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Wednesday, August 11, 2010

"Asian" Giants Decoupling from "the West"?

In an analysis published in a recent issue of the Financial Times --brought to the attention of his Facebook friends by Alex Callinicos this morning--David Pilling, Asia editor of FT, considers the possibility that the current growth engines of the world, the most steeply growing, and largest Asian economies, may be in the process of "decoupling from the west." My reading suggests that the thought Pilling raises is that "Asian economies" might elect not to trade with "the west" at some point. Pilling insists of course that their ability to do so "has not been fully tested." (I suppose the only genuinely credible test of decoupling would be--the act of decoupling, obviating the guessing game).

No matter how carefully framed as a hypothetical possibility, this raises a host of questions regarding the immediate future of the basic structural setup of the global system.

First, as it was pointed out by a senior Chinese economist at an international conference in Beijing a few years ago (at a time when the US and EU governments were threatening PRC-based producers with dumping charges) we have a situation in which the "west" is dependent on China in a number of politically sensitive areas--e.g., a vast part of consumer product manufacturing. When I say "dependent," I mean the textbook definition of dependence: an economy is externally dependent to the extent it relies on inputs that are in the hands of a relatively small number of external actors. In the words of this Chinese economist, "[If western governments were to impose punitive measures on Chinese exports,] Chinese producers will just re-tool for a different size assortment for internal consumption; meanwhile the bottom half-to-two-thirds of the US and west European markets in textiles, electronics, etc., will fall out. No government can afford such a collapse." If we consider the broader point and add all the other major growth economies of Asia to China, this is truly nothing but a new situation of external dependence.

Second, whether any or all of what Pilling calls "Asian economies" is able to decouple from "the west" is truly questionable.

Third, what would it take for all the "Asian economies" to act together, in concert, displaying a global policy move of this magnitude? A single, harmonized trade policy involving China, India (two states that have not even been able to resolve their border disputes for more than two-generations), Vietnam, Indonesia, Singapore, Taiwan, etc.? What about military alliances, the presence of foreign troops and the profits taken from such arrangements? What about the drastically different ownership structures of those economies? Some state socialist, others muslim, others hindu/muslim/parsi/buddhist/christian/united-in-diversity?

Fourth, to what extent is "the west" a single entity in this regard? Would all "Asian" economies decouple from all of the west in one fell scoop? Even the European Union--a concept we often oversimplify to mean a single unit--is known to be rather elusive and metaphorical in its "unit-ness": Consider what I call in Chapter Four of my book the elasticity of size: the European Union acts, clearly, either as a single unit or as a conglomerate of its 27 member states, or both, depending on the contexts, the decision-making rules and other conditions. Adding the USA and all the rest of the west in the mix, it is difficult to see them as a single unit of public authority (i.e., something the "Asian economies" could decouple from). Is Russia part of this "west"?

Fifth, why would the "Asian economies" want to do so? This is a truly nagging question, since the current arrangement seems to be working great for the rising "Asian" economies: they are having a 6% to 10% differential in growth rates.

Sixth, decoupling of this magnitude, especially in the non- or partly-liberalized (not to mention, as in the case of the PRC and Vietnam, to a considerable degree state-owned) economies, can only take place through a set of policy measures conceived, governed, executed and safeguarded by the national governments. Which government of these steeply rising economies would even contemplate global turmoil and precipitous drops in profitability by shedding the "west"--read: currently their largest external market?

Seventh, the threat of being left behind is of course something that will always have a certain currency in "the west," which is plagued not only by vague remnants of its own tradition of xenophobia, especially vis-a-vis "Asia," but a large dose of bad conscience in a post-colonial world. Given this mild but persistent psychosis, conversations of "Asian decoupling" will likely strengthen "western" integration, possibly beyond the borders of the European Union. At least that is what the decade's research on the five-centuries-long history of capitalist geopolitical economy, and the peculiarities of west European statehood in that history, suggest.

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cover page of the book

cover page of the book
image used for the cover design by Anannya Dasgupta