An Analysis Of The Asian Financial Crisis

An Analysis Of The Asian Financial Crisis The miracle that was East Asia came to a sudden halt in 1997.  After growing by an annual average of more than 8%, Asian economies not only shifted to lower gear, they even reversed course.  The collapse of the Thai baht in July 1997 sparked off a massive financial and economic maelstrom in the region.  As exchange rates and stock markets plunged, foreign debt denominated in foreign currencies soared.  Many domestic firms became insolvent, interest rates skyrocketed and credits dried up as panic by domestic and international investors ensued.  Meanwhile ethnic tensions, erstwhile contained by strong economic growth, flared up again, particularly in Indonesia.  This, in a nutshell, was the 1997-1998 Asian financial crisis. Despite prompt and concerted attempts by developing countries, industrial countries and international organization to contain it, the Asian Crisis of 1997 spread to other Asian, Latin and Eastern European economies to varying degrees. In fact, this crisis put one third of the globe into recession in 1998. The crisis raised various questions regarding, not only the future of the regions economy but also about the impact of the crisis on various multinational companies and the world. Reasons Although explanations differ, most accounts now agree that the weakness of Asian financial systems was pivotal. One scenario was that, the liberalization of capital accounts and financial systems in Asia interacted with poor and inadequate regulatory structures.  This led to rapid domestic expansion, as reflected in asset price bubbles, which in turn fuelled more borrowing.  As a result, the economy was held hostage to shocks like changing investor expectations.  When external events pricked the bubble, the spiraling increase in asset inflation became a downward spiral of asset collapses. Another scenario highlights the role of short-term maturity debt and the term structure mismatch between assets and liabilities that made these economies extremely sensitive to investor expectations.  The short-term liabilities of Asian ec`onomies were very high, with someparticularly Thailand, Korea, Indonesia, and Malaysia far exceeding their liquid reserves prior to the crisis.  This made them extremely vulnerable to sudden calls for repayments. Yet another scenario emphasizes the policies of fixed exchange rates followed by Asian governments, which encouraged over borrowing and contributed to the fragility of the financial sector.  When the US dollar appreciated against major industrial currencies, the Asian economies whose currencies were pegged to the dollar also appreciated, thus worsening their export competitiveness.  Poor export performance due to lower competitiveness was compounded by weak domestic demand from Japan, and low cyclical demand for semiconductors worldwide.  This, combined with the vulnerability of Asian financial systems, changed the overly optimistic outlook on Asia.  The stage was thus set for the currency attack and financial crisis. The question still being debated, however, is what made these economies pursue policies that rendered them vulnerable to external shocks, and what economic incentives or disincentives led to the weakening of the Asian financial structure, apparently to its very core? Although much has been written about the Asian financial crisis, two competing explanations dominate the debate over the root cause of the crisis.  One story is that the Asian financial crisis was caused by a panic-induced illiquidity of capital markets, the panic hypothesis or illiquidity hypothesis.  The other story maintains that the Asian financial crisis stemmed from latent structural defects, induced by adverse incentives, which then encouraged excessive risk taking, the so-called moral hazard hypothesis. Panic Illiquidity The panic view, simply told, is that the frenzied haste to divest out of the region resulted in costly asset liquidations, asset price collapses, domestic bank runs and the drying up of credit.  According to those in this camp, economic fundamentals, including government policies in crisis countries may have been unsatisfactory, but did not warrant a crisis.  Real exchange rates, for instance, were only slightly overvalued.  Instead, the crisis occurred because of adverse shifts in market expectations.  These shifts can generally be precipitated by almost anything like the collapse of a big bank, political turmoil or lackluster export performance.  Once panic prevails, however, sound fundamentals become irrelevant.  Market expectations are therefore the key to understanding crises. What the panic hypothesis highlights is the inherent instability of international financial markets.   Structural Defects Moral Hazards The moral hazard view attempts to explain why economies like Thailand, Korea, and Indonesia reached such a level of vulnerability that they were like disasters waiting to happen.  This view maintains that the root cause of the crisis lays in the wrong economic incentivesinduced by implicit or explicit government guarantees, connections with the powers-that-be or interlocking ownership structures-which then led to over borrowing, over lending, and over-investment. In other words, the moral hazard view places bad government policies at the heart of the crisis, even though these very policies were once lauded for achieving fast growth and material improvement for so many people.  