ABSTRACT
Neo-liberals reacted most quickly to the emergence of the general crisis, taking advantage of the crisis to confi rm the effectiveness of the mighty markets versus state-led development strategies. For neo-liberals, the origin of the East Asian crisis lies in cronyism, which can be symbolised as ‘the lack of transparency about the ties between government, business and banks’ (Fischer 1998: 3). Economic development based on cronyism is marked by political interventions in the market which should consist only of ‘economic matters’. Although state-led development gave Asia ‘rapid overall economic growth’, ‘there was an inevitable limit to how far this specialised Asian economic regime could develop’ (Greenspan 1998: 2-3). Unprofi table investment was excessively allowed because banks and non-bank fi nancial institutions offered loans not to profi table corporations but to fi rms having good connections with government. This ‘irrationally’ given and expanded credit caused massive fi nancial turmoil in the face of free capital in-and-out fl ow. In short, for neo-liberals, state-led development inevitably produces a distorted fi nancial system and it could cause a serious crisis of the national economy.
