Introduction

South East Asian countries (China, South Korea, Japan and Taiwan) have been the object of economic discussions over the past decade. This began in the nineties where experts called these countries ‘economic miracles’. However, in the late nineties, these countries begun underperforming after the vulnerabilities of their economical and political reforms were exposed. In the late nineteen nineties, the Asian crisis sparked off a lot of debate about the problems of the South East Asian economic and political agenda. Many experts began prescribing new approaches that would deal with the crisis. Some of them prescribed reformist agendas that would prepare these south East Asian countries for future effects of globalization. The essay shall examine the legitimacy of these prescriptions and give recommendations on the way forward. (Winters, 2000)

How East Asia performed before the economic crisis

The forces of globalization propagated East Asia’s economic success. Globalization in this context refers to the unprecedented mixing of cultures, technology, manpower and resources from different parts of the world; a phenomenon brought on by Information Technology, the end of communism and the shift towards free market forces. The overall effect of globalization within the South East Asian countries was a rapid increase in the standards of living for a large portion of the region. It also led to increased literacy levels within the countries hence a high quality labor force. On top of this, the South East Asian economies boasted of better health. (Sell, 2000)

Two major ‘recipes’ were crucial to the economic success of the early nineties. These were summarized in the World Bank report (1993) known as the East Asian miracle. The two issues were; solid macro-economic policies and government intervention. The report studied the overall patterns used by eight South East Asian countries and found that these respective governments did the following. First, they reduced fiscal spending and encouraged greater savings. Those savings were then redirected into infrastructural development and export growth. The South East governments demonstrated to the world just what could occur when the government collaborated with the private sector with the aim of improving their economy. Besides this, the government introduced flexibility within the labor markets and also changed their credit markets. It should be noted that this latter aspect was the object of great debate after the Asian crisis.

South East Asian countries reaped the benefits of these reforms because their capital flow increased adversely as was seen in GDP growth rates of close to five point five percent annually. Additionally, these countries could also boast of greater foreign investments and increased productivity within their local environments. Because of the savings culture adopted in the fiscal markets, the countries could provide stable economic environments for greater exportation. This was the point at which major sectors of their economies began opening up to the world. One particular area that depicts these changes was the industrial sector. However, some critics assert that these policy reforms brought on the problems that the country experienced in the late nineties because they ended up benefiting the elite. (Higgot, 1999)

Causes of the South East Asian crisis

Globalization was the key factor propellant of the South East Asian economic and political boom yet at the same time, it was one of the major reasons for its downfall. Through globalization, the South East Asian countries began operating in extremely competitive markets. The countries that had traditionally dominated the world markets were facing threats from these emerging economies. Consequently, the traditional countries started making their own changes. They did not want to be displaced by the emerging economies.

Despite the latter fact, there was another more serious reason that cased the 1997 Southeast Asian crisis. This was the susceptibilities of the Asian markets’ macro economic forces. Many critics have asserted that the South East Asian models was very effective at mobilizing resources but was very poor at controlling those resources that needed to be controlled. For instance, there were no set regulatory mechanisms for choosing the most productive areas of the economy. As matter of fact, key industries were left out in these capital allocations thus leading to plummeting prices and poor service delivery. Examples here include the energy sector and the telecommunications sector. One cannot undermine the importance of these two areas to the economy yet the Asian continent had been very poor at implementing changes here. As a result, the countries could not eliminate the underperforming sectors of the economy thus allowing them to drag other parts of the system too. (Rhodes, 1997)

Other critics also assert that the Asian economies missed the mark when it came to local manufacturers and businesses. The countries had tried protecting their local manufacturers while at the same time promoting exportation. This increased the level of assets within the country without due consideration as to which assets were more profitable to the respective countries. Most of them grew their economies but failed to consider the issue of equity.

