Asia’s Rise Holds Important Answers in the Search for Growth
The interminable infighting and indecisions surrounding the euro, the endless meetings between ever-higher officials and heads of government, the constant news coverage about the elections in Greece, government bank bailouts in Spain and the right amount of pain that can engineer the halting of the economic rot, first in America and then in Europe, has all helped to create a permanent crisis of the mind — a policy paralysis unheard of in recent memory.
In this uncertain world of rising unemployment, stretched pensions and social insurance programs, falling health care standards and questionable entitlements, nothing is sacred. Old beliefs are evaporating into a confusing fog of predictions, possibilities and pronouncements.
Basic assumptions are up for grabs. The friendly bank manager has turned into a greedy fiend. Witness the ignominious departure of Barclays’ Bob Diamond, one-time banking savior and hero, dragged into the public dock by an unforgiving Parliamentary Select Committee like some medieval satanic ritual driving out the devil.
In this strange new world, two things seem to be beacons of constancy. First, there is the relentless rise of Asia; second, there are the policy prescriptions of the major international financial agencies.
The “rise” of Asia is all the rage these days. Observers, pundits and politicians can’t get enough. This is not just because the same economic growth of major Asian economies, such as India, Indonesia and China as well as other parts of Asia, now seems like a distant dream to Western policymakers.
It is not only because the contrast in economic performances between the West and the rest seems to be larger than life at a time when much of the developed world is in the midst of its deepest economic crisis since the Great Depression. Neither is it because the much vaunted Western technology and Western institutions seem unable to deliver a credible way out of the current economic quagmire.
It is a primordial fear of falling behind, of sliding down the global development ladder, of a simultaneous loss of face as well as rank.
Explaining it away by pointing to 2,000 years of history, as economists and historians do, as a restoration of some historical trend of Asia contributing some 60 percent of global trade and income, might be good shock therapy for some but simply adds to the depression of others.
All in all, the rise of Asia seems to defy the imagination of the average household in the developed West, which is always on the edge of some new economic apocalypse.
The mood in Asia could hardly be different.
Countries compete with each other to defy the global downturn and to raise their economic growth rates and productivity. They also prepare for the future through sharp increases in the education budgets, and by sending their best minds abroad to work with international companies in a celebration of public-private partnerships to correct the yawning infrastructure deficits that thwart new private investment.
Just as critical, they have managed to keep their savings rates higher than anyone else, made difficult public-expenditure decisions and kept their bankers in check. Gone are the days when Chinese competition consisted of low-technology manufacturing, toys from Hong Kong or textiles from sweatshop-friendly industries. China and India today are threatening the central bastion of developed country superiority: technology, know-how and the stability of Western institutions.
In this confusing world with no fixed points on the economic compass, the gatekeepers of the international financial institutions are having a hard time.
Not only have they been unable to predict the onset of new financial crises, as was the case in the context of the Asian financial crisis of 1997-98, but they have been less than convincing in their familiar prescriptions of fiscal prudence, improving the investment climate and social safety nets.
The analogy of the doctor prescribing medicine to sick patients who must get worse before they get better is now firmly ingrained in the literature of these institutions. Such economic doctors, backed by the pharmacists of the developed West who supply their medical kits, are suddenly finding their patients questioning the overused antidotes. In extreme cases, some of these “doctors” are being thrown out of the hospitals altogether.
Free-market systems and multi-party democracies work well over a reasonable period of time. Crises and breakdowns do not do away with their intrinsic strengths, making good decisions on the allocation of resources in a political framework.
The Great Depression and the rise of fascism were the results of failure in the markets and democratic institutions in advanced countries of the West. The design of the economic ship is still sound. What it needs is to have its holes plugged and engine fixed.
This may all be true, but it does not make good reading in times of deep crisis. These are times for leadership and originality. They are also times for reflection and the creating of new philosophies and approaches. The rise of the rest provides a massive library of alternative practices, approaches and assumptions underlying public policy in times of systemic transformation.
The Indonesian case is especially significant.
Here is a country which, having withstood two major crises within a single decade, a record tsunami and a complete overhaul of its previously authoritarian political system, is set to become the driving force of a more integrated Association of Southeast Asian Nations.
It is not fashionable to look at Indonesia as an international model, but after the debacle of the former USSR and now the European race to the bottom, it is time to look beyond the free markets and free democracies of the West to what works on the ground. That is, after all, in the best tradition of medical research.
Satish Mishra is the CEO of Strategic Asia, a consultancy promoting cooperation among Asian nations. He can be contacted at email@example.com.