Crying Domino, Again

Who's right?President Clinton, meeting with his Pacific Rim summit colleagues in Vancouver, called Asia's economic woes "a few little glitches in the road."

The world news media, ever ready to adopt a cliche that conveys alarm crisply, resurrected "domino theory" as the metaphor of choice. That conveys a vision of country after country tumbled by its neighbors' economic problems.

Over time, Mr. Clinton's view (although overly casual) will likely prove correct. The dominoes of east Asia didn't fall to communism. They are not likely to fall to economic excess.

The US went through its own wringing-out process - to emerge stronger than ever. But, unlike the Asian Tigers, the US encountered its bad bank loans, speculative overbuilding, deflation threat, and market bubble in slow motion over more than a decade.

Unfortunately for Mr. Clinton, the catch phrase he might have used, "the only thing we have to fear is fear itself," had already been used. What he and the leaders of Europe's reviving economies now ought to do to halt the spread of fear is to make sure the proper remedies are taken - and understood by the Asian publics.

Japan's government at long last seems ready to take the tough step of letting the worst-offending financial institutions fail. Tokyo should also begin to rescue innocent investors and savers with tax revenues. That costly step loomed large in the US savings and loan crisis, but quickly receded as the economy rebounded.

South Korea had already begun to tackle reform of its corrupt government-business monopoly ties when the economic whirlwind arrived. Now, the International Monetary Fund can keep up pressure to complete that reform, in return for its $20 billion in emergency loans.

When the US Congress returns in January, it should do its bit by reversing its refusal to contribute to the IMF's emergency loan fund. Democratic minority members would do well to rethink their trade protectionism, which threatens to make matters worse.

While enforcing such economic disciplines, none of the principals in this drama should forget the underlying economic realities: (1) Asians will go on working hard and skillfully. (2) Growth rates will recover. (3) World consumers are not through trying to improve their living standards. Those are the basic dominoes. If the game's played rightly, they shouldn't fall.

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