Outside In | The crash of ‘97 taught us we won’t see the next one coming
‘We have had two ‘once-in-a-lifetime’ crises in the past two decades, and a third in the next couple of years cannot be ruled out’
With Hong Kong today in festive lockdown to welcome Chinese President Xi Jinping and celebrate 20 years of Chinese sovereignty, it may be important to remember that this is not the weekend’s only 20th anniversary of consequence.
And no, I am not just talking about the 20th anniversary of the publication of the first Harry Potter novel, The Philosopher’s Stone, on June 26, 1997, which must provide one of the 20th century’s epic literary landmarks.
Even more important for us in Hong Kong – though I am sure there will be some Harry Potter fans who challenge this – is the 20th anniversary tomorrow of the Tom Yum Goong crisis in Thailand, which triggered the Asian financial crisis that wrought havoc across our economies for an awful 18 months and whose scars still smart today.
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I am sure there are many who wish our past 20 years could have mirrored the trajectory of J K Rowling and Harry Potter. As a struggling single mum in an Edinburgh apartment, with eight publishers’ rejection slips in her pocket, could Rowling ever have imagined that her advance of £2,500 from Bloomsbury and a meagre initial print run of 500 copies (mostly to libraries) would have grown today to a global Harry Potter publishing brand worth US$25 billion, with sales of 400 million books in 67 languages across the world? Who would have foreseen Rowling as one of the world’s richest women – and by far its richest novelist – with wealth up somewhere around US$2 billion?
But sadly, our own trajectory from the Tom Yum Goong crisis has been immensely more stressful and challenging – and perhaps goes a long way to explaining why pervasive angst prevails today, in sharp contrast with the rambunctious swaggering self-confidence that marked our 1990s bubble years.
It would be wrong to say no one saw the Asian financial crisis coming. Many economists were wringing hands over high levels of national and corporate debt, in particular debt denominated in US dollars. Many were concerned about the large trade deficits of many of Asia’s economies. But no one saw the “perfect storm” coming. Nor did they anticipate how astonishingly interconnected we all were and how many dominos would crash into each other before the storm blew itself out 18 months later.
By the time the dominos stopped falling, the economies of Thailand, South Korea, Indonesia, Malaysia and the Philippines had been savaged. Japan and the US had been buffeted powerfully. Russia and Brazil had brought the crash into distant continents. The International Monetary Fund had negotiated bailouts ranging from US$57 billion for South Korea and US$40 billion for Indonesia and Brazil to more modest billions in Thailand, Russia and Malaysia. Currencies across the region had crashed – the Indonesian rupiah to about one-fifth of its pre-crisis level. Stock markets had been shredded. It was estimated that 80 million Indonesians fell below the poverty line during the crisis. Leaders inevitably paid the price. Suharto was unseated in Indonesia after 32 years in office. In South Korea, the opposition Democratic party swept to power under Kim Dae-jung for the first time in the country’s post-war history. The scene was set in Thailand for a series of military coups.
