Tigers with New Stripes

Two years ago on this date, the global economy began to unravel like a badly knitted sweater.

Starting in Thailand and ending in Brazil, foreign investors fled in fright as currencies came undone. Emerging markets were submerged. President Clinton called it "the most serious financial crisis in half a century."

If not for the strength of the American economy, the worst-hit countries would not have had a hungry market for their wares, and the world economy would not be perking up now.

So what have these nations learned from the crisis, now that US-led $100-billion-plus rescue packages have helped put them on a reform track?

The answers are more than economic. Deep cultural practices have been challenged, especially in Asia. They're worth noting two years on:

Honesty: Thailand, which triggered the crisis on July 2, 1997, learned it's not wise to lie to foreign investors, as it did about its currency reserves. Capital flight spread as bubbly hopes for riches in Asia popped. Too many investments turned out to be based on corrupt dealings, cozy ties, and misleading data. Honest assessments by investors' services such as Moody's were called alarmist. Truth was a casualty of face-saving.

In Russia, officials admit they squirreled away billions from the International Monetary Fund (IMF). Japan, after years of denial, came clean about bad loans held by banks.

These days, foreign investors are asking tougher questions. In Thailand, a freedom-of-information law is helping keep officials honest.

Humility: Taking money and advice from the IMF was a bold act of contrition for Asia's tiger economies. Malaysia alone shunned IMF help, but it is suffering a deep political crisis.

No longer does the "Asia economic model" suffice. Bankruptcy of some companies is now more accepted. Bureaucrats are humbled after trying to guide cartel-like business empires. The IMF itself learned from its mistakes, and the US learned that rapid capital flows can hurt small nations.

In South Korea, a former top executive set a popular example by doing the "unthinkable": He ignored job status and now does what he wants by waiting tables at a posh restaurant.

Accountability: In Thailand and South Korea, democracy was strengthened. In Indonesia, it was restored. In Japan, the ruling party was thrown out for a while.

Business empires and banks are slowly being merged or broken up. Investors who ignored the risks are being forced to take their lumps. Russia is being stiff-armed by the IMF until it installs economic reforms.

Much work still needs to be done. Billions in bad loans remain on the books. Industries have surplus capacity. But lessons are being learned in the heart as well as in the pocketbook.