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Letter from Asia: Asia will not escape the impact of the global economic recession in 2009 and Japan is already in recession.
China is concerned about mounting job losses and by the end of November, 10m migrant workers had lost their jobs nationwide, while 4.85m of those had returned home, according to government figures.
Even with double-digit growth rates, China was only able to create 12m jobs annually, whereas the new job demand was above 20m.
“We have made finding jobs for university students our top priority and will come out with some measures to make sure all graduates have somewhere constructive to direct their energy,” Premier Wen Jiabao told students at the Beijing University of Aeronautics and Astronautics, at the week-end. The fear is that the unemployed could direct their energies to anti-government protests.
In the Pearl River delta industrial heartland, thousands of companies have collapsed but it's likely that the downturn will bring improved focus to surviving companies of better financial and management controls, as the economy matures.
For Asia, post the global recession, the same level of benefits brought by a US current account deficit of $6.0 trillion since 2000, is unlikely to be replicated in the coming decade.
US consumer spending in 2007 amounted to 72% of GDP while the savings rate fell towards zero. In the absence of surging asset prices, the current recovery in US savings, is likely to continue.
Stephen Roach, head of Morgan Stanley Asia, said in recent months that the global economy is facing a multi-year rebalancing.
For the US, this spells a sustained deceleration in personal consumption growth as households abandon newfound asset-dependent saving and consumption strategies in favour of the income-led fundamentals of the past.
"The US, in my view, will now have to come to grips with a much slower growth trajectory – with real GDP growth likely to slow from the 3.2% trend of the past 13 years to no higher than 2% over the next 2-3 years, or longer," Roach says.
"This should prove to be a very challenging outcome for the rest of the world – especially for those developing nations, which have derived so much of their economic sustenance from exporting goods to over-extended American consumers," he adds.
Twelve Asian countries account for half the world's population and globalisation is no longer a one-way street. Ireland will be courting companies like Tata and Lenovo in future years, but what can be offered to them, with for example the most expensive housing in the world?
The Sunday Business Post's Political Editor Pat Leahy, wrote on December 21st, that last week, union chief David Begg claimed about 30 years of liberal economics was exposed as being bankrupt; Jack O’Connor of Siptu told the radio programme Morning Ireland, about the failure of the capitalist system of the last 30 years.
Both of them can afford to remain blind to a reality of life, whatever ism is one's cup of tea. Cuba and North Korea are the remnants of the extreme experiment with one. There is no perfect solution but they should come to Asia and see the fruits of a system that has resulted in huge numbers being lifted out of poverty in the 30 years, since China embarked on economic reforms.
Dr. Michael Spence, a winner of the 2001 Nobel Prize in Economics and Chairman of the Commission on Growth and Development, says that sustained high growth in developing economies is a recent, post-World War II phenomenon. Using GDP figures, "high" is above 7% and "sustained" is over 25 years or more. He says that these cutoffs are arbitrary, but a similar picture emerges with variants. Growth at these rates produces very substantial changes in incomes and wealth: Income doubles every decade at 7%.
There are 11 such cases of sustained high growth, and eight are in Asia. These are Botswana, China, Hong Kong, Indonesia, Korea, Malaysia, Malta, Oman, Singapore, Taiwan and Thailand.
Each and every one of these miracles had an export sector as a driver of growth and an increasing share of trade in GDP. There are no exceptions. Every growth miracle involves leveraging the demand and resources of the global economy.
Singapore, Bandon and Subic Bay
Bandon in West Cork had its Singapore, when I was attending primary school - - a public housing estate west of the town - - that apparently was being built when General Arthur Percival had led the greatest capitulation by British forces in history. On February 15, 1942, Percivel surrendered to his Japanese counterpart General Tomoyuki Yamashita at a Ford factory in Singapore. Percival had been in charge of the Essex Regiment in Bandon, during the Irish War of Independence. Bandon was then the famed English garrison town, that had been called the Londonderry of the South, where even the pigs were Protestant. Christ Church dating from 1610, the first Protestant church to be built in Ireland, still stands off North Main Street. I never ventured in there as I feared being struck blind, or something worse!! Besides, it would have been a mortal sin to have been so brave!!
