Selected Economic, Political, and Social Trends in Asia in a Global Context

Mar 29

Rise of China and, to a less extent, India as central event in Asia over the last 20 years.
China’s relation to the United States: China as manufacturer of world and US as key buyer of Chinese products; China has provided credit from its trillion dollar reserves to keep US middle class consumption up; much of US debt is debt incurred from China; estimates that US owes China one trillion dollars; what happens when China calls in its debt so it no longer suffers from falling dollar.
China has also become the driver of growth in Korea, Japan, and Southeast Asia since 2002; Chinese demand is main factor for their recovery from Asian financial crisis; they produce components for China that China then puts together for export to the US and Europe, so that a recession in US will have knock-on effects in China and Southeast Asia.
While China has acquired reputation of being manufacturer of the world, India has built up its strength on software development and providing backroom offices services—that is, providing office services at cut-rate prices for US-based corporations.  However, India’s growth stems more from domestic demand, compared to China’s export-led growth.  Having seen the environmentally and socially destabilizing consequences of China’s growth, there is rising resistance in India in influential circles to following in China’s export-led footsteps.
China’s rise has led to the question of what is happening to the second biggest economic power in the world, meaning Japan.  Japan has only gotten over its 15-years of recession, partly owing to demand from China.  However, its recovery is slowing down, and there is fear in many circles that it has not really recovered from its long stagnation after the real estate and bank crashes of the early 1990’s.  China’s rise has had major geopolitical consequences for Japan.  With its population growth dipping below replacement levels and with an aging population, Japan has increasingly felt threatened by China’s economic rise and military strength, although Japan’s Self Defense forces are among the strongest in the world.  This has led Japan to strengthen its political ties with the United States. 
The US itself has an ambivalent relationship with China.  On the one hand, its corporations have been increasingly dependent on China as an investment area with its seemingly inexhaustible supply of cheap labor; on the other, China is seen by the Pentagon as a strategic competitor.  Its military posture in the Asia Pacific, where it has over 300 bases and facilities, is increasingly determined by a strategy of containing China, along with a an effort to contain Islamic fundamentalism.  These twin drives explain the deepening of the US military presence in Sulu and Mindanao and the reestablishment of strong ties between the US and Indonesian militaries. Washington has gained a strategic ally in India, owing partly to the latter’s competition with China, while its position is eroding in Pakistan owing to its backing for the unpopular president Pervez Musharaff. India’s becoming a strategic ally of the US is particularly problematic for the region. Once the historical counter-balance to US hegemony even after the collapse of the cold war, India has abandoned the pretence of promoting political independence, national development, and social welfare
Coming to the Pacific Rim countries, also formerly known as the “tiger economies,” they have not really recovered from the Asian financial crisis.  Indonesia’s poverty rate has been rising as its economy remains stagnant.  The Philippines’ growth is really a case of statistical manipulation.  Both countries continued to be marked by massive export of labor as their economies cannot absorb new additions to the labor force.  In Thailand and Malaysia, growth has not reached the levels it did prior to the crisis.  Korea’s growth may seem impressive, but there has been a wholesale transformation of the Korean economy.  Both trade and investment have been liberalized.  The amount of land owned by foreigners climbed 3.9 times to 148.5 million square meters from 1997 to 2003.  Total foreign direct investment between 1998 and 2004 came to $79 billion, or four times nearly four times the $25 billion that came in during the previous 25 years.  Even more striking, the ratio of foreign-owned shares in the stock market increased from 13 per cent in 1996 to 40 per cent in 2003.  As the presence of transnational actors has increased, the role of labor, which was already limited under the old regime, was eroded even further by neoliberal market reforms imposed by the IMF and the US Treasury Department.
In terms of political developments, the demise of the dictatorships in the 1980’s and 1990’s was followed by a process of democratization that became more conservative over time.  What I have called the “EDSA Republic” marked its 22nd year in the Philippines last month.  Its promise of people power has given way to the consolidation of an electoral system that promotes competition among the elites while destroying radical challenges to the class system through military repression.  Many say that the Philippine system of “patrimonial oligarchy” is now being reproduced in Indonesia, where the authoritarian New Order of Suharto has been replaced by competitive electoral arena where the monopoly groups that backed Suharto now compete as well as collude.  In Thailand, democratization led to a populist regime oriented towards big business and backed by the lower classes led by Thaksin Shinawatra, which was overthrown by a military coup that was passively backed by the Thai middle classes.  The coup has been largely seen as a massive setback to what many analysts had seen as the permanent retreat of the military to the barracks.  Malaysia two weeks ago underwent what is described as a political earthquake.  The race-based politics dominated by the UMNO suffered a major setback as the ruling coalition lost its 2/3 majority in Parliament to an alliance composed of Anwar Ibrahim’s People’s Justice Party, the Democratic Action Party, and the Islamic revivalist Pas.
