1997 Asian financial crisis

With the Asian crisis, financial, monetary and economic crisis in East Asia the years is called 1997 and 1998. It began in March 1997 in Thailand and spread to several Asian countries over, and in particular many of the so-called Tiger and Panther States.

The most affected countries were Indonesia, South Korea and Thailand. Even in Malaysia, the Philippines and Singapore, the crisis became apparent, while the People 's Republic of China and Taiwan remained largely unaffected. The simultaneous economic crisis in Japan had their own causes, but was aggravated by the Asian crisis.

• 3.1 Impact of the crisis on the Asian countries
• 3.2 Impact of the crisis on other countries

• 6.1 The utility for Thailand
• 6.2 The utility for South Korea
• 6.3 The utility for Indonesia
• 6.4 Criticism of the actions of the International Monetary Fund

• 7.1 Models of first generation
• 7.2 Models of second generation
• 7.3 Current Models 7.3.1 Assumptions and Notes 7.3.1.1 The private sector
• 7.3.1.2 The public sector

Origin and causes of the crisis

For the crisis in 1997/98 in the Asian region several explanations were subsequently given by experts. Economic policy failures such as excessive investment and trade deficits and fiscal excesses of excessive borrowing - in foreign currency - and institutional shortcomings in the regional financial markets. While these explanations diagnose a self-inflicted crisis, combined with a failure of the international financial markets, has become the focus of criticism from other economists of the International Monetary Fund.

Credit bubble

As a result of the liberalization of the financial sectors of Asian countries emerged in the nineties a credit boom in Asia. The growth of credit volume was at this time, on average, 8 to 10 percent above the growth rates of GDP. It emerged not only industrial overcapacity as in South Korea, but a growing proportion of loans were used to buy shares and real estate. The result was a rise in stock markets and a sharp rise in property prices by up to four times. With the rising real estate and stock prices in the Asian banks believed to have good collateral, which led to more lending. This capital was flowing again in equities and real estate. Due to the resulting price increases in some areas was a speculative bubble. This "vicious circle" of lending relates to greater value of the securities had a strong bias in the lending policies. The end of 1997 the share of collateralized by real estate loans in Thailand, Indonesia and Malaysia was between 25 and 40 percent. This made the banks vulnerable to price declines in the stock and property markets.

Lack of foreign currency hedging

Other problems resulted from varying maturities and currencies recorded and loans granted. As the banks wanted to benefit from the favorable interest rate situation on the international financial markets, the debt was often in U.S. dollars or yen with short maturities. Lending to domestic borrowers was mostly long term and in domestic currency. Credit institutions funded long-term loans with the help of short-term ingested money. By so doing, it came to serious differences in maturity and currency between the recorded and assigned loans.

At this time, a serious error was committed because the financial institutions relied on the close linkage of the domestic currency to an anchor currency, usually the U.S. dollar, and their stability. They saw no need to hedge the liabilities in yen or dollars against exchange rate changes. Through the state- hedged exchange rates, the exchange risk for receiving foreign funds seemed negligible and foreign currency loans were comparatively low because of low risk premiums. They renounced in favor of higher gains on the need in such situations, risk hedging on the futures markets. By doing so they benefited from the weakness of the U.S. dollar against the Japanese yen between 1985 and 1995. By 1995 this strategy was very successful. The Southeast Asian countries were competitive and were able to record a strong export-led growth. When the dollar against the yen, won the European currencies and the Chinese yuan in value, suddenly the local currencies rose in real terms what. Become a serious deterioration of international competitiveness, slower export and thus led to a serious current account deficit

Foreign debt exceeded foreign reserves

The main problem of the financial policy were ongoing in foreign currency short-term loans from the Asian banks, which faced only a relatively small currency reserve inventory. The crisis countries were not repaid on the occurrence of the crisis and the maturity of the loans previously recorded able to these short-term foreign currency. Official information on the foreign reserves showed a false picture of the true situation. Foreign exchange reserves were much too high valued because transactions had not been taken into account in the futures markets. A number of central banks ( for example, the Thai Central Bank) tried to rely upon the occurrence of the financial crisis on transactions in the futures markets, the rates of their currencies in order to avert a currency crisis.

