In this second of a two-part interview, University Malaya's Prof KS Jomo continues with his analyses on the events leading up to the sacking of former deputy premier Anwar Ibrahim by his mentor-turned-nemesis Prime Minister Dr Mahathir Mohamad.

Malaysiakini: What about the 'second turn' in 1998 when the orthodox IMF policies introduced by then finance minister Anwar Ibrahim were obviously not working and instead making the situation worse?

Jomo : My sense - and as an outsider, it cannot be much more than that - is that by the second quarter of 1998, Anwar had doubts about the orthodox policies and their evidently disastrous effects.

Do note that (Nobel laureate) Joseph Stiglitz met with him during this period and, by the way, nothing in his book ( Globalisation and its Discontents) suggests that Stiglitz believed Anwar to be beholden to the IMF.

Several of Anwar's statements and initiatives during this period suggest a serious effort to reflate the economy, primarily through fiscal means - ironically with programmes not unlike the stimulus package announced earlier this year, which moved decisively away from the earlier more construction 'jobs for the boys' approach.

One can, of course, criticise Anwar's efforts for being 'too little, too late' or as another exercise in 'macroeconomic populism', but these are the very opposite of the 'IMF stooge' charge.

In fact, in November 1998, Mahathir himself acknowledged that "I had already turned (Anwar) around in terms of management of the economy because he was still in the government when we decided to impose currency controls. So that's not a problem."

But many believe that Anwar was plotting to stage a 'palace coup' against Mahathir.

In The Malaysian Eclipse , I described my only serious encounter - on May 9, 1998, in the company of others - with Anwar since he had gone into government in 1982.

At the meeting, despite many opportunities to distance himself from Mahathir, he actually came to the prime minister's defence, explaining the interest rate pressures arising from the offshore ringgit market.

The decidedly anti-Mahathir mood of representatives of non-Anwarist Umno factions at that meeting - which Anwar did nothing to encourage - surprised me, and only one other person present supported me when I urged unity in the face of the crisis facing the nation.

Indeed, as Tun Daim (Zainuddin) noted at the 1999 Umno general assembly, when Mahathir offered to resign in 1995 and 1997, Anwar turned to Daim for support to appeal to the prime minister to stay on.

I do not see this as consistent with the claim that Anwar was plotting to usurp Mahathir, but the problem was that Mahathir did not see events as Anwar did.

Let us try to see things from Dr Mahathir's perspective. On Dec 3, 1997, the cabinet unanimously supported Anwar's alternative policy response, apparently ignoring Mahathir's latest proposal.

Meanwhile, the international media and others - even from other factions in Umno - were hailing Anwar as the only one who could 'save Malaysia from Mahathir'.

In the second quarter of 1998, Anwar's supporters began importing the slogans of Indonesia's reformasi movement against KKN - corruption, collusion, nepotism, substituting 'cronyism' for 'collusion', but retaining 'nepotism' and the obvious reference to the 'rising sons'.

Then, in mid-May 1998 in Cairo, Suharto cancelled his planned trip with Mahathir to Khartoum, Sudan, to return home after three Trisakti university students were killed. Less than a week later, the old military dictator suddenly resigned after 32 years in power! As Americans would say, this must have 'freaked out' Dr M.

For years before that, as Tan Sri Musa Hitam has repeatedly noted, Dr Mahathir had lamented how the former Korean presidents - Chun Doo Hwan and Roh Tae Woo - and other former national leaders had been humiliated, even sentenced to death, after leaving office.

But instead of easing Dr M's concerns, Anwar's supporters pressed ahead. Things might have been very different if Anwar had reined in his supporters then. But left to their own devices, they dug his political grave.

Anwar's mistake was not to sense Dr M's unease and to allay them. Anwar was too much of a populist, never wanting to lose support by saying no to anyone, and perhaps the foreign media and domestic political support he was getting went to his head.

But Anwar was probably also overly confident in his relationship with Mahathir, to whom he owed his career in Umno and whom he had never betrayed in his own mind.

Anwar's enemies sensed their time had come and quickly struck - how many days did it take to write '50 Dalil' ( 50 Reasons Why Anwar Cannot be PM )? Two?

By the time Anwar realised what hit him, it was too late. So, Anwar's fate was sealed at the late June 1998 Umno general assembly, though his dismissal only came over two months later.

I have been reliably told that at the last minute, Anwar softened some of the speeches by his supporters, many of whom were naive enough to believe that their speeches would set in train forces which were going to bring down the PM.

But after Anwar was sacked, he claimed credit for these very same speeches, to imply that his opposition to Mahathir was more long standing than it actually was.

There are some obvious parallels with Musa's resignation in early 1986 and the Team B/Semangat 46 challenge, but all these episodes also reflect the naivete of some of Mahathir's opponents in Umno.

What about the sodomy charges?

How would I know? I was never in Anwar's camp, inner or even outer circle. My interest here is in the truth, in justice and to strive for what is right; to speak truth, true jihad, if you will.

