A. B. Abrams

Economic War on Asia: South Korea and the Asian Tigers (2019)

Chapter 14 of Power and Primacy: The History of Western Intervention in the Asia-Pacific (2019). [1]

A market is not politically neutral; its existence creates economic power which one actor can use against another.
 — Robert Gilpin [2]

A leading cause of leading Western powers’ newfound focus on the Asia-Pacific region has been its increasing economic prosperity since the end of European and American colonial rule. [3] While the West once held a monopoly on the modern industrialized economy, the undermining of this monopoly by the Japanese Empire, and more so later by the USSR, posed a serious threat to the West’s nations’ global primacy in the mid-twentieth century. Asia’s economic rise has particularly since the 1990s, with the Soviet challenge to Western dominance settled, thus been perceived as a key threat to the West’s position as a global center of power.

Though the importance of a retention of Western military primacy has been repeatedly emphasized by analysts and policymakers, it is at least as important if not more so for the Western Bloc to maintain economic primacy — the latter being a key facilitator of the former. Western policy towards the Asia-Pacific has long sought to ensure that the region cannot rival the West in its economic prowess. This was referred to by renowned American scholar George Kennan, chair of the State Department’s Policy Planning staff, who stated that the policy goal of the United States in the region should be to maintain its ‘position of disparity’ separating the wealth of the U.S. and Western Europe from the poverty of Asian nations. [4] As a key report by the U.S. State Department’s Policy Planning Staff, marked top secret but since declassified, stated: ‘Disparity [in wealth] is particularly great as between ourselves and the peoples of Asia. In this situation, it cannot fail to be the object of envy and resentment. Our real task in the coming period is to devise a pattern of relationships which will permit us to maintain this position of disparity without positive detriment to our national security.’ [5] Maintaining this disparity remains crucial to the West’s continuing status as world’s dominant force giving the Western Bloc considerable freedom to shape world affairs in line with its own interests. Development and modernization in Asian nations has thus been perceived as a potential major threat to Western power.

Asia-Pacific nations starting with Japan and followed by the ‘Asian Tiger’ economies of Hong Kong, Singapore, South Korea and Taiwan have since the 1970s emerged as fast modernizing economic powers with the potential to eclipse the stagnating economies of the West and become new center of the global economy. This trend has only increased with time, and by the mid-1990s the ‘Asian Tiger Economies’ were well on their way to joining Japan in becoming global economic powers, with rising living standards and technological development which threatened to potentially eclipse those of leading Western nations. The Tiger Economies were themselves closely followed by the success stories of less developed but fast rising and more populous Asian economies of Indonesia, Malaysia and Thailand. Behind these was the far more populous nation with perhaps the greatest economic potential of all. China’s economy was by the 1990s fast rising with annual growth rates well into the double digits, and having eradicated the widespread illiteracy and drug addiction which had hindered it for so long the country was rapidly modernizing and growing. With the downfall of the USSR in 1991, these rising Asian economies emerged as by far the greatest threat to the Western Bloc’s position of primacy — leading to a major shift in Western policy towards these countries. [6] Renowned U.S. foreign policy specialist, award winning journalist and chief foreign affairs columnist for the Financial Times Gideon Rachman was one of many who observed that the root cause of the West’s growing inability to shape international affairs as it once did was ‘the extraordinary economic development in Asia’ — namely the Asia-Pacific region — which led to a ‘long run shift in global economic power.’ [7] By allowing Asian economies to rise peacefully, the West had effectively failed to maintain its ‘position of disparity’ — with serious results for the balance of power in the world which threatened to undermine hundreds of years of undisputedly Western dominated world order.

Michael Cox, professor of international relations at the University of London, LSE, noted the Asia-Pacific’s unique potential to eclipse the West as a center of economic power. He stated: ‘The region overall appears to be economically “blessed,” not so much in terms of raw materials but with other, more intangible, but important assets, including a culture of hard work, a system of entrepreneurial values, a plentiful supply of labor, a huge reservoir of capital, and a set of political and economic structures that allow the state to play a critical role in engineering successful economic outcomes.’ [8] Cox was far from alone in observing this phenomenon — one as true today as it was in the 1990s.

As a result of the growing threat posed by the phenomenal economic rise and modernization taking place in Asia in the 1990s, steps had to be taken to undermine the region’s progress. One major asset the Western Bloc had to destabilize Asian economies was its position as the center of the global financial system — from its near monopoly on the global reserve currencies used for international trade to its control of the world’s leading financial markets. Acting as a center of what is often termed the ‘wiring’ of the global financial system was compounded by massive dominance of what have come to be known as the ‘Bretton Woods institutions’ — the International Monetary Fund (IMF) and the World Bank — both of which were conceived in a conference in Bretton Woods, New Hampshire, in the United States. These would play a key role in tackling the challenge posed to the West a by a rising Asia. Both of these institutions, exerting considerable influence over the global economy, are based in Washington D.C. — with the former consistently headed by a European and the latter by an American. These institutions, overwhelmingly run by the West, have, despite names which indicate an internationalist orientation, consistently served the interests of the Western Bloc. With no alternative non-Western institutions having been formed at the time, and with the Soviet Union no longer available as a source of economic assistance, the West’s effective monopoly of such global institutions proved an extremely potent tool to handle the threat of an emerging Asia. With emerging Asian economies integrated into the Western centered global financial system, and relying on Western dominated institutions for consultations and loans, they proved highly vulnerable. In 1997 the West’s assets were put to use with great efffect to destabilize the rising economies of Asia — causing devastation from which the region’s economies would not recover for well over a decade.

Just weeks before crisis hit, the ‘Asian Tigers’ were heralded as the success stories of 1990s and the great ‘emerging market’ for the future. Indonesia, Thailand and Malaysia too were seen as among the most promising with good prospects to become middle-to-high-income countries in the near future. Stockbrokers were advising their clients that there was no better investment than this new Asian market. The hard work, endurance and investments of these Asian peoples in themselves, producing a dedicated, educated and healthy workforce, were propelling them to economic success. They had all made many sacrifices to strengthen their economies, which were facilitated largely by export-led growth. However this positive future which these peoples were set to achieve was not to be permitted by those developed high income nations whose position was threatened. The free market principles the West claimed to support had allowed many Asian nations to achieve economic miracles — showing the success of a fair market based economic system and how it rewarded an educated, hard-working and efficient people. The Western Bloc revealed however that it was willing to sacrifice the free market principles it had long advocated to further its own strategic interests. It would be a hard lesson that for all the talk of free trade and a fair global financial system, under which the best and most efficient economies would be rewarded, under which East and Southeast Asia’s economies had thus thrived, the system could be rigged by the nations that founded it against those which threatened their interests.

To take South Korea, one of the region’s most prominent success stories, as an example — the following events instigated by Western financial institutions led to its economic catastrophe. In the mid-1990s, shortly before the financial crisis, South Korean and other Asian governments came under pressure from the International Monetary Fund and World Trade Organization (WTO) to restructure their economies. South Korea was under considerable pressure from the United States government to implement a financial liberalization program and deregulate its financial markets. This came as part of a broader effort by the Western Bloc, and the United States in particular, to promote neoliberal ideology abroad. The Organization for Economic Cooperation and Development (OECD), an intergovernmental organization founded entirely by and overwhelmingly comprised of Western states, itself made further demands of the South Korean economy to dispense with its system of capital account control and open its market. [9] The protection of domestic interests had to go, as did the regulation of financial centers which allowed Seoul some control over capital flows in and out of the country. The ROK government was also pressured to privatize key state-owned companies. The response to these demands and the pressure to reform was to meet them half way. Barriers to financial sectors were lifted, allowing for open currency trading and little to no control over the flow of money in and out of the country. National firms however remained off limits to foreign ownership and key state-owned companies would not be privatized. The Western Bloc had shown itself to be if anything uncompromising in the pursuit of its interests in Asia however, and with open currency trading Asian markets, including those of the ROK, were now open and highly vulnerable to speculation — a vulnerability which the Western financial institutions would exploit to achieve the ends the Western Bloc sought. [10] With no capital controls, South Korea’s most potent means of protecting itself from speculative attacks from Western financial institutions was lost.

