Op-Ed Contributors

Can Asians think? They've started to

By Andrew Sheng (China Daily)
Updated: 2010-04-28 07:49

Editor's note: Asia has been preparing to take an ideological lead in post-crisis economy instead of following the guide from the West.

My Singaporean friend, Prof Kishore Mahbubani, wrote a provoking essay in 1998, Can Asians think? I found the title rather offensive - of course we can think. But what he really meant was, "Can Asians think out of the Western intellectual box?" Most of us trained in or by the West used to think that the ideals of best practice were the wonderful theories, technologies and institutions that the West has brought to Asia.

But the global economic crisis has shocked us to the core. That the best of the West such as the iconic Wall Street firm of Goldman Sachs has been charged by the Securities and Exchange Commission of fraud is appalling for those who look up to them for standards of professionalism, innovation, intellectual brilliance and moral integrity. If this is what our teachers are we have to think for ourselves.

There are signs now that Asians are beginning to do so. In a new book, Nowhere to Hide: The Great Financial Crisis and Challenges for Asia, published by the Institute of Southeast Asian Studies, Singapore, authors Michael Lim Mah-Hui and Lim Chin argue that the global financial crisis should be examined from three different levels: Theory and ideology, financial industry practices, and structural imbalances in the international economy. (Michael Lim used to teach political science in the University of Malaya before becoming a banker and joining the Asian Development Bank. Lim Chin is a professor of economics at Singapore's NUS Business School.)

Written from a multi-disciplinary point of view, the book examines the crisis from the angle of not only how the "efficient market hypothesis" took hold of Wall Street, but also how it transformed its business practices and flourished on the penchant for consumption and debt arising from the United States balance of payments deficits.

Just as Asians suffered from hubris during the years of the "Asian miracle", so did the gods of Western economics and finance before the global economic crisis. In his address to the American Economic Association in 2003, Economics Nobel Laureate Robert Lucas proclaimed that "the central problem of depression-prevention has been solved for all practical purposes".

In 2004, US Federal Reserve Chairman Ben Bernanke lauded for "rescuing" the financial markets with "whatever it takes", said in his famous speech on the "Great Moderation" (years of low volatility growth and low inflation) that "improved monetary policy made an important contribution not only to the reduced volatility of inflation but (also) to the reduced volatility of output as well."

Central bankers, patting themselves on the back, made no mention of the role of inexpensive goods and services provided by Asia in keeping inflation low. On the contrary, in his equally famous speech in 2005, Bernanke argued that the "significant increase in the global supply of saving - a global saving glut - helps to explain both the increase in the US current account deficit and the relatively low level of long-term real interest rates in the world today."

I am puzzled by the logic of this argument, because this is like a banker blaming his problems on his depositors because they save too much. The question is where did their high savings come from? The answer: The depositors earned their income from the high-spending banker. And why do the bankers spend so much? Because the long-term real interest rates are too low!