How can Zhuangzi teach us about the 1997 Asian Financial Crisis? 🌊

Thousands of years before hedge funds and stock markets, there lived a man named Chang Tzu (more commonly spelled Zhuangzi). Tzu was one of the great sages of Taoist philosophy. Chang Tzu lived during China’s Warring States period (circa 369–286 BC), a time marked by chaos and political fragmentation. Despite being offered the opportunity to fight for power in government courts, Zhuangzi chose to live as a humble fisherman. He taught that pursuing peace & harmony over ambition leads to happiness.

Where Lao Tzu is often viewed as the mythical founder of Taoism (his legacy rooted in poetic allegory), historians have records to prove Chang Tzu’s existence. Through parables and sharp wit, he questioned the blind pursuit of success. To Zhuangzi, the world was constantly changing, and the key to navigating it was humaneness, humility, and living in harmony with nature.

These teachings may feel distant from the world of finance, but they are anything but irrelevant. They provide a profound lens through which we can observe financial meltdowns, including the 1997 Asian Financial Crisis 💸

The Rise and Fall of Southeast Asia’s Economic Boom

In the early to mid-1990s, Southeast Asia was seen by investors as a great place to park capital. Countries like Thailand, Indonesia, Malaysia, and the Philippines experienced rapid growth powered by high exports, rising foreign investment, and booming real estate and stock markets. From the outside, it appeared that these economies had discovered the secret sauce of success. Western money poured in, fueling further expansion.

But beneath the surface, cracks began to form—cracks that a Taoist like Chang Tzu might have noticed. Much of the region’s growth was built on expensive short-term financing. Local banks borrowed heavily from abroad, then lent that money to domestic companies. As long as exchange rates held steady, everything worked. But the system was unbalanced. Southeast Asian countries pegged their currencies to the U.S. dollar, but didn’t have adequate foreign reserve balances to fully support those currency pegs. Exchange rate risks weren’t truly shared; borrowing nations bore them in the interests of creditors.

Chang Tzu warned against the illusions of control and power. The Asian economies of the 1990s, drunk on greed, failed to follow his doctrine. Their systems were rigid, dependent on unsustainable exchange rates, and deeply vulnerable to external shocks. The second investors sensed weakness, they acted.

The Crash That Changed Everything

In July 1997, Thailand announced that it could no longer support the Baht’s peg to the U.S. dollar. The decision sent shockwaves through global markets. Investors panicked and began withdrawing funds from neighboring countries, fearing similar outcomes. What followed was a chain reaction: currencies collapsed, stock markets plunged, and foreign debt became impossible to repay.

Indonesia, Thailand, South Korea, and others spiraled into turmoil. The International Monetary Fund and World Bank ultimately intervened with over $118 billion in aid. Help came with conditions: countries had to adopt strict economic reforms, cut spending, and better regulate markets.

For millions of people, the consequences were devastating—jobs lost, savings evaporated, and economic progress reversed. And yet, this collapse was not due to a single bad decision. It was the result of structural imbalances paired with unchecked ambition.

What might Chang Tzu suggest about all this?

He likely would have pointed out how irony set the stage for collapse. Zhuangzi taught that resisting Wu Wei (or effortless action) leads to unhappiness.

In economic terms, this might translate to diversified growth strategies, flexible exchange rate policies, and a healthy skepticism toward rapid increases in returns. It would mean building resilience rather than overextending, fostering organic growth instead of taking excessive risks for quick gains.

Chang Tzu’s teachings also caution against our desires to become the best. As Zhuangzi once wrote, “Only he who has no use for the empire is fit to be entrusted with it.” In other words, we must always keep in mind the true motivations of people in power.

Lasting lessons

The 1997 Asian Currency Crisis remains a powerful reminder of how fragile prosperity can be when built on imbalance and overconfidence. But it’s also a reminder that wisdom can be found in unexpected places. Ancient philosophy, like that of Chang Tzu, offers more than poetic metaphors—it provides a framework for thinking about systems, uncertainty, and human nature.

Had policymakers and financial institutions embraced balance, they might have identified the warning signs earlier. Acted out of foresight instead of fear.

In a climate susceptible to financial shocks, perhaps it's time to listen again to the voices of the past. Because sometimes, the key to navigating the modern world is learning how to flow with it—not against it.