The Southeast Asian development phenomenon revisited: From flying Geese to Lame Ducks?∗

This examines the character of the development phenomenon of the Southeast Asian countries in the 1980s and 1990s and offers an explanation from a political economy perspective. The Krugman thesis is examined to point out some of its obvious flaws. The paper tries to show that the financial crisis of 1997 was caused by factors fully anticipated neither by Krugman nor by the earlier genres of developmentalist work on Southeast Asia, whether neo‐classical, neo‐Marxist or neo‐institutional. The crisis was one that occurred in the financial realm, sparked by a crisis of confidence in the performance of these economies. The financial sectors of Southeast Asia have in a sense become decoupled from their real economies, owing to the vast amounts of funds and liquidity that were available in financial markets; this notwithstanding, crises in these sectors can and did impact directly on the real economies with devastating effect, as has been demonstrated in the current episode in Southeast Asia and the earlier instance of Mexico in 1995.