한국외환위기당시 외국신문보도 자료 II (영문)

This is an article on the New York Times, May 1998 by Paul Krugman...Editor

I TOLD YOU SO

Writing in the most recent issue of ''The International Economy,'' William Greider used the occasion of Asia's economic crisis as an opportunity to settle some scores with conventional economists who scoffed at his 1997 book ''One World, Ready or Not: The Manic Logic of Global Capitalism.'' ''They're not scoffing now,'' he declared. As it happens, he's wrong: they're still scoffing. Conventional economists never denied that crises happen; it was his explanation of why and how that they thought was silly.

In one sense, however, Greider has moved into the mainstream. Over the last few months there has been a flood of columns and essays about the lessons of Asia's economic woes. As far as I can tell, every pundit draws the same central lesson Greider did: whatever he thought before about the way the world works, whatever economic doctrine is identified with his name - the crisis proves that he was right. Practitioners of at least four schools of economic thought, who rarely agree about anything, have managed to find confirmation of their faith in Asia's misfortune:

*Champions of Capitalism. On the eve of the crisis, free-market enthusiasts were cheerfully announcing that, as The Wall Street Journal put it last March, the worldwide turn to free markets was fueling ''a global growth wave that is unprecedented in size and scope.'' The main reason for that high global growth rate was, of course, the extremely rapid growth of emerging Asian economies. When those economies suddenly went into reverse, did the global capitalist faithful question their confidence in the power of free markets? No, clearly the trouble with Asian economies was simply that their markets weren't free enough. Before the crisis they were advertisements for the power of capitalist thinking; afterwards, anyone could see that they were hotbeds of ''crony capitalism,'' a far cry from the real thing. And the crisis proves the superiority of the genuine article.

*Global glutters. Greider is only one of a number of people who worried that multinational corporations were building more manufacturing capacity than the world could possibly use. And they have no doubt that this crisis - even though it seems to have been largely driven by real-estate speculation, and even though the most conspicuous examples of over-investment involved local businessmen rather than multinational corporations - shows just how right they were.

*Asia-phobes. Until just a couple of years ago you couldn't open the pages of a public-affairs magazine without running into a commentary by one of the ''revisionists,'' who claimed that Japan and other Asian countries had developed a new and superior form of capitalism that was beating the pants off Western, free-market economies. You might have expected the leading revisionists to admit to having gotten it a bit wrong, or at least to show some signs of diminished confidence in their own judgment. But no. For the most part they are still opining as freely as ever.

James Fallows, the editor of U.S. News & World Report, declared as late as 1994 that ''Like it or not, we live in the world that Asian success stories have shaped. We need to figure out how to compete in it.'' Now, while conceding some flaws in the Asian model, he still warns that ''During seven years of unremitting distress for its financial system, Japan's manufacturers have accumulated trade surpluses of more than $700 billion.'' (Shouldn't this make him wonder whether trade surpluses are necessarilysuch a good thing?)

Others have managed to change tune without missing a beat. Clyde Prestowitz, whose 1988 book ''Trading Places'' predicted that Japan's government-business partnership would allow it to dominate high technology at America's expense, now declares that ''The Japanese model was a fantastic catch-up model, but it was not a model for all seasons,'' and has taken to denouncing crony capitalism and sternly lecturing Japan on the need for fundamental reform.

*Asia-philes. A larger, more diffuse group than the revisionists, this includes just about everyone who believed that Asia's past growth rates could be extrapolated into the future (without necessarily believing that the region's success was based on some novel form of capitalism, or that it had been achieved at Western expense). One of those, Jeffrey Sachs, is the Harvard professor who led a team that compiled last year's ''Global Competitiveness Report,'' with its Asia-friendly rankings. Did the crisis shake his conclusions? Not at all. It simply proved to him what he always knew, that even the strongest of economies can be devastated by a financial panic. And of course some Asian leaders, like Malaysia's Mahathir Mohamad, see not just panic but conspiracy at work.

