George Soros and Mahathir show that the Asian financial crisis was more than a currency rout

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The implosion known as the Asian financial crisis had several chapters. For the better part of two years in the late 1990s, the economies of Indonesia, Thailand and South Korea collapsed, while Malaysia suffered its deepest recession and rocked the world with capital controls. To appreciate the intermingling of forces behind this market meltdown, a moment in Hong Kong at the start of the rout is instructive.

At the combined annual meetings of the International Monetary Fund and the World Bank in September 1997, a dispute raged over who was responsible for the burgeoning financial calamity and what kind of economic model would emerge next. The main protagonists were Mahathir Mohamad, at the zenith of his power as Prime Minister of Malaysia, and George Soros, the billionaire who made bold bets against the currencies of Thailand and Malaysia on the eve of the crisis. A few years earlier, Soros defeated the Bank of England’s efforts to support the pound. Mahathir, for his part, had presided over high growth rates for much of his 16 years in office which now risked being undone.

With Thailand already under the restrictions of an IMF-led bailout and Indonesia rushing a bailout, Mahathir feared Malaysia could be next. Soros has been described by Mahathir and other nationalists as representing global capital, in all his fickleness – and has drawn attention (and sometimes praise) for his ability to spot countries and assets that were starting to go bad. Mahathir became a substitute for an old state-directed way of doing business that often combined turbocharged economic growth with political centralization.

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