ASIA Should Not Squander Money On EU
In times past in India, only those belonging to the “upper castes” were allowed to read and write. The others were permanently condemned to a lower economic and social status, simply because they were born “low caste”. Those who enforced such a system justified their actions by claiming that the people of “lower castes” were incapable of learning and of acquiring advanced knowledge. Hence, it was a waste of time seeking to better their lives. Even in ancient times, many thousands of years ago, such an unbalanced view of humanity was proved to be wrong, by the fact that people from the lower castes accomplished great things. The archer Ekalavya was superior to high-born princes in his art, while the sage Valmiki wrote the “Ramayana”, the classic story of heroism known across the world. These days, millions of so-called “low-caste” people in India have shown that they are as good doctors, engineers and artists as those from the highest castes. They have shown that human beings are equal in potential, no matter what the circumstances of their birth was. In the same way, all rational people will admit that each country has the potential for growth.
Sadly, the EU has adopted a contrary view, placing emphasis only on those of European extraction. This columnist has warned since the 1990s that “European-only” policies would in time prove harmful to the very EU countries that had powerful economies during that period, countries such as France and Germany. These ought to have looked globally for opportunities and for partnerships, rather than concentrating most of their attention on their own European backyard. Instead of seeing the people of Europe as different from those of Asia, Africa or South America, the EU needed to accept the universal nature of the human race, and avoid policies that discriminated in favour of certain territories at the expense of others. During those years, several EU experts would tell this columnist that “Europe was special” and that it was therefore rational to concentrate on the continent at the expense of emerging economies. Such a worldview was strongest in France and Germany, and led both to expand the EU to include a host of countries that shared little with them besides also being part of Europe.
Had France and Germany since the 1990s seen the entire world as their focus of attention, and not simply the rest of Europe, neither would be in the kind of trouble that they are in today. Both French and German banking institutions are close to bankruptcy, because of their exposure to debt and credit instruments from other countries in Europe. Although there has been a collective round of meetings, these have resulted only in words rather than actions. The reality is that no democratic government, whether in Greece, Ireland, Italy, Spain or Portugal, can implement the severe cutbacks in social spending that economic conditions mandate. These countries are moving closer to a crisis with each passing week, at the end of which European public finances and financial institutions will be in a parlous condition. Although the Europe-centred Managing Director of the International Monetary Fund, Christine Lagarde, would like economies in the Middle East, East Asia and elsewhere to invest their surpluses in the debt instruments of Europe, the fact is that such a policy would only transfer the risk from European to Asian entities. It would not cure the disease, which is a system of social security that is unaffordable by the economies of the countries in crisis.
The surplus funds of Asian economies represent the hard work of the populations of these countries, and ought not to be lightly given away. In the case of the GCC states, the surpluses represent the earnings from the sale of petroleum products. These resources are finite, and the Middle East economies need to invest their surpluses in a way that will assure them security even after petroleum ceases to be a major component of trade. They should not be used in efforts to prevent the inevitable: which is the restructuring of the debts of some of the countries in Europe. The longer this essential medicine gets delayed, the more will be the pain of the rest of the world at the European crisis. Banks that have made wrong decisions on investment ought to face the consequences, rather than escape through their risk getting substituted by other countries buying up the high-risk money instruments that French and German banks hold. The people of emerging economies ought not to pay the price for the mistakes made by European bankers and European policymakers.
The major economies of Europe need to accept that they were in error when they fashioned policies that related only to their own continent. They need to accept that only freedom of trade across the world can rescue them from economic disaster. Today, consumers in Europe are paying very high prices for several items, because of the invisible and open barriers that the EU has erected to keep out services and manufactures from Asia. While the EU constantly asks Asian countries to give preferential treatment to their own manufactures and services, there is no reciprocity on their side. Trade cannot be one way. The EU needs to be as open to Asia as Asia is to the EU. In this way, consumers in Europe will benefit from the lower prices of Asian manufactures, whereas these days, they are paying high prices for clothes, pharmaceuticals and services because competition from Asia has been cut off by numerous methods. The example of India shows the folly of putting in place a system based on ethnic privilege. Rather, the universality of humanity needs to be accepted by the EU, and the world treated as a single unit.
Asia and Europe can ensure the prosperity of each other, but for this to happen, the various barriers to trade that have been erected by the EU need to be brought down. Such protectionist systems have done no good to the European economy as a whole, although they may have boosted the profits of a few large companies. The harmful effects of a Europe-centric policy have become clear with the crisis in the Eurozone. Such a crisis cannot be cured by pouring the savings of billions of Asians into economies that have been living way beyond their means for a generation. The only answer is the creation of a truly universal trading system, that ensures the right of each country to access global markets without continental barriers.
Had France and Germany paid half the attention to emerging markets in the 1990s as they did to Europe, they would not have been facing the crisis they now are. Simply going ahead with the same (Europe-centred) policy is not the way to recovery. Instead, what is needed is a universal international economic order that does not discriminate in favour of or against any group of countries. Europe must do away with the global caste system that some of its policymakers favour, and instead partner with the rest of the world to recover its prospects. Just as Asia must look beyond itself, Europe needs to look beyond itself rather than continue with an obsessive focus on the interests of just itself. Until it does that, to throw Asian money into the EU financial cauldron would be economic suicide for countries such as India and China, where hundreds of millions still live in poverty.
By MD Nalapat