Part of the problem, presumably, is that there is no licensing requirement for economic commentators; there aren't many economics professors among the global glutters or the Asia-phobes, but that doesn't stop them from adding to the cacaphony. A bigger part of the problem is that economics is for the most part not the kind of discipline where you can do an experiment that settles an issue beyond all dispute. True, you can get a bunch of undergraduates to buy and sell a fictitious commodity, or bid in a simulated auction; but you can't persuade the International Monetary Fund to rescue only half of the economies in crisis, using the rest as a clinical control group. All that we have are the lessons of history - lessons that are often positively Delphic in their obscurity. But even when history might seem to you or me to be speaking loud and clear, it is no match for the ingenuity of modern punditry, which can turn any event - no matter how much it may seem, on the surface, to contradict what the pundit was saying a few months ago - into an occasion for triumphant self-congratulation.

Oh, by the way, what about me? Back in 1994 I published a notorious article entitled ''The Myth of Asia's Miracle,'' which many people now credit with having forecast the current crisis. A close reading of that article might suggest that to the extent that I predicted anything, it was a gradual slowdown - not the sudden catastrophe that has overtaken the region. But, hey, I'm tired of fighting conventional wisdom. This time I'm ready to go along with what everyone believes: recent events prove that I was completely right.



November 3, 1997
The New York Times

The Wrong Medicine for Asia

By JEFFREY D. SACHS

CAMBRIDGE, Mass. -- In a matter of just a few months, the Asian economies went from being the darlings of the investment community to being virtual pariahs. There was a touch of the absurd in the unfolding drama, as international money managers harshly castigated the very same Asian governments they were praising just months before.

The International Monetary Fund has just announced a second bailout package for the region, about $20 billion for Indonesia. That should, in principal, boost confidence. But if it is tied to orthodox financial conditions, including budget cuts and sharply higher interest rates, the package could do more harm than good, transforming a currency crisis into a rip-roaring economic downturn.

In the Great Depression, panicked investors fled from weak banks in the United States and abroad. Since banks borrow short term in order to lend long term, they can be thrown into crisis when a large number of depositors suddenly line up to withdraw money. In the days before deposit insurance, individual depositors would all try to be first in line for withdrawals.

In 1933, the Federal Reserve played it disastrously wrong.

Rather than lending money to the banks to calm the panic and to show the depositors that they could indeed still get their money out, the Fed tightened credit, as financial orthodoxy prescribed. Confidence sank, and the banking system crumbled.

The Asian crisis is akin to a bank run. Investors are lining up to be the first out of the region.

Much of the panic is a self-feeding frenzy: even if the economies were fundamentally healthy at the start of the panic, nobody wants to be the last one out when currencies are weakening and banks are tottering because of the rapid drain of foreign loans. I t is somehow comforting, as in a good morality tale, to blame corruption and mismanagement in Asia for the crisis. Yes, these exist, and they weaken economic life.

But the crisis itself is more pedestrian: no economy can easily weather a panicked withdrawal of confidence, especially if the money was flooding in just months before.

The I.M.F. has arrived quickly on the scene, but the East Asian financial crisis is very different from the set of problems that the I.M.F. typically aims to solve.

The I.M.F.'s usual target is a government living beyond its means, financing budget deficits by printing money at the central bank. The result is inflation, together with a weakening currency and a drain of foreign exchange reserves. In these circumstances, financial orthodoxy makes sense: cut the budget deficit and restrict central bank credits to the government. The result will be to cut inflation and end the weakening of the currency and loss of foreign exchange reserves.

In Southeast Asia, this story simply doesn't apply. Indonesia, Malaysia, the Philippines and Thailand have all been running budget surpluses, not deficits. Inflation has been low in all of the countries.

Foreign exchange reserves, until this past year, were stable or rising, not falling.

The problems emerged in the private sector. In all of the countries, international money market managers and investment banks went on a lending binge from 1993 to 1996. To a varying extent in all of the countries, the short-term borrowing from abroad was used, unwisely, to support long-term investments in real estate and other non-exporting sectors.

This year, the bubble burst. Investors woke up to the weakening in Asia's export growth.

A combination of rising wage costs, competition from China and lower demand for Asia's exports (especially electronics) caused exports to stagnate in 1996 and the first part of 1997. It became clear that if the Asians were going to compete, their currencies would need to fall against the dollar so their costs of production would be lower. It also became clear that with foreign lending diverted into real estate ventures, there was some risk that the borrowers, especially banks and finance companies, would be unable to service the debts if the exchange rates weakened. After all, rentals on real estate developments would be earned in local currency, while the debts would have to be repaid in dollars.

