Burma's future amid the global financial crisis -MIZZIMA

http://www.mizzima.com/edop/commentary/1171-burmas-future-amid-the-global-financial-crisis.html

by Joseph Ball
Tuesday, 21 October 2008 20:05

Without yet knowing the end story of the current financial crisis gripping much of the world, valuable lessons for Burma's future – including the prospects and avenues for the positive development of the country – can be observed.

When the lights went off on the Soviet Union, pundits and analysts were quick to point to the failure of the command economy while simultaneously raining praise on the capitalist economic development model, and specifically the free-wheeling version trumpeted by the likes of Washington.

Then in 1997, as the Asian Financial Crisis wrecked havoc from Seoul to Jakarta, the world was told how no longer could the development models of the Asian Tigers be considered on the same plane as those of the West – while the notion of Asian Values took a pummeling from rights activists who were quick to link the so-called Asian Values with the formation of the then discredited Asian development models.


In short, economic crises have historically worked to confer legitimacy upon and acceptance of certain systems of development at the expense of alternative approaches and often associated non-financial values. This legitimacy then typically allows the perceived 'victors' greater influence and latitude in molding the direction of economic and financial approaches regionally, if not globally.

Now, as the effects of the financial turmoil in the world's major markets continue to reverberate, it is the financial system that has come to be identified most closely with the United States that is being made to appear dysfunctional in its lack of financial oversight and foresight.

Bidding to step in and replace the soiled individualist-centric model of economic growth is a pragmatic approach championed by China that seeks a symbiotic relationship between the public and private sectors in matters of economic and financial policy – in essence appreciably increasing the role of the state in the economic sector.

Whereas the International Monetary Fund, for more than a decade following the end of the Soviet empire, had preached upon the dais of global economics the boundless merits of free markets, drilling aspiring countries with the mantra of "less government is good government," the message is now clearly one of a need for increased regulation and oversight from governmental institutions – a blasphemous notion to be heard on the streets of Washington only scant years previously.

It may well transpire that 2008 is looked back on as the year in which Adam Smith's misunderstood invisible hand, long endowed with a certain mystique regarding Western development models, falls under the all-seeing eye of state authority.

Sick man of Asia no more

Almost exactly one hundred years ago, as its last Emperor assumed the throne in the form of two-year old Pu Yi, China was known as the "Sick man of Asia," a fractured economy and entity left largely to the mercy of external interests and objectives. No more.

Even before the latest financial avalanche triggered in the United States, China was poised, in many analysts' estimation, to overtake the U.S. economy within 20 years.

The International Monetary Fund, this month holding an emergency meeting on the grim outlook of the global economy, found time to announce that it expects the Chinese economy to grow at a clip approaching ten percent next year, even while the West braces to tough out the conditions of a possible deep recession. The assessment for China is the lowest such calculation for years, but still represents a considerable relative advantage.

China also holds the world's largest foreign reserves, amounting to some 1,810 billion dollars. And just last month Standard and Poor's upgraded the country's long-term sovereign credit rating from A to A+ in recognition of the country's "exceptional" economic prospects and strong financial position.

Such projections for China and the Chinese economy are made despite the Shanghai Stock Exchange taking its share of lumps over recent weeks. However, the crucial difference is that analysts look at China and see a negative economic impact in the market as predominantly a correction for problems overseas, as opposed to additionally reflecting inherent problems within China's domestic financial institutions and infrastructure.

"If you look around the world, China is doing pretty good right now, and the U.S. isn't," remarked C. Fred Bergsten, director of the Peterson Institute for International Economics, earlier this month.

With China's economic position currently portending a growing and possibly leading role for the country in the world's economy going forward, diplomats as well as monetary experts are lining up to get on board.

Since last year, when traces of many of the fissures now rending economies apart first became distinctly visible, Australia's foreign policy has become increasingly predicated upon the establishment and growth of strong ties with Beijing.