Possible reforms

Some experts have suggested reforms that could assist South east Asian countries in the process of restoring back their past economic successes. However, suggestions made by these experts were not well received by the Asian counterparts. Part of the reason for their lukewarm response is because the South East Asian model of economic and political reform created a system that encouraged elites within the system. These elites wanted to maintain their positions and they have the capacity to do so. Consequently, suggesting reforms through aggressive economic and political transformation will be extremely difficult to implement owing to these powerful elites. (Winters, 2000)

As if this is not enough, some of the changes that accompanied the opening up of the South east Asian economies have gone a long way in emerging the local pollution. The economic and political models adopted prior to the Asian crisis brought about intellectual interactions among members of these Asian countries thus exposing them to the benefits of globalization. This means that locals within those states are actually happy with the effects of globalization and could therefore resist any reformist agenda that can threaten to change the nature of the current system. Taking an example of a fast food company such as McDonald’s, South East Asian compatriots have enjoyed the services of this food outlet and actually want it to remain there. This therefore brings in the argument on true effects of globalization. Globalization is not a threat to South East Asian countries because multinationals from other countries come and force their way into local markets; on the contrary, it is a threat to these Asian countries because their consumers have seen the benefits that emerge from it and now want to continue benefiting from it. Consequently, imposing economic and political reforms that are designed to counter such effects would meet stiff resistance from the South East Asian locals. (Lee, 1999)

Some economists have also suggested that imposing a strong and totally different economic system would also bring problems because the major problems behind the crises emerge from allocation of capital to areas that do not yield effective returns. Examples of such sectors include;

• Corporate governance
• Rule of law
• Eliminate corruption
• Dispose of underperforming loans
• Create reforms within banks
• Allocate capital effectively
• Etc

Some of the latter reforms seem better said then done. This is because implementing some of the reforms mentioned above would require rigorous transformation of the economic sector which as was seen earlier could bring about stiff resistance from vested interests there.

The role of good governance in revitalizing South east Asian economies

Some experts have suggested that the major problem behind the South East Asian political system is the fact that there are inherent corrupt systems. This means that attracting foreign investors within such systems is very difficult because they face the danger of issuing or receiving resources based on their relationships rather than on economics. This makes their markets unpredictable and discourages investments. Such experts have even cited countries such as Singapore that have done very well in the international markets. They have been able to make their mark because of their zero tolerance on corruption.  (Cerny, 1997)

Another suggestions made by South Asian critics is the fact that their governance structures with regard to IT and capital flow have not been in tuned with changes in the policy. These critics assert that in order for South East Asian countries to boost their economies, they should not merely focus on gathering capital but should do this against the backdrop of policy changes. They also add that Information Technology cannot be regarded as an agent for change alone if it does not operate within the confines of political and social changes.

While these arguments may be correct, one cannot help but see some of the faults that can spring from imposing such systems upon the South East Asian countries. It should be noted that within these countries, the issue of political governance has been associated with economic governance. Underhill (2000) asserts that trying to separate these two categorizes within the South East Asian context would be an exercise in futility. It would therefore be necessary to look at the two types of systems together. In the South East Asian context, it would be extremely difficult separate those two entities yet this is the underlying principle behind the reformist agenda brought forward by South east Asian critics. The underlying principle behind these suggestions is a neo-liberal system with separate entities of political and economic governance. However, imposing such a system upon the South East Asian countries would meet stiff opposition. This is because it would be creating a market-centered approach to the economy.

Additionally, assertions by South East Asian critics about adopting a neo-liberal market approach would fail drastically owing to the non-existence of compatible structures within those countries. It should be noted that each country has its own unique political and economic models. This models do not just happen overnight. They are as a result of the historical phases that those respective countries have undergone. Even the United States, which is keen on imposing its political reforms to the South East Asian region, did not just find themselves in those governance structures; they got there through some systematic steps inherent in their own history. Due to this reason, prescribing aggressive reforms to the South East Asian continent without considering their governance institutions can be deemed unrealistic. (Beeson et al, 2000)

Some of the changes that occurred prior to the crisis created some strong systems that eventually characterized their political and economic environment. One such case is the issue of elite control. Therefore, imposing neo-liberal reforms in South East Asia can only be effective if these changes were not present. However, because they exist and they are there to stay, it would be difficult to change them. The reasons why those changes are likely to resist change within the South East Asian arena is because those same groups were responsible for the success of the emerging economies in the early nineties. Consequently, South east Asian governments and societies alike owe these groups some form of loyalty for bringing about the changes that characterized the early nineties even when those changes are no longer relevant.

