Week 9 Recitation Assignment: The Asian Financial Crisis

In the 1990s, Thailand, South Korea, and to a lesser degree Indonesia and Malaysia, were the poster-childs for globalization: rapid economic growth through open markets and increased integration with international financial institutions. In 1997, these countries were struck down in a massive economic collapse known as the Asian Financial Crisis. The political, economic and social consequences were catastrophic: governments were inundated with debt, and in some cases, were toppled, poverty rates skyrocketed, ethnic violence erupted, and social unrest threatened to consume the region. In some families, children were sold into prostitution so that the rest could eat. Globalization has been both credited with the rise of these countries, and their collapse. Your goals in this exercise are (1) to gain a better understanding of the costs and benefits of economic globalization, and how these costs and benefits are distributed, and (2) to gain an understanding of the role played by the International Monetary Fund (IMF) as an agent of neoliberalism (see your textbook, Diversity Amid Globalization, pp.161-2 for definition).

1. In your textbook, Diversity Amid Globalization, review the section on globalization (pp. 2-4).

2. In your textbook, read the paragraph on structural adjustment programs (pp. 212-213).

3. Read the following THREE articles (the articles are short but dense):

http://www.worldbank.org/devforum/speaker_heyzer.html

http://www.asiaweek.com/asiaweek/98/0213/biz3.html

Tigers Adrift

Using the information provided in these sources, answer the following questions:

1. Define the following three terms:

a) Overborrowing

b) Crony capitalism

c) Speculation.

Include in each definition the key actors (i.e. who participated in that particular business practice) and the roles these practices played in the crisis.

2. a) What was the role of the IMF in responding to the crisis?

b) What are “structural adjustment programs?”

c) Why are they known as “austerity measures?”

3. a) According to Jeffrey Sachs (“To Stop the Money Panic”), who benefited most from IMF loans to the Asian countries during the crisis?

b) Who has to pay back these loans?

4. Economic globalization is a form of neo-colonialism. Do you agree or disagree? Explain.