A Postscript to the Asian Financial Crisis: The Fragile International Economic Order

This article situates the East Asian financial/economic crisis among other key economic events of the post-Cold-War world, assessing its significance alongside that of America's extraordinary economic growth in the 1990s and the collapse of the 1999 World Trade Organization meeting in Seattle. According to the author, the financial crisis could not have been avoided merely by removing national governments and international institutions such as the International Monetary Fund from markets. Such faith in unregulated markets is based on the incorrect assumption that investors are rational, as well as on the anomalous experience of the United States in the 1990s. While the US economy did improve markedly over the last decade, this growth was not due to unfettered capitalism, but rather to idiosyncratic aspects of the economy, such as a high borrowing rate. Gilpin points out that the end of this economic growth, alongside the protectionist impulses exhibited at the Seattle meeting, has contributed to a move away from international trade liberalization. The American free-market model, tarnished by corporate corruption, he argues, is no longer the goal of developing economies concerned about the lack of market controls. The result, he fears, is a growing fragility in the stability and governance of the global economy.