The financial turmoil in East Asia has affected markets in different parts of the world and has had a particularly devastating effect on the countries of East Asia itself. Since the beginning of this year, the stock markets of Asia have collectively lost $400 billion in value, and the losses in Hong Kong in mid-October created concern around the world and affected other stock markets, including that in the U.S., which lost a large percentage of its value in one day. The effect on Europe has been more as a threat on the one hand and an opportunity on the other. While the monetary collapse affected markets around the world, the primary effect on Europe has come from changed relations with the financial markets in East Asia.
The failure of the monetary system has been blamed on the political systems in East Asia as much as on any economic troubles in the area. This situation will change "only when Asian politicians finally push their countries to get their battered economic houses back in order" (Chowdhury and Paul 96). That will require making tough choices. Singapore's Senior Minister Lee Kuan Yew recently observed: "In nearly every economic crisis, the root cause is political, not economic." Even if all goes well for the countries of East Asia, it could take as much as two years for these nations to work their way out of their current problems. Economists agree that growth in the short term in Southeast Asia will slow from around 8 percent this year to 5 percent or less next. This is bad news for Western multinationals that have been banking on Asia for a big profit boost, and this is one of the reasons the stock markets reacted as they did. However, some believe that the crisis may finally force much needed structural economic reform in the region.
The fallout from the stock market problem has not yet ceased to affect the world economy, and things may worsen as the scale of the problem is noted. At one time, fi...