Paul Blustein (2001) The Chastening: Inside the Crisis that Rocked the Global Financial System and Humbled the IMF (NY: Public Affairs)
In The Chastening, Blustein provides an overview of the policies and responses of the IMF to the Asian financial crisis. More specifically, Blustein lays the foundation with a brief history of the IMF, the specific details of the crises, and finally, the policies that were implemented. However, the book is largely an account of the crises, rather than an analysis of the policies per se.
On the other hand, Blustein manages to invoke several questions throughout the book. The question most congruent with the discussions in class is that of ...view middle of the document...
However, where do these systems evolve from? If we consider Japan to be the base for the East Asian model, in the post war period, there was a portfolio of social, political, and economic reform enforced by the American occupancy on Japan. Notably, the conglomerates (zaibatsu) were broken up, labor movements took flight, and the constitution was revised. However, despite all these, the Japanese economic growth â€˜miracleâ€™ was largely based on a strategic, goal-oriented approach as outlined by Chalmers Johnson, where the government took an active role in facilitating investment, and directing industrial policy. Hence, while the origins of the Japanese economy was based on the same principles as that of the United States, it would be difficult to claim that Japan, in either its post war rapid growth period or today, operates similarly to the American economy with the market as its main motivator and director. Therefore, since no large amount of credit can be given to the market in Japan, the only remaining possibility is that the â€˜plan rationalityâ€™, and by extension, its pilot agencies, such as MITI, was a crucial factor in Japanâ€™s success. With the success of other similar countries such as Taiwan, Singapore, and South Korea, it could therefore be concluded that a general shortlist could be constructed detailing what would cause an economy to become a high performing one. If we concede that the East Asian model does exist, then could we reasonably expect the model to survive the structural changes imposed by the IMF?
Firstly, while Indonesia and Thailand had some inherent instability in their economic system, the system had worked in the past, and there was no reason for it to not continue working. In essence, the failure of the economy was not truly due to the East Asian model, but as outlined in the book by Blustein, by the result of a combination of irrational over-reactions by the market, as well as several erroneous moves by the various governments or monetary authorities. It would seem that there would be no reason to doubt that the East Asian model could continue to be a viable path to economic strength, at least for the underdeveloped economies.
However, in Japan, certain parts of the model have been unraveling. It has been noted that in certain situations, such as the VHS versus Betamax standard conflict between Sony and JVC outlined by Noble in The Industrial Policy Debate, the power of the Japanese government as a facilitator and mediator has largely diminished. This could be put down to the fact that the East Asian model has become a victim of its own success. As the corporations that had previously required government assistance became larger and more successful, they no longer saw any reason in cooperating in industry-wide alliances, when they could easily garner greater economic profit by going it alone.
Additionally, the continued growth of the Japanese economy has also led to increasing wages...