Krugman: Asia was impressive but still human

　MIT Economics Professor Paul Krugman wrote an article "The Myth of Asia's Miracle" published in Foreign Affairs in 1994. In that article, he denounced the Asian miracle and believed that Asia's growth could not be sustained. During his visit to Singapore last month, he talked about the current Asian economic crisis and suggested some radical measures. The following is an abstract of his interview with Business Times. 　Q: In your 'Foreign Affairs' article, you argued that Asia's growth could be basically explained by high rates of investment. But how did that growth manage to be sustained for so long --close on 30 years? 　A: There were three things going on. The first was high rates of investment. The second was high rates of labour force growth. Finally, you had increases in education levels. So if you took into account those triple sources of growth, which were all measurable inputs, they somewhat surprisingly seemed to explain pretty much all of what had happened in Asia. There's nothing paradoxical about that: the mobilisation of resources was immense. 　Q: What were the earliest signs of things being wrong? 　A: The stuff I talked about in 1994 wasn't a sign of an impending crisis -- at least I didn't think so. But I suppose you could look at the indicators there and say there were signs there that Asia's growth at that pace was not sustainable. 　The first I began to see that some kind of crisis might be in the offing was some time in 1995 or early 1996, when I began to notice how similar the balance of payments developments were in South-east Asia to those in Latin America a couple of years before. 　Like a lot of people, I saw the very large current account deficits and the buildup of short-term debt and I thought: this looks awfully like Mexico and Argentina in 1993-94. And since I had already decided on the basis of my earlier work that Asia was impressive but still human and subject to the normal limitations that affect other countries, I began saying: Gosh, there could be a currency crisis here. But I never imagined that anything like what has happened could happen. 　Looking back, I think we didn't pay enough attention to the Mexican crisis of 1995. It was over relatively quickly, the rescue plan worked and we all kind of filed it away as just a blip -- a horrific blip, but still a blip. We really should have looked at it more closely because it was an indication that a new kind of economic crisis might be possible -- one that did not involve irresponsible monetary or fiscal policies and yet led to all hell breaking loose. 　Q: Why didn't the approach that worked in Mexico work in Asia? 　A: One reason was that Mexico was extremely fortunate, not just to have the US as a neighbour, but to have the US experi

encing an unexpectedly vigorous expansion. And Asia has been unexpectedly unlucky by having Japan being a deadweight instead of a locomotive. The sheer scope of the crisis --- the fact that it wasn't just South Korea or Indonesia, but this whole arc of countries, with each country affecting the others -- was another feature. 　There were also issues of financial structure. The IMF strategy is designed for countries that have a basically sound structure -- it's a strategy of buying time and waiting for confidence to return. There were also technical issues: you had this bank-centred finance in Asia and very high levels of internal leverage. Now Mexico went through a period of extremely high interest rates -- 75 per cent for quite some time --- but many Mexican companies were able to weather them because they did not have such a high degree of leverage or a dependence on short-term internal loans. Indonesia or South Korea, for example, couldn't do that. So basically, everything that went right for Mexico went wrong for Asia. 　Q: So what's your radical prescription? 　A: It's something I hate to recommend, but I think Asian countries need some breathing space. They need the ability to reflate without having to constantly worry about satisfying capital market investor confidence. That means delinking the domestic capital market from the external capital market. It certainly means debt moratoria and probably currency controls on a temporary basis. 　Q: Would you also be suggesting this for an economy like Singapore, where domestic demand is relatively small? 　A: No. Singapore is a kind of odd man out here -- as, in different way, is Hong Kong. But Singapore would be a major beneficiary of a strategy along these lines, because it is a major service provider to surrounding economies. The prime candidate is Indonesia, which is playing a waiting game with no light at the end of the tunnel. That would be the most extreme case. 　Q: What's your worst-case scenario for Asia? 　A: Gosh, for Indonesia, the worst-case scenario is virtually bottomless. An absolute worst case would be radical political unrest and five million boat people. But leaving that aside -- and that's only amateur political futurology -- I think the worst case is a kind of early-1930s scenario in which the non-Japan Asian countries try desperately to adhere to financial orthodoxy and at the same time fail to generate the political credibility that will bring back investor confidence. At the same time, Japan slides deeper into a slump, and we see all the output declines of this past year repeated. 　Indonesia's slump in the last year is possibly the worst that any country not at war has ever had. It appears to be just about the same as the US in 1932. But what happened in 193 2007-12-06 文章来自《中国免费论文网》商务英语论文论文频道 http://lunwen.52xoyo.com
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