Jay Hanson:
>>Lee that Asia's crisis was fundamentally a banking crisis with its
>>roots in "crony capitalism", leading to excessive borrowing which
>
>"crony capitalism" -- it fits! But what other kind is there?
I interpret crony capitalism to mean that transactions are not at
arm's-length. It involves giving special deals to your buddies and your
family - deals that people who are not your buddies or your family cannot
access. It would appear that obligations among friends and families are of
much greater importance in SE Asia and Japan than in the west. It is also
probable that laws governing transactions are less rigorous. What appears
to have happened in Asia is that too many buddies asked for too many favours
from too many banks, resulting in too many bad investments and bad debts. A
considerable proportion of this debt was based on foreign borrowings.
Anyone who could, got their money out - fast. Those who did not, or could
not, lost a great deal of money as currencies became devalued against the US
dollar.
One should not lay all of this on crony capitalism. Wherever capitalism has
existed, it has had elements of cronyism. Other than unfairness, there is
probably not too much wrong with cronyism if it leads to sound investment
and increased productivity. It does not appear to have done so in Asia, and
it therefore proved unsustainable.
Ed Weick
