The Impact of Crony Capitalism on Thailand’s Financial Collapse in the 1997 Asian Financial Crisis

Abstract

This study analyzes and examines the role of crony capitalism in reshaping Thailand’s economic orientation, resulting in financial volatility in the late 90s having ripple effects on other Southeast Asian economies as well. The research also evaluates and analyzes how political connections, government officials, and business conglomerates exert their power dynamics in terms of loan disbursements from banks and financial institutions. Using a qualitative approach backed by secondary economic data, the research study shares insightful analysis and provides an overview of how structural shortcomings and regulatory lapses pushed Thailand’s economy into a devastating situation, resulting in an economic crisis that lingered on up to the early 2000s as well. At the same time, it is worth noting that politically connected firms and corporations received a substantial amount of preferential access to credit allocation and financial resources without adequate amount of regulatory oversight, and rapid financial liberalization fueled the crisis for a long period of time. The study concludes with firm belief and judgment that crony capitalism played a pivotal role in amplifying the severity level of economic collapse and the fragility of the financial system in Thailand. So, it is incumbent on developing nations to restructure and readjust their financial regulatory oversight and systems to ensure sustainable development in the financial sectors.