–       When it comes to the role of multilateral institutions, I think it is safe to say that   
they have suffered a marked decline of influence over the last decade.  The most affected has been the IMF, which suffered an irreparable blow owing to its policies during the Asian financial crisis.  Thaksin Shinawatra rode to power on an anti-IMF platform, and his government fully paid off Thailand’s debt to the Fund in 2003, vowing never to return to the IMF.  Indonesia will also completely its loans this year.  This trend of the bigger borrowers from Asia and Latin America declaring themselves independent of the IMF has translated into a budgetary crisis for the IMF since the bulk of its funding has come from their debt repayments.  The World Bank and the ADB are also weaker now than a decade ago.  The bigger developing countries, such as China and India, have been leading an effort to question their policies, especially when it comes to corruption and good governance, and there is now a perceptible shift of the balance of power from the lenders to the borrowers.  The resignation of Paul Wolfowitz as World Bank president was not only a victory for the Bank’s senior management but also for the bigger developing countries who had united against him.  Equally important, many of the Asian countries, as well as that of Africa, are moving to borrow from China for their development projects, attracted by no-conditionality loans and lower interest rates.  This has moved the World Bank to lower the interest rates on its loans to compete with China, leading to its loss of leverage.  Nor only is there competition from China but also from private financial institutions are loaded with dollars seeking profitable investment as profitable investment opportunities in the US disappear with the onset of recession.  Both the World Bank and the ADB continue to support massive infrastructure programs, such as a regional power grid and electricity trading system that would create mega-dams in the Mekong region.
Debt continues to be a big drag on the development of certain countries such as the Philippines, which continues to spend 30 to 40 per cent of the government budget on debt servicing, despite increasing opposition to this in establishment political circles.  Official Development Aid has increasingly come under the same critical scrutiny as multilateral aid owing to conditionalities as well as a neoliberal focus on results.  The US Millenium Challenge Account, which clearly links ideological goals to aid levels, has not met with much acceptance by governments, who also tend to prefer low-interest loans from the private sector to official development assistance.
–       With the stalemate in the Doha Round of talks at the WTO, the US, Japan,
European Union, and China have resorted to competing efforts to come up with free trade arrangements with developing countries.  Japan is pushing for free trade agreements with key ASEAN countries, and treaties have already been signed and awaiting ratification in Thailand and the Philippines.  The US has pending FTA’s with Malaysia and Korea, though the anti-free trade mood in Congress is not likely to lead to their ratification soon.  China is negotiating an FTA with ASEAN as well as with individual Asian countries. The EU is also initiating economic partnership talks with ASEAN.  With the globe sinking into recession, however, the momentum towards free trade deals is likely to weaken.
Climate change has become a central concern of governments and citizenries   throughout Asia.  China is now on track to becoming the biggest emitter of greenhouse gases in the world while Indonesia is the fourth largest emitter of greenhouse gases.  Nevertheless, all countries are lined up with the G 77 position that unless the US and the North make really radical cuts in their GHG emissions they should not expect countries in the South to agree to mandatory cuts.  The focus of many countries is on getting the developed countries to transfer anti-global warming technology with no restrictions like intellectual property rights, provide massive funding to assist countries on the frontlines of climate change to adapt to global warming, and provide funding to create incentives for governments to protect their forests.  There is little questioning of the current capitalist mode of production and consumption that is increasingly seen as the central problem in climate change, and the implicit assumption is that the developing countries of Asia have as their goal the creation of consumption-oriented middle classes such as those of the North.
–       The climate crisis and developments in Asia must be seen in a larger global context where there have been very significant developments.  The global economy is descending into recession as a result of the gyrations of finance capital that are rooted in global overproduction.  This economic crisis will exacerbate the poverty and inequality that imprisons billions of people under the reign of global capitalism. 