The weaknesses in the Asian economies were real, but far from fatal. The deeper strengths -- high savings, budget surpluses, flexible labor markets, low taxation -- remain in place, and long-term growth prospects are solid. But, as often happens in financial markets, euphoria turned to panic without missing a beat. Suddenly, Asia's leaders could do no right. The money fled.

In this maelstrom, the I.M.F. is now reportedly pressing the Asian countries to raise existing budget surpluses still higher and to tighten domestic bank credit. In the Philippines recently, short-term interest rates were briefly pushed above 100 percent a year to meet I.M.F. credit targets.

And, in a move that is supposed to engender confidence but almost surely does the opposite, the I.M.F. has reportedly called on Thailand and Indonesia to close down several weak banks that have been caught up in the boom-bust cycle of foreign lending. Since the treatment of depositors in such cases is open to doubt (as deposit insurance is implicit rather than explicit), these calls for bank closings also worsen the investor flight from the region. Of course, one can't be absolutely sure what the I.M.F. is advising, since I.M.F. programs and supporting documents are hidden from public view. This secrecy itself gravely undermines confidence.

The Asian region needs more creative policies than these. The first step would be for the international investment community to tell the truth: the currency crisis is not the result of Asian government profligacy.

This is a crisis made mainly in the private, albeit under-regulated, financial markets.

The next step would be to let the Asian currencies float downward, so that these countries' exports will be cheaper and therefore more competitive. Once export growth starts to pick up, then panicked money market managers will begin to remember why they were until recently singing the praises of the region. This is what happened in the aftermath of the 1994 Mexican crisis, when money managers who swore they had left Mexico for good quickly reconsidered in the wake of an export boom.

Floating the exchange rate would have two more advantages: foreign reserves would not be squandered in a failed attempt to defend the currency, and interest rates would not need to be raised in an illusory quest to keep the currency strong.

The third step would be to moderate the strong forces pushing Asia into a recession, rather than adding to them. The region does not need wanton budget cutting, credit tightening and emergency bank closures. It needs stable or even slightly expansionary monetary and fiscal policies to counterbalance the decline in foreign loans. Interest rates will drift higher as foreign investors withdraw their money, but those rates do not need to be artificially jacked up by a squeeze on domestic credit. The regulation of the banking sector should be strengthened not by hasty bank closures, but by pushing weak banks to merge with stronger ones and by pushing the banks to raise their capital bases.

Southeast Asia surely needed a correction to restore its competitiveness. A moderate cut in foreign lending was needed; the panic was not. If the currency crisis is well managed, Asia will be able to resume its rapid economic growth. If it is managed with unthinking orthodoxy, the costs could be very high, for Asia and the rest of the world.

Jeffrey D. Sachs is director of the Harvard Institute for International Development and an economic adviser to governments in Asia and other parts of the world.

The following two articles are a debate between J. Stiglitz of the World Bank and C. Wolf of RAND...Editor

Wall Street Journal, February 4, 1998

Bad Private-Sector Decisions

By JOSEPH STIGLITZ

Only a year ago, the East Asian countries were held up as models for other developing countries. Today legions of critics are condemning them for their unworkable economic systems, which the critics say have long been bound to collapse into crisis. This dramatic swing in opinions about the Asian development model, matching the dramatic changes in the markets, has gone further than is justified by the fundamentals. No other economic system has delivered so much, to so many, in so short a span of time.

It is useful to remind ourselves that financial and currency crises have occurred elsewhere in the world, most recently in Norway, Sweden and Finland. The fact that these countries had highly transparent economic systems and advanced institutional frameworks demonstrates that transparency is not enough to underpin robust financial systems. Although the lack of transparency in the East Asian economies contributed to the problems, it is probably not responsible for the crisis itself.

At the same time, the crisis in the East Asian countries is very different from crises experienced by many developing countries in the past. East Asian countries have high national saving rates. The East Asian governments have all run budget surpluses or minimal budget deficits in recent years. Also, macroeconomic policy has been relatively stable, as evidenced by their low inflation rates.

