Have we learnt from the East Asian crisis? Maybe wrong lessons.

"Many of the most wildly successful economies in Asia tumbled into a crisis in July 1997," wrote an editorial in the Mint. What lessons can we learn from that crisis on its twentieth anniversary? The crisis was not caused by governments running large fiscal deficits, but because of unmanageable corporate debts and crony capitalism. The central banks were committed to a fixed exchange rate against the dollar, which they were unable to defend, even with very high interest rates and massive cuts in their budgets, as prescribed by the International Monetary Fund. Only Malaysia resorted to capital controls, which was heavily criticised at the time, but turned out to be the most successful strategy. There was panic selling due to herd mentality. "At a more fundamental level, the crisis reflected the mismatch between Asia's historic growth model and its current circumstances," wrote Prof Barry Eichengreen. "But by 1997 the South-East Asian economies had reached a stage of development at which brute-force investment alone was no longer enough to sustain higher growth rates." But lessons seem to have been forgotten because "China is still wedded to a model that prioritizes a target rate of growth". "China is now at the same point as its South-East neighbours 20 years ago: like them it has outgrown its inherited growth model." True, but in order to make up for diminishing returns from investment at home China is trying to export its excess capacity to other countries through its One Belt One Road project. This is a cunning stratagem to tie weaker countries in chains of debt which they cannot repay and will have to cede territory to the Chinese, as Sri Lanka has found to its cost. The UN has warned against the risks. India, on the other hand, needs to invest more. Which means, "India needs to maintain a high investment rate as well as create jobs to allow people to shift to modern sectors that have high productivity". But how? Banks cannot lend until they have cleared their books of bad loans worth about Rs 7 trillion and businesses cannot invest until they have paid off their previous debt. Not just India and China, seems that even Europe did not learn from the 1997 crisis, and how austerity just prolonged recovery. Europe is still applying the screws on Greece, insisting that it runs a budget surplus every year when its economy cannot grow because of tight spending restraints. Germany, the main creditor, has made a profit of 1.3 billion Euros from lending to Greece, even though Greece's population is starving. Even though globalization has failed large sections of people the elite are still insisting on continuing with more of the same, wrote A Nageswaran. The East Asian crisis may never be repeated but other crises will happen. What we learn is colored by personal interest. So new mistakes will be made.