Assigning Responsibility for the Asian Financial Crisis
December 8, 1998
One of the fundamental characteristics of capitalism (i.e., the market economy, national or international), is mutual interdependence. A favorite classroom example is Leonard Read's pencil story.(1) Who is responsible for producing the lead pencil? Is it the lead-makers, the woodspeople, the carving craftspeople, the manufacturer of the pencil, the distributor, the local stationery store, the consumer who places the order, etc. We simply can't say.
A similar problematic chain of causation can be traced out for the Asian financial crisis. To simplify, economists tend to focus on those activities that seem to have the largest impact. Typically, these are the activities of governments, although in a relatively small country, they may be the actions of large corporations. Government activities differ from country to country. Thus, if we speak of Asia in the large, we must identify the policies of each country's government. And if there are multinational corporations, including banks, whose operations in Asia are large, we must identify them as well. Since so much of Asian exports of both goods and money capital are to the U.S., the U.S. government's policies are unusually important. The Japanese government's policies are also important. However, the point is that although these particular governments, banks, and corporations may play a larger role, the interdependence of the Asian and world economies means that we should not expect to find any single individual or institution, or even a group of them, fully responsible
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Gunning’s Address
J. Patrick Gunning
Visiting Professor
U.S. Coast Guard Academy
Management Department
15 Mohegan Avenue
New London, CT 06320
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