THE ASIAN ECONOMIC MELTDOWN AT THE END OF THE 1990s term paper

Often referred to as newly industrialized countries (NICs), the Asian countries of South Korea, Taiwan, Singapore, and Hong Kong emerged in the 1960s as powerful industrial economies. By the 1980s these “four tigers” were heralded as economic prototypes not only for developing countries in Africa and Central America but also for mature economies in the developed world.

Despite considerable differences among these countries, they shared several common characteristics. All four countries benefited from the politics of the Cold War. First, they benefited from the purchases the United States made in the course of the Korean War and the Vietnam War. Then, they also profited from western efforts more generally to bolster their economies and to ensure the economic isolation of the People’s Republic of China. All are small countries; none are blessed with large mineral or natural resources. Each relies heavily on a highly efficient labor force that has nimbly moved from an economy heavily dependent on manufacturing to one focused on banking, information management, and high technology.

Imitating the Japanese, the governments of Taiwan, South Korea, and Singapore worked very closely with banks and multinational companies to plan their economic growth. Hong Kong, however, achieved its stunning success with virtually no government guidance. Despite differing approaches to economic development and markedly different political and legal systems, the economic success of the four tigers was impressive until the mid-1990s.

Starting in 1996 a deep Asian economic recession began in Japan and quickly spread to Malaysia, Indonesia, South Korea, Taiwan, Singapore, and Hong Kong. For three years this Asian economic meltdown caused widespread dislocation, unemployment, and political tension throughout the Pacific region. For the first time Japanese white-collar workers faced unemployment. Korean students studying abroad were forced to return to Korea because their families could not pay their tuition. Despite dire predictions that the world economy would suffer from the Asian meltdown, little economic slowdown occurred outside of Asia. Two factors softened the global effects of Asia’s meltdown. First, the U.S. economy continued to expand during this period; the U.S. imported record levels of manufactured goods from Asian producers. Second, by 1998 South Korea had embraced deficit spending and Japan had announced that it would align its banking and financial practices with Western standards. These decisions have restored consumer confidence and signaled to other Asian countries that an economic recovery is under way.
Suggestions for Term Papers
1. One of the hallmarks of South Korea’s economy prior to the meltdown was its largely privately owned industrial groups, chaebols, such as Samsung, Hyundai, and Daewoo. Do a research project on one of the chaebols and write a paper explaining its composition and analyzing its successes and failures.
2. In 1999 the Japanese government announced that it would welcome increased foreign investment in its finanical markets and banking industry, as well as in Internet sales. Use the Far Eastern Economic Review and The Economist to investigate the problems of foreign companies operating in Japan and write a paper on whether the situation has changed. Provide reasons for the position you take.
3. Singapore has a reputation for order, efficiency, and respect for authority. Write a paper evaluating Singapore’s system of government and how it has contributed to its economic growth.
4. South Korea experienced a sharp recession in the meltdown, but by 1999 showed signs that an economic recovery was under way. Examine the steps taken by the government to combat the meltdown and assess their contribution to recovery.
5. Despite the economic meltdown, national security and defense issues loom large. How do such countries as Japan and South Korea view defense and national security issues? 6. To what extent have Japan and the “four tigers” recovered from the economic meltdown?

Research Suggestions

In addition to the boldfaced items, look under the entries for “The Japanese Economic Miracle in the 1950s” (#47) and “The Chinese Economy at the End of the Twentieth Century” (#100). Search under Park Chung Hee, North Korea, Lee Kuan Yew, Malaysia, Thailand, and Indonesia.

SUGGESTED SOURCES

Primary Source

“Reality Hits Japan.” The Economist 345 (29 November 1997): 15, 21–23, 41, 77–78. Firsthand reports of the Japanese, South Korean and Asian banking crises.

Secondary Sources

Amsden, Alice H. Asia’s Next Giant: South Korea and Late Industrialization. New York: Oxford University Press, 1989. An authoritative examination of the key elements of Korea’s economy.

“The Devil to Pay.” Far Eastern Economic Review 160 (5 June 1997): 50–59. A close look at Japanese, South Korean, Malaysian, Indonesian and Hong Kong banking problems.

Garran, Robert. Tigers Tamed: The End of the Asian Miracle. Honolulu: University of Hawaii, 1999. This Australian journalist holds failed economic policy and irresponsible foreign investors responsible for the meltdown.

Jomo, K. S. Tigers in Trouble: Financial Governance, Liberalisation and Crises in East Asia. London: St. Martin’s Press, 1999. Good case studies of the failed economic policies in Malaysia, Korea, and Indonesia.

Mallet, Victor. The Trouble with Tigers: The Rise and Fall of South-East Asia. New York: HarperCollins, 1999. Well written analysis of the meltdown’s place within the larger context of Asian economic modernization.

McLeod, Ross, and Ross Garnaut, eds. East Asia in Crisis: From Being a Miracle to Needing One? London: Routledge, 1999. A dozen case studies illustrating how credit, economic policy, and market collapse affected the meltdown differently throughout Asia. Scalpino, Robert A., Seizaburo Sato, and Jusuf Wanandi. Asian Economic Development: Present and Future. Berkeley: University of California, Institute of East Asian Studies, 1985. Several comparative economic development studies focused on the four tigers are in this collection.

Simone, Vera, and Anne Thompson Feraru. The Asian Pacific: Political and Economic Development in a Global Context. New York: Longman, 1995. Chapter 5 focuses on economic development and has an extensive bibliography.

Vogel, Ezra F.Four Little Dragons: The Spread of Industrialization in East Asia. Cambridge, Mass.: Harvard University Press, 1991. A good starting point for understanding the special character of these economies.

White, Gordon, ed. Developmental States in East Asia. New York: St. Martin’s Press, 1988. A strong collection of essays focused on economic development policies. World Wide Web

“The World Factbook, 1999” http://www.odci.gov/cia/publications/factbook/index.html. This Central Intelligence Agency site is updated yearly.