Weak regional financial market structures

In addition to the already outlined grievances existed in most countries no or inadequate functioning supervisory authority. In addition, the banks waived a thorough risk assessment in lending, and credit check of the borrower has been greatly neglected. The consequence of these lending practices was that many of the banks had a much too low equity ratio. The management of financial institutions trusted that the government would support it, it should actually be difficulties. The errors are, however, not to just look at the management of the Asian banks, but the crisis was boosted or only brought about by foreign speculators who sat in view of the warning signs of financial markets on a fall in exchange rates of these countries and they sold forward.

Misconduct of the international financial markets

Another reason for the indebtedness of banks and thus the national level, the low level of interest rates in Japan and the associated incentive structures to borrowing in Asia was led. Many investors wanted to be there in the future market of Southeast Asia and financed their investments with low equity and cheap yen loans. In the West, the opinion prevailed that governments in Asia, there should be problems, would have the resources to intercept any solvency problems. When the creditor banks but no longer " kept quiet ", as the Asian currencies and assets increasingly fell, and presented their demands due, it was a massive withdrawal of capital from these countries. The turn led to a downgrading of the creditworthiness of these Asian countries, which had the further sale held there facilities by security-oriented institutional investors result. Inevitably, this led sales to a further decline of stock markets and currencies. This self-reinforcing capital flight from the crisis countries was a classic coordination failure. For a single creditor, it was rational, as quickly as possible the recovery of money, thus limiting losses. But because all negotiated so the same time, the creditor presented worse by the rapidly accelerating decline in values ​​of their investments.

Chronological overview of important events

Economic impact

Impact of the crisis on the Asian countries

After years of strong growth, the Asian countries were facing in deep recession with a sudden case in 1997. Dama Lige and future investors were skeptical about the prospects of the region and reacted accordingly. Before the crisis, the " Asian Tigers " were very successful on the global capital markets, the U.S. dollar market accounted for about 33 billion U.S. dollars per year. But the loss of investor confidence was enormous and 1998 fell in value to only U.S. $ 8 billion for Asian borrowers. The crisis was particularly evident in the economic performance of 1998 This year, the GDP contracted in Indonesia ( -13.7 %), Thailand ( -8.0 %), South Korea (-5.5 %), Hong Kong (. - 5.1%) and the Philippines (-0.5 %), after these countries had experienced a long-term growth through 1996. In Japan, GDP also fell by 2.8%. The labor market collapsed. In South Korea, the unemployment rate in Malaysia from 2.5% (1996 ) increased from 2% ( 1996) to 6.8 % (1998 ) to 8% (1998) and in Indonesia to 22% ( in early 1999 ).

While the Asian crisis continues worsening, the International Monetary Fund to limit the negative consequences of trying. He introduced in 1997/ 98 39 billion for Thailand, Indonesia and South Korea are available. In addition, tried numerous governments and international organizations to provide assistance. At that time, hoping that the market would recover soon. The most affected currencies, the Thai baht, the Indonesian rupiah and the South Korean won, had by mid-1998 made ​​up a part of their depreciation and stabilizes. Similarly, the export figures again stabilized. A comforting fact was that not all countries were equally affected. The PRC was relatively immune to the direct effects of the crisis. The yuan retained its value, the gross domestic product continued to grow and exports increased to continue to vigorously. Although capital outflows by foreign investors in China were remarkable, but the foreign debt and the budget deficit was lower than for example in Thailand and Malaysia. Furthermore, were the foreign exchange reserves of China in comparison to the countries affected by the Asian crisis, most significantly larger.