The point, however, that the moral hazard camp tries to drive home is that the vulnerability of the Asian economies resulted from the accumulation of many years of bad habits, glossed over while the going was good.  Some of these bad habits were actually residues of the industrial policies and winner-pick ing that, ironically, was thought to have propelled these economies to tiger hood. Policy Implications from the Lessons Learnt The divide between the two views extends to policy implications for a post-crisis, global financial environment.  On the one hand, the panic camps main policy focus was on reform of the international financial system, the inherent instability of which was spotlighted in the Asian crisis.  Grand proposals like the need for an international lender-of-last-resort, an international bankruptcy court, burden sharing between private creditor and borrower alike in the event of a systemic crisis, and better provision of information to minimize uncertainty, were the major policy prescriptions of panic view adherents. The moral hazard camp, on the other hand, was more concerned with removing the incentives that gave rise to economic vulnerability.  It proposed an arms length relationship between banks, instead of the old cozy relationships.  It also advocated increased transparency and improved corporate governance, as well as the strengthening of banking supervision and regulation. Most of the policy recommendations for strengthening the international financial system focused on the following: Improving Corporate Governance Improving corporate governance means addressing the bad incentives or moral hazards stemming from certain ownership structures.  In Asia, these structures include interlocking directorships between banks and firms; family-dominated, corporate ownership; ineffective legal and regulatory frameworks; and a lack of transparency and adequate disclosure rules.  These all contributed to the overleveraged characteristics of Asian corporations.  For this reason, an effective legal and regulatory framework, coupled with strict rules of transparency and disclosure, is fundamental for sound corporate governance and efforts are going on in this direction. Financial Restructuring Closely connected to corporate governance reforms is the supervision of banks and the financial sector.  In contrast to governance issues, however, this is more straightforward.  Bank restructuring, for instance, has had a slow start but has nevertheless advanced.  Solvent firms have been closed, some banks have been recapitalized, mergers are taking place, and Asian governments have established appropriate agencies to take care of foreclosed assets.  Rules on the foreign ownership of banks and financial institutions have also become more liberal, non-performing loans are finally being tackled, and securitization attempted. Financial restructuring must go hand in hand with better corporate governance and an improved regulatory and supervisory structure.  Supervision needs to be tight and strong, professional and arms length.   Regional Cooperation The imperative for maintaining the momentum of systemic and institutional restructuring lies with national governments, but there is some scope for support at the regional and international levels.  Opportunities exist, at a regional level, for East Asian governments to engage in policy consultation and to share their experiences in reforming the corporate and banking sectors.  The formation of the ASEAN Surveillance process is a significant development along these lines.  Its main purpose is to set up a monitoring and early warning system for the region, but it also provides the institutional setting where a frank exchange of views on policy directions in ASEAN can take place and where joint action, if appropriate, can be forged.   Performance of East Asian Economies and Financial Markets since the Crisis After the outburst of the crisis, East Asia recovered at an impressive pace. For those countries most affected by this financial crunch (e.g., Thailand, Malaysia, Indonesia and South Korea), their real GDP growth rates turned from negative in 1998 to positive in 1999 and 2000, and their currency and stock markets also largely recovered. Moreover, interest rates remained below pre-crisis levels, and inflation was well controlled for some time. In addition to the favorable domestic environment for these countries, the international economy also showed an unusually strong performance, giving East Asias economy a lift. The world GDP growth rate surpassed 4.1% in 2000, more than twice the rate of 1998; and the international trade growth rate reached 11% in 2000, more than twice the rate of 1999. Two major factors appeared to explain this fast recovery: Strong U.S. economic growth and currency value. Net cash inflows in foreign direct investment and current account surplus of crisis-hit countries. Factors Contributing to Recovery Following factors appeared to contribute towards the recovery from the crisis: Strong economic growth and solid currency value of the U.S.: The economic growth and the rising import demand of the U.S. generated a positive shock and exerted a strong influence on East Asian emerging economies. We note that the U.S. recorded a strong GDP expansion after the crisis, with growth rates of 4.5% in 1997, 4.3% in 1998, and 3.8% in 1999, and the value of U.S. dollar exhibited an