In 1986, when I first visited the Philippines, the name of Yamashita was still prominent there. He had been given command of Japanese forces in the Islands, in late 1944 and many Filipinos believed that Yamashita had buried plundered Asian treasures on the main island of Luzon when it wasn't practical to ship them back to Tokyo, as the Americans were closing in on the Japanese homeland. Even the Philippine dictator Ferdinand Marcos had claimed his wealth resulted from a discovery of "Yamashita's gold".
The US Naval Station of Subic Bay, north of Manila, and the adjacent town of Olongapo, hemmed in by the base and the Zimbales Mountains, may well have been the closest proximity of First World and Third World life then. When the USS Enterprise aircraft carrier and its support ships, returned to its home port, it was partytime in the town for the 7,000 crew.
When the base was closed in 1992, more than 40,000 Filipinos lost their jobs.
Today, there are more than 70,000 working at the Subic Bay freeport, compared with19,969 workers in 1999. It's an important hub for US airfreight company FedEx and South Korean shipbuilder Hanjin, has 5,000 employed there. The minimum wage in the freeport is US$4.66.
Michael Hennigan in Cameron Highlands, north-east of Kuala Lumpur, with a tea plantation in the background. The British developed the area as a hill station in the 1930's and today temperate climate vegetables are grown there.
Kuala Lumpur and Malaysia
Our main base of operation is Kuala Lumpur and Christmas Day is a national holiday in Malaysia.
In the past, I have spent Christmas, in the Red Sea port of Jeddah, Saudi Arabia. I liked living there but the efforts of the muttawa religious police to suppress any public evidence of Christmas, was bizarre.
Life in KL as it is known locally as, is more relaxed and in Malaysia, great advances have also been made by its economy in the past 30 years.
So Happy Christmas and I may well have something to add for the New Year, in the coming week.
We may also add some stories in the interval, but we've had enough of tsunamis in 2008, without any further bad news.
Ireland's central bank headquarters on Dublin's Dame Street.
Greenspan finds a flaw
The following exchange between Alan Greenspan, former Chairman of the Federal Reserve and Congressman Henry A. Waxman, Chair of the House Committee on Oversight and Government Reform, occurred at a hearing of that committee on October 23, 2008.
Chairman Waxman: [In your statement, you said] “I do have an ideology. My judgment is that free, competitive markets are by far the unrivaled way to organize economies. We have tried regulation, none meaningfully worked." That was your quote. You have the authority to prevent irresponsible lending practices that led to the subprime mortgage crisis. You were advised to do so by many others. Now, our whole economy is paying its price. You feel that your ideology pushed you to make decisions that you wish you had not made?
Mr. Greenspan: Well, remember… ideology is a conceptual framework with the way people deal with reality. Everyone has one. You have to. To exist, you need an ideology The question is whether it is accurate or not. What I am saying to you is, yes, I found a f1aw…in the model that I perceived is the critical functioning structure that defines how the world works, so to speak.
Chairman Waxman: In other words, you found that your view of the world, your ideology, was not right, it was not working.
Mr. Greenspan: Precisely. That's precisely the reason I was shocked.
Irish Financial Regulator: Irish banks are resilient and have good shock absorption capacity to cope with the current situation
Patrick Neary, Chief Executive of the Irish Financial Regulator, made the above statement in mid-September 2008. Two weeks later, the Irish Government guaranteed all the deposits and liabilities of six Irish financial institutions. On October 02, 2008, Neary appeared on RTÉ's Prime Time television programme, and in possibly the most bizarre performance by a public official on Irish television, since its launch in 1961, said that bad lending by Irish banks had nothing to do with the current international crisis which was all about liquidity. He said the banks had plenty of capital to absorb any losses on property loans and he did not believe that over-exposure to the property market was a weakness of the Irish banking sector.
Willie O'Dea on when the glass is full almost to the brim
Minister for Defence and Sunday Independent columnist Willie O'Dea wrote in February 2008: "The actual risk to our economy now does not come from fluctuating world markets, but from talking down our strengths and effectively talking ourselves into a crisis.
This isn't the "the glass is half-full" argument. It's hard to make that case when your glass is full almost to the brim. This is about jittery and nervous commentators shaking the glass until some of it slops out."
Brian Cowen on an Economic Tsunami
Taoiseach Brian Cowen said on Thursday, October 30, 2008, that the present economic circumstances were the toughest facing the country in 100 years. He said "now is the time for us to pull together.”
- worst than the Civil War, the Depression, the Economic War and the Skinning of the Calves, the Second World War and the 1950's when 500,000 emigrated?
