Asia's financial crisis in historical perspective

This article places the debate between prescribing illiquidity and prescribing insolvency in historical perspective, by comparing Asia's current debt crisis with Latin America's during the 1980s. It is then suggested that none of the Asian economies is in any meaningful sense ‘insolvent,’ and that those who oppose the IMF‐led ‘bailout’ fall into three equally misguided camps; ‐ fiscal conservatives, left wing moralists, and right wing academics. This is not to suggest that the IMF's response to the Asian crisis has been flawless: it has not. Finally, the article argues that South Korea's currency crisis spread irrationally from the others’, and was compounded by a ‘reverse free rider’ phenomenon among foreign lenders. A short appendix looks at South Korea's debt history between 1960 and 1989.