Ha Joon Chang, Director of Development Studies at Cambridge University, and National University of Singapore Professor Shin Jang Sup sated in their study of the ROK’s economy: ‘The post-1993 financial liberalization in Korea was critical in generating the current crisis as, for the first time in the country’s history, it instituted a very substantial, if not a complete, capital account liberalization.’ It incentivized borrowers to contract short-term loans from abroad and left the market vulnerable to speculation while failing to strengthen the supervision system. [11] The primary reason why this took place was political pressure from Western nations and Western based international organizations such as the IMF and WTO. With capital controls lifted colossal sums of money flowed into Korean markets unregulated by the Korean government. Free capital flows had begun to occur in several other rising Asian nations such as Malaysia and Thailand at around the same time — also overwhelmingly due to external pressure.

Columbia University Professor, Nobel Prize Winner and renowned economist Joseph Stiglitz concluded that the cause of Asia’s economic crisis was rapid market liberalization, primarily the sudden deregulation of capital flows — the lifting of capital controls. He noted that these were exactly the policies that the U.S. Treasury and IMF had strongly advocated and pressured nations such as South Korea to adopt. This in turn laid the ground for the country’s vulnerability to speculative attacks from the West. Following the economic advice of Western governments and institutions was thus by far the greatest cause of the Asian financial crisis which came soon afterwards. [12] American International Relations Professor and former Oxford University Foreign Service Program director Rodney Bruce Hall similarly argued that the primary cause of the crisis was an IMF attempt at ‘demolition’ of the Asian development model using the lifting of capital controls to set the stage for harsh speculative attacks. [13]

South Korea’s compromise and its lifting of its capital controls facilitated lethal speculative attacks by Western financial institutions which devastated its now vulnerable markets. In 1996 Western brokers had invested approximately $100 billion in the South Korean economy. Within just weeks, based on pure speculation and without any changes to the South Korean economy taking place, this all changed. In 1997 investment into South Korea turned to negative $20 billion, and though the economic and political situation of the country was improving there was an unexplained discrepancy of $120 billion. Western financial sectors sharply pulled out with devastating effect. Speculative attacks did not punish Korea for economic failures, ideology, opposing Western foreign policy or anything else. The other Asian countries targeted all differed significantly in all of these aspects — but what all had in common was that they were rising Asian economic powers whose growing prosperity threatened the position of the West. As HSBC’s global chief economist Stephen D. King argued in his aptly titled work, Losing Control; The Emerging Threats & Western Prosperity, the rise of Asian economies, regardless of their political orientation, posed a fundamental threat to the West’s position and its global economic primacy. [14] King was but one of many prominent figures in the West who had made this case — drawing attention to the need for drastic measures, such as those implemented in the 1990s, to forestall Asia’s rise. Rising Asian powers, whether triumphing militarily or economically, invoked the West’s feared ‘yellow peril’ of old — that the Asia-Pacific would rise to supplant the West as the world’s center of power.

On the face of it the financial crisis had no apparent rational cause. What suddenly happened to Asian markets was referred to as ‘Asian Flu,’ later ‘the Asia Contagion,’ for lack of a better explanation. The previously booming Asian economies were devastated, with the Thai Baht, Malaysian Ringgit, Indonesian Rupiah and South Korean Won all suffering. The Economist called the resulting losses ‘a destruction of savings on a scale more usually associated with a full-scale war.’ [15] These nations had adopted Western economic models, which while not necessarily flawed in themselves, when opened to global financial markets left them at the mercy of the Western centered financial system. Whatever they built could be taken from them, for the center of the economic system was in the West. The economies of their Asian nations could do little to protect themselves as they were attacked. It became clearer with time that the crisis was due to Western actions rather than Asia’s own shortcomings. A Financial Times editorial wrote: ‘The Asian crisis showed the world how even the most successful countries could be brought to their knees by a sudden outflow of capital. People were outraged at how the whims of secretive hedge funds could apparently cause mass poverty on the other side of the world.’ [16] Those developed Western nations at the center of the global financial system retained a significant advantage in their ability to use economic measures — in this case speculative attacks to destabilize the economies of developing countries which had no potential to rival them in the future.

As brokers sold all their Asian investments and advised their clients to do the same Asian currencies sunk rapidly. Asian governments were forced to drain their foreign currency reserves to prop up their own currencies. Western markets and brokers responded with increased selling which quickly depleted these reserves. As growing economies they could not compete with the economic might of the established Western financial institutions. The lifting of capital controls a year prior under immense Western pressure meanwhile meant that Asian governments had no means of regulating markets and were extremely vulnerable to speculation. In one year $600 billion had disappeared from the stock markets of these Asian nations, wealth that had been built with great effort by the peoples of these countries over several decades. [17]

In South Korea people responded in solidarity, encouraged by advertising campaigns calling on citizens to donate their belongings, particularly gold and jewelry, to save their country’s economy. Within a few weeks over 3 million donated jewelry, medals, trophies, wedding rings and more. [18] The BBC reported at the time regarding the gold donation initiative, a public attempt to save the country’s hard-earned economic achievements:

Housewives gave up their wedding rings; athletes donated medals and trophies; many gave away gold “luck” keys, a traditional present on the opening of a new business or a 60th birthday. The campaign has exceeded the organizers’ expectations, with people from all walks of life rallying around in a spirit of self-sacrifice. According to the organizers ten tons of gold were collected in the first two days of the campaign. But perhaps the most extraordinary aspect of the campaign is not the sums involved, but the willingness of the Korean people to make personal sacrifices to help save their economy. [19]

Over 200 tons of gold were collected, [20] a huge amount from a small developing nation, and enough to drive down the world gold price. [21] [22] Even this was not enough — it could never be enough. The predominantly Westerm based financial markets were unrelenting, and speculation would not stop driving the Korean Won down until Western goals had been achieved.

The power to determine whether Asian economies would be spared or not lay in the West’s hands. Three years prior to the Asian crash a similar crisis had occurred in Mexico, the Tequila Crisis, which had been ended by Western financial institutions themselves which did not wish to see Mexico fall. Swift action was taken to stop the crisis and the U.S. treasury loaned Mexico enough money to restore faith in its markets and end the destructive speculative cycle. They would not let Mexico fail and it was well within their power to save it. No moves were made to help the Asian markets whatsoever. Indeed, several Asian economists had predicted during the Tequila Crisis that should a similar crisis occur in their own region, they were unlikely to receive the financial support that Mexico did as it was not in line with Western interests to support Asian economies as it was to prop up that of Mexico. These included Toyoo Gyohten and Hajime Shinohara of the Japanese Institute for Monetary Affairs — who realized the resulting need for an Asian monetary fund independent of the United States to support a bailout where the U.S. wouldn’t. [23] Their prediction proved entirely correct. When the Asian crisis occurred it was in line with U.S. and Western interests not only to see the crisis go through, but to exacerbate the effect it had on its economic rivals. Several of the most renowned names in Western finance came out to present a unified message, not to help or lend to Asia a stark contrast to the message for the Mexican crisis. Milton Friedman, the world famous and influential American Economics professor, made a very rare appearance in his mid-80s on CNN to say he opposed any form of bailout, and that (unlike Mexico) the Asian market should be left to ‘correct itself.’ That essentially meant that it should be left to crash, and Asia’s should return to its ‘correct’ place. [24]

The view that Asian markets should be allowed to crash was also echoed by Morgan Stanley. Jay Pelosky, one of their primary emerging market strategists, made it clear to a conference in Los Angeles hosted by the Milken Institute that the U.S. Treasury and IMF should do nothing to lessen the pain of the crisis Asia was suffering. It was imperative that these two organizations held back from saving Asian markets. As Pelosky said: ‘what we need now in Asia is more bad news. Bad news is needed to keep stimulating the adjustment process.’ [25]

In November 1997 the Asia Pacific Economic Cooperation Summit was held in Vancouver four months after the market crash had begun. When the issue of the Asian financial crisis was raised U.S. President Bill Clinton enraged his Asian counterparts by referring to what they saw as an economic catastrophe as ‘A few little glitches in the road.’ [26] The United States was not willing to help its supposed Asian allies and friends, though as they had demonstrated with Mexico it was entirely within their power to do so.

