Introduction: The Mangled Miracle and the Alchemy of Finance

It was the best of times, getting even better – if that can happen – when things came crashing down in Asia. Nothing as dramatic as what happened in Asian financial markets in 1997 has occurred since the great crash of the 1930s. This is not mere hyperbole, but the sad truth about the Great Asian Crash of 1997. When economic historians look back they will mark not only Asia’s progress and unparalleled growth, but also its rapid descent into chaos within a few short months. But Asia was by no means an exception. In 1994, another crash had taken place in Mexico, and in 1998 Brazil and Russia also faced financial crises. Finally, in early 2002 Argentina descended into an economic and policy chaos that was not foreseen by the media pundits or many mainstream financial forecasters. At about the same time, starting with the Enron scandal, the serious misgovernance of several large US corporations came to light. Thus, as far as international finance and corporate governance are concerned, the twentieth century ended not with a bang, but with a whimper. While the twentieth-century crises may have been merely unfortunate, the twenty-first-century ones seem like stubborn recklessness. Is there a way of theorizing that will help us to explain these crises opening the way for better policy formulation in the future?