The financial crisis in East Asia can be understood as the result of a number of factors that have made these economies especially vulnerable to a sudden withdrawal of confidence. The problems--including misallocation of investment, unhedged short-term borrowing and, in Korea, very high debt-to-equity ratios--are rooted in private-sector financial decisions.

This is not to absolve governments of responsibility. Insufficient financial regulation and implicit or explicit government guarantees, as well as misguided exchange-rate and monetary policies, each played an important role in creating the incentives that led to the particular size and character of external financing and internal misallocation of resources.

Many of the problems these countries face today arise not because governments did too much, but because they did too little--and because they themselves had deviated from the policies that had proved so successful over preceding decades. In several countries, for instance, poorly managed financial liberalization lifted some restrictions, including restrictions on bank lending to real estate, before putting in place a sound regulatory framework.

In their haste to place exclusive blame on the governments in the region, many critics have also forgotten that every loan requires not just a borrower, but also a lender. The borrowers who misallocated their investments share responsibility for the problems with the lenders, many of them international commercial banks, that provided them with the money in the first place. Similarly, one might argue that responsibility lies not just with bank supervisors in the borrowing countries but also with their counterparts in lending countries, particularly if the international community believes that there is sufficient systemic risk to the global economy to warrant interventions.

The buildup of short-term, unhedged debt left East Asia's economies vulnerable to a sudden collapse of confidence. As a result, capital outflow, and with it depreciating currencies and falling asset prices, exacerbated the strains on private-sector balance sheets and thus proved self-fulfilling. The vicious circle has become even more so as financial problems have led to restricted credit, undermining the real economy, and almost inevitably leading to a slowing of the economy. Given the region's financial fragility the economic downturn may well feed on itself, worsening bankruptcies and weakening confidence. Policy responses should be designed to halt this downward spiral by minimizing the depth and duration of the downturn.

Restoring growth in East Asia requires restoring confidence. This is as much a matter of perception as of reality, including the perception of the fundamental strengths of the East Asian economies and their resolve to address their weaknesses. This should be addressed by improving the microeconomic and institutional fundamentals. This includes establishing an effective regulatory system, improving corporate governance and enhancing transparency more broadly.

At the same time, governments and international institutions, including the World Bank, have the responsibility for ensuring that the poor and vulnerable suffer as little as possible in the process of adjustment. Financial crises typically bring large increases in unemployment, which often linger well after the initial crisis has passed. The devastating consequences for the poor can persist long after capital flows and economic growth resume.

In East Asia the poor may be especially vulnerable to an economic downturn. In Thailand, for instance, although the statistics show that almost no one lives on less than $1 a day, millions of people are living on just over $1 a day. Korea has relied on rapid growth and lifetime employment to provide social security for its citizens. It does not have universal unemployment insurance and only a very modest social safety net.

The immediate need is for government in these countries to step in and fill the income-security gap that will be left by companies closing and workers losing their jobs. Over the longer term, we will need to work with the countries in the region to help them design modern, durable social safety nets that complement their other structural reforms. We should be mindful, however, that it will not be possible to create an effective social safety net overnight, especially in rural areas, and the pace and content of reforms should take this into account.

Some of the most important features of East Asia's development were sound macroeconomic fundamentals: high savings, a commitment to education, technologically advanced factories, a relatively egalitarian distribution of income, and an aggressive pursuit of foreign exports. All of these elements are still present, suggesting that East Asia's economic prospects continue to be bright. And these elements of the East Asian success continue to provide a model for successful development throughout the world.

Mr. Stiglitz is senior vice president and chief economist of the World Bank.

Wall Street Journal, Febraury 4 ,1998
Too Much Government Control

By CHARLES WOLF JR.

Asia's financial earthquake is the second biggest international surprise of the past decade. The first, and weightier, one was the demise of the Soviet Union. Like the 1991 Soviet shock, Asia's financial hemorrhaging has had many causes. The ensuing debate has largely focused on their relative importance.

The primary cause of the Asian crisis, however, has been largely obscured: namely, the legacy of the so-called Japanese development model, and its perverse consequences. Subsequently relabeled the Asian development model as its variants were applied elsewhere in the region, this strategy of economic growth has been grandly extolled in the past two decades. Its strongest proponents included Eisuke Sakakibara, presently Japan's vice minister of finance, Malaysian Prime Minister Mahathir Mohamad, and such Western commentators as Karel van Wolferen, Chalmers Johnson, James Fallows and Clyde Prestowitz. What we are now seeing in Asia's financial turbulence are the model's accumulated shortcomings.

