Consequently, the National Economic Action Council used the state-imposed currency stability to restructure its foreign debt. Malaysia looked east for liquidity. Japanese loans, together with judicious raids on the state pension fund, provided the capital necessary to re-float faltering UMNO-linked conglomerates.

In August 1999 the Malaysian Central Bank announced plans to combine fifty-eight banks and finance companies into six financial groups (subsequently modified to ten). Interestingly, the proposed financial restructuring only reinforces the corporatist links between party and business, for the terms of amalgamation depend not on their bottom lines but on their ties to politically favored UMNO patrons. Fueled by a cheap currency the Malaysian economy rebounded strongly in the second quarter of 1999. If little else, the Malaysian case demonstrates that, structural weakness notwithstanding, the developmental model can survive the challenges of globalization. Moreover, as the economy recovered so too did Mahathir's prestige.

Mahathir's approach to depression economics received international plaudits--notably from the economist Paul Krugman. At home, Mahathir reimposed his political authority. In the manner of the tales of the sixteenth century; Sejaruh Melayu (Malay Annals), the aging ruler removed the adherents of the disgraced pretender from his court and rebuilt links with previously excluded factions. Mahathir publicly reconciled himself with the leaders of Team B and appointed one of their more innocuous members, Abdullah Badawi, as his new deputy. To forestall any possible leadership challenge, Mahathir altered the party constitution, postponing its general assembly until after the federal election held in November 1999.

Outside the party, Mahathir took full advantage of the economic turnaround to revile the opposition and present himself as the defender of Malay and Malaysian interests. The incoherence of the opposition has enhanced his appeal. Thus he portrays the PAS demand for a restitution of Islamic law and their attack upon UMNO "infidels" as extremist, while National Justice, he contends, threatens the inter-ethnic pact that sustained growth and stability. To both the Chinese and the Malay communities, he emphasizes UMNO's pragmatism and evokes the specter of communalist violence perpetrated in the name of reformasi in neighboring Indonesia.

Internationally, he defends the national interest against interfering Western democrats, Jewish speculators and IMF economic colonialism. Here Vice President Gore proved unexpectedly useful. Mahathir shrewdly exploited Gore's support for reforms--maladroitly delivered at an APEC meeting in Kuala Lumpur in November 1998--to caricature Anwar and the opposition as "foreign stooges."  This capacity to play the nationalist and pan-Asian card was again evident in his attack in September 1999 on what he considers Australia's imperialist ambitions in East Timor. Mahathir's ability to appeal to different constituencies in different languages often appears--and often is--inconsistent. But at the same time, this rhetorical dissonance and the repression it necessitates hold together the fragile Malaysian enterprise association that he has so carefully crafted.

IN contemporary Malaysia, anxiety over national identity, the uncertainty of globalization, and the historic propensity to adopt a siege mentality legitimates the UMNO oligarchy and its machinery of corporatist controls. With the example of a disintegrating Indonesia close at hand, the UMNO elite, the Malay middle class (their misgivings over the treatment of Anwar notwithstanding) and the Chinese community all felt reluctantly constrained to support a reorganized UMNO leadership in the November elections. Mahathir milks this anxiety, presenting UMNO-style nationalism as moderate while excoriating opposition reformism as communalist and conducive to political fragmentation. Given the fundamental fragility of Malaysia, the uncertainty of economic recovery, and an external environment more unstable than at any time since the 1960s, pragmatic single-party rule remains central to political order.

The November election--in which PAS increased its representation in the federal parliament and in the rural northeast, and in which Wan Azizah was returned for the Penang seat of her jailed husband--left the succession question unresolved and the Malay community worryingly divided. The fact that the aging gerontocrat has announced that this will be his last term has merely exacerbated the problem. The issue that most troubles the Malaysian polity is not liberalism but succession. The alternative to a smooth leadership transition in an Asian political culture is not liberty but anarchy, and from the contingent perspective of Malaysia, Inc., to democratize will be to disintegrate.

David Martin Jones is senior lecturer at the University of Tasmania's School of Government, and author of Political Development in Pacific Asia (Polity Press, 1997).