Japan, which is a natural trading partner and investor for the Asian region from a geographical location out was significantly more severely compared to the U.S. and Europe from the negative effects of the crisis. The ongoing since 1991 Japan crisis was exacerbated by the Asian crisis. As a direct consequence of Japan's export growth was significantly lower and the first time this decade, Japan's economy in 1998 no longer grew. The Japanese economy went into recession.

Impact of the crisis on other countries

Market forecasts at the outbreak of the crisis were very bad, and promised a serious negative effect on the entire world production. There were predictions that emanated from a reduction up to one third. In fact, the direct effects turned out to be much less serious. The reason for this is the relatively small share of exports to the U.S. and Europe to Asian countries, except for Japan to call. For example, In 1996, only 2.5% of U.S. exports to Southeast Asia. In contrast, the Asian countries had an average export share of 36% in the USA and Europe and were thus in a narrow relationship of dependency.

The U.S. could keep their economic growth and even increase in late 1998 during the events. At the same time managed to keep inflation low, consumer spending were high and unemployment reached a 30 -year low of 4.3%. But the highlight of the positive developments for the U.S. was the soaring Dow Jones index, which topped the 10,000 mark and pulled the European stock markets to record levels.

The impact on the EU economy has been limited, despite the fact that European investment in Asia suffered a setback. The secondary and tertiary sector suffered the most, as a number of European industrial products and services for the Asian market were determined. The loss of the Federal Republic of Germany, were estimated, according to the government 10 billion DM. The growth rate of the German economy fell by 0.25 % and the unemployment rate increased by 0.1-0.2 %.

Impact on the population

The social impact of the crisis expressed predominantly in the rise in unemployment and strong real income losses. Not all income groups were equally affected. The share of wages in total income declined and thus led to changes in the income distribution. Living in rural areas, who grew their own food or bred, had profited by selling their products at higher prices, while the urban households, who had to buy food at higher market prices were negatively affected. Accordingly, the poverty in urban areas rose faster than in rural areas. Due to cuts in social expenditure decreased the availability of services and the quality of education and health care and other public services. The investments of households in the areas of education, health, nutrition and family planning took off. In healthcare, many households resorted to self-help or attended traditional healers, less modern medical care. Private hospitals and clinics in Malaysia reported a decrease between 15 and 50 percent of the number of patients in treatment. The cost of contraceptives increased and a large number of different women from the family planning programs from. In Indonesia, to date, the participants of the national family planning programs had to bear the costs in full. Accordingly, estimates suggest that the number of illegal abortions and infanticide significantly increased.

Decay of the crisis and recovery

The economic recovery from the crisis took place in most of the affected countries rather quickly. A good macro -economic management in strengthening the stabilization of financial markets played a special role. In most Asian countries, the real and nominal interest rates were two years later lower on the money markets than before the crisis in 1997. As the speculative currency pressures subsided, interest rates fell in South Korea, Thailand ( early 1998 ) and Indonesia ( mid-1999 ). The granting of credit in the private sector was drastically lowered and pulled a negative impact on private consumption by themselves, but stabilized the banking system.

In the years 2005-2007, the gross national product grew an annual average of 8%, as fast as before the crisis. However, this figure takes into account the growth of China and India.

Studies suggest that public infrastructure in 2007, particularly in Thailand and Indonesia, worse than a decade earlier had been in the days of the crisis. Capital expenditures have fallen by the economic and political uncertainty and companies are regarding borrowing still very cautious. The Asian Development Bank therefore demands that governments could contribute much more to change this: Increased investment in education and infrastructure, elimination of corruption and the improvement of the legal framework.

The role of the International Monetary Fund

The International Monetary Fund led in Indonesia, South Korea and Thailand programs, the financial assistance included, but were subject to conditions regarding structural reforms and macroeconomic policies.

