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ANALYSTS
attributed last week’s global stock market plunge to two
major factors, namely the fall in
China’s
stock market after the Chinese government announced a
crackdown on stock price manipulators and the recent
negative data coming from the United States.
What
many analysts did not focus on so much is that the event
may signal that we are now in a “post-US” world that
could prove to be full of uncertainties.
We used
to say that when
America
sneezes, the rest of the world catches cold. These days,
following last week’s stock market plunge, analysts are
wondering whether or not the country will catch fever.
Concerns
over the prospects of the economy saw the government and
private sector analysts trying to spin the issue down.
Our fundamentals, they say, are sound. The local
economy, they say, won’t be hurt because only the rich
play in the stock market. Our main driver of growth are
dollar remittances by overseas Filipinos. Recovery, they
say, is going to be immediate.
Theirs
is strange behavior because in reality no one knows how
the markets globally would behave. Trading in the stock
market is all about greed and no rocket scientist has
yet figured out how to ride and predict the behavior of
this unruly tiger.
The
current scene is a sea change from a period when all an
analyst would do to divine the country’s prospects is by
just looking at America’s economic vitals. Is America’s
consumer-confidence high? Are Americans building more
houses? Are they buying more cars and gadgets? Is the
American economy generating more jobs? These were the
common questions asked. If the numbers look good, we
were then also supposed to feel good, as it would mean
rising purchases of our exports.
Now
analysts are increasingly watching the moves of
policymakers in China. And rightly so because, combined
with Hong Kong, China these days accounts for 18 percent
of the country’s merchandise exports. Many of our
business elite are doing business there and local
economic managers are hoping that by hitching our
fortunes to the Chinese star, we might just grow out of
our own misery. So overall, it’s a nice development
since, with diversifying markets and global linkages, we
could develop greater capability to deal with external
shocks.
Indeed,
China is currently the main driver of global economic
growth. This trend is part of the ever-increasing
spatial shift in wealth creation toward the Asia-Pacific
region. Recent statistics show that the combined output
of “emerging economies” now account for about half of
the global output. “Emerging economies” here are
actually mostly about China, India, Korea, Singapore,
Russia. That means we are right smack in the vortex of
these wealth-creating powerhouses. If we could play our
cards well, we might yet achieve the higher growth
levels and prosperity that we all desire. Or so they
say.
With
this spatial shift in wealth creation towards the
Asia-Pacific necessarily comes a shift of political
power as well. Observers wary of American dominance in
global affairs are therefore happy that this trend may
yet usher in a “multipolar world.” Certainly, a
diversifying global market, coupled with the shift
towards multipolar international relations, should sound
like an ideal state for a globalizing world order. And
yet, it’s in this situation that we are starting to
raise our doubts about the future.
Why?
Because of two things. First, it means that there
wouldn’t be anyone to lead the global economy toward a
meaningful conclusion of the Doha Round of Trade
negotiations. There’s no doubt that expansion of global
trade in the last two decades came as a result of the
opening of markets with the signing of the Uruguay Round
agreement. That agreement, which ushered in the World
Trade Organization, brought wealth to the Asia-Pacific
through greater flows of investments, trade in goods and
services, and technology. Initially, the Europeans
blocked the Uruguay Round but the leadership of America
under Bill Clinton broke the deadlock. Specifically,
European intransigence gave way to compromise when Bill
Clinton pushed hard for free trade within the region
through the Asia Pacific Economic Cooperation (Apec).
But the
gains from the Uruguay Round agreement proved inadequate
to address poverty in many nations; hence the
Doha
round emerged. But with President George W. Bush
preoccupied with the “war on terror” and the continuing
flurry of bad news in
Iraq
and Afghanistan, America has been distracted from
playing a leading role in the negotiations.
Its war
on terror and
America’s
worsening twin deficits have lowered its prestige and
ability to exert positive influence. Without such
leadership, it’s possible the world will descend into
the chaos of regional trade blocs that distort the flow
of trade.
And
worse, given the continuing flow of investments and the
transfer of jobs to Asia-Pacific, some demagogic
politicians in the West might yet resort to
protectionist policies that will harm the global
economy. Given the fact that close to 60 percent of the
country’s GDP is accounted for by the globalized
sectors, among the first to be hit by such policies
would be the Philippines.
This is
a very dark scenario, of course, but possible—given the
fact that no one among the current global players and
emerging ones has what it takes to lead the world toward
a more liberal trading order. Not Europe, which is not
capable of generating consensus on the reform of its own
Common Agricultural Policy. It’s too fixated on its own
navel to be an economic global leader. Not Japan, which
is scrambling to address its own problems, including the
graying of its population. Not China, whose main
preoccupation is grabbing every available natural
resource to fuel its own frenetic growth.
And
certainly not Putin’s Russia. Because of rising prices
of natural gas and oil,
Russia
has been experiencing rapid economic growth and
accumulated quite a stash of cash to bully its
neighbors. It certainly has gained a lot of economic
clout but it’s the kind that sends shivers down people’s
spines.
Consider
this:
Russia’s
rise to power and influence came largely from the
turbulence generated by uncertainties in the
oil-producing region, specifically the
Persian Gulf and the
Middle East. Apparently, it doesn’t seem to have any economic incentive
for a geographically stable
Middle East.
A safer
multipolar world? We should think again and figure out
how to put up the Philippine economy’s defenses. |
