Earlier in the year there had been “runs” on several international currencies by hedge fund operators. In July 1997 it became the Thai baht’s turn to be attacked by currency traders and it proved to be the beginning of a cascade of economic troubles that caused first the Thai baht to crumble and then the Thai financial system to crash and eventually the Thai economy to come tumbling down. A run on a country’s currency can be overcome easily if the underlying fundamentals of the economy are sound. But in Thailand’s case the fundamentals were in a shambles thanks to the crony capitalism and corruption of the banking and securities sectors.
Thailand became the first of the Asian Tigers to fall, but it soon had plenty of company. Indonesia and then South Korea followed in Thailand’s footsteps and for many of the same reasons. When the dust had settled the Thai baht went from about 24 to the dollar to about 55 to the dollar. Thousands of workers in the financial sector were suddenly without a job when their banks and securities firms closed their doors overnight.
This is essentially an economic story but it relates to public diplomacy because at its heart is the pi–non relationship. When Thailand’s economy crashed, Thailand looked to the U.S. for help. But the U.S. Treasury Department, looking through the framework of economics and finance, not public diplomacy or diplomatic relations, examined Thailand and saw that it basically got what it deserved for not having its house in order. The State Department then as now defers to the Treasury in all things having to do with economics and finance. So the U.S. did absolutely nothing when Thailand’s crash came. Puzzled and resentful, the Thai saw the U.S. as abandoning Thailand and renouncing the pi–non relationship just when the going got tough.