The Penguin History of the World

Taiwan, moreover, was only one source of uncertainty and nervousness in East Asia. An increasing instability and volatility was apparent in the region after the Cold War ended, even though these trends did not reach the same levels as in Europe. What the closing of that relatively well-defined and therefore clarifying struggle might mean was at first very hard to see. In Korea, for example, it changed very little; North Korea remained obstinately locked in a confrontation with the United States and with the Republic of Korea in the south by its rulers’ determination to maintain a command economy in virtual isolation. Economic mismanagement, the ending of Soviet aid in 1991 and, it appeared, some straightforward dynastic exploitation of power by the ruling dictator, brought North Koreans to the edge of starvation by early 1998. North Korea’s problems remained unusually specific, detached somewhat from the regional trends as South Korea could not be. That country was, by the mid-1990s, an established democratic regime with high growth figures and an impressive involvement in international trade.

While all of East and South-East Asia, China excepted, went through a deep but, for most countries, temporary financial crisis in 1997 and 1998, Japan entered a recession after the Cold War that was to last for more than a decade and from which the country is still struggling to recover. The economy often hailed in the 1980s as the world leader in productivity and product development was by the end of the century a shadow of its former self. Property speculation and huge investment in non-productive activity or sectors generating very small returns had encumbered its banks and financial institutions with unserviceable debts. The currency weakened sharply; speculation against it was immediate and crippling in a world of financial transactions more rapid than ever before. The prevailing business culture of Japan, firmly embedded as it was in official and financial networks that now proved unable to give decisive leadership, made solutions harder still to achieve as conditions worsened. The Japanese economy became a laggard in international terms, with deflation and unemployment the result. The rapidly shifting governments seemed unable to stem the process, and some of them began pandering to nationalist sentiments to strengthen their authority. The recession in Japan meant that it could not be counted on to help pull the other economies out of their economic difficulties in the late 1990s, and even though the region as a whole was growing again in the early 2000s, some countries – such as Indonesia and the Philippines – only slowly regained their earlier growth rates. Millions of people, from Hokkaido to Bali, lost their savings and sometimes their livelihoods in the process.

The political shifts in South-East Asia that followed the crisis were also significant. Authoritarian governments in some countries had exploited public resources in the interests of cronies of those in power and their families. In May 1998, after the Indonesian economy had shrunk by more than 8 per cent since the beginning of the year and the currency had lost four-fifths of its dollar value, riots drove the president from power. Thirty-two years of a firmly controlled, corrupt, but formally ‘democratic’ system came to an end. The successor governments made Indonesia a much more open society, but there was only a gradual rebuilding of the economy. For a while there was increasing ethnic and religious strife. But from the early 2000s growth returned, and under President Yudhoyono, a former general, political stability increased within a pluralist setting. By 2010 this mainly Muslim country of almost 250 million people was making rapid progress.

The second most populous country in the region, Vietnam, moved in the opposite direction, further centralizing its politics while intensifying Chinese-style economic reform, called doi moi (‘renovation’) in Vietnam. By the early 2000s Vietnam was the world’s second-fastest-growing economy, but large parts of the country were still very poor and – as in China – the exploitation of the workforce in the name of capitalism with Communist characteristics was intense. Altogether, what the extraordinary highs and lows of the East Asian economies had shown in the first decade of the twenty-first century was how integrated the global economy was becoming: economic shifts in Beijing or Jakarta would have an immediate effect on the world, and vice versa.