Along with the Berlin Wall, the communist system came crashing down in 1989. But in the same year, the Japanese "economic miracle" of the 1970's and the 1980's, with its `guaranteed' safeguards, turned out to be a lot more vulnerable than any investor wanted to believe. The possibility of what is happening in Asia spreading next to Europe, and then to America, should not be summarily dismissed.
The root of the problem is found in the flawed premise upon which economic systems around the world have been based for the last century. For us to escape the economic malaise being experienced in Asia, we must address those fundamental problems not look for quick-fixes.
Belief that an artificial boom, brought about by a "central bank" credit creation, can last forever is equivalent to finding the fountain of youth. Wealth cannot be created out of thin air, and new money and credit, although it can on the short-run give an illusion of wealth, is actually destructive to prosperity on the long-run.
The crisis in Indonesia is the predictable consequence of decades of monetary inflation. Timing, severity, and duration of the correction, is unpredictable. These depend on political perceptions, the day's realities, subsequent economic policies, and the citizenry's reaction to the escalating events. The issue of trust in the future and concerns for personal liberties greatly influences the outcome, as well. Even a false trust, or an ill-founded sense of security from an authoritarian leader, can alter the immediate consequences of economic malaise, but it cannot prevent the inevitable collapse, as is occurring slowly in the more peaceful Japan and rapidly and violently in Indonesia.
But what we cannot lose sight of is that the Indonesian economic bubble was caused by a flawed monetary policy which led to all the other problems. Monetary inflation is the mother of all "crony capitalism."
One important characteristic of an economic correction, after a period of inflation is its unpredictable nature because reactions of the individuals concerned influence both political and economic events. Therefore, it's virtually impossible to predict how and when the bubble will burst - though burst it must. Likewise, the duration of a collapse is not scientifically ascertainable.
"Crony capitalism" was not the cause of Indonesia's trouble; inflationism and political corruption are the culprits, for they allow 'crony capitalism' to exist. In fact, there is nothing "capitalistic" (in a free market sense) about crony capitalism - it is simply a mild form of fascism.
Any serious economic crisis eventually generates political turmoil, especially if political dissent has been held in check by force for any significant period of time. It should be no surprise to see blood in the streets of Jakarta. But instead of these circumstances leading to freedom, many are inviting marshal law for the purpose of restoring stability--with all the dangers that go with increased restrictions on liberty. Sadly, errors in economic thinking often prompts demands for more government programs to `take care' of the rapidly growing number of poor.
Further, international efforts to prop-up an ailing economy after the financial bubble has popped prolongs the agony and increases the severity of the correction. Restoration of free markets, including the establishment of a sound monetary policy, has not yet been considered though those are the only real solutions. The people of Indonesia and the rest of the world should prepare for the worst as this crisis spreads.
For the United States, the most important thing Congress can do is recognize that further taxing American workers to finance a bail-out is the worst policy of all for us to pursue.
The philosophy of the free market holds the solution to the exploding East Asian crisis, yet few are willing to consider the philosophy of liberty.
Concern for liberty is not a subject associated with economic crisis and is in fact an ongoing casualty of past and current policy. A greater concern for the philosophy of liberty - whether it is the "personal liberty" of the individual or freedom in the marketplace - is required if a positive outcome is to be expected from the Indonesian crisis.
Let's hope we can get our priorities straight.