It was sinking, after the bursting of the property bubble, in a spiral of deflation in what The Economist described as “Death by deflation”. Japan had stopped buying and since it traditionally had taken 25 per cent of the rest of Asia’s exports (the main ingredient of their outstanding growth performances over the previous 10 years), the effect was devastating.China had entered the world’s free market in 1990, bringing 1.2bn people to the market place at a time when Communism collapsed in Russia. Two devaluations of the Chinese currency in the early Nineties meant real competition had arrived for the rest of Asia. Indeed, practically all of Hong Kong’s manufacturing base moved to southern China overnight, where wages were one-tenth of those prevailing in Hong Kong.Some will say the “Asian miracle” hit overdrive in 1985 after the Plaza Accord, when the US dollar went into free fall, by design, and the Asian currencies pegged to the dollar fell with it. Their devalued currencies instigated the greatest export boom in living memory. Things started to change 10 years later, with the US dollar riding an upward wave and dragging Asia’s currencies with it.
China was by then leading the Asian export charge with a weaker currency while Japan was on a go-slow.Back at the ranch, Asian countries had come to accept that their long run, miraculous as it was, would last for ever because they were sort of special. They had begun to believe in their own indestructible status because they were told they were different from the rest of the world.Their huge success was being heralded as a consequence of what were termed Asian values – not because of some of the other forces at work, which, in reality, had been the real fundamental contributors to their miraculous growth, combined with massive investment flows wanting to join the party.Trade flows influence capital flows, as do exchange rates and many other things Japan had been grinding down for years. Korea had been in deep trouble for some time with costs driven up by powerful unions, a bad bet on the yen, a massive investment in industries that had global over-capacity and a mountain of debt that was never going to be repaid. Thailand had been awash with excess property for years and a collapse was inevitable. So all the signs were there but when it happened, the collapse was Niagaran and right across the region.We had lived through the oil shock in 1973, and periodic collapses of stock markets (particularly in Hong Kong), currency wipe-outs in Indonesia and in Hong Kong, war threats in China, Taiwan, North and South Korea, India and Pakistan, riots in Thailand, Indonesia and Malaysia. All that, but never before a total regional economic collapse.I would have liked to hear much more on all this from Mr Vines, given his writing skills, investigative journalistic ability and valid reputation as an observer of the region. There is no mention of the part played by the banks, providers of huge dollops of easy credit, who pulled the rug overnight as soon as trouble started.What we get is a vitriolic attack on Asian business practices and an in-depth and scathing account of corruption among politicians and businessmen through the region.
He attributes the collapse primarily to bad management in the public and private sectors. No one – but no one – gets past without a hammer blow.The description of this management (or lack of it), the behaviour of autocratic governments and some of the cultural issues is a fascinating, if not somewhat depressing, read. Mr Vines has a didactic style and, indeed, the layout of the book is reminiscent of a school textbook, but he provides relief with his dry humour, which shines through despite the sombre overlay of the subject matter.Mr Vines is very knowledgeable about his subject and makes his point succinctly. The subject is very clear and definitely a worthwhile read for those venturing into Asian business waters, but it is not an analysis of the Asian Crisis.
