Asian woes

Is an Asian economic rebound fast approaching? Not likely. An article in last Sunday’s Honolulu Advertiser reported an alarming Asian deflationary spiral. Prices are sliding, market demand is faltering, profits are declining, and economic growth is contracting. Regional economic fundamentals are only worsening.

This means that the CNMI is in for even graver troubles ahead. Our economic woes should persist for at least several more years, as long as it takes Asia–and foreign investment–to fully recover.

Japan’s turnaround, in particular, remains critical. If Japan continues to flounder, so will our tourism industry. Japan is still our number one tourist market. It would take years to develop another substantial market.

The rest of Asia also depends heavily on Japan’s recovery. After the United States, Japan is the world’s second largest economy. It is the single largest economy in Asia and a major source of Asian tourism and foreign investments.

Japan, however, is not likely to recover any time soon. It has been embroiled in a deep recession for at least the past seven years, ever since its speculatory bubble bursted. Japan’s underlying problems go much deeper than insolvent banks.
(Although on a somewhat smaller scale, America recovered rather quickly from its Savings and Loan fiasco a few years back.)

Japan’s basic problems are intrinsic to the country’s political-financial system. The problem ultimately stems from Japan’s prevailing collectivist culture. As a November 1998 article in Forbes magazine attests, “In the name of the common good, the Japanese people have come to accept a system that is inimical [hostile] to their best interests.”

During the heady “Asian miracle” days of double-digit economic growth, liberal academic types vilified the United States for failing to follow the successful Asian “Capitalist Developmental State” model. Liberal naysayers poo-pooed free market capitalism in favor of centralized bureaucratic enlightenment, which favored heavy government subsidies, particularly in high-tech research and development for product exports. (Korea had its government-backed Chabol conglomerates; Japan had its state-sponsored interlocking Keiretsu directories.)

For a number of years, it all seemed to work. The various Asian ministries of trade and finance seemed all the rage. For a time, the West seemed to suffer a free market conundrum–a perplexing situation in which the guiding hand of state control appeared to have successfully worked the so-called Asian miracle. Some pundits even suggested we take advice from Malaysia’s amazing success at the time.

Since the Asian miracle unraveled with the currency crises of 1997, however, Western free market capitalism appears to have been vindicated. America remains an oasis of prosperity in a cataclysmic sea of economic tumult. And as long as Asia refuses to completely follow the competitive free market model, it will continue to remain adrift–and so will we.