The 1997 IMF-led loan package of $55 billion for South Korea was the biggest financial rescue effort to date. When, a few months before that, Thailand's financial crisis spread to the Philippines, Indonesia, and Malaysia, it was nothing but a distant tragedy to much of the industrialized world. Then, suddenly, the contagion jumped the boundaries of South East Asia, touching Brazil, Japan, and, in a very big way, South Korea. The crisis was marked by stock market crashes, currency depreciations, runs on banks, and the actual collapse of several banks—including Hokkaido Takushoku, one of Japan's largest.

In the mayhem, no one really understands what happened, what started the forest fire in South East Asia—there is an actual forest fire in the region, to add to the confusion—and how to douse it without bringing the economies to a halt. As is usual, pundits are cropping up by the day. They claim to have known all along that this was coming. They tell us that these Asian economies had ‘weak fundamentals’, a safe thing to say since no one knows what that means; their exchange rates were overvalued; their monetary policy was wrong.

Nothing can be further from the truth. On 1 March 1997, The Economist, while pointing to several cracks in the Asian economies, noted that ‘on most structural issues, these economies have got a large number of big things absolutely right: high savings, prudent monetary and fiscal policies, openness to trade’.