Asian Meltdown or Startup?
by Andre Gunder Frank / Miami, March 1, 2000
The latest notable development in East Asia is the financial and economic crisis that erupted in 1997, which brought evident relief to many observers in the West. As a result and misled by day-to-day press media reports and short term business and government analysis and policy, even »informed« public opinion
in the West changed again. Now the »East Asian Miracle« is said to have been no more than a mirage, a dream for some and a nightmare for others. The previously supposed »explanations« and sure-fire strategies of success are being abandoned again as quickly as they had come into fashion. We hear no more appeals to »Asian values«, no more guarantees from »the magic of the market«, and no more security from state capitalism. So much the better I would say, since these
supposed »explanations« and »correct policies« were never more than ideological shams anyway.
The historical evidence presented in this book shows that no one particular institutional form or political economic policy offers or accounts for success (nor failure!) in the competitive and ever changing world market. The contemporary evidence shows the same. In that respect, Deng Xiaoping`s famous aphorism is
correct. The question is not whether cats are institutionally, let alone ideologically, black or white; the real world issue is whether or not they catch economic mice in competition with others in the world market. And that depends much less on the institutional color of the cat than it does on its opportune position in the world economy at each particular place and time. And since the obstacles and opportunities in the competitive world market change over time and in place, to succeed the
economic cat, no matter what its color, must adapt to these changes or fail to catch any mice at all.
The significance of position and flexible response in the world economy is particularly important during periods of economic crisis – that is in Chinese of (negative) danger and (positive) opportunity. In the present economic crisis so far, the focus has been far too predominantly on its undoubtedly serious negative
consequences. But the opportunities it poses have received insufficient attention, except perhaps in the United States and China, both of which are seeking to reap competitive advantages from the political economic problems and alleged »meltdown« of Japan, Korea, and Southeast Asia.
But the dismissal of East Asian and particularly Chinese economic strengths and prospects may be premature and
certainly is based on a shortsighted neglect of the historical evidence as presented in this book and a serious misreading of the contemporary evidence. I believe that this latest quick dismissal of Asia is mistaken for the following reasons among others:
1) Since Asia and especially China was economically powerful in the world until relatively recently, it is quite possible that it soon be so again.
2) Chinese and other Asian economic success in the past was not based on Western ways; and much recent Asian economic success was not based on the Western model. Therefore, there is also no good reason why Japanese or other Asians need or should copy any Western or other »model«. You can manage your own ways and have no good reason to now replace them by Western ones as the alleged only way to get out of the present economic crisis. On the contrary, Japanese and other
Asian reliance on other ways is strength and not a weakness.
3) The fact that the present crisis spread from the financial sector to the productive one does not mean that the latter is fundamentally weak. On the contrary, the present crisis of overproduction and excess capacity is evidence of the underlying strength of the productive sector, which can recover.
4) Not that economic recessions will or can be prevented in the
future – they never have in the past even under state »planning« in China or the Soviet Union. More significant is that this is the first time in over a century that a world recession did not started in the West and then moved eastward but that instead it started in the East and is now moving West. This recession can therefore be read as evidence not so much of the temporary weakness as of the growing basic economic strength of East Asia to which the center of gravity of the world economy
is now shifting back to where it had been before the Rise of the West.
5)That underlying political economic strength also puts East Asia, and especially China and Japan in a much more favorable position than the rest of the »Third World« and even Russia and Eastern Europe to resist Western blackmail as it is now exercised by the U.S. Treasury Department through the International Monetary Fund, the World Bank, the World Trade
Organization, Wall Street and other instruments.
6) The very act and cost of East Asian concessions to this Western pressure during the present recession makes it politically more likely, since it is economically possible, that East Asia will take measures, including especially a new financial bloc and banking institutions, that can prevent a recurrence of the present situation in the future by escaping from the
strangle-hold of Western controlled capital markets.
7) Indeed, one of the present battles, first by the Japanese and now also by the Chinese, is to remodel the world financial and trade institutions that were designed by the United States to work in its favor. Thus, Japan wanted to establish an Asian monetary fund to prevent the East Asian recession from deepening as it has thanks to the International Monetary Fund
based in and subservient to Washington. And China wishes to join the World Trade Organization but also seeks to have this Western dominated institution reformed to its advantage.
8) A related political economic struggle is the competition between the United States and China to displace Japan, Korea and Southeast Asia in the market by taking advantage of their bankruptcies. American capital is buying up some East Asian
productive facilities at bargain basement prices, while China is waiting for them either to be squeezed out of the competitive market altogether, and if not to engage in joint operations. Only time will tell which strategy will be more successful, but the Chinese and perhaps also some Southeast Asians seem like the better bet over the long term. Moreover, no matter how deep the recession in Japan; it is not for that eliminated as an economic power, especially in Asia.
9) Equally significant is that India and to recently to a lesser extent China have remained substantially immune from the present recession, thanks in part to the inconvertibility of their Reminbi and rupee currencies and the valve in their capital markets that permits the inflow but controls the outflow of capital. The currency devaluations of China`s competitors elsewhere in East Asia and the reduced inflow into China of
Overseas Chinese and Japanese capital that is negatively affected by the recession in East Asia may oblige China to devalue as well to remain competitive. Nonetheless and despite their serious economic problems, the Chinese and Japanese economies appear already to have and to continue to be able to become sufficiently productively and competitively strong to resist and overcome these problems.
It is noteworthy that the economically most dynamic regions of
East Asia today also still or again exactly the same ones as before 1800:
1. Around the North China Sea, the quadrangular trade relations with among Northeast China, Siberia/Russian Far East, Korea, and Japan;
2. in the South, Lingnan centered on the Hong Kong - Guangzhou corridor, and Fujian, still centered on Amoy/Xiamen
and focusing on the Taiwan straits and all of Southeast Asia in the South China Sea; and between them, the Yangtze Valley, centered on Shanghai and trade with Japan that is already taking the lead away again from the southern and northern regions. All of these in turn were and still or again increasingly are important segments of world trade and of the global economy. In that sense also and although its story ends in 1800, the examination of the world economy and of the
predominant place in it of the Chinese, Japanese and Southeast Asian economies points to the most fundamental bases of contemporary economic developments in the region and also presages important world economic ones for the foreseeable future.