Alongside the perceived threat to its primacy posed by a rising Asia, the West had much to gain economically which further incentivized it to exacerbate an economic crisis in the Asia-Pacific. South Korea’s economy, along with those of Malaysia and Thailand, had rapidly developed under strong protectionist policies, under which foreigners were banned from owning land or buying out national firms. These countries had kept several sectors such as transportation and energy publicly owned, while many imports from Japan and Western countries were strongly discouraged to strengthen domestic production. They were success stories, but entirely Asian success stories the benefits of which were enjoyed by their own people. Western investment banks wanted more benefits from Asia’s success for themselves while Western multinationals did not want strong Asian firms providing for their own markets, and potentially competing for exports. They also wanted open access to Asian markets themselves and an end to any protectionist policies. In South Korea, as companies such as Samsung, Hyundai, Daewoo rose to prominence and success, Western investors wanted the rights to buy up the best of them. This was forbidden by the South Korean government. Asia’s success was to be enjoyed by the Asian peoples, something which sounded reasonable but for the West was unacceptable. These considerable financial incentives, along with the aforementioned impact of Asia’s rise in undermining the West’s longstanding primacy and the political consequences this had, made exacerbation of the crisis strongly in line with Western interests.

Morgan Stanley strategist Jay Pelosky told things as they were in his analysis. If the crisis was left to worsen all foreign currency would be drained from the target Asian nations, leaving Asian companies unable to operate. They would be forced either to sell themselves or to close down — both of which suited Western interests very well. The aim was to leave Asian corporations desperate. Pelosky said in relation to the 1997 crisis: ‘I’d like to see closure of companies and asset sales … Asset sales are very difficult; typically owners don’t want to sell unless they’re forced to. Therefore, we need more bad news to continue to put the pressure on these corporates to sell their companies.’ Pelosky thus strongly advocated withholding support for Asian markets — something from which Western corporations would go on to benefit greatly. [27]

Eisuke Sakakibara, Japan’s top international finance bureaucrat at the time, noted regarding the performance of the IMF in the region: ‘Absurdly, they forced fiscal consolidation on countries at a time of crisis. They shut down financial institutions — a measure that will squeeze the economy. They also introduced capital liberalization, forcing countries to move from a pegged exchange system to a flexible one. If you do that at a time of crisis, the outcome is obvious — it will cause the currency to collapse. All these measures exacerbated the Asian financial crisis.’ Could provoking a currency collapse and exacerbating the currency crisis not have been the intention of the Western run IMF considering both the predictability of the results of their adjustments and, critically, the very substantial benefits the West derived directly from the destruction of Asian currencies? [28]

Canadian journalist, award-winning author and political analyst Naomi Klein stated in her analysis of the Asian financial crisis and its beneficiaries: ‘What few were willing to admit at the time is that, while the IMF certainly failed the people of Asia, it did not fail Wall Street — far from it. The hot money may have been spooked by the IMF’s drastic measures, but the large investment houses and multinational firms were emboldened … [The firms] now understood that as a result of the IMF’s “adjustments,” pretty much everything in Asia was now up for sale — and the more the market panicked, the more desperate Asian companies would be to sell, pushing their prices through the floor.’ Klein speculated that the IMF could have likely intended to deepen the crisis intentionally to benefit Western firms at Asia’s expense, but in the best case was ‘recklessly indifferent’ when intervening in Asia’s economies. She stated that whatever the IMFs intentions, it was clear who had benefited from their harmful policies. [29]

British Professor of Anthropology David Harvey noted in his own study of the Asian crisis, regarding Western Bloc’s ability to use its position as the center of the global financial system as a means to ‘liquidize’ its potential rivals: ‘Liquidation can come by a variety of means … IMF austerity programs implemented at the behest of the U.S. Treasury can be used with equally destructive effect as physical force. The distinctive role of U.S. financial institutions and the U.S. Treasury backed by the IMF in visiting a violent devaluation of assets throughout East and South-East Asia, creating mass unemployment and effectively rolling back years of social and economic progress on the part of huge populations in that region, is a case in point.’ [30] Regarding incentives for the United States in particular to use its power over the global financial system to bring ruin to the Asia economies, Harvey noted that the purpose was to eliminate a threat to its place as the center of the world economy and the world’s leading power, stating: ‘It is hard to imagine that the U.S. would peacefully accept and adapt to the phenomenal growth of East Asia and recognize … that we are in the midst of a major transition towards Asia as the hegemonic center of global power. It is unlikely that the U.S. will go quietly and peacefully into that goodnight.’ [31]

The United States took up its opportunity to reshape Asian nations’ economies in line with its own interests. As José Piñera, senior fellow at the highly influential Cato Institute think tank in Washington D.C., said ‘the day of reckoning has arrived’ — referring to the fall of the Asian Tigers as ‘the fall of a second Berlin Wall.’ [32] [33] The Western world had won a victory in taking their primary rival, the Soviet Bloc, under their economic influence following its disintegration. Now they would neutralize emerging economic rivals in Asia as well. The devastating effect of this form of economic sabotage was clearly seen by the fall not only of Asian nations’ currencies, but also the extreme and sudden economic contraction of these states. Gross National Product (GNP) of many nations fell so quickly and so greatly that it exceeded the economic devastation resulting from many of the century’s major wars. [34]

Table 1
Currency Exchange rate (per US$1) Currency Depreciation
June 1997 July 1998
Thai baht 24.5 41 40.2%
Indonesian rupiah 2,380 14,150 83.2%
Philippine peso 26.3 42 7.4%
Malaysian ringgit 2.48 4.88 45.0%
South Korean won 850 1,290 34.1%
Country GNP (US$ 1 billion) GNP Contraction
June 1997 July 1998
Thailand 170 102 40.0%
Indonesia 205 34 83.4%
Philippines 75 47 37.3%
Malaysia 90 55 38.9%
South Korea 430 283 34.2%

The IMF, whose responsibility it was to prevent such crises, responded to the Asian crisis only after the worst was over. When they did so it was with a long list of demands for economic restructuring. The crisis was not something to be averted, but rather an opportunity to further push forward the United States’ neoliberal agenda onto Asian nations. Alan Greenspan, Chairman of the U.S. Federal Reserve, perhaps the world’s most influential economic policymaker, described the fall of Asia’s markets as ‘a very dramatic event towards a consensus of the type of market system we have in this country (United States).’ [35] It was the birth of a new Asia, born into the United States’ economic dominance. As Greenspan observed at the time: ‘the current crisis is likely to accelerate the dismantling in many Asian countries of the remnant of a system with large elements of government-directed investment.’ [36] [37]

Malaysia was notably an exceptional case, and by refusing to comply with the ‘advice’ of Western financial institutions to restructure and adopt neoliberal policies it was spared the worst of the crisis. The country had relatively little debt even after the crisis and chose to resist the demands and pressure of the West and the IMF. As Prime Minister Mahathir Mohamad said, he should not have to ‘destroy the economy in order that it should become better.’ [38] That was essentially what other nations were forced to do, at great cost to their own peoples. Mahathir used any opportunity at domestic and international forums to raise awareness of and speak against the West’s ‘movement to turn all Asian economies [into] Anglo-Saxon laissez faire market economies.’ He accused the World Bank and IMF of being instruments of the West’s ‘neocolonialism’ and the Western financial system and currency traders of artificially devaluing Asian currencies ‘so the so-called East Asian economic tigers suddenly turn into meowing cats.’ [39]

As it became evident to increasing numbers of observers that the crisis was caused largely as a result of the lifting of capital controls and the resulting ease with which money could flow in and out of Asian economies unregulated, many lawmakers in other afflicted Asian states suggested simply reinstating capital controls. Malaysia did so, and their economy recovered soon afterwards. Though Prime Minister Mahathir’s defiance produced results, or perhaps because of it, he was portrayed as a dangerous economic extremist in the West — all the better to prevent Malaysia’s common sense approach from being adopted by neighboring states which suffered from similar economic issues. Other Asian governments relied heavily on advice from the IMF, having largely outsourced their decision-making to the fund in return for loans. As Thailand’s deputy premier Supachai Panitchpakdi said at the time, while its IMF drafed economic reforms were passed by four emergency degrees to avoid parliamentary debate: ‘We have lost our autonomy, our ability to determine our macroeconomic policy. This is unfortunate.’ [40] The IMF meanwhile dismissed such ideas as Mahathir’s as absurd without explanation. [41] The Washington based institution acted in accordance with the strategic interests of the Western Bloc — seeking not to amend the crisis or look to its causes but rather to leverage the crisis to further weaken the Asian nations and undermine their independence and their formerly successful economic models.

