NBR Analysis vol. 9, no. 4
The East Asian Crisis
Implications for Policy
On June 9-10, 1998, The National Bureau of Asian Research (NBR) and the Strategic Studies Institute of the U.S. Army War College convened an extraordinary group of government, business, academic, and military leaders to address the political, economic, and security implications of the East Asian financial crisis. Participants included: officials from the Clinton and Bush Administrations, senior executives of major U.S. and Asian corporations, World Bank officials, partners of some of the nation’s most prestigious law firms, leading specialists on East Asia, and military officials responsible for developing strategy in the Asia-Pacific. They analyzed the sources of the crisis and the multidimensional challenges that lie ahead. The essays in this issue of the NBR Analysis were prepared for the conference and emphasize a recurring theme of the meetings: The United States must continue to exercise economic, diplomatic, and military leadership in the Asia-Pacific region.
The first essay is an adaptation of a speech given by Robert Zoellick, NBR board member, president and CEO-designate of the Center for Strategic and International Studies, and undersecretary of state during the Bush Administration. Mr. Zoellick discusses the impact of current economic problems on the future political and security order in Asia, and offers policy recommendations for the United States to guide the region through the current turmoil and coming transitions smoothly. He points out that the American response to the crisis will mold the impressions of an entire generation of East Asians. Therefore it is crucial that the pursuit of U.S. interests in open markets, greater transparency (especially of financial institutions), and democratization be accompanied by concrete assistance from the government and private sector. Active U.S. engagement in the region will also help manage changes in the regional security environment that are likely to result from the shifting economic landscape.
In the second essay, Kenneth B. Pyle, NBR president and professor of history and international studies at the Henry M. Jackson School of International Studies at the University of Washington, analyzes Japan’s post-Cold War immobilism and the failures of its once highly praised political-economic system. In a succession of crises, including its recession and banking crisis, Japan has exhibited an indecisiveness that has paralyzed its policymaking. There are several fundamental causes of the indecisiveness, including the entrenched interests and institutional practices that remain from the century-long efforts to “catch up” with the West; and the exclusive concentration on economic growth since World War II that left many political-strategic institutions underdeveloped. Immobilism also results from the difficulty of consensual decision-making in Japan in times of great uncertainty. Dr. Pyle concludes that the U.S. must continue to prod Japan to make decisions that its system resists.
The final essay addresses the political and economic impact of the East Asian crisis on Russia at this crucial stage in its post-Soviet transition. Herbert Ellison, NBR’s director of Eurasia Policy Studies and professor of history and international studies at the Henry M. Jackson School of International Studies, outlines the steps taken by the Russian government to deal with the crisis and evaluates the ability of the new government to handle urgent problems. Dr. Ellison asserts that President Boris Yeltsin’s March 1998 decision to dismiss the cabinet of Prime Minister Viktor Chernomyrdin was not capricious, as many have asserted. Rather, the decision resulted from the recognition that bold reforms would be needed to keep the crisis from worsening. From the crisis has emerged “the most promising reform government of the Yeltsin era,” led by the new prime minister, Sergei Kiriyenko. Dr. Ellison argues that the $22.6 billion IMF-led package of loans to Russia, agreed to in mid-July, was awarded not only in recognition of the country’s strategic importance, but also as an expression of confidence in the young government.