Two Asias

The following sections are included:

• Preface

• Acknowledgments

• Contents

• List of Tables and Figures

• List of Contributors

The global recession depression (2008–2010) has been the severest postwar decline on record.¹ It began symbolically with the collapse of Lehman Brothers on September 15, 2008 and may not have fully run its course, although the NBER “officially” declared that America’s recession was over in June 2010²…

Living standards of the East and West were broadly similar a millennium ago and remained that way for 500 years before the East swooned into a protracted decline. Asian per capita GDP fell relative to the EU benchmark for nearly 400 years, before Japan began closing the East‐West gap in the late 19th century. Taiwan and South Korea followed suit after being annexed by Japan and then continued their advance independently after the Second World War. China, Vietnam, Laos, and Cambodia joined the bandwagon in the 1980s after shifting from siege‐mobilized terror‐command to market communism. Thailand also has progressed, but North Korea and perhaps Myanmar continue to languish. There was a time when Asia’s ascent seemed unstoppable. Many confidently predicted that Japan and the tigers would overtake the West and just keep progressing. Similar claims are now being made for China and Vietnam, but this should not be taken seriously until the sources of their purported institutional superiority are convincingly elaborated. Asian economic systems have virtues, but their cultures constrain competitive utility‐seeking, judged from the neoclassical perspective, rendering them underproductive and inefficient. Although, this clouds Asia’s prospects, it does not settle the issue of comparative merit because the West violates its own ideal.

The following sections are included:

• Introduction

• Pre-crisis Consensus

• New Dissensus

• Omitted Variables

• Historical Benchmark

• Prospects

The following sections are included:

• Introduction

• Boom Before Bust

• Financial System Goes Bust

• Global Trade Grinds to Halt and Inventories are Run Down

• Country Experiences

• Exchange Rates During the Crisis

• The China Factor

• Concluding Remarks

• References

The 2008 financial crisis’s impact on Asia provided in Chapter 3 by Iikka Korhonen and Aaron Mehrotra is illuminated further with a battery of macro, fiscal, and monetary statistics for all Asian nations compiled by Takeo Hidai at the Institute of Economic Research, Hitotsubashi University. The macro indicators are GDP, new capital formation, industrial production, export and import activities, the current account (trade balance), and population. All are connected with the creation of value-added. They are complemented with fiscal indicators showing government revenues, expenditures and budgetary balances, and monetary indicators (money supply, wages, interest rates, reserves, and foreign exchange rates) essential for judging macroeconomic economic stimulus. Those wishing to evaluate the correlations between GDP trends and government stimulus country by country can do so by utilizing the following indicators.

The following sections are included:

• Introduction

• The Impact of the Global Financial Crisis on Asia
  • Hard hit by the crisis
  • Increased resilience against external shocks

• Estimating Structural Shocks to Demand Components

• Policy Challenges for the CMI
  • Progress of the CMI
  • Enhancing the effectiveness of regional surveillance

• Summary and Conclusions

• References

The following sections are included:

• Introduction

• The “Lost Decade” and After

• The Global Crisis and Fragile Recovery

• Dramatic Changes in Corporate Japan

• Labor System Reform

• Uncertain Compromise

• Conclusion

• Supplementary Notes

• References

The American financial crisis, triggered by Lehman Brothers bankruptcy, sent shock waves around the world in September 2008, including China. Demand for Chinese exports plummeted, exacerbating a downturn that had begun mid-2008 for purely domestic reasons. Exporters in Guandong Province were especially hard hit.

