Review of International Political Economy 10:2 May 2003: 169–195 Review of International Political Economy ISSN 0969-2290 print/ISSN 1466-4526 online © 2003 Taylor & Francis Ltd http://www.tandf.co.uk DOI: 10.1080/0969229032000063199 ‘Eyes wide shut’: reconceptualizing the Asian crisis Ravi Arvind Palat State University of New York at Binghamton ABSTRACT Rather than seeing the spectacular collapse of stock and currency markets in East and Southeast Asia in 1997–98 as a financial crisis caused by imprudent banking practices and ‘crony capitalism,’ this article argues that the economic meltdown was a symptom of the collapse of the social coalitions underpinning the developmental states. The first section charts the contours of these social alliances between the late 1940s and the mid 1980s. The second section demonstrates that though the creation of a regional division of labor had enabled these economies to withstand the debt crisis, the progressive trans-border expansion of corporate production and procurement networks rendered national industrial policies increasingly incoherent. It charts how governments were able to paper over cracks in their domestic social alliances through debt-financed industrial expansion till the mid-1990s. Finally, the last section highlights emerging tensions in the different national constella- tions of power and privilege. KEYWORDS Asian crisis; developmentalist state; social classes; transnational corpora- tions; industrial structure; capital flows. Nothing illustrates the pervasiveness of a de-historicized economic ration- ality than the debate over the causes of, and solutions to, the meltdown of the Asian ‘miracle’ economies. Seizing the opportunity presented by a precipitous drop in the value of East and Southeast Asian currencies since 1997 and to remake them in the Anglo-Saxon image, mainstream econo- mists attributed the economic malaise engulfing some of the fastest growing economies in history to their ‘crony capitalism’. As code for the collusion between governments and businesses and for cartel-like networks based on interpersonal associations that undermined, subverted or otherwise distorted market forces, ‘crony capitalism’ functioned as a