Asia is bracing for Hurricane W. Whether this refers to Wall Street, or the middle name of the outgoing U.S president, take your pick.
The storm has already wrought havoc in the United States and it is now traveling with gathering speed and force across the Pacific. Countries located directly in the path of the cyclone will feel the destructive force of "W", others on the periphery will feel the brunt nevertheless. Worse than Katrina, this is a hurricane that is bound to bring untold destruction and misery to many parts of the world.
How Asia responds will be crucial, not only for Asians themselves, but also for how this global financial turmoil is resolved, and how long it will take to do so.
There is no doubt that the financial turmoil hitting the United States, as the world's largest economy, will impact globally. Countries that have large scale dealings with America will, sooner or later, be affected. Much of Asia's economic fate and fortune is tied to the United States. So these countries too must prepare for the gathering storm.
All Asian countries owe their rapid economic expansion to the seemingly insatiable American market and to a lesser extent, to its financial institutions and corporate investments: Japan in the 1970s, the Asian economic tigers (Korea, Taiwan and most of Southeast Asian countries) in the 1980s and 1990s, and the rise of China and India this past decade, all have U.S. free-market capitalism to thank for their economic progress.
So when America, which has championed free trade that benefited much of Asia all this time, goes into a major crisis, the rest of the world will suffer with it.
The most frequently asked question in Asian capitals today is not so much about how Hurricane W will impact them, as how they are preparing themselves. Sadly, some of the policy responses seem to be self-destructive, and may even prolong the crisis.
Some Asian countries are retreating into protectionism, or are seriously looking into that option to fend off the crisis. It is certainly the more popular political option.
They are building walls around their economies, hoping to avoid not only the storm blowing from across the Pacific, but also against the ripples coming directly from their close neighbors.
In Indonesia, the business community's greatest fear is that China and other Asian countries will begin dumping on our doorstep their surplus manufacturing products that had been intended for the American market.
No wonder business people and politicians are busy invoking nationalism and patriotism in seeking favors from the state, in the form of favored treatments or even outright bail outs to keep "national" assets in their hands.
Blaming the crisis on the greed of America's unbridled capitalism, many in Asia are now turning their back on the economic system that gave them their current prosperity. Free trade is only good as long as it benefits them.
But how they expect resorting to protectionism will help the national economy is still a mystery.
Raising protectionist walls will lead to quick retaliation. Soon, everyone will be putting up walls around their economy. Exports will cease to be the driving force the way that they have been for just about every Asian economy in the past, and everyone in the end will suffer. Protectionism is a sure recipe for economic disaster as far as Asia is concerned.
Protectionism will also throw the idea of a Asian free trade and the larger vision of an East Asian economic community out of the window.
More than at any other time, this crisis should give Asian countries the impetus, or at the very least a renewed interest in pushing for the idea of a borderless East Asia.
What this crisis is telling us is that we in Asia have become way too dependent on the United States economically for our own good. We are too dependent on the American market for exports and for our economic growth.
We have also become too dependent on the American greenback -- or we have become addicted to it -- this might be a more apt term. Although we are trading with one another more extensively than ever, the U.S. dollar is still the currency of choice.
If Asia can detach itself, or reduce its dependence on the United States, who can we turn to? United Europe is too small to replace the United States. Besides, Europe has its own financial problems to deal with.
Asia needs to look at the untapped potentials of trading and dealing with other Asian countries. Asia has a huge market unmatched in any other region in the world, it has the financial muscle in Japan and China, and it has the pool of skilled workers necessary to expand their economies.
Protectionism however will be the wrong way to go and will only deprive Asia from making use of all its competitive advantages.
The current financial crisis has deflated the notion that this is the Asian century.
In spite of impressive growth in the last two or three decades, Asia is still unable to stand on its own two feet to claim the ground as the new center of global economic activities. This economic recession will dampen the recent rapid rise of China and India as the new global economic players. Their impressive rise, like those of other Asian countries before, has been on the back of the U.S. economy.
Sadly, no one in Asian capitals today is talking about greater economic integration within the region. Everybody is just too busy to fending for themselves in the face of the financial turmoil. There are even growing suspicions about dumping practices from the neighbors, prompting many to look at protectionist measures.
Just 10 years ago, Asia went through a massive financial meltdown not too dissimilar to the one we are now seeing in the United States and Europe. That episode triggered talks about the need for greater economic integration within Asia. There were even talks of launching an Asian fund and an Asian currency.
Those discussions seem to have lost their urgency as soon as Asia recovered, aided in large part by strong demands for Asian products from the United States.
Now should be the time to bring back the idea of building an East Asian community from the drawing board. This is certainly much more productive and useful than indulging in self-defeating protectionism.
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