We have much to learn from late Asian tiger
WORLD VIEW:Region understands how important it is to downsize an overblown financial sector
A FIRST visit to Singapore told me several things. Its exuberant multicultural life, economy and architecture make a wonderful introduction to southeast Asia, which surrounds the island city state. Looking at a map of the region, or going to Singapore’s several wonderful museums, one begins to understand how limited our views of Asia often are in Europe.
China, India, Indonesia, Malaysia, Thailand, Burma, Vietnam, Cambodia, Brunei, Hong Kong, Taiwan and the Philippines are all present in Singapore. South Korea, Japan, Australia and New Zealand are there too. So of course is Britain, the old imperial power; the United States, its geopolitical successor; and then the European countries, along with the Latin Americans, Africans and Middle East.
Thousands of Irish people work in the health, finance, commerce and educational sectors, with flourishing GAA clubs, associations and pubs galore.
Singapore is not necessarily the real Asia, because it is unusually rich and comfortable, but it does provide a fantastic window on the region – not least through its food. Its citizens prefer to eat out, mostly in food halls where a fine meal chosen from these diverse cuisines costs €5. Its window on the world comes through the wonderful shopping malls, where no global brand is unrepresented.
I was there for a conference comparing leadership, decision- making and governance in the EU and east Asia during the current economic crisis – and looking ahead to the post-crisis setting.
Explaining how Ireland has been on the receiving end of the EU bailout deal, I found a receptive audience from those who experienced the Asian tiger period that ours emulated.
They have learned the lessons better than us, investing more in social infrastructure and going through the painful 1997-1998 Asian financial crisis, which taught its leaders to distrust the neo-liberal verities imposed on them by the IMF.
By doing so they understand better how important it is to downsize an overblown financial sector by finding a better balance between states and markets. The Association of South East Asian Nations (Asean) has been to the fore with this, along with China, South Korea and Japan. Their integration project is much looser than the EU’s, but it is the hub around which much of the activity bringing together Asian states and the rest of the world revolves.
The current period involves not only this global financial crisis but a major shift in political power as well. That makes its management especially difficult and fateful.
While I was there Asian leaders were absorbing the recent proposal for a Trans-Pacific Partnership from the US. It is intended to be a 21st-century trade pact, but it notably excludes China and coincides with a strong move to assert the US security presence in the Pacific. This looks like a crude 20th-century containment policy to many Asians, who have to live with emerging Chinese power and don’t want to be forced to choose between that and the US but would prefer a new multipolarity. From Singapore one realises better that while China is not Asia, neither can that region exist without it.
To see why that should be, one needs to understand Asian perspectives on the global financial crisis and what is happening in the euro zone. They were outlined in a brilliant talk in Dublin this week by Andrew Sheng, chief adviser of the China Banking Regulatory Commission in Hong Kong and president of the new Fung Global Institute (see video and slides at iiea.com).
He says the 1997-1998 Asia crisis was the first 21st-century one and its lessons must now be applied globally to the current systemic one. He believes the financial sector has grown too large and must be scaled down for the safety of the whole world.
Globalised finance is out of sync with the real economy, with financial assets (excluding derivatives) rising from 108 per cent of world GDP in 1980 to 400 per cent in 2009 (555 per cent in the EU). The tail is therefore wagging the dog. This transition will be painful and we are now living through the politics of who bears the costs – the finance sector or taxpayers.
It requires global as well as regional action, including a Tobin tax to reduce activity, much tighter regulation, breaking up finance conglomerates and a transition to a new balance between long-term sustainability and short-term greed.
Sheng says Asians are willing to invest in this. But they want political rebalancing to accompany economic restructuring, including a change in the post-second World War Bretton Woods institutions still dominated by the West. New mechanisms of dialogue and decision-making are needed in this multipolar setting.
It opens up great opportunities for an imaginative and reciprocal European response. A new book by Irish-based authors, The Transformation of Asia in a Global Changing Environment (Nova), suggests some of the political, economic and ethical ways ahead.