A reformist agenda within the South East Asian countries is likely to fail owing to the fact that most South East Asian countries have deep seated institutional reforms already. Taking the example of Japan, this country adopted a developmental model of governance. The country realized that it was not in a position to be laid back about the governance approach. They had developed at later stages compared to their Western counterparts. Consequently, in order to remain competitive, there was a need to create a push within the system. This would only be possible by direct government intervention in the markets. The reform agenda proposed by South East Asian critics centered on creating liberal markets where decisions should be made solely on market forces. By instructing such reforms, this would be going against some of the developmental aspects of the South East states and would therefore solicit friction from the latter countries. (Beeson, 2001)

In line with the latter arguments, it will also be difficult to impose some of the suggestions surrounding the neo-liberal systems because there are massive cases of immigrations within the South East Asian region. For instance, many Chinese have relocated to other parts of the South Eastern region. Woo Cummings (1998) estimates this number at around fifty million. The large dispersion rates of the Chinese people have been facilitated by their huge population size and also by the need to cushion themselves against the hostilities of the external market. The overall result of such a system is that many Chinese capitalists have prospered in the South Eastern region. They utilize their prior contacts to access resources and penetrate regional markets. In this regard, it would be very complicated to try and fight such a complex network yet this is the basis of the reformist agenda suggested by critics.

Political systems within the South east Asian countries have a large part to play in term of the overall success of the reformist agenda. This is because political systems in these regions have tended towards authoritarianism. While one cannot assert that this may no be out rightly visible; there are hints of this political system of governance in various avenues. For instance, in China and Japan, their governments are used to having control on economic systems. The capitalists that have the capacity to drive the economy also happen to be political entities. Consequently, trying to pursue a system that is tailored on a liberal approach would not be very realistic owing to the fact that it can meet stiff resistance from such political systems. The South East Asian political governments are deemed as superior to civil society and therefore trying to empower the latter would not be plausible in the region. (Searle, 1999)

There are certain dynamics within the South Eastern political context that would make it extremely difficult to adopt a western style reform agenda. This is because of the nature of operation of the Non Government Organizations. In the Western context, NGOs act as separate entities to the state and therefore have the capacity to affect the economic and political landscape of Western states without soliciting interference from the respective governing bodies. However, in the Asian context, the same features do not apply. As a matter of fact, NGOs characterize government preferences. This is actually the notion behind government owned NGOs. One of the problems that spring from such an approach is that no external bodies can interfere in government regulation. In fact, this principle of government superiority directs some of the regional bodies formed for those respective countries. It has been found that South East Asian bodies have a principle of no interference in the internal affairs of another countries. Consequently, imposing a reformist agenda in such a stringent political arena would be an exercise in futility the power of the state overrides all other influences and would therefore not be feasible with the South East Asian operating environments. (Suzuki, 2000)

Conclusion

Every country in the world follows their political and economic path. These paths may be relevant and successful at certain points but may not be applicable in other circumstances. However, they still form part of the political and social institutions in those countries. It would therefore be unfair to impose another country’s economic systems upon another system yet this is the basis behind the reformist arguments proposed for South East Asian countries. The latter country’s political and social structures would not be favorable for Western-style liberal market structures and therefore such reforms would fail drastically.

Reference:

Beeson, M., Jayasuria, K. & Kim, H. (2000): Politics and Markets in the wake of the Asian crisis; Routledge

Beeson, M. (2001): Globalization, governance and the political economy on public policy reform in East Asia, Journal of governance, 14, 4, 481-502

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Higgot, R. (1999): Resisting the imperialism of economics; University of East Anglia Conference paper, 9th September

Lee, S. (1999): Political economy; Journal of far Eastern Economic review, 22, 49, 15

Rhodes, R. (1997): Understanding governance, Governance, Policy Networks, Accountability and reflexivity, Open University press

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