ABSTRACT
Joseph Schumpeter once complained that ‘historians of crises primarily talk about stock exchange events, banking, price level, failures, unemployment, total production and so on-all of which are readily recognised as surface phenomena or as compounds which sum up underlying processes in such a way as to hide their real features’ (cited in Freeman 1990:21). Asia’s financial crisis is no exception: rather than the result of isolated errors and the faulty working of credit mechanisms, it stems from more deep-rooted, structural weaknesses. The crisis has revealed an underlying ‘crisis of disproportionality’ between the slow pace of institutional development at home, and the fastchanging process of global economic integration. Asian governments fell victim to a series of errors in the way they perceived the region’s political economy: a nostalgic faith in economic planning and interventionism; premature confidence that Asian high-performers were rapidly evolving into modern capitalist societies; and a naive emphasis on capital accumulation at the expense of qualitative appraisals of real market transactions. Prolonged statism, secrecy and monopolistic behaviour meant that, by the 1990s, Asia’s crisis-prone high performers had lost the flexibility to adapt to changing economic conditions. Failure to safeguard legitimate entrepreneurial activity made several economies vulnerable to booty-seekers long before the crisis broke.
