A new myth is in the making. Once held as a model of development by practitioners and theorists alike, East Asia's Newly Industrializing Countries (NICs) are now identified as an epitome of ‘crony capitalism,’ a perversely deformed system of political and economic exchange driven by rent seekers. The privileged few have allegedly captured the state to pillage banks and sabotage market forces in pursuit of rents. But imbued with Confucian norms, which Francis Fukuyama (1995) once characterized as limiting the ‘radius’ of trust to familial ties, society cannot weed out rent seekers. The emphasis on personal loyalty is held as breeding clientelistic networks, which easily degenerate into a collusion for monopoly profits. Hiding behind a profoundly opaque corporate governance structure and protected by dense political patronage networks, business firms engage in shady deals to share rents with party politicians and state bureaucrats. From this perspective, the 1997 financial crisis was a logical outcome of East Asia's exclusionary cultural proclivities, opaque institutional arrangements, and shady business practices.

On the eve of the tenth anniversary of its democratization, Korea was hit by an unprecedented financial crisis marked by massive capital outflows, a sharp depreciation of the won and severe distress in the corporate and financial sectors. Korea's anniversary gift from the interntional community was an IMF conditionality program that imposed a comprehensive package of neoliberal economic reforms. Compared with the South American and East European experiences, economic reform in Korea has been implemented without significant policy obstructions, political instability or social disruptions. Despite much skepticism, the backbreaking reforms quickly began to pay off. The reforms created a V-shaped (rather than U-shaped) pattern of recovery, though more determined financial and corporate restructuring is needed in order for the nation to achieve sustainable growth. And, the quality of democracy has not deteriorated because of conflicts resulting from the economic reform program (neither, however, has it improved).

Ever since the destruction of Hiroshima in 1945, states all over the world have been faced with the issue of whether or not to acquire the ‘absolute weapon’ for themselves. The question of ‘going nuclear’ has been especially acute on the Korean peninsula, with its history of conflict, division and great power meddling. Has any one of the two Koreas, or both, ever attempted to acquire nuclear weapons? Did either of them decide to abandon that quest? If so, when and why? These are the questions that motivate this paper.

The historic June 2000 summit and subsequent exchanges between North and South Korea have added a new dimension to not only South-North Korean relations but also the situation in Northeast Asia as a whole. On one hand, the thawing South- North Korean relations has generated great optimism among those who see it as an irrefutable sign of North Korea's intention to join the rest of the world as a constructive player. At the other extreme, it is seen as a deceptive, if not desperate, act on the part of North Korea to reap economic gains and lower the guard of South Korea and its allies, principally the United States. Perhaps a more realistic assessment lies somewhere between these polar analyses.

The George W. Bush presidency has raised wide speculation about future United States' policy toward the Korean peninsula. The conventional wisdom among pundits in Washington, Seoul and elsewhere is that the incoming administration will switch to a ‘harder line’ regarding the Democratic Peoples' Republic of Korea (DPRK) and move away from the engagement policy practiced during the Clinton administration. In a similar vein, others have argued that Bush will place a premium on reaffirming and consolidating ties with traditional allies and friends like the Republic of Korea (ROK), Japan, and Taiwan while downplaying strategic engagement with China. The problem with such punditry is that it is usually overstated and under analyzed. Given the current state of relations, there is little incentive for dramatic changes in U.S. policy toward North Korea or with regard to the U.S.-ROK alliance. Moreover, given what is known of the Bush administration's foreign policy vision, there is little evidence upon which to predict an unadulterated hard line swing in policy toward Pyongyang.

On March 18, 2000, Taiwan experienced an electoral earthquake. After half a century in power on the island of Taiwan and eight decades of an undisrupted ruling position dating back to its heyday on the Chinese mainland, the Kuomintang (KMT) lost power in a free and fair presidential election. The power rotation at the close of the century is historic by any measure. It has closed an epoch of one-party dominance and inaugurated a period of party dealignment and realignment. It deflated Lee Teng-hui's charisma and brought his era to an abrupt and calamitous end. At the elite level, it has triggered a generational turnover, pushing the baby boomers to the forefront of governing responsibility. Most significantly, it pushed the island's political system for a major step forward toward the consolidation of democracy.

China in 1978 embarked on a major economic transformation, seeking to alter the stance of the previous 30 years and engage economically with the rest of the world in several dimensions—trade, foreign direct investment by private firms, external borrowing by government from both private and public sources, and education. Each of these represented a major change in policy. The transformation in the intervening 22 years has been dramatic and palpable, as can be seen in the sky-lines of the major cities. On official figures, agricultural output has jumped more than two and a half times from 1978 to 1998, and industrial output increased more than nine-fold. The service sector, discouraged under central planning, increased eight-fold. Exports during this period grew from $10 billion to $184 billion, making China now the world's ninth largest trading country (just ahead of Belgium). The current account was roughly in balance over most of the last 20 years (although in surplus since the currency consolidation and anti-inflation program of 1994), but thanks to large inward foreign investment, foreign exchange reserves have grown to $160 billion, second largest in the world after Japan. China experienced various bouts of inflation, followed by policy constriction; prices during 1999 declined by 3 percent, exceptional for a developing country.