The Asian Crisis Ten Years After

There is little likelihood of a repeat of the 1997 global financial crisis. But there is nonetheless reason to be worried about the future of global financial stability and prosperity, because the most important lessons of the meltdown ten years ago have yet to be absorbed.

This July marks the tenth anniversary of East Asia’s financial crisis. In July 1997, the Thai Baht plummeted. Soon after, financial panic spread to Indonesia and Korea, then to Malaysia. In a little more than a year, the Asian financial crisis became a global financial crisis, with the crash of Russia’s ruble and Brazil’s real.

In the midst of a crisis, no one knows how far an economy will drop or for how long. But capitalism, since its beginning, has been marked by crises; each time, the economy recovers, but each crisis carries its own lessons. So ten years after Asia’s crisis, it is natural to ask: what were the lessons, and has the world learned them? Could such a crisis recur? Is another crisis imminent?

Some similarities exist between the situation then and today: before the 1997 crisis, there had been rapid increases in capital flows from developed to developing countries – a six-fold increase in six years. Afterward, capital flows to developing countries stagnated.

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