In the years 1997/98, he paid about 39 billion U.S. dollars for financial adjustment and reform programs in Indonesia, South Korea, Philippines and Thailand. A total of 85 billion U.S. dollars was pledged by bilateral and multilateral organizations; this amount was never paid in full. This funding was provided under the condition in view that monetary policy would be tightened in the respective countries and thus contained a further decline in foreign exchange rates, and a more restrictive budgetary policy. Furthermore, there was the release of the funds tied to structural reforms, including in particular rules and setting up monitoring committees included which should solve the debt, efficiency and management problems in the banking and corporate sector. Other reform measures should mitigate the social impact of the crisis and the budget cuts and revive economic growth.

"(...) First, the failure of overheating pressures of growing in Thailand and many other countries in the region was visible in large government budget deficits, real estate and stock market bubbles manifested curb; secondly, that the too long maintenance of the pegged exchange rate regime, which encouraged external borrowing and led to excessive exchange rate risk exposure both in financial as well as in the corporate sector, and thirdly, lax prudential regulation and financial market supervision to a sharp deterioration in the quality of loan portfolio banks led. "

" The medicine that has given the IMF was right. He could not assert that the patients take them properly only. "

The utility for Thailand

On August 14, 1997, the Thai government addressed a Memorandum of Understanding ( Letter of Intent ) to the International Monetary Fund, have been described in which structural programs, which the Thai government intended to implement with the simultaneous request for financial support. On August 20, 1997, the IMF approved $ 4 billion dollar grant for a period of 3 years. The primary objective of this financing help to stabilize the Thai bahts should be. Funding assistance was associated with several conditions, including an increase of the Thai prime rate, cut spending, increase in VAT, far-reaching privatization, restructuring of the financial sector and ultimately the task of the exchange rate peg of the baht to the U.S. dollar.

The aid program for South Korea

On 4 December 1997 the International Monetary Fund agreed a Memorandum of Understanding of the South Korean government regarding a grant program in the amount of 58 billion U.S. dollars, of which only 21 billion dollars was paid to for three years. At this time it was the largest monetary grant from the International Monetary Fund to a country. The terms of this grant saw among other things, the short-term increase of the South Korean prime rate, reforms of the heavily indebted company and sector restructuring measures related to the maturities of short-term loans.

The aid program for Indonesia

In the years 1997/98, the International Monetary Fund provided 14.9 billion U.S. dollar grant for Indonesia available. Economic policies that were tied to this financial assistance, included restructuring and closure of financial institutions, fight corruption and mafia -like structures, release of the rupiah exchange rate and trade liberalization.

Criticism of the actions of the International Monetary Fund

The International Monetary Fund describes his actions as successful and necessary. However, the role of the IMF is still controversial, and the actions of the IMF during and after the Asian crisis have encountered numerous criticisms, especially from critics from the U.S.. Up to 1997/ 98, the IMF had " ordered" in more than 90 developing and emerging countries structural programs in the context of lending. Criticism of the conditions attached to the priorities of these restrictions and to implement structural changes (liberalization of markets) came predominantly from the area of the political left. In the U.S. Congress, however, also the Political rights at the time of the Asian crisis expressed critical of the actions of the IMF. They accused the IMF of having preserved at the expense of taxpayers, U.S. banks and bondholders of far-reaching losses. Partial demanded the critics from both political camps from different political motivation for the abolition of the IMF.

The criticism, irrespective of the political motivation, the International Monetary Fund can be summarized as follows:

Theoretical models of explanation

The causes of currency and financial crises are the subject of numerous scientific studies and approaches to explanation in the economic literature. These models can distinguish three different generations, which are based on several theoretical approaches to explanation.

First generation models

The first generation models for the theoretical explanation of financial crises are mainly based on the model of Paul Krugman. In these models, for example, at the 1984 presented model of Robert Flood & Peter Garber, is declared that a financial crisis can be triggered when the government whose budget has permanent monetary budget deficits, tried with limited foreign exchange reserves one at a reserve currency bound to keep exchange rate ( exchange rate parity). In these models, financial crises are viewed as pure currency crises.

