The Financial Crisis of 1997–1998 and its Impact on Security Relations in East Asia

Based on an integrated analytical framework that takes account of the post-cold war balance of economic power and the increased fungibility of power resources, the article finds that the Asian financial crisis has changed security relations in East Asia. Military spending has gone down and domestic sociopolitical instability has increased; both factors will probably have significant, if mixed, security impacts. Most conspicuous is that China stands to gain influence in the region while the United States maintains and even expands its preeminent position of hegemony, at least in the short run. In the longer term, the predominant influence of the United States, based on its exaggerated economic power, will vanish as the financial crisis settles down and the structural vulnerability of financial systems in the crisis-hit countries is remedied. Resentment toward U.S.-led “casino capitalism” is another factor that is expected to work to the detriment of the U.S. policy of preserving its hegemonic presence in East Asia. Lastly, the ideological components of coalitions/alliances will become much less important, and regional security relations in East Asia are likely to take a multipolar form in which China and Japan, separately or together, will challenge U.S. dominance in managing regional security.