The Asia Miracle was always about exports starting with Japan in the 1970s and 1980s and followed by Korea and China in the 1990s.
The consuming classes in these countries never looked like the ones in the U.S. They were not large enough to buy up a significant portion of what their nations produced, at least until recently. As a group, these middle classes were also new, created in just the last three decades. (See pictures of the global financial crisis.)
Yesterday, three pieces of news hit the markets. China's GDP growth moved down to just over 6% in the fourth quarter. Its economic expansion has been running a hot 10% for more than five years. At the same time, Japan announced that its exports had gone off a cliff, down 35% in December. And, in Korea, GDP actually fell 5.6%.
In each case, the big dips were more than expected.
Because most of the world is in a recession, the drying up of exports is to be expected. The tumble may be happening more rapidly than had been forecast, but the global slowdown is spreading with astonishing speed.
The real culprit of dropping economic indicators in these three Asian nations is as much the fragility of the middle classes as it is export problems. The American middle class, as it is constituted now, began to form after WWII. It has driving the construction, automotive, energy, travel, and retail industries and made each of them large and relatively stable, even when the economy moves toward deep trouble.
Asia will go through a vicious cycle because its middle classes will be decimated as the recession bites as hard in the East as it will in the West. But, Asia has no buffer, a long-standing and vast number of consumers which may pull back their spending.
Douglas A. McIntyre
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