Economic recession and Asia’s experience

Links: Literacy education among Vietnam’s ethnic population. Avril Lavigne is too sexy for some Malaysian politicians. Singapore is harassing Burmese activists. Laos is pronounced as Lao (silent ‘s’).

Indonesia: Views on the U.S. Financial Crisis, a post written for Global Voices. Read the Bangla translation. Check out my profile in Voices Without Votes. Blog Action Day 2008.

The financial crisis in the United States has weakened the economies of many nations. Investment banks are falling. Unemployment is rising. Inflation is getting worse. Poverty is expanding. These are obvious indicators of an impending – or has it already arrived? – global economic recession.

To point out the seriousness of the problem, economists and other commentators are comparing the present economic downturn to the Great Depression of the 1930s. The similarities are difficult to ignore: bank failures, a stock market crash, soaring unemployment and homelessness, and the fact that in both periods, it was the decline of the U.S. economy that triggered the global economic crisis.

The Great Depression has always been used as a benchmark to explain and measure economic upheavals. The mere mention of the term creates panic among people, especially Americans. Today, everybody is talking about the Great Depression again. Thanks to the Wall Street crash, everybody is worried that the world will again experience the horrors of the Great Depression era.

Like the rest of the world, most Asians are terrified of the Great Depression. But this fear must be put into context. Asians share the global anxiety about the uncertain future of the U.S. economy and world economy. They dread the possibility of a prolonged economic crisis. But it is not always adequate to invoke the threat of the Great Depression in order to remind Asians about the gravity of U.S. economic woes.

Somehow, Americans and Asians have different memories of the Great Depression. Yes, Asian economies were also down at that time; but most of them were colonial subjects of Western powers. Many Asians blamed their social problems on colonial economic policies. While the West was trying to cope with the depression, Asians were struggling to become free nations. Many Asians remember the Great Depression as the period when independence movements started to expand in their countries. For many Asians, stories about poverty were subsumed in their collective memories of colonial bondage and the struggle to resist the foreign intruders.

It is not the Great Depression of the 1930s, but rather the 1997 Asian financial crisis that is a more appropriate reference point to capture the attention of Asians. Before 1997, many Asian countries were called “tiger” and “dragon” economies because of their amazing economic output. Many Asians thought the positive performance of their economies would continue for a long time. Then the fatal economic crash came in 1997.

The financial crisis spread like wildfire through the region. Suddenly, rising economies like Thailand and Indonesia quickly went down. Confidence in many Asian economies declined. Economic indicators became negative overnight. Asians became poorer, and markets became unstable. Many Asian countries have yet to fully recover from the 1997 downturn.

For many Asians, the Great Depression seems too distant and ancient, while the 1997 Asian crisis is very recent and concrete. Thus, it is not surprising that many Asian commentators are highlighting the 1997 crisis to explain the possible impact of an imminent global financial meltdown. If Asians are worried about the deteriorating condition of the U.S. economy, it has more to do with the fear that their recovering and struggling economies will be unable to withstand the aftershocks of another economic recession, after the last one hit the region only a decade ago.

Remembering Asian countries’ struggles to rebuild their economies after 1997 is relevant too in order to understand Asia’s reactions to the financial bailout program of the U.S. government. On one hand, there is pessimism that the United States will be unable to solve its economic problems. It was the West, led by the United States, that lectured Asia about the need for market reforms in 1997. So far, these neoliberal economic prescriptions have failed to revive the economies of Asian countries.

On the other hand, there is a feeling of contempt for the United States. Former Malaysian Prime Minister Mahathir Mohamad echoes this sentiment in his blog: "We cannot forget how, in 1997-98, American hedge funds destroyed the economies of poor countries by manipulating their national currencies. (Asian) governments were told not to bail out any company or bank that was in deep trouble. The Americans claimed that these companies or banks were inefficient, and they should be allowed to go bankrupt and perish. Better still, they should be sold at fire-sale prices to American investors. Yet today, we see the U.S. government readying $700 billion to brazenly bail out banks, mortgage companies and insurance companies."

The global economic catastrophe must be viewed from different perspectives. The American worldview is relevant, but it is not applicable nor should it be imposed on the rest of the world. For example, Asia has its own unique historical and social experience, which means it needs a different approach to solve its economic problems.

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