What Asian Crisis?

By John Greenwald Reported By Bruce Van Voorst/Washington

Get with the program! That was the message U.S. policymakers delivered to Indonesia and Japan last week as Washington struggled to keep the economic turmoil in Asia from spiraling out of control. In a week of public and private arm twisting, Bill Clinton dispatched former Vice President Walter Mondale to riot-plagued Indonesia, where President Suharto is trying to backpedal from the terms of a $43 billion International Monetary Fund bailout. Among the 70-year-old Mondale's tasks will be to persuade the 76-year-old Suharto to make good on promises to break up monopolies and cartels run by the autocrat's cronies and members of his family.

Mondale's mission stemmed from growing concern that Suharto could drive Indonesia into a collapse that would flood its neighbors with refugees. One appeal came from Singapore's Prime Minister Goh Chok Tong, who called Clinton to urge the U.S. to intervene. That helped trigger a Feb. 18 White House session in which Treasury Secretary Robert Rubin proposed Mondale, a former ambassador to Japan, as Clinton's envoy. Participants agreed that Mondale had the clout to pressure Suharto while reassuring him that the U.S. remains his friend.

While Suharto has resisted the bitter medicine of the IMF program, Japan is deaf to foreign calls for deeper tax cuts to rouse its long dormant economy, traditionally the engine of growth for the Pacific Rim. Federal Reserve Chairman Alan Greenspan warned Congress last week that the Japanese economy was "sinking." Asked whether Japan was doing enough to stimulate the economy, the usually circumspect Greenspan replied, "No, I think not."

But like Suharto, who is about to have himself selected to his seventh five-year term, Japanese Prime Minister Ryutaro Hashimoto can ill afford to offend political cronies. Hashimoto vowed last year to slash Japan's outsize budget deficit, which would rule out any substantial stimulus package. Yet without a healthy Japan to buy their exports, other Asian countries will find it even harder to resume the prosperity they once enjoyed. --By John Greenwald. Reported by Bruce van Voorst/Washington