The Role of Financial Institutions in the National Economy

After the East Asia economic crises of the 1990s, the debate about the role of state institutions has resurfaced. However, each side of the argument has generally focused on defending their own perspective without reaching a consensus. The main question at hand is whether laissez-faire (liberalism) capitalism is the only economic system that can effectively develop a country or if the crises were a result of the West manipulating Asian markets for the benefit of developed nations. Joseph Stiglitz, the Senior Vice President of the World Bank in 1998, attempts to explain what happened in East Asia and its underlying reasons.

The State Papers on East Asian Economies

Joseph's essay on Asia's crises highlights the fact that the government had significant involvement in the Asian economies, including their industrial development. However, one question raised in the essay is whether the crises were caused by the inefficiency of economic regulation or by the regulations themselves. It is suggested that state-regulated economies are more likely to respond poorly to free market government policies, which some East Asian countries attempted to implement. Joseph argues that in debates about the crises, the argument is often made that a country's existing economic problems are definitely the cause of the economic crisis, leading to a "post hoc ergo propter hoc" fallacy.

The Success of East Asian Economies

The Weak Financial Institutions in East Asia