Beware the temptation to gloat
ON SEPTEMBER 26th, as America’s Congress was meeting to debate its bail-out, Dr Mahathir Mohamad, Malaysia’s former prime minister, wrote on his blog: “We cannot forget how in 1997-98 American hedge funds destroyed the economies of poor countries by manipulating their national currencies. When as a result of the so-called trade in currencies the companies in the poor countries faced bankruptcy, the governments were told not to bail out any company or bank which was in deep trouble...Yet today we see the US Government readying $700 billion to brazenly bail out banks, mortgage companies and insurance companies...Desperate to avoid a serious recession the US has abandoned all its principles.”
It was an authentic voice of Schadenfreude, comparable to the contemporaneous jeering of Argentina’s president, Cristina Fernandez, who mocked “the era of the Washington Consensus, when we heard that the market would solve everything, that the state was unnecessary” or Bolivia’s president, Evo Morales, who claimed that there are “uprisings against a capitalist economic model around the world and if no one understood that capitalism is destroying the planet, then major problems will go unresolved.”
Yet what is most striking about Dr Mahathir’s gloating is how unusual it has been in Asia. Compared with Latin Americans, Asians have been reluctant to blow their trumpets over the bleeding figure of American capitalism. There have been no anti-capitalist riots in South Korea, for example (and South Koreans take to the streets at the drop of a hat). Chinese officials seem anxious to tone down any suggestion of triumphalism at the thought that the rich world’s implosion vindicates China’s cautious liberalisation.
But perhaps the Chinese—like everyone else—are just anxious. On Monday, China announced that its gross domestic product had grown by 9.9% in the first nine months of 2008, compared with 12.2% during the same period in 2007. By anyone else’s standards, that was a lot. But not by China’s. It means growth has now fallen for three quarters running: it was 12% from January to March but about 9% in July-September. Other indicators, notably property and steel prices, suggest the slowdown may be getting worse. Li Xiaochao, a spokesman for the National Bureau of Statistics, admitted the impact of the global financial crisis has been far worse than the government’s had expected.
And China is usually regarded as the country which, thanks to the buoyancy of domestic demand, is more likely than most to have managed to “decouple” itself from the recession gathering pace elsewhere. South Korea, which launched a $130 billion bank and corporate rescue package on October 19th, has been hit harder. So have Thailand, the Philippines and Malaysia, all of which have domestic political worries to add to their imported economic ones. With their deep integration with the world economy, their reliance on exports and their huge foreign-exchange reserves held mostly in dollars, Asian countries know they cannot escape the consequences of a recession in the West.
But while they are right to eschew regional gloating, flopping around in an unproductive, unco-ordinated fashion is surely taking ineffectiveness a step too far. That is what seems to be happening. On October 24th, Asian and European leaders are due to meet in Beijing for their seventh regular Asia-Europe Meeting (ASEM). It is threatening to descend into farce. The president of the Philippines, Gloria Macapagal Arroyo, said the region had agreed to set up its own version of America’s TARP (troubled assets relief programme). No one else could remember any such deal. China, the host nation, seems more interested in bilateral talks with EU members and ASEAN countries than with the larger grouping. After the crisis of 1997-98, Asian countries were criticised for failing to produce a co-ordinated regional response. So far, they have done no better this time.source:
Beware the temptation to gloat