Sudip Bandyopadhyay’s Blog

Asian elites have always looked at the world differently from western elites. And after this crisis is over, the gap in perspectives will widen. Asians will naturally view with caution any western advice on economics, particularly because most Asians believe that the crisis has only vindicated the Asian approach to capitalism.To be accurate, there is more than one Asian approach. China’s economy is managed differently from India’s. Yet neither China nor India has lost faith in capitalism, because both have elites who well remember living with the alternatives. The Chinese well remember the disasters that followed from the Maoist centrally planned economy. The Indians well remember the slow “Hindu rate of growth” under  socialism.

The benefits of the free market to Asia have been enormous: increased labour productivity, efficient use and deployment of national resources, a tremendous increase in economic wealth and, most importantly, hundreds of millions have been lifted out of absolute poverty. Just look at Chinese history through Chinese eyes. From 1842 to 1979, the Chinese experienced foreign occupation, civil wars, a Japanese invasion, a cultural revolution. But after Deng Xiaoping gradually instituted free market reforms, the Chinese people experienced the fastest increase so far in their standard of living.

The desire for an orderly society is deeply ingrained in the psyche of all Asians, which helps explain why virtually all Asian states hesitated to copy America in deregulating their financial markets. Instinctively, they felt government supervision remained critical. This was equally true in India’s democratic system and in China’s Communist party system. Despite this, there will be no ideological trumpeting of the virtues of Asian capitalism. After their experiences of the past 100 years, Asians are wary of ideology. They prefer the simple, commonsense approach of learning from experience and they will heed the advice of Adam Smith, who said that prudence is “of all virtues that which is most useful to the individual”. It may also be helpful to nations.