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Lessons for the West from Asian Capitalism
Singapore—Asian elites have always looked at the world differently from western elites. And after this crisis is over, the gap in perspectives will widen. Asians will naturally view with caution any western advice on economics, particularly because most Asians believe that the crisis has only vindicated the Asian approach to capitalism.
To be accurate, there is more than one Asian approach. China's economy is managed differently from India's. Yet neither China nor India has lost faith in capitalism, because both have elites who well remember living with the alternatives. (...)
The benefits of the free market to Asia have been enormous: increased labor productivity, efficient use and deployment of national resources, a tremendous increase in economic wealth and, most importantly, hundreds of millions have been lifted out of absolute poverty. (...)
The desire for an orderly society is deeply ingrained in the psyche of all Asians, which helps explain why virtually all Asian states hesitated to copy America in deregulating their financial markets. Instinctively, they felt government supervision remained critical. This was equally true in India's democratic system and in China's Communist party system. (...)
Asian culture has been honed by centuries of hard experience, which explains why Asians save more. All Asian societies have memories of turbulent times. They know from experience the importance of preparing for the bad days that will follow the good. Most Asian friends of mine find it inconceivable that some Americans can live from pay check to pay check. "But what happens if you lose your job?" they ask.(...)
And when this storm is over, we should not be surprised to discover that the greatest global believers in capitalism will be in Asia. But it will be an Asian mix of capitalism, not the western formula, that will become the dominant form of global capitalism, where the "invisible hand" of free markets will be balanced by the "visible hand" of good governance.
The Asian mix may have its own weaknesses. Asia is still underperforming in creativity and innovation. Corruption will remain a serious problem.
The Asian emphasis on the family unit may also be a mixed blessing. Many of Asia's most successful entrepreneurs are keen to retain family control of the business. This enables them to take a long-term view. But the downside is nepotism and the lack of a deep culture of meritocracy.
On balance, the strengths of Asian capitalism are greater than the weaknesses. Within a decade Asians will have some of the largest free trade areas, including those between China and the Association of South East Asian Nations, the Japan-Asean FTA, and the Indian-Asean FTA that is likely to be set up. (...)
Despite this, there will be no ideological trumpeting of the virtues of Asian capitalism. After their experiences of the past 100 years, Asians are wary of ideology. They prefer the simple, common sense approach of learning from experience and they will heed the advice of Adam Smith, who said that prudence is "of all virtues that which is most useful to the individual." It may also be helpful to nations.