"My understanding is that China will continue to drive strong economic growth for its own national purposes, but that's also good for countries like Australia because China is such a major trading partner of ours," implored Australian Prime Minister Kevin Rudd.

Meanwhile, Michel Camdessus, a former Managing Director of the International Monetary Fund, recently proclaimed of Asia, "Your countries are now creditors of the world." And the biggest creditor of them all is China.

Nation building or national interest?

To be sure, nation building and national interest are not mutually exclusive concepts. But the decades ahead could well see the question of national interest weighing increasingly heavy in the calculations of policy makers regarding projects associated with nation building.

George Bush assumed the Presidency of the United States eight years ago with a reputation of abhorring the concept of nation building. Two terms later, nation building sits as a central tenet to his administration's legacy. It is a policy approach that likely will not survive the ensuing Presidential handover in January of next year – no matter who resides in the Oval Office.

The prospect of a deepening financial crisis will likely take a heavy toll on the countries most susceptible to promote a foreign policy distinctly cognizant of nation building, those in North America and Europe. This diminished financial capacity to incur such massive financial outlays will be paired with domestic electoral constituencies increasingly critical of elected officers who pursue such objectives over policies more directly linked with national, domestic economy, issues.

In contrast, China has shown little, if any, interest in nation building since the implementation of broad economic reforms under then Premier Deng Xiaoping, opting instead to pursue a foreign policy definitively focused on national interest. Unlike the early decades of the People's Republic, when politics of ideology figured authoritatively in the country's foreign policy calculations, Deng's China is almost singularly infatuated with the notion of national interest – with economic considerations first and foremost.

A clear example of this approach was in the pervading atmosphere of economic uncertainty instigated by the Asian financial crisis. While China did bail out Burma, it did so out of pure economic national interest, headlined by a desire for relative stability in Burma, concessions on natural resources and easy access of Burmese markets for Chinese products.

Policy imperatives for a future Burma

National interest and nation building obviously sleep together in matters concerning domestic policy. What, then, in the national interest of building a prosperous Burmese nation, can the present financial turmoil tell Burma's current and future leaders?

To the extent that the pervading political stagnation in Burma is resultant upon the notion that some country, group of countries or international agency will proactively, possibly even physically, intervene in Burma…such premonitions, at present, must be removed from any policy equation. Already unlikely, the external financing of nation building not intrinsically linked to national interest is likely to be prohibitively expensive for potential suitors in the foreseeable future.

Succinctly put, it is imperative that prospective ruling Burmese political parties develop strategic models for the future that incorporate components of both enhanced self-reliance and diversification than what is accounted for by present models.

Whatever Burma's domestic political orientation in the future, it does nothing to change the fact that Burma's development and economic fortunes will be substantially linked to its foreign relations and eventual "re"integration into the global economy. Understanding this, and in lieu of the current financial upheavals, is there an entity that both wants to and is capable of taking the lead in providing the assistance necessary to fuel a transformation of the Burmese state? The answer is yes, and it's China.

Burma's prospects for a brighter future are thus best served by nurturing strong bonds with China, the quicker the better for prospects of economic transformation when change does come to Burma.

In doing so, nobody need forfeit any political aspirations and differences between the countries and the people are certain, and welcomed, to exist. As seen, the Australian Prime Minister, at the head of a vibrant democratic society, is outwardly supportive and positive in assessing the importance to a democratic Australia of a strong and growing relationship between Canberra and Beijing. Similarly, China is vital to several U.S. industries, inclusive of such 'national' endeavors as the development of the U.S. space program.

A strategy of confrontation with, or relative ignoring of, China is a policy inimical to the interests of a future Burma – a fact laid bare by the recent gales of financial turmoil. It is up to Burma's leaders to recognize this, while ensuring that the Burmese state effectively prioritizes the interests of the Burmese people in dealing with China – without being unjustly abused in return.