Essays in Honor of John Dunning
Edited by H. Peter Gray
Chapter 12: Asynchronous Political and Economic Development and the Asian Financial Crisis: A Preliminary Analysis
12. Asynchronous political and economic development and the Asian ﬁnancial crisis: a preliminary analysis Michael A. Santoro and Changsu Kim1 INTRODUCTION: TOWARD A BETTER PREDICTOR OF FINANCIAL CRISIS. In the course of his distinguished career, our colleague, mentor, and friend John H. Dunning, left an indelible mark on virtually every aspect of international business studies. The subject of this chapter – the relationship between economic and political development and risk – is no exception to this rule. In his 1993 Geary Lecture to the Economic and Social Research Institute in Dublin, Professor Dunning oﬀered the prescient observation that ‘just like the emerging managerial structure of the twenty-ﬁrst century ﬁrms, we need governments to be lean, ﬂexible and anticipatory of change. The new paradigm of government should eschew such negative or emotive sounding words such as “command”, “intervention”, “regulation”, and replace them with words such as “empower”, “steer”, “co-operative”, “coordination” and “systemic”’ (Dunning, 1993b). As the twenty-ﬁrst century begins, Professor Dunning’s vision of soft government oversight of the economy is still markedly ahead its time, particularly among the developing nations of East Asia. Indeed, as we argue below, the heavy-handed direction of economic resources was one of the factors contributing to the ﬁnancial crises besetting East Asia in 1997. For private investors, the biggest shock of the ﬁnancial crisis derived from the inability of the debt and equity markets to anticipate the crisis. Indeed, foreign capital continued to ﬂow into East Asia as usual until just before the crisis...
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