Stop exaggerating Asia's troubles

Stop exaggerating Asia's troubles

The economies of Southeast Asia are in varying degrees of
trouble....As their economies grew so rapidly, many of their
political institutions did not keep pace. The result has been
corruption, a lack of transparency, inadequate supervision of
banking and insufficient investment in education to train the
next generation of workers and engineers.

But none of those shortcomings is new, and none prevented the
Southeast Asian economies from progressing from poverty toward
middle-class success with historic swiftness. The tiger
economies, in other words, did many things right, and continue to
do many things right. Their savings rates are high; their fiscal
policies are responsible. They invested heavily in public health
and primary education. They opened their economies to trade and
foreign direct investment.

Many of the fundamentals were and remain sound. the question
now is how quickly these nations can correct their admittedly
real shortcomings and return to a path of growth.

All of them, to successfully evolve into higher-tech, higher-
income economies, will have to reform their political systems in
ways that will discomfort entrenched elites. They will have to
democratize, regulate more evenly and openly, get serious about
public corruption. But if their troubles are falsely exaggerated,
the recovery could take far longer than necessary.

Some outside investors and would-be saviors now are calling
for draconian treatment: Banks should be shuttered, budgets
slashed, interest rates jacked up. Overdoing such remedies could
send the region into a prolonged and unnecessary recession. That
would have grave human costs in Asia, and it would hurt the U.S.
economy, too.

Jeffrey Sachs, a Harvard economist whose credibility is
bolstered by the general warnings he issued before last July's
crash, now cautions against an overreaction.

"Asia's long-term growth prospects are real," he said at an
Asian Development Bank conference in Washington last week. "There
is work to be done, but no reason why this financial crisis
should turn into a prolonged contraction -- unless misguided
policies were to make it so."

-- The Washington Post