Friday, Nov. 26, 2010

Decoupling from the West

Strong growth in recent decades and the relatively quick recovery of Asia from the financial crisis has sparked debates on whether Asia is decoupling from the West. But perhaps what is more pertinent is the normative question of whether Asia should decouple from the West and exactly what this decoupling process entails.

Loosely interpreted, decoupling is said to happen when two entities move in opposite directions, disconnect, or no longer has a direct effect on the other. This essay argues that Asia should decouple from the West, and that this process of decoupling will be the greatest challenge that Asia will face in the coming decade. However, a more measured definition of decoupling is used — the overarching process whereby Asia explores, diversifies, and reduces general reliance on the West. The key is to engage and cooperate with the West but allow more room for Asia to find its own niche and maximize its potential. It is not a zero-sum game and it is certainly not about disengaging from the West or isolating Asia.

It might seem misguided to focus on the macro issue of decoupling when there are many other specific challenges plaguing Asia, spanning from environmental problems to instability in domestic politics. However, closer examination would reveal that decoupling is an overarching process that underlies practically all of these realms. Due to the eminence of the West in the recent centuries, its norms, values, standards and methods have become the de facto hardware and software of the world, and Asia is often at the receiving end. Continued reliance and benchmarking against the West in all these realms is not the way forward. Much has been written about finding the "Asian Way", but this is very much a misnomer and the concept remains nebulous. Truth of the matter is, nothing in this globalized and interdependent world is completely unique these days, and what we have are merely adaptations and improvements. What is suggested here is not a singularly Asian or "un-Western" way, but rather adaptations, improvements, and leapfrogging from what is already in existence.

Sketching Asia

Several qualifiers are necessary at this juncture. The usage of "Asia" and the "West" is not always meaningful, and suggests rather erroneously that the two are opposites, and each are coherent, homogeneous wholes. Clearly, this is hardly the case. The demarcation of "Asia" and the "West" is problematic in many ways. Asia, as used in this essay, refers to East Asia and South Asia. The "West" refers generally to the United States and Europe. While it is obviously futile to descend into steoreotypes, this essay does seek to highlight the fact that Asia is different in several ways, above and beyond dissimilar philosophies and the elusive term, culture.

First, what is tried and tested in the West has not always worked for Asia. For instance, during the Asian financial crisis in 1997, recommendations from the International Monetary Fund (IMF) which were imposed on the Asian countries as part of the conditions for the loans did not alleviate the situation. Malaysia, which detracted from the recommendations was among the first to recover. There were also suggestions that the IMF recommendations for maintaining high domestic interest rates, liberalizing the economy and pegging currency to the dollar were what triggered the financial crisis in the first place. In addition, most Asian economies have achieved the greatest level of growth under semi-authoritarian regimes, and examples include Taiwan, South Korea, Singapore and China. While economic growth is not the best yardstick to measure the overall health of a nation, there are definitely indicators that the Western definition of democracy and its accompanying multiplier benefits have their limitations.

Second, the adage "It's the economy, stupid", so notably used by Bill Clinton during his 1992 presidential campaign which has pretty much held up in the West, does not hold true for Asia. Asia has achieved rapid economic growth but not domestic political stability. From developed countries like Japan to developing countries like Thailand, from democracies like the Philippines to authoritarian regimes like China, most Asian countries continue to be plagued by volatile domestic politics despite economic growth. Such instability can be partially attributed to the fact that Asia leans heavily toward elite governance, which is deeply embedded in Asian culture. It is virtually impossible for unknowns to make the mark. Political leaders are usually descendents of political pedigree or foreign-educated elites. The current political turmoil in Thailand is fundamentally a struggle between the rural class and the ruling elites, and Japan which has appointed five Prime Ministers in four years, has only one Prime Minister, Junichiro Koizumi (notably a "non-blue blood") who has completed the full five-year term of office since 1972. This is a critical problem because if Asia does not achieve domestic stability, continued upheavals would certainly hamper economic growth.

Third, there is marked wealth disparity in Asian countries, without in-built mechanisms to handle the social ramifications or to redistribute wealth. According to an Asian Development Bank report in 2007, income inequality is on the rise in Asia and out of the 22 countries examined, 15 showed a rise in the difference in incomes of the rich and poor. (1) Asian countries have increasingly restive domestic populations as they make the transition from elation as a result of economic growth to disillusionment realizing that they are not going to benefit directly from the growth. And yet the Western solution of social safety nets and welfare systems might not work for Asia. Currently, only urban dwellers in China are covered under a very basic pension scheme and yet, the pension system is already the single largest expenditure of the Chinese government. To include coverage of the remaining 900 million rural population (currently a trial scheme) would be a formidable task. Corruption and nepotism are also deeply embedded in many Asian societies.

Fourth, as many Asian countries have only recently (re)acquired their sovereignty, they guard it warily, and are apprehensive about any membership in organizations that requires them to cede sovereignty in name or in form. As a result, Asia is more inclined toward consensus-building, rather than applying pressure to influence behavior of other countries. Asia also prefers less committal and non-interventionist modes of conflict resolution.

