ABSTRACT
Why has the Asian economic crisis been a bad thing? This may seem like a trivial question because the answer appears to be so obvious. But in this chapter I would like to examine the assumptions that underlie the process o f growth and development that appears to have been so cruelly interrupted by the crisis. By exploring the reasons for believing that the crisis has been undesirable we will raise the question o f whether the objective now should simply be to get the affected economies back on to the paths they previously followed. First o f all, while we are on issues o f blinding obviousness, I will state at the outset that I am assuming that the purpose o f economic activity, and the purpose of government, is to improve national well-being, or ‘social welfare’ as the economics books call it. These are both assumptions only. We know that Adam Smith is remembered above all for arguing that market activity will maximize social welfare, although it was not until this century that neoclassical economist set out to prove, on the basis o f a number o f axioms, the Fundamental Theorem of Economics, which says that under certain conditions, the activities in the market of private producers and consumers, in pursuit o f their own interests, will result in the most efficient allocation of resources. As for the objective o f government, a persuasive argument could be made that the objective o f the Suharto Government in Indonesia was personal enrichment and that the apparently good growth rates were an incidental consequence. I think the true story would combine both national objectives and personal ones.