The IMF’s own internal audit by the IMF Independent Evaluation Office during the Asian crisis was itself highly critical of the Fund’s leveraging of the economic crisis to impose reforms on Asian nations. It stated that, contrary to IMF policy at the time, ‘crisis should not be used as an opportunity to seek a long agenda of reforms just because leverage is high, irrespective of how justifiable they may be on merits.’ It referred to the stringent structural adjustment demands as ‘ill advised,’ ‘broader than seemed necessary’ and ‘not critical to resolving the crisis.’ Regarding the IMF’s efforts to prevent Asian nations from reinstating capital controls as Malaysia previously did, the audit stated: ‘If it was heresy to suggest that financial markets were not distributing world capital in a rational and stable way, then it was a mortal sin to contemplate’ capital controls. Capital controls were not, the audit stated, dismissed on the basis of their merits or lack of them, but the IMF was determined to prevent their imposition regardless. [42] [43] The highly critical report by the Independent Evaluation Office did not emerge until 2003, by which time it was far too late for Asian nations affected to reconsider their near unconditional acceptance of IMF structural adjustments and economic reforms.

The IMF offered negotiations only after the crisis had run its full course, when Asian governments were deeply in need of foreign currency and unable to negotiate effectively. As Stanley Fischer, Former Governor of the Bank of Israel and Vice Chairman of the Federal Reserve System’s Board of Governors, then in charge of talks for the IMF, said: ‘You can’t force a country to ask you for help. It had to ask. But when it’s out of money, it hasn’t got many places to turn.’ [44] The great irony remained that the IMF’s own pressure, along with the WTO, had forced the Asian nations to remove the capital controls and initiate reforms which first caused the crisis. Now these same nations were forced to turn to the very same IMF and follow its own programs to further reform their economies. One could compare the situation to asking a man who is responsible for torching your house to help put out the fire.

The first stage of the IMF reform process was to strip countries of active state participation in their own economies. What was removed was nothing less than the ‘trade and investment protectionism and activist state intervention that were the key ingredients of the “Asian miracle,”’ according to political scientist Professor Walden Bello. [45] With their own states unable to intervene in their interests, Asian peoples and economies were left entirely at the mercy of Western institutions. Fischer admitted that the IMF’s own investigation had in fact concluded that the crisis in Korea and Indonesia was unrelated to government overspending, yet he went ahead to enforce severe and sudden austerity measures regardless. Whatever one’s opinions of state interventionism in an economy, the key point was that it was pulled back not as a response to economic necessity or stimuli, or at the request of the people, but rather as an external imposition to further foreign interests. It was nothing to do with helping Asia recover. One New York Times reporter wrote that the IMF’s actions while working to reform Asia’s economies were ‘like a heart surgeon who, in the middle of an operation, decided to do some work on the lungs and kidneys, too.’ [46]

Singaporean political and economic analyst Cheong Yip Seng noted in 2010 that the policies advocated by the IMF and Western institutions for Asia were utterly hypocritical considering their response to the West’s own financial crisis in 2008. He wrote:

The West — including the International Monetary Fund and World Bank — prescribed bitter medicine. They extolled traditional free market principles: Asia should raise interest rates to support sagging currencies, while state spending, debt, subsidies should be cut drastically. Banks and companies in trouble should be left to fail, there should be no bail-outs. South Korea, Thailand, Indonesia were pressured into swallowing the bitter medicine … Western credibility was torn to shreds when the financial tsunami struck Wall Street [2008]. Shamelessly abandoning the policy prescriptions they imposed on Asia, they decided their banks and companies like General Motors were too big to fail. How many Asian countries could have been spared severe pain if they had ignored the IMF? [47]

The supposedly internationalist Western led institutions prescribed austerity and a selling off of corporations in the rival economies of Asia, with devastating effect, but advised generous bailouts to save their Western counterparts. Market principles were not applied consistently, but rather in a way that best suited Western economic interests.

The IMF, an organization founded in the United States in 1946 with its headquarters in Washington D.C., whose managing directors have all been Westerners, was inevitably working to further Western interests throughout the Asian crisis. During the negotiations between the IMF and the South Korean government David Lipton, U.S. Treasury Undersecretary for International Affairs, flew to South Korea and checked into the Seoul Hilton — the hotel where negotiations were taking place. He attended to ensure that the interests of U.S. firms were represented and reflected in the final agreements. Korea’s economy was being rewritten to reflect Westen interests. As Washington Post and Wall Street Journal economic reporter Paul Blustein wrote, Lipton’s presence at the negotiations was ‘a visible manifestation of the influence the United States wields over IMF policy.’ [48] To reflect Western economic interests the IMF went on to privatize basic services, all of which were open to be bought by foreigners — something formerly illegal in several Asian countries including South Korea. Central banks were made independent and workforces were made more ‘flexible’ as Western firms — then best positioned to buy out their Asian rivals — wanted assurances that they could radically downsize them. Korea was forced to lift its laws protecting its workers against mass layoffs, [49] and the IMF set them strict layoff targets. Korea’s banking sector was forced to shed 50 percent of its workers, though this figure was later reduced to 30 percent. [50] A year beforehand South Korea’s unionized workforce held immense influence, but now following the crisis the government was forced to crack down on them in accordance with Western demands made through the IMF. Social spending was also reduced significantly.

South Korea was devastated and when the next presidential elections took place two of the four leading presidential candidates ran on anti-IMF platforms. This was a threat to IMF policy and Western interests in South Korea — whose reform process was just beginning. The IMF responded by refusing to release the money it would loan to South Korea, that for which Seoul had already made extensive concessions, unless an extra condition was met. All four main presidential candidates had to pledge in writing that they would stick to the deal with the IMF if they won. There would be no return to government control and protection of the country’s economy against foreign interests. With the country held to ransom all candidates had little choice but to sign. [51] South Koreans could vote of course, but they could not have any say in the future running of their country’s economy. It was not to be run in their interests anymore. [52] The day of the signing was fittingly known as the country’s ‘National Humiliation Day.’ [53] [54]

Within a year the economies of Thailand, Indonesia, the Philippines and South Korea had been hugely restructured and remade under the regime of the IMF, in accordance with Western interests. Financial Times commentator Martin Wolf referred to this imposed restructuring as ‘the humiliating dictation by IMF officials operating under the thumb of the U.S. Treasury.’ [55] The idea behind the IMF’s restructuring was that the now remade and efficient Asian economies would supposedly attract all the currency that flowed out back in. However after a year of IMF reforms, many of them wholly unnecessary, the markets were not emboldened to invest in a new Asia but rather panicking. The reasoning was, if Asia needed such a severe makeover as the extent of IMF reforms was widely interpreted to indicate, it must truly be a dire situation indeed and not a good place to put one’s investment. While, as the IMF Independent Evaluation Office would later confirm, the institution’s restructuring of Asian economics was highly excessive and was wholly unrelated to inefficiencies in these economies, this was not how speculators perceived the massive restructuring program. As the IMF had insisted on removing capital controls, the only form of defense against the destructive effects of such speculation, money again flowed out. Traders and brokers took more and more money out of Asia, further weakening the Asian currencies. South Korea was losing $1 billion every day and its debt was downgraded to junk. As Jeffrey Sachs, American Economist, Columbia University Professor and director of the Earth Institute put it: ‘Instead of dousing the fire, the IMF in effect screamed “fire” in the theatre.’ They had turned a severe crisis into an outright catastrophe, for which target Asian nations would pay the price. [56]

The human cost of economic disaster in Asia was very high. 24 million people in the affected countries lost their jobs. In Indonesia the unemployment rate tripled. In South Korea 300,000 workers lost their jobs every month, largely due to the IMF’s demands to lay off workers which proved to be totally unnecessary and if anything counterproductive. South Korea’s unemployment rate nearly tripled while its ‘middle class’ all but collapsed. In 1996, 63.7 percent of South Koreans had ‘middle-class’ living standards and incomes. By 1999, after just two years of IMF restructuring, the middle class was down to 38.4 percent. 20 million people fell into poverty during this period as a direct result of this crisis brought on by a combination of Western pressure to remove capital controls, its financial institutions’ speculative attacks, and finally the Washington based IMF’s painful restructuring of their economies. [57] [58]

