The End of the Asian Miracle
Comment of the Day

June 18 2012

Commentary by Eoin Treacy

The End of the Asian Miracle

Thanks to a subscriber for this interesting article by Antoine Van Agtmael for Foreign Policy which offers a more
measured opinion than the sensational headline might suggest. Here is a section:
The takeaway: Confidence about political stability and effectiveness has been shaken in China, India, and other emerging markets. The Arab Spring was a shock wave that not only brought to light misdeeds of autocratic regimes but also created economic uncertainties for the future. In BRICs at two ends of the political spectrum, political stability has turned out to be more fragile than earlier assumed. The Bo Xilai case in China has raised questions about the legitimacy of the whole political succession process. And Prime Minister Manmohan Singh's disappointing performance in India (some business leaders even told me he had "lost it") has created gridlock in New Delhi while emboldening states.

At the height of the financial crisis, local elites and the broader population in India and China viewed indecision, stagnation in policymaking, corruptive power of vested interests, and lack of leadership as major problems in the United States, Europe, and Japan -- but these same people are now concerned that they face similar problems. On the positive side, turmoil from Tunisia to Myanmar has brought hope and a feeling of empowerment. The sudden transformation now under way in Myanmar has re-energized Southeast Asia and the Association of Southeast Asian Nations as a sizable, relevant, and vital economic entity nestled between the two emerging regional superpowers, China and India.

Eoin Treacy's view Fullermoney has long said that “Governance is Everything” and it is no less true today than it ever was in the past. It is seldom useful to project well established trends into the far distant future and particularly when politics represent a considerable influence. We can only deal with the reality provided by the market when approaching our investments. If the considerable potential for growth evident in many countries is to be achieved then the trajectory of governance must be perceived to be improving.

China faces substantial challenges in migrating from an export and infrastructure driven growth model to one where domestic consumption plays a greater role. The USA has experienced a traumatic decade with lower standards of living for many and mounting federal debts. Europe is suffering the repercussions of failing to establish budgetary checks and balances when introducing the Euro. Strong leadership and improving standards of governance are essential if these challenges are to be met successfully.

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