Social Consequences of the Financial Crisis in Asia

Abstract

This paper assesses the social impact of the Asian financial crisis, drawing on the results of studies in six countries, namely, Indonesia, Republic of Korea, Lao People's Democratic Republic, Malaysia, Philippines, and Thailand. The impacts appear to be less than were anticipated early in the crisis. However, it seems too early to draw conclusions about the eventual social consequences. First, the data on which the present is based were collected at a relatively early stage in the crisis. There was a lag of several months between the economic effects and the social impacts of the crisis. Second, many of the coping mechanisms used by poor households to maintain current consumption levels are likely to have deleterious consequences in the future. Third, due to data limitations, the study is incomplete in some areas. For these reasons, the study should be considered at best as an interim assessment of the social impact of the crisis. Nevertheless, the study findings make it clear that further monitoring and assessment of the social impact are required. The Asian financial crisis also provides a rare opportunity to learn how existing social systems function under duress. If the lessons are adequately documented and effectively communicated to policymakers, the experience gained during the crisis can provide a useful guide to needed policy reforms. The crisis has revealed that considerable effort needs to be directed to the further development of social safety nets throughout the region, given the limited capacity of families to sustain their members through difficult times. At the same time, it must be acknowledged that, given the inadequacy of government-fostered safety nets, the family system has yet again carried out its traditional fallback role of seeing its members through tremendous hardships. In developing then social safety nets, most Asian countries will have the benefit of building from the ground up, not only drawing on the experiences of countries outside the region but also shaping systems that are best suited to the needs of Asian societies in the context of an emerging information-based global economy.