[OPE] Walden Bello: "Asia: The coming fury"

> *Asia: The coming fury*
>
> Walden Bello
>
> The dynamics of foreign-investment-driven growth was best illustrated in
> Thailand, which received $24 billion worth of investment from
> capital-rich Japan, Korea, and Taiwan in just five years, between 1987
> and 1991. Whatever might have been the Thai government's economic policy
> preferences - protectionist, mercantilist, or pro-market - this vast
> amount of East Asian capital coming into Thailand could not but trigger
> rapid growth. The same was true in the two other favored nations of
> northeast Asian capital, Malaysia and Indonesia.
>
> It wasn't just the scale of Japanese investment over a five-year period
> that mattered, however; it was the process. The Japanese government and
> /keiretsu/, or conglomerates, planned and cooperated closely in the
> transfer of corporate industrial facilities to Southeast Asia. One key
> dimension of this plan was to relocate not just big corporations such as
> Toyota or Matsushita, but also small and medium enterprises that
> provided their inputs and components. Another was to integrate
> complementary manufacturing operations that were spread across the
> region in different countries.
>
> The aim was to create an Asia-Pacific platform for re-export to Japan
> and export to third-country markets. This was industrial policy and
> planning on a grand scale, managed jointly by the Japanese government
> and corporations and driven by the need to adjust to the post-Plaza
> Accord world. As one Japanese diplomat put it rather candidly, "Japan is
> creating an exclusive Japanese market in which Asia Pacific nations are
> incorporated into the so-called /keiretsu/ [financial-industrial bloc]
> system."
>
> *China masters the model*
> If Taiwan and Korea pioneered the model and Southeast Asia successfully
> followed in their wake, China perfected the strategy of export-oriented
> industrialization. With its unmatchable reserve army of cheap labor,
> China became the workshop of the world, drawing in $50 billion in
> foreign investment annually by the first half of this decade. To
> survive, transnational firms had no choice but to transfer their
> labor-intensive operations to China to take advantage of what came to be
> known as the "China price", provoking in the process a tremendous crisis
> in the labor forces of advanced capitalist countries.
>
> This process depended on the US market. As long as US consumers
> splurged, the export economies of East Asia could continue in high gear.
> The low US savings rate was no barrier since credit was available on a
> grand scale. China and other Asian countries snapped up US Treasury
> bills and loaned massively to US financial institutions, which in turn
> loaned to consumers and homebuyers.
>
> But now the US credit economy has imploded, and the US market is
> unlikely to serve as the same dynamic source of demand for a long time
> to come. As a result, Asia's export economies have been marooned.
>
> *The illusion of decoupling*
> For several years China has seemed to be a dynamic alternative to the US
> market for Japan and East Asia's smaller economies. Chinese demand,
> after all, had pulled the Asian economies, including South Korea and
> Japan, from the depths of stagnation and the morass of the Asian
> financial crisis in the first half of this decade. In 2003, for
> instance, Japan broke a decade-long stagnation by meeting China's thirst
> for capital and technology-intensive goods. Japanese exports shot up to
> record levels.
>
>
> Indeed, China had become by the middle of the decade, the overwhelming
> driver of export growth in Taiwan and the Philippines, and the majority
> buyer of products from Japan, South Korea, Malaysia, and Australia.
>
> Even though China appeared to be a new driver of export-led growth, some
> analysts still considered the notion of Asia decoupling from the US
> locomotive to be a pipe dream. For instance, research by economists C P
> Chandrasekhar and Jayati Ghosh, underlined that China was indeed
> importing intermediate goods and parts from Japan, Korea, and member
> countries of the Association of Southeast Asian Nations, but only to put
> them together mainly for export as finished goods to the United States
> and Europe, not for its domestic market.
>
> Thus, "if demand for Chinese exports from the United States and the EU
> slow down, as will be likely with a US recession", they asserted, "this
> will not only affect Chinese manufacturing production, but also Chinese
> demand for imports from these Asian developing countries".
>
> The collapse of Asia's key market has banished all talk of decoupling.
> The image of decoupled locomotives - one coming to a halt, the other
> chugging along on a separate track - no longer applies, if it ever had.
> Rather, US-East Asia economic relations today resemble a chain-gang
> linking not only China and the United States but a host of other
> satellite economies. They are all linked to debt-financed, middle-class
> spending in the United States, which has collapsed.
>
> China's growth in 2008 fell to 9%, from 11% a year earlier. Japan is now
> in deep recession, its mighty export-oriented consumer goods industries
> reeling from plummeting sales. South Korea, the hardest hit of Asia's
> economies so far, has seen its currency collapse by some 30% relative to
> the US dollar. Southeast Asia's growth in 2009 will likely be half that
> of 2008.
>
> *The coming fury*
> The sudden end of the export era is going to have some ugly
> consequences. In the past three decades, rapid growth reduced the number
> of people living below the poverty line in many countries. In
> practically all countries, however, income and wealth inequality
> increased. But the expansion of consumer purchasing power took much of
> the edge off social conflicts. Now, with the era of growth coming to an
> end, increasing poverty amid great inequalities will be a combustible
> combination.
>
> In China, about 20 million workers have lost their jobs in the last few
> months, many of them heading back to the countryside, where they will
> find little work. The authorities are rightly worried that what they
> label "mass group incidents", which have been increasing in the last
> decade, might spin out of control.
>
> With the safety valve of foreign demand for Indonesian and Filipino
> workers shut off, hundreds of thousands of workers are returning home to
> few jobs and dying farms. Suffering is likely to be accompanied by
> rising protests, as it already has in Vietnam, where strikes are
> spreading like wildfire. South Korea, with its tradition of militant
> labor and peasant protest, is a ticking time bomb.
>
> Indeed, East Asia may be entering a period of radical protest and social
> revolution that went out of style when export-oriented industrialization
> became the fashion three decades ago.
>
> /*Walden Bello*// is a Foreign Policy In Focus columnist, a senior
> analyst at the Bangkok-based Focus on the Global South, president of the
> Freedom from //_Debt_/
> <http://www.atimes.com/atimes/Asian_Economy/KB11Dk01.html#>/ Coalition,
> and a professor of sociology at the University of the Philippines./

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Received on Tue Feb 10 15:19:03 2009