newfound sense of confidence stems from three factors, all of
which are ultimately rooted in the power of comparisons.
No, it is not that Asian elites have become delusional or
merely giddy. They know that there are still masses of people
living in poverty, despite the gains made on this front, especially
biggest lesson from the faltering West from an Asian
perspective? Whatever you do, never over-promise
to your own people.
They also feel the pressure of a massive youth wave, which
focuses political leaders on ensuring economies are successful
enough to accommodate new labor market entrants — so as not
to create a backlash among those who fail to find work.
And, sure enough, pent-up demand, the urbanization wave and
the emergence of a rising and prosperous middle class are
all positive economic growth vectors that make Asians confident
about their ability to generate sufficient GDP growth.
Of course, Asia's leaders know that this is a double-edged
sword, since it also creates enormous new challenges, particularly
in terms of environmental management.
Why then the profound optimism in such a large array of countries
that are not naturally predisposed toward optimism?
There are three reasons. The first is the number 441. This
figure represents the average debt-to-GDP ratio of the G7
nations that would prevail by 2050 under current policies.
That is up from about 70% in 2007, prior to the onset of the
global economic crisis.
Nothing describes the impending shift of global economic
fortunes more succinctly — and more harshly. For this is not
just a number, but an economic reality that, in retrospect,
makes decades of pain experienced by developing countries
in dealing with over-indebtedness seem not so terrible after
When the world's (soon to be formerly?) leading economies
are on track to compile debt nearly 4.5 times their annual
GDP, it makes Asia's mountain of problems appear that much
more manageable, which further inspires confidence in the
unites much of dynamic Asia today is a collective
and rigorous willingness to learn and to improve.
Politicians, mind you, are keenly aware of how much easier
it is to manage a population that, by and large, feels in
ascendance, compared to one that has a nagging sense of standstill,
or of being on the road toward decline.
In societies in the midst of a perceived decline, the reform
process becomes overwhelmed by negative sentiments as forces
defending the status quo organize themselves vigorously to
block the necessary reforms.
And as tough as it was for developing countries that took
on too much debt in decades past, not only has the issue largely
been worked out by now, it also forced them to pursue policies
that would allow for sustainable economic progress in the
That makes the collective experience of the Asian financial
crisis the second reason for Asia's new-found confidence.
As bad as things were for many countries in the region back
in 1997/98, the current "global" (i.e., by now largely Western)
crisis has done more than just prove that Asia has not been
While the jury is still out on whether Europe can live up
to Rahm Emanuel’s dictum to never let a crisis go to waste
(and while it is entirely doubtful that the United States
can do so), Asia has evidently embraced the former White House
Chief of Staff's challenge, with a decade-long track record
to prove it.
The third reason for the strong sense of confidence in much
of Asia is that it is building dynamically on the experience
garnered during the recent phase of economic and financial
crisis management. In fact, the full potential for pan-Asian
cooperation has barely been scratched.
This does not refer to any pie-in-the-sky sentiment of grand
bargains between big Asian powers. Rather, it addresses the
many benefits still to be reaped from a deepening of further
policy coordination on very specific matters, as Zeti Akhtar
Aziz, the head of Malaysia’s central bank, made plain at the
recent IMF annual meeting.
precautionary principle, widely considered a hallmark
of European policy management, applies at least
as much to Asian preferences.
In response to the financial shock that gripped much of Southeast
Asia just over a decade ago, she explained, the ASEAN nations
have been on the forefront of assembling teams in the region
based in finance ministries and central banks. These teams
now collaborate on a daily basis to monitor critical events,
such as capital flows and other market developments, in real
The reason for all this? The crisis of 1997/98 was so potent
that any repeat of the failure to articulate problems in the
financial markets as early as possible is widely viewed as
potentially tragic, and therefore unacceptable.
Reliance on external resources — whether the early warning
mechanisms of the IMF, World Bank, the rating agencies, or
worse, one's financial intermediaries, such as investment
banks — had proven wholly insufficient.
Building up internal capacities for proper risk monitoring
at the intersection of the domestic, regional and global economy,
borne out of the necessity of responding to a very real crisis,
was the only logical consequence.
That step is also having another major benefit: helping the
cause of the ASEAN countries in Asia at large. These countries
had long been considered “wannabes” or even nuisances, not
able to integrate or punch in the proper weight category.
But in the aftermath of the 1997/98 crisis, they have taken
on the same constructive role that the Benelux countries did
50 years ago in the foundational stages of the European Community.
They provide the policy glue and ideas that help the "biggies"
overcome their mutual prejudices.
In this emerging new world, it will be interesting to observe
how the ASEAN nations will seek to advance global agreements.
Asians are committed to one thing regarding global
coordination, then it is a rigorous embrace of the
best practices principle.
Many top Asian policymakers today spent the formative periods
of their professional training in the United States. And while
that country has long led the process of global policy coordination,
there are very real questions as to whether it is in a domestic
position to do so much longer.
The future "global game" will likely depend more on employing
a variation of the uniquely Bush II principle of global politics
(alliances of the willing) — only that these alliances will
now be based on actual willingness.
If Asians are committed to one thing regarding global coordination,
then it is a rigorous embrace of the best practices principle.
The old default position — father (aka, the United States)
always knows best — has become untenable.
But the trouble with the best practices idea is that none
is clearly established in the global finance and economics
domain, since they deal with quite a few unknowns, if not
But in that complexity-laden world, it comes down to essentially
two choices: going all-in, American-style, or applying the
precautionary principle, widely considered a hallmark of European
policy management. The latter, of course, is a misnomer, as
it applies at least as much to Asian preferences.
This joint preference would, in principle, augur well for
the Europeans' role in global affairs. But they would be well-advised
not to rest on their laurels.
What unites much of dynamic Asia today is a collective and
rigorous willingness to learn and to improve — the Toyota
principle of the continuous improvement process writ large.
future "global game" will likely depend more on
employing a variation of the uniquely Bush II principle
of global politics (alliances of the willing).
And while there is much to learn from Europe, especially
on the art and mechanisms of consensus-oriented management
among independent nations, the collective sense in Asia is
that this is Asia's time.
The developed world’s “441” challenge firmly rooted in their
mind, they have all the incentives and useful warning signs
to get the process of managing Asia's — and their individual
countries’ — economic future right.
The biggest lesson for the faltering West from an Asian perspective?
Whatever you do, never over-promise to your own people. Never
become locked into long-term payment schemes you cannot afford.
And preserve the spirit of personal self-reliance that is
widely imbued in most of Asia as an economic necessity while
traveling the path toward much wider-spread wealth creation.