For decades, many Far East nations seemed to do the impossible: produce dynamic capitalist economies that were still harnessed by the guiding hand of government. This Japan-inspired approach left many free-marketeers in the West scratching their heads.
Others heralded the dawn of a peculiar Asian capitalism that tempered market "chaos" and maintained social order.
Today, those economic "tigers" - from Korea to Thailand - are floundering under the weight of weak currencies, bankruptcies, fears of mass unemployment, and the shame of Western-guided economic reforms.
The recent turmoil has many asking if the "Asian way" was more mirage than miracle - and if the region should find a new or modified model.
The reason: The region's economies can no longer afford business as usual. With foreign investors looking elsewhere and deep debts piled up, Asians are being forced to reassess their strategies. That may include taking a second look westward.
"It's inevitable that we blend styles of development," says Segong Il, head of the Institute for Global Economics in Seoul. "In this age of rapid globalization, we must abide by the rules of the game" that govern other countries.
Those rules clash sharply with a more traditional "Asian model." For more than a decade, many Asian leaders argued their countries could thrive on bureaucratic targets for growth, limited domestic demand, and a financial system based on little disclosure and lending practices more often guided by cozy ties and bureaucrats' national goals.
Oddly, it was a Western institution, Moody's Investors Service, that helped trigger a crisis in Japan.
Last week, the dispassionate credit-rating firm downgraded the market value of Yamaichi Securities. The move forced Yamaichi, Japan's fourth-largest brokerage, into bankruptcy and sent shock waves through Japan and neighboring countries.
Indeed, the government's refusal to bail out the company, which could no longer get access to short-term credit, sent a message worthy of steely cold Western capitalism: Meet independent standards or fail.
To the United States, it's a welcome approach. It is exactly the traditional Asian practices that have sidestepped openness and accountability, it charges, that helped produce the current crisis. Cozy government-industry links have led to unwise investments and poor oversight of investment institutions. Informal business practices have hidden deep flaws in institutions and heightened a sense of risk among investors.
They have also produced a chronically explosive issue: a flood of exports to America's huge market.
"If there is an Asian model, it is being able to export," says Ronald Bevacqua, an economist at Merrill Lynch Japan. Now, with currencies that have plummeted in value, Thailand, Indonesia, South Korea, and Malaysia may be tempted to try to export their way out of crisis.
The policy is risky. Heavyweights Japan and China, whose currencies have also declined against the dollar, seem inclined to continue the export strategy as well. "It puts enormous distortions in the market because Japan is big, and country after country is taking that model," says Ira Wolf, a vice president at Kodak Japan and a former US assistant trade representative for Japan and China. If the US, with its strong economy and low unemployment, experiences a downturn and domestic pressures to reduce exports rise, countries in Asia could find that their old standby will no longer bail them out.
But some say that the financial crisis in Asia will prompt much-needed reform. "There is going to be some change in how Japan and other Asian countries decide what policies to pursue," says Matthew Poggi, an economist at Lehman Brothers Japan Inc. But, while the rules of the game may shift, "it will take some time."
The US would like to see more open economies and tax cuts and spending packages that could spur consumer demand. Few, however, are predicting radical change. For one thing, allowing market forces to rule means dealing with problems like higher unemployment - policies that have social costs previously deemed unacceptable. And even the economic leader in the region, Japan, is proving reluctant to open its market to absorb more Asian imports, announcing last week that it could not be expected to act as a "locomotive" for Asia.
More likely, say observers, is a modified "Asian model" that, while taking into account a more Western-style openness and strict accountability for businesses and financial institutions, will remain distinct from no-holds-barred capitalism.
Can Asia Cope?
The 21st century may still belong to Asia - but only if the region's struggling economies are able to regain their footing.
Four Asian nations - Thailand, Indonesia, South Korea, and the Philippines - are being bailed out by the International Monetary Fund. But the IMF aid comes with strings attached, typically requirements for less government spending, lower economic growth, a pledge not to prop up weak banks and companies, and acceptance of higher unemployment rates.
How these nations handle these changes remains to be seen.
In Japan, several years of stagnation have followed the bursting of a high-flying bubble economy. Now some reforms are under way. A so-called "big bang" plan to deregulate the financial industry takes effect next April. It will open the Japanese banking, insurance and financial sectors to much greater competition from aboard.
"Japan is moving toward a more open system," says one American business executive in Tokyo. "But it's not going to look just like the kind that is in the US."