Farewell To The West?

In our little series “Who Will Save Capitalism,” we turn today to the ascendant Asians who are considered to be on the verge of cracking 200 years of Western – mainly American – economic dominance, to the benefit of the “Asian Century.”

But first, an interim report: the up-and-coming nations will be neither the saviors nor the avengers; they’re also caught in the global crisis, and it is exposing only their weaknesses.

The stock market is an important index: markets (since the beginning of the year) have fallen no more dramatically than they have in China (down 62 percent), in the developing countries (down 61 percent), and in Russia (down 72 percent). So much for the “Schadenfreude Choir” that smugly sang “decoupling” and wished the West an early retirement.

In the light of the crisis, what’s missing becomes apparent. In Russia, for example, it’s a constitutional government and a functioning market where oligarchs and foreigners have stopped investing since the invasion of Georgia and falling oil prices.

And China’s double digit growth as long as the Yangtze River – that is, up until now. Two figures: the growth of exports has fallen to 9 percent. Not too bad? In 2007 it was at 26 percent.

Tens of thousands of factories have closed their doors because China’s economic miracle was a borrowed one. The magical growth was based on very low-cost “leasing” of workers and facilities to foreign entrepreneurs who accounted for two-thirds of China’s exports.

That gave China two trillion dollars in currency reserves, but also made it extremely dependent on the rest of the world. Almost one-third of China’s exports go to three nations: the United States, Japan, and Germany. If they get sick, panic breaks out in the political arena because if growth falls to less than eight percent, social unrest rises to an unbearable level.

Where is the other giant, India, in this crisis? It’s neither seen nor heard, because the largest democracy on earth is in many ways not even capable of leadership – not with its corrupt caste system, its decaying educational system, and its lasting conflict with Pakistan outside its borders and 200 million Muslims inside. The Rupee is falling because 13 billion in investments has been withdrawn.

Now let’s turn to the problem solvers. Funny, the United States and the European Union are still good for half the world’s economic output (the USA for 26 percent, an historical average over the last 100 years).

The decline of the West must be taking an awfully long time. Could it be that the 800 million people who settled between Berlin and Berkeley, those who invented everything between the Renaissance and the fax machine, might also have the best tools for managing this crisis, namely democracy and markets?

Both systems run the same way. They produce endless information in real time (what works, what doesn’t), and they permit corrections in the eternal struggle that is embodied in constitutional government, respect for opponents, and the peaceful transition of power.

And a word from my own domain: how important it is to have independent media! In Russia, the only source people have for the truth about their own economy is the Internet.