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Monday, Oct. 14, 2002
Resurgent Asia may yet help buoy America
By TOM PLATE
LOS ANGELES -- Think of the world economy as one huge ship with many passengers from all over and wildly varying tiers of service.
There's the top tier for those from wealthy nations; those from developing nations take the second level; and then there's the bargain basement for anyone unlucky enough to be born in a country that never seems to get off the ground.
Imagine further that in the absence of a drifting iceberg, what's capable of grounding this "good ship global economy" is either gross inattention to maintenance and safety, or the corrosive effects of many little leaks below while the big shots on the top deck are having a jolly good time.
During the Asian financial crisis of 1997-99, that's what happened -- until the West finally noticed the rising water and began helping plug holes, notably in Thailand, South Korea and Indonesia.
But imagine, afterward, that the ship's top tier goes about its merry business, inattentive to other safety and maintenance needs.
That, too, is nearly what happened: For until the Dow became sicker than a mad cow, the West kept on partying as if nothing was wrong. Now the party looks to be over, particularly in the United States, where the dismal and unpredictable clouds of war hang over an economy that already is suspiciously unsteady.
Those leaks on the upper deck -- in the banking, corporate-debt or corporate governance areas -- seem especially ominous.
Shopping malls are starting to look like ghost towns as consumers retrench; with the holiday retail buying season just around the corner, the recent West Coast dock lockout threw a scare into everybody, from President George W. Bush, who intervened last week, to nervous exporters in China, Japan, Taiwan and Singapore. And now, perhaps most worrisome, official spokesmen are saying, "Don't worry, the U.S. banking system is in great shape." Such declarations are almost always a bad sign.
Even in ordinary times, Asia would be right to worry because America is its most important customer. During the past crisis, the region would have suffered even more without steady U.S. consumer demand. So now, with even the little gems of the region -- Hong Kong, Singapore and Taiwan -- in trouble, what will happen?
Should the lower decks get the lifeboats ready?
No. Today's Asia is not the same ship of yesteryear. Many of its economies have retooled their structures and processes, though they acknowledge that much reform is still needed. The results are abundantly evident. In China, government spending has pumped up domestic demand to the point that any decline in U.S. demand for its exports should prove no calamity. Its involvement in the World Trade Organization, which began last December, has so far been, overall, less a disruption than a stimulus.
"This is kind of a watershed," Price-Waterhouse-Coopers' Kenneth DeWoskin wrote recently in the distinguished Australian quarterly Sydney Papers, "because it brings to an end a very disruptive and unstable chapter in China's history." Next year, it is predicted, China's' "market-socialist" economy serving more than a fifth of the global population will account for more than a quarter of the world's steel consumption.
China is not alone in Asia in righting its economic course. South Korea has impressively sped back from 1997, thanks in large part to internal reform and sizzling high-tech growth. India's gargantuan domestic demand continues to ramble on like a foraging elephant -- its upside potential incalculable.
Yes, Japan is still stumbling badly, prompting the rest of the world to lose sleep over apocalyptic nightmares of collapse. But it's still the world's second-largest economy, and it's still by far the largest economy in its half of the world. Prime Minister Junichiro Koizumi and his new economic-reform czar, Heizo Takenaka, are hardly unaware of what's at stake as they hack their way out of the heart of economic darkness.
In 1998, with much of Asia struggling, a colleague suggested that the West should just take over these troubled economies and show them how to do it. This was before Enron. His arrogance was, of course, dwarfed only by his ignorance.
Indeed, some day, not too far down the road, resurgent and voracious Asian domestic economies might prove part of the America's solution instead of its problem. The very fact that one today can envision such a once-improbable scenario suggests how fast the world can change, and how far Asia -- problems and all -- appears to have come.
Tom Plate, a UCLA professor, is a regular columnist for the South China Morning Post and the Honolulu Advertiser.