–       It is likely that the global recession will further weaken US capital’s dominance globally, and this will accelerate the trend towards a multipolar global capitalist system marked by the emergence of new capitalist powers in the South such as China, India, and Brazil. This erosion of the power of the key center economy has been accompanied by the weakening of the multilateral system of global economic governance associated with Western hegemony, with a loss of momentum, authority, and credibility on the part of the International Monetary Fund, World Bank, and World Trade Organization. The WTO was seen as so central in the consolidation of a Western-dominated global capitalist system that the failure of the Doha Round has pushed the US, Europe, and Japan to accelerate the negotiation of bilateral and regional free trade deals with the South. 
–       Nevertheless, the decline of old actors and the rise of new ones does not seem to have prevented the spread of the underlying processes promoting the consolidation of global capitalism such as the privatization of the commons or what David Harvey calls “accumulation by dispossession,” though increasingly they encounter popular resistance.  The consolidation of global capitalism may not, however, take route of globalization or the rapid integration of production and markets that the world has been experiencing over the last 25 years, which has created tremendous crises and strains and to which there is now great popular reaction globally.
–       Paralleling the erosion of US capital is the weakening of US military and political hegemony.  The US imperial expedition in Iraq has gravely overextended US power, making it difficult for Washington to intervene militarily elsewhere, such as Iran.  Not only the US but the West as a whole has suffered militarily from the NATO adventure in Afghanistan, where the Taliban have expanded their influence.  The Iraq War and the Afghanistan Intervention have also prevented the US from paying attention to the coming to power in Latin America of movements and individuals hostile to Washington and neoliberalism such as Venezuela’s Hugo Chavez  and Bolivia’s Evo Morales. Mindful of Washington’s weaknesses, Russia has also become more defiant of both the US and Europe in pushing its geopolitical and geoeconomic interests.
On balance, however, at a global level, the US is weaker now than in 2003, when it invaded Iraq.
–       Other key global trends that bear mentioning are Israel’s continuing suppression of Palestinian rights; the deepening of the economic, political, and health crises in Africa, which is also being subjected to more intense geopolitical competition among the US, European Union, and China; an increasingly visible global food crisis affecting not only the poor but the middle classes as well as a result of , among other things, climate changes and the expropriation of agricultural land for biofuel production, urban development, and speculation; increasing movements of people under distress owing to loss of land and jobs, conflicts and wars, and forced resettlement; and the reemergence of significant movements for autonomy, secession, and independence, many of which are motivated by the desire of peoples and communities to exercise control over their resources
–       On the other hand, trends in Latin America are hopeful.  The coming to power of Rafael Correa in Ecuador and Evo Morales in Bolivia has strengthened the anti-neoliberal and anti-US axis in the region.  Argentina’s three-year string of 10 per cent growth has shown the merits of a policy of debt repudiation.  An alliance of Southern Cone countries was able kill the Free Trade Area of the Americas promoted by Washington.  This is not to say that there are no countertrends, among them the successful negotiation of a US-Peru Free Trade Agreement and the consolidation of Colombia as a US surrogate.  On balance, however, trends in Latin America have been positive.
Let me end by addressing key trends in civil society internationally and in Asia.  
Civil society has continued to be a major actor, though its influence is uneven globally.  In Latin America, civil society movements were clearly the key force in Evo Morales’ coming to power in Bolivia, and to a certain extent the same thing was true in Rafael Correa’s triumph in Ecuador.  The anti-free trade network continues to make a difference, contributing the continuing inability of the WTO to conclude the Doha Round. In East Asia, civil society networks actively engaging ASEAN and ASEM (Asia Europe Leaders’ Summit) have become prominent regional actors.  However, the global anti-war movement that mounted the impressive Feb. 15, 2003 global march against the Iraq War has lost a great deal of momentum.  The World Social Forum appears uncertain on where to go, with its promise of being a dynamic site for the formulation of alternative economic paradigms remaining largely unfulfilled. 
–       In a number of key Asian countries, however, trends are, on balance, negative. In India, the expectations that accompanied the defeat of the communalist, neoliberal BJP during the 2004 elections were doused when civil society and mass concerns failed to prevent the Congress-led alliance that took power from continuing on the BJP’s neoliberal course.  In the Philippines, progressive civil society networks were key actors in unsuccessful efforts to force the resignation of the president for cheating in the 2004 elections.—efforts which failed to lift off owing to absence of mass support.  In Thailand, civil society networks were active in the mobilizations against the Thaksin government in 2006, but their ranks were split badly by the coup that ousted Thaksin in September of that year.  As a result, they have been largely bystanders in the developments that led to the triumph of the pro-Thaksin forces in the December 2007 elections and the formation of a pro-Thaksin government.
Thank you.

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