Second- generation models

The second-generation models consider a financial crisis also only as a currency crisis. In these models, such as the published by Maurice Obstfeld in 1994 model, it is explained that a currency crisis may be triggered even without expansionary monetary policy and related materiel without strong budget deficit. In these models, it is explained that international financial market participants speculative attacks on a currency run, if they expect that a country would be a policy of stable exchange rates in favor of other objectives, such as the fight against unemployment give up. These models of the second generation are mainly based on the expectations of economic agents, which determines the triggering of a financial crisis.

Current Models

Current models, also known as the third generation models, try to take account of the fact that it not only is monetary crises in financial crises, but at the same time or subsequently, is also directly to economic downturns or financial crises. These models are summarized in the English literature by the term "twin crises ". Here, the role of current account deficits, government guarantees to banks (even indirectly through the moral hazard problem ) is set and weak financial market structures in conjunction with currency crises in particular.

Giancarlo Corsetti, Paolo Pesenti, Nouriel Roubini, published in 1999 a model based on the moral hazard problem which attempts to represent the financial and currency crisis in Asia macro-economically based. Under the moral hazard problem is understood that an indirect state guarantee scheme for weakly regulated and controlled private financial institutions an incentive to engage in excessive and risky investments.

Assumptions and explanations

The private sector

The model is simplified by a small open market economy assumed, which specializes in the production of tradable goods. This market economy is represented by the Cobb -Douglas production function.

• : Production volume
• : Stochastic process, which maps to technical progress. As a factor in front of the production function, as in the above case represents the Hicks - neutral technical progress.
• : Capital Stock
• : Labor input
• : time
• : Partial production elasticity. In the event that the sum of the partial production elasticities, ergo the scale elasticity is 1, as in the above equation, this means if and increased by a certain percentage, the yield increased by the same percentage.

It is also assumed that the capital market is segmented and is not perfect. This means that only a small proportion of the population access to the capital market (eg banks, insurance companies and other institutional investors), called ( ELI) in the other "elite", and the other residents in the other " rest of the country " ( ROC) not have capital assets.

The expected utility function of the elite is defined as follows:

• : Nominal money supply
• : Price level
• : Income
• : benefit
• : Consumption of the "elite"
• : Time parameters
• : Inflation or deflation

Furthermore, it is believed that applies to the budget constraint of the elite, that the entire capital stock of the country is entirely debt financed by foreign financial institutions. This assumption is a realistic simplification since Corsetti can show empirical evidence about how inadequate the equity ratio of domestic firms was at the time of the emergence of the crisis.

• : Debt to foreign institutional investors
• : Capital
• Credit costs
• : Number of investors with international capital market access ( ELI)
• : taxes
• : Nominal exchange rate
• : Labor income
• : Native price level

For the " rest of the country " is labor income is the only source of income. The budget constraint for the rest of the country is defined by its consumption and the tax payable.

• : Number of domestic investors without international capital market access ( ROC)

For these budget constraints will be seen that the outstanding amount of debt to foreign institutional investors should be greater than the capital stock of the country, a crisis would be triggered if the foreign creditors vergäben no further loans more. The elite would then be forced to file for bankruptcy, if the government or the central bank does not intervene, for example, in monetary or exchange rate.

The public sector

The State collects taxes, has cash reserves and can borrow and lend in the international money market money at a market interest rate. The consolidated ( state and central ) budget equation would accordingly as:

• : Nominal exchange rate
• : Real exchange rate
• : Cash reserves (in foreign currency)
• : Liabilities (in foreign currency)
• : Market interest rate

Assuming that the government couples the domestic currency to a strong, non- floating currency, the following budget constraint of the public sector results before the crisis.