upward trend in those three years. Stimulated by an expanding economy and currency appreciation, the domestic demand for import went up strongly in the U.S. throughout the post-crisis period, creating tremendous export opportunities for East Asian economies. Net cash inflows in FDI and current account: In 1996, the net direct investment and other capital accounts were in surplus, while the current account was in deficit. After the crisis, massive foreign capital fled East Asia. The deficit of capital account was large, which further contributed to the instability in this region. How-ever, the net direct investment remained in surplus and the outflow in capital account slowed down considerably in 1999. In addition, the current account reversed from deficit to surplus after the crisis largely due to increasing ex-ports to the U.S. The overall cash flow balance turned from negative to positive in 1998 because of the sizable surplus in current account and the net inflows in capital account. Hence, the net cash inflows in 1998, 1999, and 2000 have helped the crisis-hit countries build up substantial foreign reserves. Conclusion The Asian crisis was an eye-opener.  The Achilles heel of the Asian economies, their financial systems finally gave in after years of excess.  What caused the financial systems to give way is still a matter of academic debate. A pragmatic reading of the crisis suggests that the bulk of the policy responses had to be carried out on the home front.  It is imperative that domestic reforms focus on both systemic and institutional restructuring.  Asia clearly needed and needs to change continuously.  It needs to be open to the West and the Western style of business, from the provision of information to business relationships.  Domestic efforts should also be supported by regional and international mechanisms.

Advantages and disadvantages of taking curriculum packages from the centre as mere proposals and not prescriptions in Zimbbwe Essay

There are several views of curriculum that many involved have encountered. One view is that the curriculum must be a prescription; it should tell educators and all involved what to do, how to do it and in what order. Another view is that a curriculum is just a mere proposal; there is room for modifications and other provisions. In Zimbabwe, the national curriculum comes from the Curriculum Development Unit (CDU), which is the Centre, where specialist curricularists develop it. The curriculum is distributed as a package to the provinces and districts then lastly to the schools where it is to be implemented by educators. This exposition seeks to identify some of the advantages and disadvantages of taking such packages as proposals and not as prescriptions in Zimbabwe. Stenhouse (1975) defines curriculum as â€Å"†¦ an attempt to communicate the essential principles and features of an educational proposal in such a form that it is open to critical scrutiny and capable of effective translation into practice†. He suggests that a curriculum is rather like a recipe in cookery. A curriculum, like the recipe for a dish, is first imagined as a possibility, then the subject of an experiment. The recipe offered publicly is in a sense a report on the experiment. Similarly, a curriculum should be grounded in practice. It is an attempt to describe the work observed in classrooms so that it is well communicated to teachers and learners. So, within limits, if a recipe can be changed and varied according to taste so can a curriculum (Stenhouse 1975: 4-5). This definition focuses more on the process of teaching and learning, the angle from which this discourse unfolds. One advantage of taking a curriculum package as a proposal is that teachers are empowered professionally resulting in greater academic growth. Stenhouse (1975) is of the idea that the proposal is not to be regarded as an unqualified recommendation but rather as a provisional specification, implying that it should not limit the freedom and creativity of both teachers and students. In Zimbabwe, such an approach can be widely accepted because educators can expect, even invite negotiation and transaction, and use their practical situational knowledge for implementation and for modifying the original package according to the demands and resources of their specific localities. Using this approach in Zimbabwe where we find different ethnicities with unique customs, beliefs and lifestyles, makes the learning experience meaningful and relevant allowing learners to gain a sense of ownership of their education. This expansive exposure, which also directly involves the local community, is beneficial to the learner in that it equips one to be a well-rounded and adaptable member of society. More so, and associated with the above, given the uniqueness of each school and classroom setting in Zimbabwe, the scripted curriculum is not always appropriate for all learners. Some students sometimes have difficulty accessing areas of the curriculum that can be challenging. Taken as a proposal, it is an advantage for the teacher to be able to modify teaching approach, take note of the leaners’ differences and make sure that everyone catered for. The curriculum’s success highly depends on the methods of instruction put in place by the teachers. A curriculum therefore â€Å"†¦ is a way of translating any educational idea into a hypothesis testable in practice. It invites critical testing rather than