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The following article appeared in Left Business Observer #85, September 1998. It retains its copyright and may not be reprinted or redistributed in any form - print, electronic, facsimile, anything - without the permission of LBO.
Since Asia broke in the summer of 1997, LBO's official stance has been confusion. Was this was another of the regional financial crises we've gotten used to seeing - like the banking crises in the U.S. and Scandinavia in the late 1980s/early 1990s, the European monetary crisis of 1992, Mexico's 1994/5 disaster - or was it the opening movement of a broad and possibly monstrous global deflation, the one policymakers have been staving off for years? If it was the second, it was likely that things would get worse where they were already bad, and spread savagely beyond their point of origin. So far, things have been breaking badly. There is no sign of recovery in Southeast Asia; the crisis has spread to Russia, and Latin America looks wobbly. The authorities have pulled off many an improbable bailout over the years, and they may once again, but they sure do have their hands full.
Japan's latest GDP figures were far worse than expected, showing an annualized decline of 3.3% in the second quarter - the third consecutive decline, the worst losing streak since the stats began in 1955. It's not an economy in "freefall," as it's sometimes described, but it's still pretty sick. A consolation is that there's been no collapse in employment so far.
That's not true elsewhere in Asia, where the International Labour Organisation estimates that 15-20 million will lose their jobs by yearend. Indonesia's unemployment rate will be 12% and real wages will be down 15%. Thai unemployment is likely to be 6% (and jobless rates in the so-called Third World notoriously miss marginally employed people working in the "informal sector," selling pencils on the street or combing through trash), compared with 2% two years ago. Korean unemployment is already 7%, more than double last year's rate. Even if China avoids implosion, 3.5 million are likely to become jobless this year. Malaysia plans to boot half its 1.8 million migrant workers, 200,000 of them by yearend, under a program called Ops Nyah or "Operation Get Out"; 800,000 will be booted by Thailand, Korea, and Hong Kong. Many displaced workers will be returning to the Philippines and Indonesia, which are in no shape to welcome them.