Innovation & Wealth › The information age › East Asian economic miracles
Asian financial crisis
1997–1998· Event· Society: who gained, who lost
Well documentedSolid records, texts or physical evidence.
A currency and banking crisis that began in Thailand in July 1997 spread to Indonesia, South Korea and beyond, halting years of fast growth.
See it on the Innovation & Wealth map →What happened
Banks and firms had borrowed heavily in short-term US dollars while local currencies were pegged. When Thailand let the baht float on July 2, 1997, it plunged, and investors fled its neighbors. Indonesia's rupiah lost about 80% and President Suharto fell in 1998. South Korea took a record $58 billion IMF-led rescue in December 1997, which Koreans still call the 'IMF crisis.' Conglomerates like Daewoo collapsed, unemployment surged, and millions of Koreans donated gold jewelry to help repay.
Impact on society and the economy
It broke several Korean conglomerates (chaebol), made Asian governments stockpile dollar reserves, and fueled lasting criticism of the IMF's austerity terms.
How we know
IMF documents and its own later assessments, currency and output data, and Korean records of the 1998 gold-collection campaign.
Still debated
Economists still debate whether the IMF's tight-money, open-market conditions eased or worsened the crisis, and how much blame goes to hot money versus local cronyism.
Connections (2)
▸Hyundai (Chung Ju-yung) was broken up after Asian financial crisisWell documented
The connection
After the 1997 crisis, the government and IMF pressed chaebol to cut debt and shed sprawling units. Hyundai, heavily indebted and caught in a 2000 succession fight among founder Chung Ju-yung's sons, split into separate groups: Hyundai Motor (which had bought bankrupt Kia in 1998), Hyundai Heavy Industries, and a smaller Hyundai Group.
When and how
Seoul, 1998–2002. Chung Mong-koo took the carmaker, Chung Mong-joon the shipyards and Chung Mong-hun the core group; Chung Ju-yung died in 2001.
How we know
Corporate filings, Korean regulators' records and press coverage document the split and the government's restructuring demands.
Debates
How much the split came from crisis-era pressure versus the family feud over succession is debated.
▸East Asian economic miracles were interrupted by Asian financial crisisWell documented
The connection
Fast growth drew foreign lenders, and firms in Thailand, Indonesia and Korea borrowed short-term dollars to expand. When confidence broke in 1997, money fled, currencies collapsed and 1998 brought deep recessions. Most economies recovered within a few years, so the crisis interrupted the miracle rather than ending it.
When and how
Bangkok, July 1997, spreading to Jakarta, Kuala Lumpur, Seoul and Hong Kong by late 1997.
How we know
IMF and national data show sharp output falls in 1998 (Indonesia about 13%, Korea about 5%) and recoveries in most countries by 1999–2000.
Debates
Paul Krugman had argued in 1994 that the growth came from piling up inputs rather than efficiency; how much that explains the crisis is debated.