With

Before the crisis, the state has a reasonably balanced current account. This means that the initial level of monetary reserves is positive and that the debt could be offset by taxes on labor income and corporate taxes. The price level is constant and indexed with 1 Upon the occurrence of the crisis, the debt of the public sector to the financial expenditures of the state, to rescue the insolvent elite increased. Accordingly, the budget constraint of the public sector changed, supplemented by the additional charges as follows:

If this budget constraint used in the aforementioned budget equation, we obtain the budget constraint during the crisis:

• = Total tax revenue ()

This equation corresponds to the accumulating debt, ie debt less cash reserves (left-hand side of the equation ), and the discounted expected income from the taxation of labor income and the increase in the money supply.

Refinancing spiral

Below is modeled as worsened the crisis situation when the foreign institutional investors allocated via the covered by the state with reserves capital stock out loans to the elite. The following equation shows after by the first derivative of what the elite happens when they add another unit in the international financial market as a credit.

Since the elite, the guarantee guarantee of the government or the central bank is certain and it can it expect a positive transfer of capital, they will suffer no loss, no matter whether it comes ( Cobb -Douglas production function ) to a negative output shock or not. And precisely for this reason, this is the crucial mistake, the elite will refinance all financial bottlenecks by further loans on the international financial market. Hence it follows that the desired capital of the elite is larger than the actually efficient.

This phenomenon is described by Paul Krugman as a specific "over investment". This is stimulated by an expected positive return on further borrowing. This additional borrowing to cover losses is also known as " evergreening Effect".

The accumulated losses at the time of irrecoverable receivables by the domestic institutions are defined as follows:

At the time of the crisis, ie the insolvency of the elite, go to the accumulated losses of the elite in the budget of the public sector through, it shall

The public sector in crisis

The budget constraint after the crisis was triggered looks therefore as follows:

• Average interest rate after the crisis was triggered

At this time, the financial crisis leading to a currency crisis, should not be sufficiently high enough tax revenue from labor income and corporate taxation. Because then the left side of the equation would be positive and an increase in the money supply would be necessary. One way to prevent this would have been a credible implementation of a repayment plan in installments, provided that it would have been compatible with the creditors. This option was not used, so the money supply had to be increased. This led to a further increase in the inflation rate, which had increased rapidly already by using up cash reserves. This led additionally to the financial crisis, a currency crisis.

The role of foreign institutional investors and speculators

The foreign institutional investors are exactly as long as willing to fund the local elite, as long as a minimum is present on cash reserves of the public sector. The moment in which the anticipated accumulated losses attributable to the national debt liabilities exceeds the cash reserve threshold that foreign institutional investors are to levy their claims try. ( " Show me the money -constraint "). This means the crisis is triggered when the following condition occurs:

With

• Official cash reserves expressed as a fraction of the liabilities growing might occur of the state.

With the beginning of the first financial institution insolvent speculators immediately began to speculate on the decline in the exchange rate. Because they expected a decline in foreign exchange rates, firstly by using up cash reserves, secondly, by triggering the " Show me the money constraints" and thirdly. Due to the underfunding of the arrears with tax revenues This speculation against the Asian currencies worsened the situation even further.

What is unusual about the Asian crisis was that the problems were not limited national, regional or global but moved repercussions. Because of this phenomenon a variety of theories, including the idea that crises in countries that are "healthy" really are and have been praised shortly before the crisis, analysts may infect, were derived. This effect was known in the English-language literature as Contagion Contagion or as effect.

Criticism of the mathematical modeling

Paul Krugman criticized the fact that the financial intermediaries shown in models of the first generation serve no useful purpose. Although the adoption under moral hazard considerations is correct, but neglecting an important aspect of financial crises: financial market crises have precisely why so serious impact on economic growth as the financial intermediaries in particular are affected.

Paul Krugman criticizes further, that it was wrong to push the sole fault of the over investment and over-estimation of assets to domestic financial intermediaries. He justifies this by saying that even individuals and foreign institutional investors in Asian equities and real estate before and invested during the Asian crisis. This tends to suggest that particular " herding" could have played a crucial role.

