Whither the Crime in Financial Crises? The Thailand Crisis and the NASDAQ Market Collapse Compared

Abstract

The dominant view of what caused the crises in Thailand and elsewhere holds that local corruption in the form of “crony capitalism” is among the prime culprits. This paper seeks to redirect focus away from the alleged crime of commission as a primary cause of recent crises toward the crime of omission in not interrogating more fully both the instability of finance capitalism and the resulting distributional consequences of that instability. A comparison with the recent American experience suggests crises are an enduring feature of capitalism and not the product of “corrupt” Southeast Asian business practices. This comparison suggests as well that redistribution of income over the course of such episodes may very well be quite regressive. Together this perspective suggests that when western interest groups, exercising their influence through the international financial community, advocate for what is in essence a redirection of entitlements, questions of conflict of interest—arguably lying at the heart of the problem with cronyism—must be redirected as well.