Recovery Through Reform: Culture Matters in the Thai Turnaround (Perspectives‪)‬

On July 2, 1997, an economic shock in Thailand was felt around the world. Both the event itself and its causes confirm the interconnected nature of the global economy that Thomas Friedman described in his book The Lexus and the Olive Tree. The decision by the Thai government to float the Thai baht caused a freefall in both the value of the currency and the stock market--in weeks, the baht lost approximately half its value. Prior to this economic crisis, the Thai government had tried to sustain the value of the baht by using its US dollar exchange reserves to buy baht. This rapidly depleted and squandered Thai foreign exchange reserves since the baht was pegged to the US dollar, which was rising in value thanks to the US economic boom of the late 1990s. The economic crisis quickly spread to other Asian countries, such as South Korea, Indonesia, Malaysia, and the Philippines, and then elswewhere, including Brazil, Russia, and Turkey. [ILLUSTRATION OMITTED]