand over office to Dai Jung in the context of a popular rising and hand over power. In Thailand in 1992 General Suchinda Kratrayun’s regime was replaced by a new government based on multi-party elections. A democratic upsurge in Indonesia ended in the substitution of General Suharto’s totalitarianism with the new government under Habibi. In Malaysia the feudal overlords accepted in February 1993 a constitutional reform which substantially curtailed their political powers.

Unfortunately, however, the new South-East Asian regimes have been unable to come out of the clutch of the US-backed IMF-World Bank formulated development paradigm. They have undertaken massive borrowings from the World Bank and IMF to tide over the economic crisis, Indonesia securing 43 billion dollars, Thailand 17.2 billion dollars and South Korea 57 billion dollars. But these are conditional loans which have subjugated them to a vicious circle of new dependency to western capitalist world. Unless these countries adopt the policy of self-sustained economic growth they would never be able to liberate themselves from the economic crisis.