Mahathir Mohamad, prime minister of Malaysia, shows an increasing tendency to talk rubbish. Commenting in early September on foreign investor selling of Malaysian stocks and the ringgit, he said: "They are racists. I say it openly. They are not happy to see us prosper."
As delegates to the IMF-World Bank annual meetings gather in Hong Kong, this is an opportune time to look at the future of Asia's economies. Contrary to what Mahathir said, foreign investors have been thrilled by the astonishing economic development of Asia over the past two decades. If westerners are not happy now, it is because they are starting to worry whether the miracle is drawing to a close.
Frankly, it is Mahathir - and his counterparts in Thailand, Singapore and Indonesia - who are drawing to a close. They are the principal causes of the current malaise.
The era of strong leaders and interventionist government policies in Asia needs to end. Powerful state interference was a key factor in bringing about the early economic development of Asia. But the time has come when state control hampers development rather than aids it. (Japan and Korea, mired in their own problems, have demonstrated how hard it is for the state to withdraw from running the economy, and how damaging when it fails to do so.)
Mahathir's cack-handed reaction to the run on the Kuala Lumpur stock exchange in late August did nothing but damage. First he banned short-selling, which served only to worry foreign investors and push many into further selling. The ban was later hurriedly rescinded. Then he announced the creation of a fund which would buy Malaysian stocks from locals (but not from foreigners). The size of the fund, Mr60 billion ($19 billion), is equivalent to 23% of GDP; if it was all used, it would represent the nationalization of 10% of the stock market.
This was the wrong reaction in every possible way. It spooked investors, and completely avoided addressing the fundamental problems which caused the sell-off in the first place. To academics and analysts who questioned the wisdom of his move, Mahathir's feeble reply was: "I have led this country for 16 years."
That is exactly the problem with dictatorial leaders: they start to believe in their own infallibility, and never notice when they have outstayed their ability to create positive change.
The situation is not so different in other Asian countries. Indonesia and Thailand, to a large extent, have developed despite the policies of their governments, rather than because of them. Anyone who travels to Bangkok will find it astonishing that a country, whose capital is so badly run and has such poor infrastructure, can grow at 8% a year.
The damage inflicted on Indonesia by the warped rule of President Suharto is even more extreme. Our survey of Indonesia in this issue (see page 243) details the petty monopolies, distorting taxes and family cronyism that have hampered healthy development.
There is good news, however. There are signs that the era of Asia's strongmen may be over. In Malaysia, although the details are unclear, bitter in-fighting appears to have arisen over the reaction to the stock market crash. Rumours that deputy prime minister Anwar Ibrahim threatened to resign were denied by Mahathir, but are widely believed. In Indonesia, too, 76-year-old Suharto will not be able to stay in office for much longer. Some of his potential successors seem more democratically minded and more in favour of free-market economics.
The lead for this change may come from Singapore. The resignation in July of Koh Beng Seng, deputy managing director of the Monetary Authority of Singapore, can be seen as an end to heavy-handed state interference in the financial system. Koh was known as a draconian regulator who distrusted banks under his supervision. He was later persuaded to stay but his power seems to be broken.
Even Lee Kuan Yew, Singapore's senior minister, complained recently that his financial centre "lacked buzz" compared with Hong Kong. He put this down to the fact that Singapore's traders like to return to their comfortable homes every night, rather than drinking with other traders (as happens in Hong Kong and elsewhere). A more realistic explanation is that Singapore-based banks are too hemmed in by unnecessary rules.
We need a reappraisal of the Asian model.
Asian leaders like Mahathir have boasted for years about the moral superiority of their societies, and resisted calls for "western-style" democracy. But there are many economic advantages in democracy, too. A truly free press makes it harder for politicians to ram through foolhardy policies. A deep-rooted belief in free markets helps governments resist the temptation to interfere.
Speculators make an easy target. But even the word is misleading - how does a speculator differ from an investor? If Asian leaders truly believed in free markets, they would understand it was their policies (for example, engineering the over-valuation of their currencies) that were to blame, not speculators.
Until the dictators disappear from the scene, Asia's economies will find it hard to move to the next level of sustained economic development. But that day may not be far away.