THE ASIAN DEBT-AND-DEVELOPMENT CRISIS OF 1997 - CAUSES AND CONSEQUENCES

Interpretations of the Asian crisis have coalesced around two rival st ories: the ''death threes of Asian slate capitalism'' story about inte rnal, real economy causes; and the ''panic triggering debt deflation i n a basically sound but under-regulated system'' story that gives more role to external and financial system causes. The paper presents the stories and assesses the evidence. The evidence - in particular, the c hronology of the crisis - supports the second rather better than the f irst. The paper discusses the interests driving capital account libera lization without a framework of regulation, the single most irresponsi ble act of public authorities in the whole crisis. US and UK financial firms, allied with their treasuries and with the IMF, the WTO, and th e OECD, saw themselves at a chronic disadvantage in the Asian system o f long-term relationships and patient capital. This alliance, supporte d by segments of Asian political and financial elites, achieved dramat ic domestic financial sector liberalization and capital account openin g in Asia over the 1990s, setting up the conditions for crisis. Parado xically, the crisis may be looked back upon not as the triumph of beni gn globalization and neoliberal economic doctrine but as the beginning of its end. (C) 1998 Elsevier Science Ltd. All rights reserved.