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The Coming Asian Storm
According to a lot of mainstream thinking Asia is weathering the current economic meltdown. “Asians are taking the economic collapse far more calmly than many in the west,” writes David Pilling, Asian editor for the Financial Times. The region he says, “brims with confidence that its time has come” and is operating under the assumption that “when the dust settles, wealth and power will have edged decisively east.”
Pilling may be right that about the rise of the east, but things are not nearly as rosy as he paints them, and there are restless clouds on the horizon.
“As goods pile up on 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,” says Walden Bello, a senior analyst at the Bangkok-based Focus on the Global South, president of the Freedom from Debt Coalition, and professor of sociology at the University of the Philippines.
The current crisis is due to the global crisis of capitalism, but most Asian economies are being particularly hard hit because they bought into a scheme by the World Bank back in the 1970s. The plan was to raise living standards without redistributing wealth—thus challenging local elites—by turning countries like South Korea and Taiwan into exporting machines, where economic growth would lift the poor out of poverty.
At the same time, the U.S. was pressuring Japan to revalue its currency to make Tokyo’s products more costly in order to cut the trade gap between the two nations. Japan complied, but its domestic labor costs increased as a result. To keep its status as the world’s top exporter, Tokyo began pouring tens of billions into the rest of Asia to take advantage of low wages in places like China and Vietnam. The strategy was to produce low cost goods, ship them to Japan, and then Europe and the U.S. “This was industrial policy and planning on a grand scale,” says Bello, “managed jointly by the Japanese government and the corporations.”
The export machine did indeed raise living standards all over Asia, but it ran on the endless appetite by U.S. and European consumers. As long as Americans could get easy credit—and they could as long as China and Japan bought up hundreds of billions of U.S. Treasury bonds—everything was hunky dory.
Until the housing bubble popped and the bottom fell out of the credit market. The fallout has been catastrophic:
“China’s growth in 2008 fell to 9 percent, from 11 percent a year earlier. Japan is now in deep recession…South Korea, the hardest hit of Asia’s economies so far, has seen its currency collapse by some 30 percent relative to the dollar. Southeast Asia’s growth in 2009 will likely be half of that in 2008,” says Bello.
Although economic growth did alleviate some poverty, the gap between haves and have-nots actually expanded over the last decade. Between 200 and 2006 Asia grew at more than twice the rate of the rest of the world, but, as the Financial Times points out, that hardly meant the end of penury.
“Many of the people in the region were still suffering from serious poverty. More than one billion people, representing almost 62 percent of the region’s labor force, were still working in the ‘informal economy’. Some 900 million were living on less than $2 a day. The International Labor Organization found that 308 million of these people were living in extreme poverty: less than $1 per day.
According to Bello, some 20 million Chinese have lost their jobs in just the last few months, and there are no industries to soak up the growing army of the unemployed. The economic crisis has also forced millions of Indonesian and Filipino migrant workers to return home to markets that high unemployment drove them to flee.
Rising poverty rates and joblessness is already leading to protests in Vietnam, and “Korea, with its tradition of militant labor and peasant protest, is a ticking time bomb,” says Bello.
The Financial Time’s Pilling writes that “Asians are stoical…nor have the people yet turned with a vengeance on incompetent politicians or negligent regulators.”
You wouldn’t want to put a lot of money on that stoicism to endure.
CONN HALLINAN can be reached at: email@example.com