The extent of the human suffering was greater than statistics could show. Through destroying economies people’s lives were devastated which had horrific consequences — many of which would commonly be associated with famine or total war. Economic war targeted Asia specifically for exploitation. As the middle classes across Asia fell, the poor fell further. Many rural families in the Philippines and South Korea were left with little choice but to sell their daughters to human traffickers. These young girls would go on to work in the sex trade in Australia, Europe and the United States. [59] Without firing a shot, the West had looted not only Asia’s riches and economy, but their young women as well. In Thailand public health officials reported that child prostitution had increased by 20 percent in just one year, the year following the IMF reforms. [60] The Philippines noted the same trend. [61] Again it would be primarily Westerners who would benefit from a more desperate population and resulting child sex industry in Asia, with the prime destinations for trafficking being synonymous with the Western world. [62] [63] The BBC similarly reported a rise in sex tourism and child sex tourism, largely catering to Western clients, occurring as a direct result of the Asian financial crisis. [64]

Khun Bunjan, a Thai community leader, said when interviewed on the impacts of the crisis: ‘we the poor pay the price … even our limited access to schools and health is now beginning to disappear.’ Khun’s husband had lost his factory job, and she had been forced to send her children to work as scavengers. Young women increasingly turned to prostitution, catering specially to Western foreigners, while drug dealing became increasingly attractive to the now destitute young men. [65] Given this it was painfully ironic when U.S. Secretary of State Madeleine Albright visited Thailand in March 1999 and scolded the Thai people for turning to prostitution and ‘dead end drugs.’ She emphasized how it was ‘essential that girls not be exploited and abused and exposed to AIDS. It’s very important to fight back.’ Despite this she expressed her ‘strong support’ for the severe austerity policies dictated by the IMF which were forcing them into such vice. On the same trip she lobbied hard to sell U.S. fighter jets worth hundreds of millions of dollars to the impoverished nation and combined with the harsh austerity measures it appeared that the United States was encouraging Thailand to spend money on anything but its increasingly desperate population. [66] [67]

While the IMF’s operations had devastated the lives of the Asian peoples, they had benefited Western interests tremendously. As a result of the IMF’s adjustments everything was now for sale dirt-cheap (from their daughters to Hyundai and Daewoo). The more the markets panicked, the further prices fell and the more Asian firms would be forced to close or sell. As Jay Pelosky had said, Asia needed ‘more bad news to continue to put pressure on these corporates to sell their companies.’ [68] It was now time to scavenge the broken Asian economy and take what could be taken at bargain prices unthinkable before 1997.

Jeffrey Garten, former U.S. Undersecretary of Commerce, had predicted that when the IMF was finished with Asia, ‘there is going to be a significantly different Asia, and it will be an Asia in which American firms have achieved much deeper penetration and much greater access.’ [69] Asia’s crash was dubbed ‘the World’s biggest going-out-of-business sale’ by the New York Times[70] Business Week called it a ‘business-buying bazaar.’ [71] The apparatus of the Asian economy, the workforce, consumer base, and brand value built up by Korean firms particularly were coveted, and fell under Western control. Western firms entered not to build their own businesses, but rather to buy up businesses. These would then often be broken up and downsized or shut down completely to eliminate competition to Western brands.

Observing Asia’s colossal losses and the West’s equally colossal gains as a result of the crisis, British economists Robert Wade and Frank Veneroso predicted that ‘the Combination of massive devaluations, IMF-pushed financial liberizations, and IMF-facilitated recovery may even precipitate the biggest peacetime transfer of assets from domestic to foreign owners in the past fifty years anywhere in the world.’ [72] Indeed, why invade Asia to acquire its wealth and forestall its growth through military means as in imperial times when economic warfare seemed to work just as well but far more subtly.

The Korean giant Samsung was broken up and sold for parts. S. C. Johnson & Son took its pharmaceuticals arm. Volvo took its heavy industry division. General Electric took its lighting division. Daewoo’s car division previously valued at $6 billion was sold to General Motors for a mere $400 million. [73] Nissan bought one of Indonesia’s biggest car companies. General Electric bought the controlling share in Korea’s previously successful refrigerator manufacturer LG. The large Korean electricity and gas company LG Energy was bought up by the British Powergen. Other large Western companies which benefited directly from Asia’s crisis included: Coca-Cola, Seagram’s, Hewlett-Packard, Nestlé, Interbrew and Novartis, Carrefour, Tesco and Ericsson. [74] [75]

Western financial institutions also gained a great deal. Two months after the IMF reached its final deal with South Korea The Wall Street Journal published an article titled: ‘Wall Street Scavenging in Asia-Pacific,’ which detailed how Morgan Stanley among others had ‘dispatched armies of bankers to the Asia-Pacific region to scout for brokerage firms, asset management firms and even banks that they can snap up at bargain prices. The hunt for Asian acquisitions is urgent because many U.S. securities firms, led by Merrill Lynch & Co. and Morgan Stanley, have made overseas expansion their priority.’ These banks managed incredible deals and acquired valuable assets. [76]

AIG bought Bangkok Investment for a small fraction of its prior worth. JP Morgan bought a significant stake in the Korean car giant KIA Motors. Merrill Lynch bought both Japan’s Yamaichi Securities [77] and Thailand’s largest securities firm Phatra Thanakit. [78] Travelers Ground and Salomon Smith Barney bought several companies including Korea’s largest textile company. [79] The Carlyle group became a major shareholder in one of Korea’s largest banks, as well as buying Daewoo’s telecom division and SsangYong Information and communication, one of Korea’s largest high tech firms. [80]

Asian governments were also forced to sell off publicly owned services to Western interests. This had been predicted by the United States which sought to benefit from buying up what had been property of the Asian peoples at very low prices. To make a case for the U.S. Congress authorizing billions to the IMF to help remake Asian economies, the U.S. trade representative Charlene Barshefsky said that the agreements with the IMF would force Asian nations to ‘accelerate privatization of certain key sectors — including energy, transportation, utilities and communications.’ This was put forward as a positive step not because it would help Asia to recover, but because it would ‘create new business opportunities for U.S. firms.’ [81]

A wave of privatizations took place all across Asia, the main benefactors of which were Western interests. Bechtel bought the water and sewage systems in Eastern Manila, [82] as well as beneficial contracts to build an oil refinery in Indonesia’s Sulawesi. [83] Motorola took full control over South Korea’s Appeal Telecom. [84] Sithe, an American energy giant, took a large stake in Cogeneration, Thailand’s public gas company. Indonesia’s state-owned water systems were split between Britain’s Thames Water and France’s Lyonnaise des Eaux. A massive Indonesian government power plant project was taken by Canada’s Westcoast Energy. British Telecom purchased large stakes in Malaysian and South Korean postal services. Bell Canada took a piece of Hansol, Korea’s telecom. [85] [86] [87] These were but a few of the many Western acquisitions of Asian publicly owned companies.

Professor of Anthropology David Harvey noted regarding how the United States, having played a key role in orchestrating the Asian crisis, was now the key beneficiary:

Various bouts of devaluation and destruction of capital were visited, usually through the good graces of IMF structural adjustment programs … The hedge funds’ attack upon the Thai and Indonesian currencies in 1997, backed up by the savage deflationary policies demanded by the IMF, drove even viable concerns into bankruptcy throughout East and South-East Asia. Unemployment and impoverishment were the result for millions of people. That crisis also conveniently sparked a flight to the dollar, confirming Wall Street’s dominance and generating an amazing boom in asset values for the affluent in the United States. [88]

The West had vested interests in seeing other nations adopt neoliberal economic systems under which emerging industries could not be protected from external acquisitions. While such economic models, as well as the reforms and ‘adjustments’ which lead to them, have been promoted by Western states, academic institutions and media as being in the best interests of the peoples and countries in which they were implemented the prime benefactors of their implementation were always the parties which advocated them rather than the countries in which they were implemented. As the American Interest noted, implementation of neoliberalism in independent states was seen highly favorably by Western nations because it brought about ‘co-option and an evolutionary change in values.’ [89] These political, economic, and resulting social changes and the weakening of the role of foreign states in protecting their own emerging industries have benefited Western designs to maintain their own economic primacy.

