..........Crisis and Rejuvenation by William H. Overholt

 

Educational impoverishments could reduce it to a backwater status among nations.

..Thailand’s Financial and political systems Crisis and Rejuvenation William H. Overholt With Thailand’s long history of economic success from the late 1950s throu7gh 1996 -- during which time it had not experienced a single year of negative economic growth, a record unequaled by any other nation – its financial of 1997 – 1998 took Thais and outsider by surprise. The collapse was brought on by a failure to coordinate policy responses within an economic establishment weakened by corruption; the downfall was further fueled by the broad consensus to focus first on political rather than economic establishment weakened by corruption; the downfall was further fueled by the broad consensus to focus first on political rather than economic and financial reform. Ironically, Thailand’s virtues of diversity and the equivalent of five years of growth. The Thai crisis has been described as a currency crisis, the consequence of speculative attacks, an artifact of premature liberalization of capital flows, a bankers’ panic, and even as a crisis of Asian values. While elements of all these aspects were present, the real roots of the crisis were both simpler and more complex. In financial terms, the problem was that a system that for decades had been managed with fiscal conservatism and competence-for instance, it achieved a full decade of government budget surpluses and limited foreign - debt, quickly developed a huge domestic real estate bubble and an unsustainable level of short term foreign debt. The systems of trouble long predated the crisis itself. Even the current account imbalances that first aroused the interest of speculators were a relatively superficial indicator. In the three years prior to the baht devaluation of July 2, 1997, earnings growth had disappeared from an economy that previously, except for rare and isolated years of global economic stress, was exceptional in this respect. By 1996 which started with the usual optimistic estimates of earnings growth, the corporate earnings collapse began to be acknowledged, as indicated by 35% decline in the stock market. The Thai system had lost its ability to allocate capital efficiently. The emerging financial bubble meant huge but profitless investment. Simultaneously, Thailand developed a current account deficit that eventually ballooned to 8% of GDP. This deficit reflected the same phenomenon as the collapse of corporate earnings growth: the inefficient deployment of capital increased imports of nonproductive capital goods and consumption and failed to contribute proportionately to production and exports. .