New Left Review I/228, March-April 1998

Robert Wade and Frank Veneroso

The Asian Crisis: The High Debt Model Versus the Wall Street-Treasury-IMF Complex

How could the widely acknowledged real estate problems of Thailand’s banks in 1996 and 1997 have triggered such a far-reaching debt-and-development crisis? [1] The devaluation of the Thai baht in July 1997 was followed by currency crises or financial instability in Indonesia, Malaysia, the Philippines, Taiwan, Hong Kong, Korea, Estonia, Russia, Brazil, Australia and New Zealand. Commodity producers around the world have suffered. Yet there were few signs of impending crisis, such as rising interest rates in the g-7 countries or a sudden suspension of capital flows to developing countries after the baht devaluation. On the contrary, bank lending to Asia actually rose to a record level in the third quarter of 1997. The Japanese government’s de facto credit rating agency, the Japan Center for International Finance, gave Korea one of its highest credit ratings for any developing country in June 1997. The imf and the World Bank lavished praise upon the governments of the region through 1997, including on the Korean authorities as recently as September 1997.

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