In the case of many nations affected by the crisis, perhaps most prominently South Korea, it was the elite of American educated economists who supported Western governments and institutions in advocating the neoliberal policy that proved so disastrous. As Ha Joon Chang, Director of Development Studies at Cambridge University, and National University of Singapore Professor Jang Sup Shin stated in their study of the ROK’s economy noted of the liberalization process in South Korea: ‘What was decisive in this process was the increasing conversion of the intellectual elite, especially the bureaucratic elite, to Neo-Liberalism. The increasing number of elite bureaucrats and academics who got advanced degrees from the U.S. at the height of its Neo-Liberal revolution meant that there were more and more people inside the government who were convinced of the virtues of the free market and saw developmentalism as a “backward” “mistaken” ideology. It needs to be added that in this ideological battle, the Neo-Liberals were critically helped by the ideological dominance of the Anglo-American academia and media at the world level.’ This pressure from American educated Koreans was an invaluable asset to external actors which were pressing the country to change course and adopt economic reforms in line with their own interests and these in turn led the economy to disaster. [90]

Despite the great costs to the peoples in affected countries the Asian crisis is largely considered in the West to have been a positive development. It is not spoken of as something that hugely benefited the West at Asia’s expense, but rather as a chance for Asia to ‘correct’ itself by conforming to Western economic ideals — a remaking of the region in the West’s image and in line with Western interests. The Asia-Pacific was no longer a strong and rising economic region, but rather an impoverished crisis, yet this was lauded as a great new step for Asian nations. The Economist wrote: ‘it took a national crisis for South Korea to turn from an inward looking nation to one than embraced foreign capital, change and competition.’ [91] The reality in Korea, however Western sources chose to word their analyses, was in fact one of suffering, economic loss, suicides and destitution. In 1998 the suicide rate spiked, with the greatest increase occurring among those over 60 who had sought to lessen the economic burden on their children. Korean authorities pointed out that there was a tremendous increase in family suicide pacts, in which fathers would lead their household in group suicide pacts. According the South Korean media these family suicide pacts meant that the official suicide rate was in fact far below the nation’s actual rate. Under a family suicide pact one member of the family would hold the responsibility of killing the others then finally themselves. As a result: only the [family] leader’s death is classified as suicide while the rest are listed as murders, the actual number of suicides is far higher that the statistics released. [92] [93] The crisis was hailed as positive development only because it benefited Western interests at the expense of the Asian populations.

Three times Pulitzer Prize winner Thomas Friedman wrote it his book The Lexus that the destruction of Asian economies in the crisis had a positive effect. He wrote: ‘Globalization did us all a favor by melting down the economies of Thailand, Korea, Malaysia, Indonesia … in the 1990s, because it laid bare a lot of rotten practices and institutions.’ [94] [95] What he failed to explain was how these countries, if they really were so ‘rotten’ were so successful before they had been pressured by the West to lower capital controls and expose themselves to speculation. What had led them to crash was not their ‘rotten institutions and practices’ but rather external pressures followed by external destruction of their currencies, then adoption of IMF policies which sabotaged their economies. Whether he viewed them as ‘rotten’ or not, they had produced far better results for their populations when they had been in place than afterwards.

Analyzing the crisis and its long-term implications on Asian populations affected ten years afterwards in 2007, Naomi Klein noted the extent of the devastation. She stated:

The truth is that Asia’s crisis is still not over, a decade later. When 24 million people lose their jobs in a span of two years, a new desperation takes root that no culture can easily absorb. It expresses itself in different forms across the region, from a significant rise in religious extremism in Indonesia and Thailand to the explosive growth of the child sex trade. Employment rates have still not reached pre-1997 levels in Indonesia, Malaysia and South Korea. And it’s not just that the workers who lost their jobs during the crisis never got them back. The layoffs have continued, with new foreign owners demanding ever-higher profits for their investments. The suicides have also continued. In South Korea, suicide became the fourth most common cause of death, more than double the pre-crisis rate, with thirty-eight people taking their own life every day [the world’s highest suicide rate].

Klein attributed the fast growth of brothels, slums, human trafficking, child prostitution, and suicide in the Asian countries affected to the Western financial centers’ attacks on their economies and to the policies of the IMF which exacerbated the situation. [96]

Could this catastrophe on a massive scale be another lesson in the results of trying to compromise with Western interests when they seek to dictate policy to a country? To try to compromise with the uncompromising can hardly yield positive results. Notably the countries that avoided towing the Western line fared much better. As economics professors Damien Cahill and Martijn Konings noted regarding neoliberalism’s discredited track record and the reason why the West was so eager to see China’s emerging economy adopt such a system after attempts to promote destabilization and topple the ruling Communist Party in 1989 failed: ‘The Asian crisis of 1997 did much to undermine the idea that following neoliberal strategies offered a viable development model. This was in part due to the sheer severity of the crisis and the way the currency speculation plunged an entire region of the world into a prolonged economic recession, but also due to the simple fact that those countries following the IMF rulebook had been affected most severely, whereas those that were quick to impose capital currency controls in fact remained somewhat shielded from the worst effects of the crisis.’ They noted that Russia, which had also implemented the IMF’s reforms and adopted neoliberal policies, had seen crises of their own within years of the Asian crisis, and that these collectively largely discredited the neoliberal ideology the Western Bloc was so avidly promoting, often imposing, on rest of the world through its economic institutions. [97]

Mainland China and North Korea were not hit by crisis at all. Though China had long been advised by several prominent Western economists and pressured to lower its capital controls, it had refused to do so. Western powers have since 1997 made extensive efforts to press China to transition to adopt a neoliberal economic system. [98] As British economist Stephen D. King indicated, it was precisely because China, unlike Thailand, South Korea, Indonesia and Malaysia, did not adopt the economic policy advocated by the West, that it withstood the crisis where others were devastated. [99]

British Professor, Lecturer and China specialist Jude Woodward noted regarding the agenda behind the United States’ efforts to persuade China to adopt a neoliberal policy, namely to leave its markets vulnerable as those of other Asian nations had been:

The U.S. tried to persuade China to pursue a range of neoliberal policies — privatization, deregulation, ending or reducing state and state-aided investment and so on — which would open the Chinese economy up to both U.S. commodities and capital while slowing its growth. Such tactics had succeeded with Yeltsin’s Russia [also in the 1990s] where ‘shock therapy’ led to catastrophic destruction of the Russian economy [a 45 percent GDP contraction in five years) [100] and thus its potential to act as a global counterweight to the US. But China had no equivalent of Yeltsin — a leader willing to comply with the West’s demands — and so U.S. economic policy interventions against China have been confined to an assault from think tanks, the economic and financial media, Western business schools and economics departments arguing China should urgently deepen market ‘reform’ through privatizations and deregulation. [101]

Nobel laureate in economics and chief economist of the Roosevelt Institute Joseph E. Stiglitz noted in a similar vein regarding the Asian financial crisis that Beijing had only been spared the effects of the crisis because it had refused to adopt many of the market liberalizations strongly advocated by the West. He further stated that the West continued to press China to adopt such economic reforms, similar to those undertaken by Russia, long after the Asian crisis and the catastrophic impacts of these reforms had become clear. [102] What this indicates is that the West’s economic ‘advice,’ in both the Asia-Pacific and in Russia, was a means by which rival economic and political entities could be weakened with the Western Bloc taking advantage of the authority of the prestige of its academic and financial institutions to push for the adoption of economic policies which would leave rival states vulnerable to economic destabilization.

