Op-Ed Contributors

Can Asians think? They've started to

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

In the testimonial defense of his low interest rate policies at the US Financial Crisis Inquiry Commission, former Fed chairman Alan Greenspan, said: "By 2002 and 2003 it had become apparent that, as a consequence of global arbitrage, individual country's long term interest rates were, in effect, delinked from their historical tie to central bank overnight rates." In other words, central banks have little impact on low long-term interest rates and therefore, by extension of this logic, no one is responsible for the asset bubbles.

This is exactly the theoretical failure and dilemma of Western policymaking that Lim and Lim have pointed out. As early as 1983, Californian physicist Fritjof Capra had already identified that the segmentation and fragmentation of academic disciplines and government bureaucracy meant that no one was responsible or accountable for the state of world affairs. It had become easier to blame it on the others, meaning other departments and other countries.

If Western intellectual thought and policy formulation appears to be incomplete or flawed, what are the challenges for Asia? Lim and Lim ask the right questions in their book, but do not answer them fully. You can actually find several answers in the foreword to the book by Venu Reddy, former governor of Reserve Bank of India (RBI). Reddy was vilified by investment bankers for not being willing to open up India's financial system fast enough when he was RBI governor. But after the crisis, it was clear that his steadfast and prudent approach shielded India from the worst shocks of the financial shenanigans and large capital flows.

Reddy has argued that post-crisis growth in Asia will remain strong. And along with the growing workforce, education and upgrading of skills would be major challenges. Asia can become a global financial hub because of its large pool of capital human skills, he has said, but a major challenge will be the question of leadership in thought and innovation.

Providing the environment for that leadership will require good governance. Reddy foresees growing intra-regional cooperation but warns that major shifts in world economic power take place over long periods and may not be smooth. Wise words indeed.

If Asia is to take its rightful place - equal to the West - in the world there has to be more original Asian thinking, not about parochial Asian values but about values and practices that apply universally. The book by Lim and Lim shed light in that direction.

The author is adjunct professor at Tsinghua University, Beijing, and the University of Malaya, Malaysia.

(China Daily 04/28/2010 page9)

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