The following sections are included:

• Introduction: The Societal Context of the Modernization in Russia

• A Strong Growth After the Collapse of 1998, but Institutional and Societal Weaknesses Remain

• The Present World Crisis has Revealed Financial Vulnerability and Structural Weaknesses

• The Necessity for Modernization of the Russian Economy and for a Transition Toward a Post-Industrial Knowledge-Based Economy⁹

• The Importance of a Renewed External Policy: A Regional “Soft Power” Independent Policy is not Sufficient to Stimulate the Modernization Process

• Conclusion: The Europe-Russia Relationship and the Potential Effects Accruing from Membership of the WTO must be the Driving Force for Modernization

• References

Financial crises are riveting experiences because there is always the chance that the fire this time will be catastrophic, even though history shows that ‶Black Swan″ disasters are extremely rare¹. At the crisis’s onset, scholars diagnose symptoms, round up the usual suspects, identify novel elements, prescribe remedies, scour the past for clues about the shape of things to come², and prognosticate.

China’s greatest loss from the 2008‐2010 crisis is the death of its 1986‐2007 growth model. However, like a phoenix resurrected from its funeral ashes, what China metamorphoses into has the potential to be even better than its past. Section 10.1 of this chapter explains China’s 1986‐2007 export-driven growth model and why the 2008‐2010 crisis has killed it. Section 10.2 explains China’s short-term response to the crisis – an increase in fiscal stimulus – and produces preliminary quantitative estimates of its effectiveness. Section 10.3 explains China’s long‐term response to the crisis – a switch to a domestic consumption‐driven growth model – and why it could make China an even better economy. Section 10.4 concludes.

The following sections are included:

• Export-Led Growth and its Role in the Current Imbalances
  • Advantages and disadvantages of export-led growth
  • Transmission of impacts and decoupling
  • Global imbalances are part of the export-led growth mechanism

• The Pattern of Asia-Pacific Integration into the Global Economy Sets: These Economies’ Future
  • Recent trends in exports and imports
  • Developments in trade orientation and trade dependence prior the current crisis
  • “Factory Asia” phenomenon
  • Intraregional trade grows asymetrically

• Helping the (New) Engine to Run
  • Fiscal policy and, stimulus packages
  • Trade, investment, and exchange rate policies

• Way Forward

• References

The following sections are included:

• Introduction

• Comparative Advantage and Import Variation

• Shifting Sources of US Import and Japan’s Offshore Sourcing

• Changes of Japanese Exports: Extensive and Intensive Margins

• Changes of Japanese Exports after the Financial Crisis

• Sustainable Growth of World Trade

• Conclusion

• References

The following sections are included:

• Introduction

• Literature Survey

• Data and Empirical Methodology
  • Data
  • Empirical methodology

• Results

• Conclusions

• Appendix

• References

The following sections are included:

• Introduction

• An Overview of Economic Growth in the BRICs

• From Dutch to Russian Disease

• The Impact of Trading Gains on Economic Growth in the BRICs

• Summary

• References

The international crisis has hit hard the Eurozone (EZ) and shows remarkably distinct patterns among its countries. The EZ, and hence the Euro, has shown to be highly vulnerable to external shocks, suffering of deep-seated as well as new structural and financial imbalances. At the same time, the EZ’s ability to cope with its economic vulnerability has been weak, revealing rigid decisional procedures. Coordinated policy responses have been slow. However, the crisis has given an important push to coordination of economic policies and instruments.

Modernization, enlightenment, liberalization, and democratization allowed the West to surpass Asian economic achievements from 1500 to 1945. After World War II, Japan, building on its Meiji, Taisho and Showa era successes, together with Taiwan, South Korea, Singapore, and Hong Kong began rapidly converging to the West’s high per capita income frontier. Market communist China and Vietnam followed on their heels with a 40-year lag.¹ All these countries adopted export-led development strategies and liberalized in accordance with neoclassical microeconomic theory. All embraced the nostrums of Western macroeconomic and monetary theory and joined the World Trade Organization (WTO), International Monetary Fund (IMF), and World Bank. All pursued rapid modernization policies, including gender-neutral mass education, and increased female labor-force participation. They acquired superior technologies and skills through outsourcing and technology transfer. All marketized, liberalized, and promoted entrepreneurship.

The following sections are included:

• Conclusion

• Index