Home » Politics & Society » International Trade » The Ultimate Family Affair

The Ultimate Family Affair

© Carey Goodman

"What is in a name?" William Shakespeare pondered this question in "Romeo and Juliet". As Romeo and Juliet soon learned, there are actually many things in a name. Their dreams of a world full of sweetness and light that would emerge after their marriage and the end of their families' feud rapidly evolved into a world full only of the searing darkness of the burial vault.

And so it is today. There is especially a lot in a name among the Southeast Asian industrialists and bankers. And now the bearers of those powerful names are stumbling into a burial vault of a different sort.

The model began in Japan before the second world war. The sequence of events was always the same: Family starts business; family becomes involved in politics; family bankrolls campaigns of preferred politicians; family gains approval to acquire business owned by rival family who bankrolls campaigns of opposition politicians; family builds conglomerate; family soon has members in powerful political positions. By the 1960s other Asian economies such as South Korea, Thailand, Malaysia, and Indonesia also followed this model. By the time Japanese goods lost their status as "cheap trash" among Western consumers, goods from these other states quickly filled the niche.

As the cycle repeated itself in these rapidly developing Asian economies, the grand illusions of family power were inevitably shattered. Eventually false data will reveal volumes of truth. That is exactly what began to happen in 1995. Japanese banks encountered severe financial difficulties. The value of the yen dropped drastically against the US dollar. Several finance ministers resigned and/or committed suicide in response to the loss of honor the unfolding banking scandals caused them.

Two years later the same crisis hit the Asian states that had so closely obeyed the Japanese model. In states such as Indonesia, the difficulties were compounded by civil strife, but most of the trouble is directly traceable to the fact that the government kept otherwise fiscally ruined businesses operating. The vault was sealing, and the powerful leaders would soon find their unhappy fate.

It started with the stock markets. It spread to the banks. IMF intervention finally forced regional finance ministers to reconsider their policies. That meant in effect that they would allow the defunct companies to be declared bankrupt. The harm in that scenario was that the conglomerates, who in pursuance of standard accounting practices should have been bankrupt long ago, employed thousands of people. If these companies failed, the national economy would again be plunged into deep chaos.