From 'miracle' to 'cronyism': explaining the Great Asian Slump

Abstract

Explanations are about the only thing not in short supply in the Asian crisis. For all their diversity they can be collapsed into two ‘meta’ interpretations reflecting deeper differences in beliefs about rationality and markets. Those whose world view emphasizes rationality, self-adjusting markets, and market failure as exceptional except when governments introduce distortions, tend to see the crisis as the result of rational calculations in a situation of market-distorting government interventions and institutional weaknesses in Asian economies. Those whose world view stresses non-rationality (or a different kind of rationality than that assumed by neoclassical theory), routine failure of well-working markets, and the need for government interventions to modify market outcomes, tend to see it as the result of non-rational calculations in under-regulated financial markets, both national and international.