Oceania, Eurasia, Eastasia.... Orwell was damn right:
Towards a tripartite world
W A S H I N G T O N , D C
This week, the leaders of the big industrialised countries are preparing to meet in Okinawa. But a challenge to their dominance of the world’s financial and trading systems is stirring right under their feet, argues Fred Bergsten*
economist.com
Excerpt:
Virtually unnoticed by the rest of the world, East Asian countries are getting together to make their own economic arrangements. As a result, for the first time in history, the world is becoming a three-block configuration. Not only global economic relationships, but political ones too, will turn on the direction these new agreements take --and on how the United States, and others outside the region, decide to respond to them.
The early steps
It was Mahathir Mohamad, the prime minister of Malaysia, who first proposed an East Asian Economic Group (EAEG) a decade ago. Nothing happened, partly because Dr Mahathir was under suspicion as a protectionist, but largely because the United States feared "drawing a line down the middle of the Pacific". America pushed instead, successfully, for relying on the Asia-Pacific Economic Co-operation forum (APEC). With very little fanfare, however, Asia has now created the "ASEAN+3" with precisely the same membership (ASEAN, China, Japan and South Korea) envisaged by Dr Mahathir. The group has held its own summits for three years in a row, has set up a "vision group" to guide its work, and holds regular meetings of its finance ministers.
[...]
Frustration, inspiration
Why have Dr Mahathir’s EAEG, Japan’s AMF and the long-dormant Asian trading-group idea sprung back to life at the outset of the 21st century? There are four basic reasons: the East Asian financial crisis; the failures of the WTO and of APEC to make headway on trade liberalisation; the positive inspiration provided by European integration (especially the euro); and a broad disquiet with the behaviour of both the United States and the European Union.
The single greatest catalyst for the new East Asian regionalism, and the reason it is moving most rapidly on the monetary side, is the financial crisis of 1997-98. Most East Asians feel that they were both let down and put upon by the West. In their view, western banks and other lenders created much of the crisis by pulling out. The leading financial powers then either declined to take part in the rescue operations, as the United States did in Thailand, or built the much-ballyhooed “second lines of defence” so deviously that they could never be used.
At the same time, the IMF and the United States dictated much of the Asian response to the crisis. Fealty to the “Washington consensus” was seen as necessary to qualify for official help and to restore access to private capital markets. The visual symbol of all this, captured in a photograph sent round the world, was the managing director of the IMF looming over the president of Indonesia like some imperial tyrant from ages past. The widespread view that the IMF programmes made things worse, at least for a while—a view proclaimed by some economists in the West itself—makes Asians still more resentful. And Malaysia’s recovery without the IMF implies that acceptance of the global norms may not have been so crucial after all.
This Asian perception of the events of 1997-99 is highly selective. Japanese banks were probably the biggest culprits in triggering the currency runs. Since most of the crisis countries are now recovering rapidly, the IMF
programmes were basically successful. The United States
kept its economy booming and its market open, accepting
a huge further increase in its trade deficit. By contrast,
Japan fell into recession and the yen plummeted. Japan’s
record trade surplus therefore rose even higher, and made
the Asians’ problems worse. However, inept American
diplomacy failed to capitalise on these stark contrasts; and
Japan recovered, at least in part, by pouring in government
money to meet Asians’ most urgent needs.
Whatever the right and wrongs of its opinions, East Asia
has decided that it does not want to be in thrall to
Washington or the West when trouble hits in future. It is not
rejecting the multilateral institutions, let alone opting out of
the international capital markets or the globalisation of
trade—which it knows would weaken rather than
strengthen its prospects. It seems to want to work with,
and within the framework of, existing bodies.
But East Asia also clearly feels that multilateral institutions,
on which it was previously willing to rely, are no longer
infallible. It notes that its aggregate economy and external
trade are about as large as those of the United States and
the EU, and that its monetary reserves are much larger (see
table). Hence it wants its own institutions, and a central say
in its own fate. As East Asia regains its strength, it is
determined never to be totally dependent again. |
