Aheli Moitra
A strange, seemingly innocuous, thought was presented at the 25th general conference of the Naga Students’ Federation. The chief secretary of Nagaland State, speaking at the closing event, pointed to the “East Asian miracle” and went on to congratulate the South Korean delegates for being from a country that witnessed this “miracle”. It is not clear how the South Korean delegation reacted but it could well have been with a cringe.
For, had the chief secretary’s office simply googled the “East Asian miracle”, they would have found the miracle came with devastation. The responsibility lay with the indiscriminate ways in which a free market is allowed to function. Whether Nagaland is in a position to tackle this, or will be 10 years from now, is hard to say without weighing the genesis of the Asian financial crisis of the 90s and then deliberating on “reforms and restructuring”.
The East Asian Miracle: Economic Growth and Public Policy was a document created by the World Bank in 1993. It stressed on minimal state intervention in market function as the values behind the East Asian economic boom of the 80s—this understanding, however, was far from reality.
Eight ‘economies’ were a part of what the World Bank termed an economic miracle: Hong Kong, Indonesia, Japan, the Republic of Korea, Malaysia, Singapore, Taiwan (China), and Thailand. During the 1980s, these economies started booming, for which the nations had intentionally prepared. Levels of education among citizens remained high prior to the boom, and there was a pool of human capital, especially skilled engineers, to encourage the transfer of technology from foreign investors. Government policies (and they were as diverse as the countries themselves) maintained a control over respective markets.
Reports suggest a systematic accumulation of wealth in the said economies as per capita savings remained high. Thus also began investment in physical capital that included infrastructure, an assumed safe-way for economies to grow, apart from exports and harnessing value-added industries. As for the governments, adaptation became the buzz word—there was constant reworking of policy to suit the demands of a new economy. Unlike the former Soviet Union, the governments of East Asia did not seek to replace the market, rather work with it in a complimentary manner.
Romantic. Till you take East Asia out of the vacuum, apply conjectures of a larger economy and hegemonic politics on them. Conditions change in miraculous ways. In the early 90s, America started applying a different sort of pressure on East Asian economies. More economists in the US saw the whole world as one big “ecosystem” that fed off and into each other. They made economies, especially in East Asia, open up to the “free flow” of capital.
Under pressure, countries like South Korea and Thailand gave up most political restrictions. Western capital with their consumer goods poured in—this acted as side fuel to the East Asian “miracle”. Economists like Joseph Stiglitz, head of the Council of Economic Advisers to the US government, tried to warn against this. What preceded and followed has been constructed meticulously by filmmaker Adam Curtis in the 2011 BBC documentary series, All Watched Over by Machines of Loving Grace.
“The Council was worried about these short term speculative capital flows (from west to east) because while the countries benefit a little bit when the money comes in, when the money goes out, the countries are devastated,” Stiglitz stated in an interview.
The documentary explains: The Asian crisis began in Thailand. As developers of speculative housing (hundreds of thousands of which had been built) began to go bust and defaulted on their loans, western investors panicked and withdrew their money from the countries. The panic spread first to South Korea—news footage showed homemakers queuing up on streets with “spare dollars” to rescue the country. The International Monetary Fund (IMF) flew in and offered to rescue the economy on the condition that the Asian economies become fully “western” and follow the free market model as opposed to the unique models they had created; using politics (sensitive to cultural uniqueness) to maneuver economic growth where desired.
Reforms and restructuring were suggested by the IMF accordingly. Countries like Indonesia, Thailand and South Korea were forced to succumb and take the IMF loans. Soon after, their currency exchange rates crashed—the economies collapsed in the late 90s. Governments cut spending and subsidies, hospitals and schools became too expensive for the people to afford, riots and looting broke out in Indonesia. Millions of people lost jobs, productivity declined.
It so turned out that the IMF loans, put directly into Asian banks, had been used to bail out western investors first. The financial community had protected the interest of its elites and left the East Asian tax payers in debt, who now had to pay the IMF back.
Since the great depression of the 1930s, these Asian economies suffered the worst set back ever. The free market and “free flow of capital” had, under the guise of equality and democracy, brought more corruption of power, debilitating local populations. The Asian economies took a long time to recover.
Basing “reforms and restructuring” on the East Asian “miracle” could work in the long term if the Naga state is a strong one that is first of all interested in providing equitable profits to its people. It has to be strong enough to withstand the hegemonic manipulation of markets. It has to stand by cultural uniqueness and apply relevant models. It has to have the will and sense to negotiate investment, and create capital that goes beyond land, for instance, human capital of skilled labour. It has to educate the masses, provide wide-ranging opportunities for people to be able to access markets, as well as retain control of the markets. By opening up an economy without deliberating on these issues, softening politics for economics, the Nagaland state will only benefit a small section of the elite giving rise to a further unstable economy.
For feedback and ideas, write to the author at moitramail@yahoo.com
