Asia: The Coming Fury

Foreign Policy in Focus ^ | February 9, 2009 | Walden Bello

[Lorianne]

As goods pile up in wharves from Bangkok to Shanghai, and workers are laid off in record numbers, people in East Asia are beginning to realize they aren't only experiencing an economic downturn but living through the end of an era.

For over 40 years now, the cutting edge of the region's economy has been export-oriented industrialization (EOI). Taiwan and Korea first adopted this strategy of growth in the mid-1960s, with Korean dictator Park Chung-Hee coaxing his country's entrepreneurs to export by, among other measures, cutting off electricity to their factories if they refused to comply.

The success of Korea and Taiwan convinced the World Bank that EOI was the wave of the future. In the mid-1970s, then-Bank President Robert McNamara enshrined it as doctrine, preaching that "special efforts must be made in many countries to turn their manufacturing enterprises away from the relatively small markets associated with import substitution toward the much larger opportunities flowing from export promotion."

EOI became one of the key points of consensus between the Bank and Southeast Asia's governments. Both realized import substitution industrialization could only continue if domestic purchasing power were increased via significant redistribution of income and wealth, and this was simply out of the question for the region's elites. Export markets, especially the relatively open U.S. market, appeared to be a painless substitute.

[Lorianne]

This process depended on the U.S. market. As long as U.S. consumers splurged, the export economies of East Asia could continue in high gear. The low U.S. savings rate was no barrier since credit was available on a grand scale. China and other Asian countries snapped up U.S. treasury bills and loaned massively to U.S. financial institutions, which in turn loaned to consumers and homebuyers. But now the U.S. credit economy has imploded, and the U.S. market is unlikely to serve as the same dynamic source of demand for a long time to come. As a result, Asia's export economies have been marooned

[dr_who]

Scary to think of what China’s “safety valve” would be.

[Star Traveler]

We don’t got no more money to buy your crappy products.... ;-)

[ It was all funny-money anyway.... LOL... ]

[hosepipe]

Life was and still is quite cheap in Asia..

[Eye of Unk]

This is going to really upset the Asian markets when they find out that consumers are NOT going to be able to “buy the bling” anymore.

Now people want quality goods that will last longer, something that China neglects on a continuing basis.

No more the throw away its cheap mentality, people will spend a little bit more a little bit less to have something more reliable a lot longer.

Buy American before it too is Communist.

[Jedi Master Pikachu]

Ironically, as in the East Asian financial crisis in 1997, the Philippines - often dubbed the 'Sick Man of East Asia' - seems set to weather the storm better

- because it has had such a poor record of attracting foreign investment and doesn't export as much stuff as most of the other countries in the region. As a consequence, the Philippines' economic growth rate has been lackluster (not bad for Latin America, good for Africa, but poorly for East Asia).

Even with this downturn set to hurt the region (including the Philippines), if I were to look at things objectively, and not favor any particular nation, I would argue that EOI is still the best option for poor countries to industrialize rapidly. The rich West is able to buy expensive exports that relatively few people in the manufacturing countries can (currently) afford. If they were restricted to the domestic market, countries seeking to industrialize could only produce as much as their own country is willing to buy, and only the low-grade products their country is able to buy.

After developing, the way South Korea and Taiwan* have, however, these countries have to work on turning their economies into domestic-consumption ones. China's trying to do that now, even though it isn't developed, because it needs to keep providing jobs to hold off larger, and more dangerous, protests.

Anyway, that's my little spiel and understanding (or not) of the situation.

*Singapore and Hong Kong are developed, but because they are so tiny, they need to be export-driven indefinitely; I'm including services as exports.

[oldbill]

This is the setup for wars.

[chasio649]

This is the setup for wars.

---

yep

[Lurker]

Scary to think of what China’s “safety valve” would be

100 million dead Indians.

L

[mamelukesabre]

funny froo froo money for funny froo froo product.

Now we are back to the real deal. A ten dollar horse and a 40 dollar saddle.

[Lurker]

In the mid-1970s, then-Bank President Robert McNamara

After all McNamara had such a stellar record 'helping' in Asia.

L

[ikka]

In the mid-1970s, then-Bank President Robert McNamara

Note: this is the same person who was SecDef under Kennedy and LBJ.

[mamelukesabre]

Well, they got a billion of em. How may dead chinese are they willing to spend for a hundred million dead indians?

[LeoWindhorse]

one export is not in jeopardy ; American men continue to go for Thai wives in record numbers . Sawasdee kap!

[this_ol_patriot]

Scary to think of what China’s “safety valve” would be.

Convert almost everything to military production, then use the stuff. Isn't that the normal historical response to bad times?

[Lurker]

The Chinese will quite happily trade 200 million or so of their 20 something men who have no jobs, no women, and no future in order to save The Party.

They'll incinerate as many Indians as they need to in order to achieve that goal.

India better start making nukes. Lot's of them.

L

[Star Traveler]

You said — “one export is not in jeopardy ; American men continue to go for Thai wives in record numbers .”

Yeah, I know a guy around here with one of those wives. He tried to “hook me up” with someone over there... I kept telling him, no, but he kept on trying... LOL..

[dr_who]

I’d say Russia, Mongolia, and a number of other neighbors have reason to be afraid. The PRC may need to find the PLA something to do.

[NoPrisoners]

This is the setup for wars

Of course, and this is how we got out of the Great Depression #1. Anyone care to remind me again who the warmongers are supposed to be?

[Lorianne]

I think we have quite enough salad shooter (TM) now.