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| Andreas Sieren & Frank Sieren: Asian lessons for Europe |
| Andreas Sieren & Frank Sieren / Jul 15, 2010, 00:59 IST |
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Asia understood a long time ago that pluralism in difficult situations may accelerate the crisis
If somebody had asserted during the late 1990s that Europe would slide into an economic crisis as Asia had done more than a decade ago, one would have dismissed the person as delusional. A reasonable response would have been: Crises only occur in developing countries where governments borrow beyond their means. Newly rich elites in these countries have not fully comprehended the risk of the game.
And then one would have politely changed the topic of the conversation.
Yet now we have the Asian financial crisis in Europe. Similar to what’s happening in Europe now, back in 1997, one Asian country went beyond its means economically and pulled other countries in the region down. The Asian Greece was Thailand, which today remains one of the most economically vulnerable countries in east and south-east Asia. However, contrary to the situation in Europe, Asian countries had a valve that allowed them to release pressure: They were able to devalue their respective currencies. And the Asian nations that remained sound in the late 1990s were still anticipating a new phase of economic growth with their unsaturated markets.
Since an economic growth spurt in Europe is unlikely in the near future, one has to assume that the worst is yet to come. Spain may become the South Korea of Europe. Spanish banks are already shaking. And the economic rating of the country is falling. Thailand was down on its knees in July 1997; South Korea followed in November the same year. And then everybody began to say: “Now it’s getting serious.”
Parallels can also be drawn between the term used for bailing out countries in economic trouble by Europe and that used by Asia.
The China of crisis-stricken Europe is Germany. Both countries are export champions of their respective regions. With large trade surpluses, each has the strongest economy and, therefore, carries substantive political weight. Because of their success and, at times, brusque ways of conducting politics, both are more respected than appreciated.
Nevertheless, Asia has never put its economic and political champion China under pressure as Europe did with Germany. First, the Germans had to defend themselves for their economic well-being, which allegedly occurred at the cost of its European neighbours. Once the crisis broke, the Germans were expected to foot most of the bill and were consequently criticised for their reluctance to do so. Then the Germans had to rally all European leaders around an economic rescue package. Eventually, the Germans tried a solo run to push through a tighter regulation of financial markets. Again, criticism was strong — but this time it was justified. This poorly prepared step led to Europe drifting further apart on important issues.
To treat a leading nation in such a way in crisis would have been unthinkable in Asia — then and now. Asia is far from being as integrated as Europe. To date, Asia has no common currency, no common market, no relaxed customs and no common government.
The respectful treatment of China in Asia may have been for cultural reasons. It definitely has to do with the fact that China has a lot more power in Asia than Germany has in Europe. But there is another reason: Asians currently have a more realistic self-image. They are a lot more aware of their own weaknesses, while Europeans until recently felt unimpeachable. They believed that there was no competition out there.
Now, Europeans have woken up — although not completely. While they are tending to their wounds, they have begun to quarrel among themselves again. Leading politicians in Europe may not yet have fully grasped the unfavourable situation that Europe finds itself in. They still believe that a lasting economic crisis in Europe is impossible.
In the meantime, political observers in Beijing have come to the following conclusion: Europe has to get through a short crisis, but in the long term, it is also in an inauspicious development phase. That becomes apparent in a comparison between the European crisis and the Asian financial crisis. Shortly after the economic turmoil, Asians resumed an economic spirit of optimism that has prevailed to this day. The European crisis, on the other hand, will be followed by economic stagnation. Irrespective of Europe’s continued secret and bashful accumulation of debt or attempts to reduce government spending, thereby undermining any possible economic take-off, the fact is that Europe has limited scope to expand its prosperity level.
Even the Chinese prime minister has publicly expressed concern about conditions in Europe: “This phenomenon — is it over? It does not look like it. We have to become aware of the full extent of the difficulties.” The problems in America and Europe cannot stop the global recovery and cause a new downturn of economic growth, the premier added.
This assessment does not appear to be exaggerated. It suggests that Europe is being burnt, slowly and steadily, by a long-smouldering fire. The flames are cooled but may soon blaze again. Europe has to become accustomed to the smell of a smouldering fire.
There is also no all-clear signal coming from America. Household savings rates are declining again, the government continues to accumulate debt. It is likely that we will have to face a series of crises with the trouble spots alternating between Europe and America.
Although a bit exaggerated, one can identify three different reactions to the global crisis. The US is becoming more aggressive, especially towards China, which won’t make it any more popular. One should not be deluded by the seeming cosiness between the two super powers at the recent US-China summit in Beijing. Europeans only act collaboratively in an acute crisis and then disunite again over major issues. That weakens their position towards other regions in the world. In the meantime, Asians are moving closer together — suppressing their national egos, assessing opportunities and risks rationally and becoming more competitive. All three reactions contribute to a development which will hurt Europe economically in the long run — the shift of the epicentre of global economic development towards Asia. The dramatic increase of inter-Asia trade in recent months attests to this.
In the same way that Europeans are still disbelieving that an Asian financial crisis-type situation has arrived in Europe, they do not appraise their situation realistically. Every major nation still believes it can pursue its own individual economic path, its Sonderweg. That is dangerous, as it is by pulling itself together that Europe will be able to find a pathway through and out of the crisis. Europeans particularly have to realise what Asians understood a long time ago: Pluralism in difficult situations may accelerate the crisis.
Andreas Sieren is a specialist in international relations and development aid. He worked for many years for the United Nations in Asia and Africa. His brother Frank Sieren is a bestselling author and has been living in Beijing for 15 years. He is regarded as one of the leading German experts on China
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