On July 2, 1997, Thailand experienced an economic shock that impacted a number of distant countries. As Gerald Fry put it, "The decision by the Thai government to float the Thai baht caused a freefall in the value of the currency and the stock market," creating a situation in which the baht lost about half its value in a short period of time and in which Thai foreign exchange reserves (with the baht tied or pegged to the U.S. dollar) rapidly disappeared. The crisis spread to other Asian countries (e.g., South Korea, Indonesia, Malaysia, and the Philippines), and then further spread to Brazil, Turkey and Russia.
Accompanying the economic crisis were deep concerns regarding Thailand's continued economic security and its vulnerability to further economic malfunctions. The purpose of this essay is to examine the crisis of the 1990s, its causes and effects, and the relationship between economic and national security. As Walden Bello, Shea Cunningham and Li Kheng Poh have suggested, the crisis left Thailand essentially bankrupt, saddled with a massive foreign debt of US$89 billion, and therefore vulnerable to other socio-political effects.
Fry also noted that when national economies collapse, national security is invariably impacted.
Between 1990 and 1993 Thailand "opened up its capital account, removing most restrictions on the inflow and outflow of money. The funds immediately poured in." The economy quickly became distorted with the exchange rate becoming fixed and the baht being overvalued. Thai products were less competitive internationally, exports were in decline, and the inflow of money boosted local consumption, including import purchases, distorting the balance of trade and causing deficits. As some have noted, "the flood of capital had nowhere much to go. The underlying economy was already into a cyclical downturn after years of structural bloom."
Simultaneously, Thailand was undergoing political cha...