The political power of economic ideas : comparative policy responses to the East Asian financial crisis in South Korea and Malaysia
This thesis explores the politics of economic adjustment in South Korea and Malaysia. Empirically, it examines how Korea and Malaysia responded to the East Asian financial crisis. A widespread perception is that Korea pursued orthodox policies (the Washington consensus) while Malaysia used unorthodox policies (the post-Washington consensus). However, this interpretation exaggerates the divergence in macroeconomic adjustment policies (e.g., different exchange rate regime policy and their relationship with the IMF), thereby underestimating the 'policy' convergence in macroeconomic stabilisation and structural reform at least from late 1997 to mid-1998. For this reason, this thesis explores the convergence and divergence in a balanced perspective. Theoretically, it interprets why the 'policy' convergence emerged between Korea and Malaysia from an ideational perspective. The convergence was caused, in part, by economic ideas - the Washington consensus or neoliberalism - that prevailed among both the international financial institutions (IFIs) and national policy makers. The consensus de-legitimised the existing economic system by attributing the underlying causes of the financial crisis to structural weaknesses in the financial and corporate sectors. In addition, the consensus provided a far-reaching blueprint for institutional change. This is why both countries embraced neoliberal policies particularly in structural reform, irrespective of IMF interventions. The emphasis on economic ideas does not mean that ideational approaches overlook the role of interests and institutions. Vested interests - big business and organised labour - and state capacity had a considerable impact on policy-making. Thus ideas-oriented approaches are complementary to - rather than conflicting with - interest-oriented and institution-oriented approaches.