This study is designed to overcome the two extremes of economic determinism and political voluntarism in explaining the economic crisis and recovery of Southeast Asia. It analyzes the dynamic process of economic and political reforms by treating the role of political leadership as the independent variable and the nature of institutional conditions as the intervening variable. The end of the Cold War accelerated economic globalization, posing grave challenges to the authoritarian 'security state' and the mercantilist 'developmental state'. The economic crisis intensified pressures for economic liberalization and politcal democratization, resulting from the economic marketization and political pluralization owing to export-oriented industrialization. Under the circumstances, economic and political reforms required a flexible combination of the 'transforming' and 'transactional' orientations of political leadership, and an adequate balance between the centrifugal fluidity and cenripetal rigidity of institutional conditions. Whether there exists a vicious or a virtuous cycle between economic and politcal reforms depends on the role of political leadership to compensate the costs of economic liberalization with the benefits of political democratization in a certain institutional context.