It became increasingly clear, particularly in the early 2010s, that it was unlikely for China to adopt a neoliberal economy or to leave itself vulnerable by fully adopting the West’s economic philosophy and exposing its markets to speculators. The American Interest noted in 2015 China’s ‘unequivocal rejection of Western political philosophy and values, raising serious doubts about the neoliberal presumption that China’s current regime would ever embrace a U.S.-led liberal political-economic world order.’ [103] Western press such as the New York Times reported in 2013 that Chinese ruling party had themselves openly rejected ideas such as neoliberalism and radical economic reforms along the lines of Western interests as those imposed across much of Asia in the years preceding the 1997 crash. [104] At a meeting in December 1997 Vice Premier Zhu Rongji told the Chinese central bankers and financial executives that the country was ‘lucky’ to have not been involved in the Asian financial crisis which he attributed to state controls on the country’s financial system. The extent to which China’s combination of a far more independent political system and awareness of the intentions of Western financial institutions towards its economy saved it economic and social hardship therefore cannot be overstated. [105] While Western sources, from the media to financial analysts to leadership continue to call for China to open its market and harshly criticize its protectionist actions, and have clear motives for making such calls, the Chinese leadership remains largely aware of the benefits of a more closed system. [106]

China’s policy independence and refusal to reform its economic and political systems are key factors in making it the only Asian power capable of ending Western primacy and seriously challenging the Western Bloc’s regional dominance. This is something states which continue to see Western influence over their internal affairs are unable to achieve. Indeed, it is worthy of note that the Republic of China’s Guomindang government was never able to diverge significantly in its policy from the influence of the West, in particular the United States, and it is precisely for this reason that Western media and scholarship today continue to lament the ‘loss of China’ in 1949. [107] [108] [109] A Chinese government heavily beholden to the West in its policymaking could never challenge the Western Bloc’s economic primacy as the Chinese People’s Republic, by virtue of its fully independent policy making, does today. Like South Korea, Thailand, and the Philippines, the ‘other China’ would always have been vulnerable to pressures from the West to ‘reform,’ allowing the Western Bloc to cripple its economy at will should it pose a threat to their primacy — much like what happened to emerging Asian powers in 1997. A Guomindang ruled China was favorable to the West not only because it would have been a Cold War ally but perhaps more importantly because it could never have been a challenge to Western primacy. China’s economic success under the People’s Republic today therefore, and its ability to challenge the West, have largely been facilitated by the victory over the GMD in the Civil War which gained the country an invaluable and genuine sovereignty and policy independence from the Western Bloc. Because China continues to plot an independent course it has now become arguably the greatest threat to continued Western primacy while the Western Bloc is powerless to enact economic measures to derail its success. [110]

Behind the demands for denuclearization and disarmament, a key demand of Western powers from North Korea remains the granting of ‘enhanced opportunities for economic cooperation.’ [111] Based on Western policy towards other developing nations, this would very likely involve instigating neoliberal reform that would leave the East Asian state vulnerable to economic warfare in the future in much the same way. In the case of Malaysia its shrewd leadership quickly realized the true nature of the threat and responded accordingly — reinstating capital controls against all the advice of Western experts. The Malaysian economy recovered soon afterwards and continued to be run in the interests of its own people without the painful austerity measures, IMF restructuring and asset sell offs that neighboring states would suffer from. [112] Only those states which lacked genuine independence in policymaking and remained blind to the nature of Western financial institutions and the hostile designs of several Western nations could thus be brought down, while states which continued to conduct policy independently could not. This has crucial implications regarding the potential for nations to grow to challenge the West economically in future.

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  2. Gilpin, Robert, The Political Economy of International Relations, Princeton, NJ, Princeton University Press, 1987 (p. 13). 

  3. For those that dispute that the United States was ever a colonial power, in the Pacific alone one need only look to the annexation of the Philippines, Guam and Hawaii and the former status of Okinawa. 

  4. Chomsky, Noam, Who Rules the World?, London, Hamish Hamilton, 2016 (p. 73). 

  5. ‘Report by the Policy Planning Staff, Review of Current Trends, U.S. Foreign Policy, February 24. 1948; Office of the Historian, Foreign Relations of the United States, 1948, General; the United Nations, Volume 1, Part 2, United States of America Department of State. 

  6. Pempel, T. J., The Politics of the Asian Economic Crisis, Ithaca, NY, Cornell University Press, 1999 (p. 41). 

  7. Rachman, Gideon, Easternisation, War and Peace in the Asian Century, New York, Vintage, 2017 (p. ix, 3, 4). 

  8. Cox, Michael, and Stokes, Doug, U.S. Foreign Policy, Second Edition, Oxford, Oxford University Press, 2012 (p. 271). 

  9. Shin, Jang Sup, and Chang, Ha Joon, Restructuring ‘Korea Inc.’: Financial Crisis, Corporate Reform, and Institutional Transition, Abingdon, Routedge, 2003 (3.4.1, ‘The Decline of the Development State’ and 3.4.2, ‘Mismanagement of Financial Liberalisation’). 

  10. Klein, Naomi, The Shock Doctrine: The Rise of Disaster Capitalism, London, Penguin, 2008 (p. 267). 

  11. Shin, Jang Sup, and Chang, Ha Joon, Restructuring ‘Korea Inc.’: Financial Crisis, Corporate Reform, and Institutional Transition, Abingdon, Routledge, 2003 (3.4.1, ‘The Decline of the Development State’ and 3.4.2, ‘Mismanagement of Financial Liberalisation’). 

  12. Stiglitz, Joseph E., Globalization and Its Discontents, New York, W. W. Norton & Company, 2002 (p. 89). 

  13. Bruce Hall, Rodney, International Studies Quarterly, Volume 4 (pp. 87-88). 

  14. King, Stephen D., Losing Control: The Emerging Threats to Western Prosperity, New Haven, CT, Yale University Press, 2010. 

  15. ‘The Weakest Link,’ The Economist, February 6, 2003. 

  16. Isimbabi, Michael J., Globalization and the WTO Agreement on Financial Services in African Countries (p. 11). 

  17. McNally, David, ‘Globalization on Trial,’ Monthly Review, September 1998. 

  18. ‘Selling Pressure Mounts on Korean Won — Report,’ Korea Herald (Seoul), October 27, 1998. 

  19. ‘Koreans give up their gold to help their country,’ BBC, January 14, 1998. [web] 

  20. Hur Nam Il, ‘Gold Rush … Korean Style,’ Business Korea, March 1998. 

  21. ‘South Koreans sell jewellery to help economy,’ BBC, January 10, 1998. 

  22. ‘South Korea’s gold collection campaign draws public support,’ Minnesota Daily, January 7, 1998. 

  23. Lipsey, Phillip Y., ‘Japan’s Asian Monetary Fund Proposal,’ Stanford Journal of East Asian Affairs, Volume 3. Number 1, Spring 2003 (p. 94). 

  24. ‘Milton Friedman Discusses the IMF,’ CNN Moneyline with Lou Dobbs, January 12, 1998. 

  25. Milken Institute, Global Conference 1998, Global Overview, March 22, 1998. 

  26. ‘Why did Asia crash?’ The Economist, January 8, 1998. 

  27. Milken Institute, Global Conference 1998, Global Overview, March 22, 1998. 

  28. ‘Looking back at the “Asian IMF” concept,’ Nikkei Asian Review, June 22, 2017. 

  29. Klein, Naomi, The Shock Doctrine: The Rise of Disaster Capitalism, London, Penguin, 2008 (p. 274). 

  30. Harvey, David, The New Imperialism, Oxford, Oxford University Press, 2005 (pp. 38-39). 

  31. Ibid. (p. 77). 

  32. Piñera, José, The ‘Third Way’ Keeps Countries in the Third World, Prepared for the Cato Institute’s 16th Annual Monetary Conference cosponsored with The Economist, Washington, DC, October 22, 1998. 

  33. Piñera, José, The Fall of a Second Berlin Wall, October 22, 1998. 

  34. Cheetham, R., 1998. Asia Crisis. Paper presented at conference, U.S.-ASEAN-Japan policy Dialogue. School of Advanced International Studies of Johns Hopkins University, June 7-9, Washington, DC. 

  35. Bell, Daniel A., Beyond Liberal Democracy: Political Thinking for an East Asia Context, Princeton, NJ, Princeton University Press, 2006 (p. 356). 

  36. ‘Text — Greenspan’s Speech to New York Economic Club,’ Reuters, December 3, 1997. 

  37. ‘U.S. Senate Committee on Foreign Relations Holds Hearing on the Role of the IMF in the Asian Financial Crisis,’ February 12, 1998. 

  38. Interview with Mahathir Mohamad, July 2, 2001, for Commanding Heights: The Battle for the World Economy [web] 

  39. Verma, Vidhu, Malaysia, State and Civil Society in Transition, Boulder, CO, Lynne Rienner Publishers, 2002 (p. 38). 

  40. Bello, Walden, ‘A Siamese Tragedy: The Collapse of Democracy in Thailand,’ Transnational Institute, September 29, 2006. 

  41. Grenville, Stephen, The IMF and the Indonesian Crisis, Background Paper, Independent Evaluation Office of the IMF, May 2004 (p. 8). 

