Is Asia Becoming the Center of the World Economy? Posner

I am less bold than Becker, and so I will make no predictions about the future of the wo rld economy. I do have some reservations about treating Asia as a unit, however. Even if one stops at the eastern border of Pakistan, the Asian countries are far from uniform in their economic prospects. For they include such politically and economically challenged nations as Pakistan, Bangladesh, and Burma, along with Australia and New Zealand, which are not culturally or ethnically Asian; and Japan, which has a rapidly declining population and is economically stagnant, albeit at a high level. The fact that there is such heterogeneity in the Asian world suggests that individual country factors predominate over factors that distinguish Asia as a whole from the other continents. online casino with paypal casino casino gamble gambling gambling online online virtual roulette online casino gaming online casino links online casino online casino sign up bonus online play casino slot machines casino online slots casino gambling law online betting casino gambling online sports online casino gambling casino online sports books and casino best casino slot online online casino review vegas online casino casino casinos online secure online casino internet casino online directory legal online casino daily search statistics trucos casino online casino game online slot online blackjack casino gambling casino gambling holdem online poker texas best online casino casino online coupon usa forum online casino list money online casino online casino royal vegas online casino gambling no deposit online casino listings usa casino gambling online poker uk rules of poker casino online online casino poker online casino christmas no deposit casino gamble money online win casino online in usa grand bay online casino codes casino grand mgm online us online casino reviews online casino wheel of fortune grand hotel online casino casino royal 07 online poker casino blackjack game online game bonus internet casino and gambling online casino gambling compare online uk eurolinx online casino no deposit online casino usa new listings top 10 online casino no deposit freebies online casino no deposit bonuses casino forum online What is a common to a number of the Asian countries is mercantilism, which is to say the policy of accumulating large cash balances (in the old days, it was gold) by devaluing the currency, so that exports are cheap and imports dear. The result is an export surplus; and if a country sells more than it buys, it takes in more foreign currency than it spends in its own currency. China, aggressively mercantilist, has accumulated almost two trillion U.S. dollars. The mercantilist policy of China and other East Asian countries has been attributed to the financial trouble that a number of these countries got into in the late 1990s when their governments were pursuing the opposite policy--that of encouraging imports and, in particular, foreign investment in their countries. As a result (much like the United States in the 2000s!) these countries accumulated large foreign exchange deficits, which ballooned when the investors shifted many of their investments to other parts of the world. The deficits reached a level at which the countries had to push interest rates up to depression-causing levels in order to prevent the flight of capital from reaching a point at which the countries' credit systems would collapse. Once burned, twice shy; the East Asian countries switched to an export-first policy, which by enabling them to accumulate large dollar balances have prevented a recurrence of capital flight. I am calling it "mercantilist" but in part, perhaps major part, it should be viewed as precautionary--to prevent a repetition of the economic crsis of the 1990s. Yet China had already begun to emphasize exporting. The reason may lie in John Maynard Keynes's analysis of mercantilism. He argued that if domestic demand for goods and services is weak, perhaps because of a low propensity to consume, there is likely to be a lot of unemployment, as otherwise supply would exceed demand. By devaluing the currency and thus making exports cheaper and so increasing the demand for exports, government can increase employment, because the higher output is, whether consumed domestically or abroad, the more workers are needed. The Chinese population was (and is) poor, so domestic demand was weak, and overall demand and therefore output could be increased by pushing exports. The success of such a policy would depend on the foreign demand for goods that Chinese industry was able to produce at reasonable cost, but that demand proved to be strong. The large dollar balances accumulated as a consequence of the export-first policy were available for investment. As a result, China is today the world's largest creditor. Should the United States and other debtor nations reduce their foreign borrowing, China's (and other East Asian countries') mercantilist policies will become less attractive because interest rates will fall. Moreover, as domestic demand in those countries grows, there will be pressure to make imports cheaper and to divert production from satisfying foreign demand to satisfying domestic demand. On both counts, trade balances will become more even. But how even? Japan, despite its very high standard of living, had, until the current economic downturn, a strongly positive balance of trade. An unusually high propensity to save, coupled with an inefficient system for distributing consumer goods and services, keeps domestic demand down. It remains to be seen whether, as China's economy grows, it will become more like Japan, or more like the United States.

Comments

You can follow this conversation by subscribing to the comment feed for this post.

Very nice site! cheap viagra

Posted by: Anonymous | 07/17/2009 at 03:35 AM

Very nice site!

ÿØÿ±ÿØÿ¥ÿ©
___
ÿµŸàÿ±

Posted by: Anonymous | 07/19/2009 at 09:16 AM

Perfect site, i like it!

Posted by: Anonymous | 07/22/2009 at 04:12 PM

Very interesting site. Hope it will always be alive!

Posted by: Anonymous | 07/23/2009 at 07:45 AM

thanks for your

ÿ¥ÿßÿ™

ÿØÿ±ÿØÿ¥Ÿá

Posted by: Anonymous | 07/23/2009 at 08:48 PM

Beautiful site!

Posted by: Anonymous | 07/23/2009 at 10:49 PM

thanks to tell me that,i think thats ao usefully----
tiffanys
links of london

Posted by: Anonymous | 07/24/2009 at 03:34 AM

Posted by: Anonymous | 07/24/2009 at 06:02 PM

features keep likely international new

Posted by: Anonymous | 07/27/2009 at 07:56 AM

less new observations levels ocean global direct

Posted by: Anonymous | 07/27/2009 at 08:08 AM

Posted by: Anonymous | 07/28/2009 at 02:12 PM

Posted by: Anonymous | 07/28/2009 at 02:14 PM

Posted by: Anonymous | 07/30/2009 at 09:47 PM

Great site. Keep doing.

Posted by: Anonymous | 07/31/2009 at 06:14 AM

ÿØÿ±ÿØÿ¥ÿ© ÿ®ÿ±ŸÇ

ÿØÿ±ÿØÿ¥ÿ© ÿßŸÑÿÆŸÑŸäÿ¨

Posted by: Anonymous | 07/31/2009 at 07:30 PM

Posted by: Anonymous | 08/01/2009 at 08:17 AM

Excellent site. It was pleasant to me.

Posted by: Anonymous | 08/03/2009 at 02:11 PM

I bookmarked this link. Thank you for good job!

Posted by: Anonymous | 08/03/2009 at 09:04 PM

Posted by: Anonymous | 08/04/2009 at 01:21 AM

Perfect work!

Posted by: Anonymous | 08/04/2009 at 02:46 AM

Posted by: Anonymous | 08/04/2009 at 04:11 AM

I want to say - thank you for this!

Posted by: Anonymous | 08/04/2009 at 08:30 AM

Posted by: Anonymous | 08/04/2009 at 11:24 AM

It is the coolest site, keep so!

Posted by: Anonymous | 08/04/2009 at 12:52 PM

Verify your Comment

Previewing your Comment

Posted by: |

This is only a preview. Your comment has not yet been posted.

Your comment could not be posted. Error type:

Your comment has been posted. Post another comment

The letters and numbers you entered did not match the image. Please try again.

As a final step before posting your comment, enter the letters and numbers you see in the image below. This prevents automated programs from posting comments.

Having trouble reading this image? View an alternate.

The Becker-Posner Blog

Welcome to the new Becker-Posner Blog, maintained by the University of Chicago Law School.

05/31/2009