acceptance† (Stenhouse (1975:144). Thus in this sense, a curriculum is not a package of materials or a syllabus of ground to be covered but simply a guideline on the practice of teaching. As such, the major disadvantage of the proposal approach is that it rests upon the quality of teachers. There is need for highly qualified teachers who are able to modify curriculum. There will be severe consequences on what could happen educationally if the teacher is inadequately trained. Zimbabwe is highly dependent on untrained teachers to fill the void left by professionals opting to work abroad.Gatawa(1990) contends that if the curriculum package is taken as a proposal, there is a high probability that teachers will only teach what they know, ignoring the major objectives of the document all together. This means there is no guarantee that national goals will be achieved because the curriculum will be too localized and in turn produces students with limited marketability. Invariably so, Gatawa (1990) is of the view that there will be too many curricula in one education system, making it virtually impossible for learners to transfer from one school to another. Eunitah et al (2013) contend that in developing educational contexts like Zimbabwe, it is premature to do away with centrally prescribed curricula in order to accomplish uniformity in the provision of education. This implies that developing countries like Zimbabwe need a centralised curriculum system to determine levels of academic growth and educational development. Financially, the proposal approach is not viable because institutions have to continually replace curriculum material or buy material to suit a particular teacher’s desire (Lawton, 1980). Taking the curriculum package as a proposal does not work in this context so the prescription approach is therefore more suitable. In light of the above, one advantage of taking a curriculum package as a prescription is that the syllabus content is decided upon centrally and is based upon the goals and philosophy of the nation (Gatawa, 1990) . This means there is uniformity in what is being taught so learners can easily adapt if there is need for a transfer. There is also uniformity in that learners taking the same subjects sit for the same examinations and one examination board like ZIMSEC, as in the Zimbabwean context, is responsible. Entry requirements for universities and colleges can be centrally determined and parity can be ensured. Lawton (1980) is also of the view that the prescriptive approach to curriculum implementation satisfies the political need for a system of accountability. In Zimbabwe, there are considerably more government educational institutions than private ones so when the ‘prescription’ is explicitly stuck to, educators can account for the resources invested in the education sector by the state. More so, a prescriptive approach to the curriculum package makes sure that the Ministry of Education approves all textbooks used. Where teachers are minimally trained, as is the case with temporary teachers in Zimbabwe, the prescriptive curriculum tells the teacher what to teach, how to teach it and the materials to use in the process. Maravanyika (1982) is of the view that it makes standards and expectations about what should be taught and learnt clear to everyone. A prescribed curriculum therefore makes progress and attainment measurable and comparable on a national scale .That way, underperformance is easily dealt with while success can be modeled and shared. To this end, the prescriptive slant is more effective as it limits deviations that may otherwise be of no relevance, come examination time. However, taking a curriculum package as a prescription undermines what Lawton (1980) terms a ‘†¦teachers’ legitimate desire for professional autonomy†¦.’.This means the prescriptive slant is too restrictive and assumes that the user is incapable of making a good curriculum. This scuppers teacher development because it does not allow for research. The educator is limited to giving the prescribed instruction that generally stresses content, mainly knowledge, at the expense of the development of attitudes and skills. In Zimbabwe, learners are chiefly taught to pass examinations rather than to master and develop lifelong skills (Ndawi and Maravanyika, 2011). There is a scramble for certificates with little regard for the development and demonstration of productive skills. The education system is therefore suffering instead of developing. Above all, the prescriptive approach also overlooks the possible differences in the availability of resources. It assumes that educational institutions have the same facilities; learners are similar and operate in the same circumstances (Tanner and Tanner, 1975). This is clearly not the case in Zimbabwe, rural schools are traditionally underfunded and the infrastructure is either temporary or dilapidated. This is the reason why most rural based schools tend to perform poorly compared to urban schools. Curriculum implementation should take socio-geographical learner diversity into consideration, the essence of which involves addressing the needs of different learners at different institutions. In summation, the proposal approach fosters lifelong learning and independent thinking but is exhaustive in terms of skills and resources. The prescriptive method is also beneficial and even more appropriate in Zimbabwe’s examination oriented system.