These characteristics of Asia necessitate a different paradigm in dealing with Asia's problems and charting its future development. In addition, Asia's newfound wealth affords it the resources and confidence to explore new modes of development and problem-solving. Decoupling is necessary for Asia to actualize its potential, and contribute proactively and constructively to the world. Decoupling would also allow Asian countries to have a more equal and productive relationship with their Western counterparts. However, the process of decoupling is fraught with several barriers.

A Delicate Balance

Decoupling is generally perceived negatively and it is indeed a delicate balance. The key is not to disengage, but to reduce reliance, diversify and find Asia's niche and optimality. It is important not to alienate the West in the process. The rapid growth in intra-regional trade (which now accounts for more than fifty percent of trade in Asia according to the IMF), formation of regional organizations like ASEAN and its affiliated organizations, calls for the formation of an East Asian community and the reduced reliance on foreign capital have triggered fears of the formation of an Asian bloc, designed to keep out the West. (2) This should not be the intent of Asia, and to fuel such a perception would be counter-productive — Asia needs the West and vice versa.

Evidently, the process of decoupling is not without baggage — many countries in Asia have a recent history of colonialism, and arguably went through a subsequent period of neo-colonialism where Westerns norms and standards were seen as the golden standard to emulate. Envisioning Asia striking out on its own, coming forth with alternative ways of global and domestic governance, economic models and environmental management etc. takes imagination, determination, and confidence, without lapsing into complacence. Decoupling also should not be defined by aggression, the desire to claim an Asian era or to undo past "humiliation". Most importantly, decoupling entails a great degree of innovation, getting over inherent inertia, and the courage to challenge and change the status quo. As evident from the above, decoupling is both a physical and mental transition.

Forging a Path Forward

Despite these challenges, decoupling is desirable, achievable and necessary. This would entail several concurrent developments. First, as the latecomer to the game, Asia has the distinct advantage of leapfrogging and it should learn and adapt from the experience of the West in their development. It should also maximize the advantage to go even further by applying currently available technology and cutting-edge thinking to leapfrog the West which remains hampered by investments and decisions made earlier in their own economic development cycle. This extends to all areas including infrastructure, environmental management and education. Asia should build upon what has already been done by the West, but decouple by constantly incorporating, adapting and reinventing.

Second, Asia should build and capitalize upon its own drivers and engines of growth. There are signs that this is slowly happening. Asian recovery from the recent crisis has been driven largely by the region's own economic demand and there has been a rebound in intra-regional trade. Although the region is less dependent on Western foreign capital than before, it is still reliant on export-led growth. Asia needs to cultivate an autonomous momentum of growth, by harnessing the rising purchasing power of the expanding middle class, continued investment in massive infrastructural development as well as apply measures to expand intra-regional trade and investment. Although partially limited by the "spaghetti bowl effect," the proliferation of free trade agreements do mark Asia's commitment in the right direction. Asian countries should also continue to focus on confidence-building measures and foster interdependence, given the presence of fault lines within Asia due to territorial disputes, historical conflicts, clashing interests and competition.

Third, Asia has to innovate on all fronts rather than merely benchmarking against the West or importing technology. There is strong consensus among economists that the biggest productivity gains stem from inventions. While Asia has been strong on investment-based growth founded on capital accumulation and imitation, it is very weak in innovation-based growth which stems from technological change and innovation. According to the World Intellectual Property Organization, while the US is still the world's most inventive country, nearly 26% of all international patent applications last year came from Japan, South Korea and China. In addition, China registered a strong growth rate of 29.7% in the number of patents filed while the filing rate dropped by 11.4% in the U.S. and 11.2% in Germany in 2009. (3) This is a cogent indicator that Asia has the potential to push the frontiers of knowledge and innovation.

Lastly, Asia needs to perceive and carry out decoupling as a logical extension of its growth, and not a measure to break away from the West. This would be highly challenging, given the historical sensitivities and inherent competitive nature between the Asia and the West, and the disparate agendas of the different Asian countries. To reap the maximum benefits from decoupling and avoid a backlash, Asia has to tread consistently and work on a collaborative approach with the West.

Global interdependence will always be a part of international relations, and the difference lies in a matter of degree. Decoupling would foster an independent but cooperative Asia which would be beneficial not just for the region, but for the world. Asia is well-poised to take advantage of the current upswing in its development and whether it makes the necessary leap to decouple from the West (and successfully manages Western sentiments in the process) would determine its growth path in the future.


1. "Inequality in Asia: Key Indicators 2007 Special Chapter Highlights." Asian Development Bank. 2007.

2. Gruenwald, P., Hori, M. "Intra-regional Trade Key to Asia's Export Boom." IMF Survey Magazine. 6 February 2008.

3. "International Patent Filings Dip in 2009 Amid Global Economic Downturn." World International Property Organization. Press release dated 8 February 2010.