  42. The IMF and Recent Capital Account Crimes: Indonesia, Korea, Brazil, Washington, DC:, Independent Evaluation Office of the International Monetary Fund, September 12, 2003 (p. 42-43). 

  43. Grenville, Stephen, The IMF and the Indonesian Crisis, background paper, Independent Evaluation Office of the IMF, May 2004, page 8. 

  44. Interview with Stanley Fischer, May 9, 2001, for Commanding Heights

  45. ‘The Influence of Trade Liberalization on Deindustrialization; IOSR Journal of Business and Management, Volume 17, Issue 10, October 2015. 

  46. Kahn, Joseph, ‘I. M. F’s Hand Often Heavy, A Study Says,’ New York Times, October 21, 2000. 

  47. Cheong, Yip Seng, Ob Marker: My Straits Times Story, Kuala Lumpur, Straits Times Press, 2012. 

  48. Blustein, Paul, The Chastening: Inside The Crisis That Rocked The Global Financial System And Humbled The IMF, New York, Public Affairs, 2003 (p. 7). 

  49. Hart-Landsberg, Martin, and Burkett, Paul, ‘Economic Crisis and Restructuring in South Korea: Beyond the Free Market-Statist Debate,’ Critical Asian Studies 33, no. 3, 2001. 

  50. Ambrose, Soren, ‘South Koran Union Sues the IMF,’ Economic Justice News 2, no. 4. January 2000. 

  51. Sachs, Jeffrey, ‘Power Unto Itself,’ Financial Times, December 11, 1997. 

  52. Klein, Naomi, The Shock Doctrine: The Rise of Disaster Capitalism, London, Penguin, 2008 (p. 270). 

  53. Sheng, Andrew, From Asian to Global Financial Crisis: An Asian Regulator’s View of Unfettered Finance in the 1990s and 2000s, Cambridge, Cambridge University Press, 2011 (p. 40). 

  54. ‘Maldives,’ The World Factbook, Central Intelligence Agency, 2007. 

  55. Text, Gillian, ‘What Asians learnt from their financial crisis,’ Financial Times, May 21, 2007. 

  56. Sachs, Jeffrey, ‘The IMF and the Asian Flu,’ The American Prospect no. 37. March-April 1998. 

  57. International Labour Organization, ‘ILO Governing Body to Examine Response to Asia Crisis,’ press release, March 16, 1999. 

  58. Jordan, Mary, ‘Middle Class Plunging Back to Poverty,’ Washington Post, September 6, 1998. 

  59. Klein, Naomi, The Shock Doctrine: The Rise of Disaster Capitalism, London, Penguin, 2008 (p. 273). 

  60. Sawatsawang, Nussara, ‘Prostitution Alarm Bells Ringing Sound Amid Child Sex Rise,’ Bangkok Post, December 24, 1999. 

  61. Baguioro, Luz, ‘Child Labour Rampant in the Philippines,’ Straits Times (Singapore), February 12, 2000. 

  62. Klein, Naomi, The Shock Doctrine: The Rise of Disaster Capitalism, London, Penguin, 2008 (p. 273). 

  63. ‘Asian Financial Crisis Rapidly Creating Human Crisis: World Bank,’ Agence France-Presse, September 29, 1998. 

  64. ‘Asia’s child sex tourism rising,’ BBC, August 22, 2000. 

  65. Robb, Caroline M., Can The Poor Influence Policy: Participatory Poverty Assessments in the Developing World, World Bank Publications, 2002 (p. 186). 

  66. Myers, Laura, ‘Albright Offers Thais Used F-16s, Presses Banking Reforms,’ Associated Press, March 4. 1999. 

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  68. Milken Institute, Global Conference 1998, Global Overview, March 22, 1998. 

  69. Hahnel, Robin, Panic Rules!: Everything You Need to Know about the Global Economy, Boston, MA, South End Pres, 1999 (p. 74). 

  70. Lewis, Michael, The Real Asian Miracle; The World’s Biggest Going-Out of Business Sale, New York Times, May 31, 1998. 

  71. ‘Invasion of the Bargain Snatchers,’ Business Week, March 2, 1998. 

  72. Wade, Robert, and Veneroso, Frank, ‘The Asian Crisis: The High Debt Model Versus the Wall Street-Treasury-IMF Complex,’ New Left Review, 128, March-April 1998. 

  73. ‘Chronology-GM Takeover Talks with Daewoo Motor Creditor,’ Reuters, April 30, 2002. 

  74. Klein, Naomi, The Shock Doctrine: The Rise of Disaster Capitalism, London, Penguin, 2008 (pp. 274-275). 

  75. Ozawa, Tertutomo, and Zhan, James, Business Restructuring in Asia: Cross-Bank, M&As in the Crisis Period, Copenhagen, Copenhagen Business School Press, 2001 (pp. 96-102). 

  76. Raghavan, Anita, ‘Wall Street Is Scavenging In the Asian-Pacific Region,’ The Wall Street Journal, February 10, 1998. 

  77. McCarthy, Roy, ‘Merrill Lynch Buys Yamaichi Branches, Now Japan’s Biggest Foreign Broker,’ Agence France-Presse, February 12, 1998. 

  78. ‘Phatra Thanakit Announces Partnership with Merrill Lynch,’ Merill Lynch Press Release, June 4, 1998. 

  79. ‘Advisory Board for Salomon,’ Financial Times, May 18, 1999. 

  80. ‘JP Morgan Carlyle Consortium to Become Largest Shareholder of KorAm,’ Korea Times, September 9, 2000. 

  81. Bello, Walden, Dilemmas of Domination: The Unmaking of the American Empire, New York, Holt Paperbacks, 2006 (p. 122). 

  82. ‘International Water Ayala Consortium Wins Manila Water Privatization Contract,’ Business Wire, January 23, 1997. 

  83. ‘Bechtel Wins Contract to Build Oil Refinery in Indonesia,’ Asia Pulse News Agency, September 22, 1999. 

  84. ‘Mergers of S. Korea Handset Makers with Foreign Cos on the Rise,’ Asia Pulse News Agency, November 1, 2004. 

  85. United Nations Conference on Trade and Development, World Investment Report 1998, (p. 337). 

  86. Klein, Naomi, The Shock Doctrine: The Rise of Disaster Capitalism, London, Penguin, 2008 (pp. 274-275). 

  87. Ozawa, Tertutomo, and Zhan, James, Business Restructuring in Asia: Cross-Border M&As in the Crisis Period, Copenhagen, Copenhagen Business School Press, 2001 (pp. 96-102). 

  88. Harvey, David, The New Imperialism, Oxford, Oxford University Press, 2009 (p. 66). 

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  91. ‘The Weakest Link,’ The Economist, February 6, 2003. 

  92. ‘Economic Woes Driving More to Suicide,’ Korea Times, April 33, 1998. 

  93. ‘Elderly Suicide Rate on the Increase,’ Korea Times, October 27, 1999. 

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  102. Stiglitz, Joseph, ‘The Asian crisis 10 years later,’ The Guardian, July 2, 2007. 

  103. Eikenberry, Karl W., ‘China’s Place in U.S. Foreign Policy,’ The American Interest, June 9, 2015. 

  104. ‘China Takes Aim at Western Ideas,’ New York Times, August 19, 2013. 

  105. Xin, Zhou, ‘How Beijing and Hong Kong sent billionaire George Soros packing the last time he attacked Asian markets,’ South China Morning Post, January 27, 2016. 

  106. E. Looney, Robert, Handbook of Emerging Economies, Abingdon, Routledge, 2015 (p. 518). 

  107. ‘Post-War China, Alternatively Chiang’s China. What if Mao Zedong’s Communist Party had lost the Chinese civil war to Chiang Kai-Shek’s Nationalist Party?’ The Economist, July 1, 2015. 

  108. David Baker, Benjamin, ‘What if the Kuomintang Had Won the Chinese Civil War?’ The Diplomat, December 24, 2015. 

  109. Kaplan, Robert D., ‘Mao Won the Battle, Chiang Kai-shek Won the War,’ Foreign Policy, March 24, 2014. 

  110. Covered in the following chapter. 

  111. Welch, David A., ‘Bringing North Korea Into Line,’ The Diplomat, January 17, 2016. 

  112. Harvey, David, The New Imperialism, Oxford, Oxford University Press, 2005 (P. 73).