Much of their skilled human capital was in government, so elitist state planners naturally led the way. As trade grew, they were supported by populations who have a deference to authority and are willing to put community interests first. But the very top-down nature of the Asian model has proved fatal. In Korea, banks lent vast amounts on the basis of political connections and corruption rather than risk assessment. The highest mountains in the country are now made up of bad debts that the International Monetary Fund cannot possibly pay off.
All eyes are now on Japan.
The malaise is evident there, and how it responds is crucial. Japan is stronger. It has currency reserves and the export surplus that will enable it to meet external debt. Apprehension about the scale of the hidden losses has compounded the crisis of confidence. The financial authorities are inviting panic by fudging.