But you should ask them. Not the few remaining Anwar loyalists, of course, but if there was any truth to the charges, surely, at least one ex-Anwar loyalist would have come forward to confirm the claims.

After all, so many have defected and accused him of all and sundry, but why no independent corroboration of the charges.

And one might ask Dr M why he did not act in 1993 when he heard (the same accusations) from (then police chief) Tun Hanif Omar, or after that, when he had a chance. Why only when it seemed that Anwar was threatening him?

It may be useful to look at this in another way. I still remember hearing in the 1970s and early 1980s that Dr M would never be allowed by 'the establishment' to become PM.

Recall the ISA arrests in 1976 after the untimely death of Tun Razak, and what the detainees were being asked to confess to - in order to implicate Dr M as having communist connections. Then later, as he was about to take over, an alleged Soviet mole on his staff was conveniently exposed.

Why then? Why not earlier? Was the timing a coincidence? Surely not.

From the late 1980s and especially after 1993, I heard the same about Anwar, about not being allowed by 'the establishment' to become PM. Now, I am not saying that there was another conspiracy responsible, but I think there is more here than meets the eye.

Let's get back to economic policy. Do you think that developments since September 1998 have vindicated you?

What is there to feel vindicated about when millions suffer? Paul Krugman published a controversial article called ' The Myth of the Asian Miracle ' in 1994, criticising the World Bank's East Asian Miracle book of 1993 where it revised its earlier hardline neo-liberal position.

After the crisis broke out, many commentators claimed that Krugman had been vindicated. Krugman later denied this, or even the relevance of his own currency crisis theory of 1979 for understanding the East Asian crisis.

Terence Gomez and I published Malaysia's Political Economy in 1997. And when the cronyism explanation for the crisis was gaining currency, our work was being cited as predicting the crisis.

On July 1, 1997, another book, Southeast Asia's Misunderstood Miracle - our critique of the World Bank book based on the region's experiences - appeared. This too was incorrectly celebrated as explaining the crisis.

While I stand by both books, neither of them anticipated the crisis. I don't think anyone did, although there had been warnings about Thailand's precarious situation in, for example, Business Week .

True, I had been criticising economic liberalisation and globalisation for some time in broad terms, and was especially concerned about financial liberalisation, the asset price bubbles as well as weak economic governance and capabilities in the region.

But when the crisis broke, I had to go back to heterodox economic theories and revise them to try to understand what had happened. The world had changed so much since I was a student, and I had not kept up.

But the bigger problem was that the theories, especially the orthodox ones, were wrong, which was partly why the IMF messed up 'big time' in the region.

It would be too simplistic to attribute the IMF's mess-up to a US or Western imperialist conspiracy, although it would be correct to point to and reflect on the financial interests' influence on the dogmatic neo-liberal Washington Consensus shaping IMF policy responses, the blocking of (former Japanese vice finance minister Eisuke) Sakakibara's ( photo ) so-called Asian Monetary Fund regional emergency credit facility, and the self-congratulatory smug Western triumphalism blaming the crisis on East Asian values and corporate governance to be found in the early 1998 speeches of Alan Greenspan, Larry Summers and Michel Camdessus.

How would you assess what has happened since the crisis?

Much work remains to be done to fully understand what happened at different stages of the crisis, and since, including the effects and contributions of different fiscal and monetary policy measures.

For instance, what really contributed to the strong economic recovery of 1999-2000, which could not be sustained despite persistently high budget deficits?

We have dropped further behind Korea since the crisis, and may even have dropped relative to Thailand in recent years in some regards.

The quality of public discourse in Malaysia generally leaves a lot to be desired, but it is especially wanting in economics. We have the government cheerleaders on the one side versus market orthodoxy on the other, but there is little attempt at serious understanding to draw lessons for others and for the future.

The cheerleaders generally blame all problems on external circumstances - or Anwar, when convenient - while claiming credit for the government for everything remotely successful, while the converse is true for the other side.

And of course, all this is made worse by what may be called 'competitive sycophancy' where we try to outdo one another to gain favour.

A friend recently pointed out that despite the recent official criticisms of globalisation - we were celebrating it when we thought its sun would never set - our dependence on trade has increased, now well over 200 percent of GDP (gross domestic product), from around 190 percent before the crisis, which itself was a massive increase from about 110 percent when Dr M took over.

The fact is that the policies of the past two decades or so, whatever the rhetoric, has been to create a more 'dependent' economy, not a more self-reliant one.

Southeast Asia's Misunderstood Miracle

showed that we are only second to Singapore in relying on FDI (foreign direct investments) for capital formation, which has meant our domestic industrial and technological capabilities remain limited, unlike Japan, South Korea and Taiwan, where FDI never exceeded two per cent until very recently.

This and many other Malaysian realities at the end of the Mahathir era must come as a shock to those for whom dependency theory explained the world economy or who are viscerally anti-globalisation.

Unfortunately, many people do not go beyond the rhetoric and actually believe that Malaysia is a shining example of independent development for the rest of the world.