The Global Economic Crisis, Contagion, and Institutions: New Realities in Latin America and Asia

Abstract

This article uses the current economic crisis in Asia to analyze the impact that economic turmoil—especially economic contagion—in emerging markets can have on the process of social, political, and economic institutionalization and reform in Asia and Latin America. It argues that continued financial instability will result in increased democratization and transparency in Asia, as has happened in Latin America as a result of its struggles to consolidate and reconcile democratization and economic reform from the late 1980s to today. This transformation in Asia will temper the argument that the Asian development model was the path Latin America should have followed. This does not mean, however, that the reform path that the Asian countries choose will be successful or certain. Rather, although many authoritarian tenets of the Asian model will be challenged by calls for political and economic reform, the ultimate degree of liberalization in Asia will be uneven and incomplete, especially if the economic crisis deepens. Conversely, Latin American nations will need to use the Asian crisis as further evidence that the most sustainable form of economic and political reform necessitates a renewed commitment to promoting democracy and liberal institutions.