This is not to deny the role of other proximate causes, including short-term borrowing by Asian banks and companies, and their long-term lending or investing; the failure of the money-center banks in Japan, the U.S. and Germany that provided the mounting short-term credit to exercise due diligence; and foreign investors' unrealistic assumptions that Asian currencies' pegs to the U.S. dollar would be maintained. But these proximate causes are traceable to or abetted by the primary cause: widespread insulation from market forces.

The Asian development model began with a conceptual framework largely built by American and Japanese academic economists. Central to it is the phenomenon of "market failure": the predictable inability of market mechanisms to achieve maximum efficiency and to encourage growth when confronting "economies of scale" and "path dependence." These conditions may lead to monopolies in the advanced economies and the extinction of competition from late-starters in the development process. If the objectively based decisions of the marketplace are recognized to have such predictable shortcomings, the argument has run, then subjectively based decisions by government agencies or key individuals could improve upon market outcomes.

In the original version of the model, these subjective judgments were provided by Japan's Ministry of International Trade and Industry and Ministry of Finance, in collaboration with targeted export industries believed to be associated with economies of scale. MITI and the Ministry of Finance tagged these "winners" to receive preferred access to capital, as well as protection in domestic markets through the use of tariffs or nontariff barriers to limit foreign competition.

In the Korean variant of the model, the subjective judgments as to who and what would receive preferences--often the same industries targeted by Japan--were exercised by the president, the industrial conglomerates and these chaebols' associated banks. In the Indonesian variant, the subjective oracular sources have been President Suharto and his extended family and hangers-on, in conjunction with B.J. Habibie's self-styled technological community at the Ministry of Research and Technology.

To be sure, the Japanese model and its variants produced noteworthy accomplishments. Vast amounts of savings and investment were mobilized for and channeled to the anointed industries and firms. While substantial resources were wasted in the process--for example, MITI's blunders in the case of steel, shipbuilding and aircraft--the scale of resource commitments led to world-class performance in other cases--notably in cars, consumer electronics, telecommunications equipment and semiconductors in Japan, similar heavy-industrial development in Korea, and light-industry development in Indonesia.

But the negative effects of the Asian model were cumulatively enormous, including the following:

Wasted resources when nonmarket choice processes made mistaken decisions, such as Indonesia's large investments in a national car and in a domestic aircraft industry. These nonmarket failures account for the fact that Asia's economic growth has been mainly due to large inputs of capital and labor, with relatively limited improvement in productivity. Structural imbalances due to overemphasis on export industries and neglect of the domestic economy. As a result, domestic production has been shortchanged, and consumption standards held down in favor of aggressive pursuit of export markets. Excess capacity has been built up in export industries through the arbitrary processes of "picking winners." Failure to take adequate account of demand saturation while production continued to expand has contributed to currency depreciation, falling prices and sharply adverse changes in Asia's terms of trade.

A sense of hubris among the favored industries, firms and individuals. When these entities confronted market tests that they could not meet, they and their foreign lenders expected to be bailed out with additional resources, often publicly funded or guaranteed. Whether the shortfall was in an old-line major banking house (Japan's Yamaichi Securities), or an established conglomerate (Korea's Halla group), or the start-up of questionable new ventures (Indonesia's Timor car), it was expected that some nonmarket (i.e., government) preference would make up the difference.

The favoritism, exclusivity and corruption of the Asian model's back-channel and nontransparent decision making has had a corrosive effect on the societies and polities of the region.

That market-mediated allocations of resources have shortcomings doesn't imply that the Asian model's subjectively mediated ones will not have still greater shortcomings. In fact, the legacy of the Japanese model and its Asian variants suggests that their associated shortcomings are enormously greater, because they tend to be protected and concealed. Lacking the corrective, mediating responses that market mechanisms and incentives provide, the shortcomings accumulate until a systemic breakdown occurs. If this lesson is heeded, Asia's recovery can be rapid and enduring; if it is not, recovery is more likely to be slow and fitful--and ultimately far more painful.

Mr. Wolf is senior economic adviser and corporate fellow in international economics at RAND.