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THERE
just isn’t enough evidence to support the increasingly
popular hypothesis that Asian economies are “decoupling”
from a slowing US.
Markus
Rosgen, who is Citigroup Inc.’s chief
Asia strategist in
Hong Kong, says the notion that the region has its own
self-sustaining growth and doesn’t have to sink or swim
with the
US “is a
case of hope over reality.”
The
ratio of consumption in Asian nations’ gross domestic
product, he says, has declined over the last five years.
While
the US share of Asian exports has fallen—to 17 percent
last year from 23 percent in 1985—the intra-Asian trade
that has replaced it moves in lockstep with US imports.
The
correlation between the growth in intraregional Asian
exports and US non-oil imports has increased sixfold in
the past 25 years or so, Rosgen’s analysis shows.
Ditto
for the flow of capital: stock indexes in
Asia are more linked with US—and European—benchmarks now than
they have been in 30 years, Rosgen says.
Even US
patent records show that Asia’s decoupling from the West
is going to be a long-drawn process.
The flow
of knowledge isn’t getting the attention it deserves in
the decoupling debate, which remains largely focused on
movements of trade and capital. This is odd, considering
that throughout history the rise of new economic nerve
centers has essentially been triggered by spurts of
innovation.
Economist Joseph Schumpeter called them K-waves, in
honor of Russian academic Nikolai Kondratiev, who
devised a theory of 50-year-long business cycles of
booms and busts.
K-waves
George
Modelski, a University of Washington political
scientist, says the maturing of printing techniques in
China in the 10th century was the first K-wave, while
the arrival of Intel Corp.’s microprocessors in the
early 1970s is the starting point of the 19th—and the
most recent—one.
All the
waves have started as concentrated bursts of activity
that gradually spread in all directions; their primary
effect has been to make the host economy rich for two
generations, or about 50 or 60 years, and then
dissipate.
Viewed
from this prism, the brisk economic activity in Asia
that is being touted as proof of decoupling may be just
what one would expect to see in the diffusion phase of a
disruptive technology—such as the Internet—that was
hosted elsewhere.
Together
with excess telecommunications capacity created during
the dot-com bubble, the Internet has made it possible
for many tasks—from analysis of X-ray reports to
remotely monitoring the shop-floor inventory at a
Detroit automaker—to be outsourced to the Asian region
cost-effectively. Yet, outsourcing is still about
satisfying final Western demand.
US
patents
The
current technological cycle won’t make
Asia a new economic powerhouse; it may set the stage, but the
spark will have to come from within. What that
innovation might be remains unknown. However, after it
does arrive, it will be seen—with the benefit of
hindsight—as a new 20th wave, or K-20.
What we
are witnessing now is the buildup phase of Asia’s
scientific prowess. Analysis by Albert Hu, an economist
at the National University of Singapore, shows that
three-fifths of US patents granted to innovators in
seven East Asian countries cite prior work done in the
US, a figure that has actually risen a little since the
early 1990s.
That
isn’t surprising. There are many more US patents for
Asian innovators to cite from than there are Asian ones,
as Hu noted in a recent paper cowritten with Milan
Brahmbhatt, lead economist for Asia-Pacific at the World
Bank in Washington.
Remove
that difference from the equation, and the picture
begins to look brighter, especially for
South Korea
and Taiwan, two of the most technologically advanced
countries in
Asia outside
Japan.
Asian
knowledge hubs
Increasingly the building blocks of Korean or Taiwanese
scientists—the “prior art” in patenting lingo—are coming
from within their own country or from other Asian
nations.
“After
controlling for the fact that the potential pool of
citable electrical and electronics patents is much
smaller than the potential pool in the US, Korean
patents cite other Korean patents almost five times as
intensively as they do US patents,” Brahmbhatt and Hu
note.
To a
lesser extent, the same is true of Taiwan.
Apart
from building on the technologies developed by their
compatriots, researchers in Taiwan are also making three
times more use of Korean inventions than they are of US
patents.
“These
trends confirm the growing regional dimension in East
Asian knowledge flows,” the economists say.
The
emergence of local knowledge clusters is crucial for
Asia. They will lead to specialization and improve the
odds of big-bang innovation which, in Schumpeter’s
scheme of things, is the biggest tool any entrepreneur
can lay his hands on to “creatively destruct” existing
hegemonies.
Until
that happens, prosperity in
Asia will be subservient to Western demand. And that
automatically means that another prerequisite for a
decoupled economy—freedom in setting fiscal and monetary
policies—won’t be available to Asian policymakers for
many years to come. |
