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South East Asian currencies continue to dive as Krugman rises from the dead
17th August 1997
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Asian currency values finished last week at record low levels. Nothing new
here that we havent heard for several weeks now, but it seems a watershed
is being reached. It is getting harder for Asian leaders and their economic
spokesman to blame their own devaluations on that of neighboring countries
or plotting Western governments.
The Malaysian Ringitt and Indonesian Rupiah plunged, and the previously perceived "safe" havens of the Singapore and Hong Kong dollars saw losses that are causing nervousness among many. That coming just a few days after Hong Kong was roundly praised for resisting a previous attack by deft financial management in a matter of two hours. Many thought that was the end of it.. but the Hong Kong dollar has since slid downwards slightly again, this time the financial whizkids in Central skyscrapers having a harder time at resistance. In 6 weeks, the Thai Baht is down 30% against the US dollar; the Ringitt more than 10%. While Asian leaders of course have to talk up their currencies as to some extent it is "talk" that fuels speculation, privately there must be great concern. It is now clear that the fast economic growth of the recent past, particularly in South East Asia, is coming to a faster than expected end ..All of which has seen the renaissance of Paul Krugman, the controversial MIT Economics professor, whose theory that the growth on Asia was more illusion than substance and due to "perspiration" rather than "working smarter", did nothing to make him the pin-up boy of Asian leaders or to endear him to the mainstream economic orthodoxy of the day. Krugman comes close to saying "I told you so", trying hard not to display his glee, and getting a few broadsides back at his opponents in a recent article published in Fortune titled What happened to the Asian Miracle? The Washington Post also enters the fray, reporting that Thailand and other Asian governments were warned several times by international agencies of potential instability in economies The Rat?.... Well he's sticking to his previous featured Editorial of the Month. ..This is no death of the Asia Pacific Century, but a completely predictable correction to growth that was clearly becoming unsustainable. History will show that the start of the slow down that we are seeing now will in the final analysis benefit the people of Asia by shifting concern to fundamentals and learning how to become more competitive rather than the spoilt "golden boy" of the world. Though of course we can expect some beating of chests and point scoring from our riding high US friends in the future, (though the presently cited articles certainly do not go this far), to suggest it's all over is not only premature, but more importantly misguided. What we are seeing now is a not unpainful transistion from the enthusiasm, idealism, and sometimes self-centredness and arrogance of adolescence to the wisdom of maturity. Time now also to realise the unique things about our region that sometimes youth forgets in the thirst for respect and wealth.... ...tradition, culture and respect for diversity. These are real competitive advantages if we can take advantage of them. As we said before, in South-East-Asia, we are now seeing a shift from a decade of unsustainable growth to one of consolidation and substance. A wiser and stronger Asia will be the final result. |
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