Rousseau And Hobbes And Rousseau On Individual And...

Dissent over thoughts and opinions has been prevalent since society was first created. Rousseau and Hobbes and their individual and differing social contracts are no exception to this. Each of the theorists believed their specific social contracts would best provide the solutions to the political problems they address. Both create complex, sometimes contradicting diagnosis s of the individual problem they address. As with most pieces of writing, the setting the author was in when writing it often has great amounts of influence. This is true with both social contracts and problems arise later because of this. Rousseau and his concern with inequality and Hobbes and his concern with anarchy are prevalent not only to their contracts but also open the doors to Charles W. Mills and the problems he exposes in both social contracts. The time of history someone lives during has ample influence on the ideas he forms throughout his life. This theory proves evidently true for both Rousseau and H obbes. Rousseau was alive for the duration of the mid-1700s. It was during this time that the social upheavals leading up to the French Revolution were occurring. Rousseau was witness to substantial amounts of poverty, inequality, and instability. As a result of this, he noted that people are â€Å"good† if they are provided with what they need. One’s morality is based on their circumstances. Rousseau theorized that there are no â€Å"good people† and â€Å"bad people†, instead there are simply people whoShow MoreRelatedHuman Nature Establishes Political Authority982 Words   |  4 Pagesimportant to understand the differing accounts of how human nature establishes political authority. Hobbes believes that because the state of nature is a constant state of war, the role of government must be to protect the people to protect people from themselves. 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The Poetry Lesson by Don Maclennan Essay - 1605 Words

In the poem â€Å"The Poetry Lesson† by Don Maclennan an ironic mood emerges. The poem is about an English poetry lecturer. He expresses his views and feelings on his lessons, how he might have impacted on the lives, altered the views and the challenges he has given his students. He states what he expects from his students. It is interesting to note that Don Maclennan is in fact a South African English poetry lecturer. I thus assume that this poem is a reflection on how he views himself and his students. I intend to give a detailed analysis of the poem, by defining the type of irony that occurs in the poem and commenting on the use of irony and the nature of the poems commentary on itself. I will give my interpretation of each stanza of the†¦show more content†¦10). This shows the irony that the teacher who should know most things about his/her subject knows very little. The reader is made to ponder about whether he is ignorant or just feigning it. In stanza one we are introduced to the teacher. He seems to be an unhappy person as he speaks of sliding â€Å"into depression† (l. 1). We hear of him listening to â€Å"the redwing starlings in the tree† (l. 3) and the impression that he longs for someone to hear him is given as he says, â€Å"I need someone to hear my confessions† (l. 4). The word confessions could imply that he has something bearing down of him that he longs to share with others. At this point in the poem it is not clear that the speaker is a lecturer, I assumed he was a student who would be describing a poetry lecture. The irony here is the idea that the lecturer was a student. The lecturer stands by and watches his students walking into class. Stanza one has provided the reader with an idea of where the poem is set and a brief introduction to the poet and how he feels. In stanza two the poet describes himself in detail as his students might see him and we see how he sees his students. The poet states that he brings his â€Å"emptiness inside† (l. 10) the lecture hall and refers to his students as being the knowledgeable ones. This is ironic as the lecturer should be the knowledgeable one, the person who educates his students by passing on what