Luke Menkhoff criticized in terms of the third generation " The unsatisfactory at the plurality plausible -sounding explanations models is that they do not combine to form a harmonious whole. It is not clear to what extent the explanations compete with each other and in what weighting they play a role. "

Preventive measures

Speculative attacks can take many forms, with a financial crisis can cause a currency crisis. Under certain circumstances, as shown in the model of Corsetti, the " moral hazard " problem lead to additional government liabilities by the insolvency of domestic banks, limiting the ability to pursue a policy of fixed exchange rates in return.

A precise and strict financial market supervision to safeguard against inadequate assessment of the risk of arrears of domestic financial institutions can be seen as the main instrument for crisis prevention. In Europe, the since speculative attacks are not controllable and not just reduced to developing countries without management of capital flows, supported by a credit risk evaluation process, which is introduced in Europe by the Basel II regulations. This will eventual insolvency and mismanagement of credit institutions and entities that grant excessive loans abroad or borrow in foreign currency, recognized early and the State or the Central Bank may allow early liabilities that do not appear in the current account, with. An early estimate of the state that may occur liabilities would reduce as a result, the extent of "over investments". At the same time, would fall on a new level of efficiency of investment, the real income of the rest of the country, on the one hand due to lower real wages and on the other hand due to a higher tax rate. During the sub-prime crisis of 2007 and critics point out that the Basel II rules would be insufficient. The minimum capital requirements for credit risks are too low.

Paulo Corsetti, however, looks to be the simplest method of preventive government measures, a cash flow control through a tax on credit accounts or recordings in foreign currency. The problem occurring in this case would be that just developing countries are dependent on foreign direct investment. Their lender tried to hedge against the high exchange rate volatility in developing countries by abschlössen loans not in local currency, but U.S. dollars or yen terms. Still would be from a theoretical consideration in the implementation of a control of capital flows, the tax rate to be chosen such that a balanced relationship between non-completion and completion of loans in foreign currency is possible.

Culturalist explanations of the Asian crisis, their effects and their criticism

In addition to economic models of explanation of cultural causes of the Asian crisis were discussed in the social sciences.

In the 1990s, American sociologists formulated Harvard University, the thesis that the cultural values ​​of a society significant influence on the economic development of the same may time. Although the discussion of this relationship was already in the 1950s and 1960s, has been in the context of the debate on modernization theory out. And many authors such as Samuel P. Huntington, Lawrence E. Harrison, Francis Fukuyama ( re-) but updated the claim that cultural stubbornness rebel against the ubiquitous Westernization, prevail and still (or because of it) could pave the rise in the world capitalist economy the way. In the case of East Asia, therefore, Confucian values ​​for the institutional expression of capitalism in the region, for certain forms of economic behavior of individuals and for differences in the global economy were responsible. This argument was paraphrased as Konfuzianismusthese.

The Konfuzianismusthese could gain some media and political resonance. In science, moreover, the argument could to the sociology of religion debate a worldwide renewal of religious tie (→ thesis of de-secularization ). The challenge on the part of neo-liberal and neo-classical arguments, contributed to the expansion of culturalist explanations.

Critical of explicit reference back culturalist explanations on Max Weber should both be seen as this the inference of differences of modern capitalisms to religion - had as = " foolishly doctrinaire thesis " discarded - as the dominant cultural factor of explanation. For modern forms of capitalism is its anethische quality ( ≈ beyond ethics), according to Weber, of constitutive importance. On the other hand, the various explanations of the reasons for the Asian financial crisis diametrically opposed to, in so far as either " secularization " ( here: Westernization ) of Confucian values ​​in the wake of forced globalization, or conversely be seen in a strong after-effects of Confucian traditions. The problem is, in particular, that "the distinct, dominant character of religion as the dominant power of individual life [ ... ] for the representatives of the [ ... ] Konfuzianismusthese identifiable [ is ] sufficiently rare ".