The Asian Financial Crisis and Thailand: Catalyst for Change...or More of The Same?

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During the second half of the 20th century Thailand underwent a rapid transformation from an agrarian to export-driven industrialized economy while sustaining rapid economic growth. What took Europe almost a century, the East Asian tigers (Hong Kong, Singapore, South Korea, and Taiwan) and the newly industrializing economies (Indonesia, Malaysia, and Thailand) accomplished in a matter of decades, which led many to believe in an East Asian miracle. However, in 1997 Thailand became the first country swept into an economic crisis that spread throughout the region within months. Why did Thailand unexpectedly fall into a rapid economic crisis and how has the crisis shaped the current political economy of the country? Although Thailand…show more content…
By the end of August, the crisis spread to the Philippines, Malaysia, and Indonesia, which after floating their currencies, experienced sharp depreciations ensuing an economic collapse. Despite the International Monetary Fund's (IMF) attempts to restore confidence with currency standby agreements, the crisis spread to Singapore, Taiwan, and Hong Kong. These countries all managed to escape a financial meltdown, but not without significant currency depreciation. When the crisis forced South Korea, the eleventh largest economy in the world, to devalue the won, the IMF responded by creating substantial rescue programs for Thailand, Indonesia, and South Korea. However, the programs were unable to prevent the crisis from deepening. In a matter of months the Asian tigers were reduced to “whimpering kittens.”
Early responses to the crisis, fueled by Washington and even the IMF, were that the “dark underside to 'Asian values'” or Asian capitalism, which promoted a paternalistic authoritarian or single party rule to guide the economy, had failed and was being reprimanded by the free market. However, both authoritarian and democratic governments fell to the rapid contagion due to institutional weaknesses that created vulnerabilities to international capital flight. Many of these countries

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