Just a few months ago, the 21st century still seemed certain to be the Asian Century -- an era in which Western dominance of the global economy would be surpassed by Asia's mighty industrial engine and burgeoning wealth.
Today, devastated by collapsed currencies and stock markets, their banking systems weakened and their people's confidence deeply shaken, the eve of the 21st century finds the nations of East Asia facing perhaps their greatest challenge of the post-World War II era.
It is a mammoth challenge for the rest of the world as well. With one-third of the planet's population and a similar share of its industrial capacity, the path East Asia follows in its drive to recover its economic health -- or in China's case, to maintain it -- will invariably alter the landscape of the global economy.
Some experts believe that the future of world capitalism itself is at stake.
The temptation to walk away from the tenets of international trade and cooperation, a major global triumph of the 1990s, could become overwhelming -- which would have dramatic implications for every country. Millions of jobs could be at risk; price deflation could ravage many companies, or inflation could resurge; the wide selection of goods now available worldwide could shrink; and the decade's bull stock markets could collapse.
For now, global financial authorities are trying to extinguish the most dangerous fire: the spreading doubts about Asia's banking system, which like all banking systems requires confidence above all else to survive.
When that situation is stabilized, East Asia's focus will turn again to the future. That is when the battle lines will be drawn.
Many Western analysts fear that Japan, South Korea, Malaysia and other states in the region will simply attempt to export their way back to wealth -- a flood-the-market strategy that could raise simmering protectionist sentiments around the world by threatening other nations' jobs.
The Japanese yen has already slumped to nearly 128 per U.S. dollar, the weakest level in five years, guaranteeing new pricing pressures on U.S. companies from ever-cheaper Japanese imports. For Thailand and Indonesia, their pricing advantage over U.S. competitors has ballooned by more than one-third as their currencies have plunged, while their ability to afford U.S. goods has declined by a like amount.
The United States, while resigned to the reality of this new currency disadvantage, has cautioned Japan, in particular, about merely focusing on exporting more.
The U.S. prescription for the region: Abandon the once-celebrated economic model of heavy government-directed investment, which encouraged cronyism and massive corporate borrowing for industrial and real estate projects that had poor profit prospects; open these economies, and let free markets rule via "Darwinian capitalism"; encourage domestic consumption.
If East Asia can change, it can prosper, many analysts insist. "This crisis is a result of delays about reform of finance and markets in the region, but the fundamental reality is that the key factors of global production have shifted to the Pacific countries," said Stephen J. Anderson, visiting professor at Temple University in Tokyo.
"These countries still have enormous potential," said Russell Jones, chief economist at Lehman Bros. Japan Inc.
"It's hard to imagine that once they get through this phase they won't be growing at much faster rates than the [West] can. But they can't operate outside the rules the rest of the world has to play by," he said.
The first sign of stress in East Asia was a marked slowdown in export growth, beginning in 1995. By 1996, Asian countries that once had financing surpluses with the rest of the world began to run deficits.
The recipe for disaster was written by Mexico in 1994: In a small economy, soaring debts coupled with slowing economic growth can send investors and creditors fleeing in fear -- which can then make a currency collapse inevitable.
Thailand surrendered July 2, allowing its currency, the baht, to plummet in value vs. the dollar and Japanese yen. That triggered devaluations throughout the region, in turn collapsing stock and real estate markets and fully exposing the high debt levels that many companies had incurred in the boom years.
The International Monetary Fund, in supplying emergency loans to Thailand and Indonesia to keep their banking systems from melting down, is demanding that the countries close down sick lending institutions and open their economies to greater foreign competition -- the idea being that only free-market forces can rid an economy of inefficiencies and promote new growth.
But will East Asian governments so willingly give up the control they have exerted over their economies since World War II?