Asian Responses to the Global Financial Crisis

Asian Responses to the Global Financial Crisis

The Impact of Regionalism and the Role of the G20

Edited by Jehoon Park, T. J. Pempel and Geng Xiao

The expert contributors – both Asian and Western – illustrate that as G20 members, many Asian countries are now able to showcase their increasing powers and influence on global issues. Within this context, and via multidisciplinary economic and political science perspectives, the book deals with various issues such as World System analysis, the debate between the Washington Consensus and the Beijing Consensus, roles within the G20, and the contribution of ‘middle’ powers such as Korea and Australia. The application of European experiences to Asia is also considered, as are perspectives from the US. The book concludes that the key to resolving the current global economic crisis lies in how quickly a new global governance and monitoring system can be constructed, and that there are multiple roles for Asian countries to play in its development.

Chapter 11: Global Financial Regulation: G2 or G20?

T.J. Pempel

Subjects: asian studies, asian economics, economics and finance, asian economics, politics and public policy, international politics, international relations, urban and regional studies, regional studies


T.J. Pempel1 11.1 INTRODUCTION July 1997 saw the beginnings of a massive run on the Thai baht. Despite a strenuous bailout effort costing $26 billion, the Thai government was not able to stem the attack, following which a financial panic was unleashed across much of East Asia. In quick succession the governments of Indonesia, Malaysia, the Philippines and South Korea faced similar challenges, and by the end of 1998, what had once been dubbed the ‘East Asian Miracle’ appeared to be in serious jeopardy as growth rates staggered, unemployment soared and political turmoil spread. Eleven years later, in March 2008, Bear Stearns, a major US global investment bank and securities brokerage and a heavy investor in subprime mortgages, found itself on the verge of bankruptcy. In a move pressed by the US Federal Reserve, Bear Stearns was absorbed by other financial institutions at a fraction of its value a bare month earlier. The Bear Stearns debacle proved to be but a precursor to the chaos that was to follow. On 15 September Lehman Brothers, a global financial services firm facing $60 billion in bad investments and unable to secure US government assistance, declared what was then the largest bankruptcy in American history, triggering a global financial panic and the largest recession in the United States since the Great Depression of 1929–33. In the wake of the Asian financial crisis, the G20 was established. Its first meeting took place in Berlin on 15–16 December 1999, hosted by German and...

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