Before Asia's financial crisis there was general agreement within the broad neo-liberal camp that deregulation, not least in the financial sector, was the key ingredient of effective market reform. Western governments, their aid agencies and international financial institutions, notably the IMF and the World Bank, enthusiastically pressed for the opening of capital markets and the removal of state control and ownership in domestic financial and banking sectors. But the crisis was to change all that, setting in train a bitter debate over whether these reforms had, ironically, been at the heart of the crisis.

For hardline neo-classical economists within the IMF and elements of the economic press, the crisis was confirmation that economies built around systems of state-managed markets were not sustainable in the long term. For these hardliners, the Asian economies that collapsed in 1997 fell under the weight of their own inherent inefficiency and dysfunction. The crisis was a reminder that deregulation had not gone far enough and that economies must embrace the natural efficiencies of the market.

Others within the neo-liberal camp were, however, to propose that the roots of the crisis were to be explained in terms of panic and speculation in open global financial markets and an ensuing rush for the exits when confidence collapsed. Such interpretations led naturally to policy prescriptions centring on reform in global financial architecture rather than a reconstruction of domestic economic and political regimes.