Invited Policy Economics Paper €” Economics In Asia 1995–2020

Over the last 25 years, Asia’s economic rise has been extraordinary. Its share of global gross domestic product (GDP) has risen from 5.8% to 22.9%.1 The first phase of high economic growth — up to 1995 — saw Asia enter the global supply chain primarily with labor-intensive/low-cost manufacturing. Domestic consumption was a fairly low share of GDP; Asia was manufacturing mainly for consumption in the US and Europe. As such, it was primarily a rule-taker. In the second phase — from 1995 to 2020 — it gradually turned into an economic force joining the US and Europe in shaping the global economy, exercising significant influence upon the value chain, the cycles of the global economy, transport and logistics, the global capital markets and consumption patterns (consumer preferences and tastes). While not yet among the leading rule-makers, it had become difficult for policymakers (public and private) to make decisions without Asia’s consent. To form an opinion of today’s emerging third phase — post 2020 — the intriguing question is whether the Asian countries have adopted what may be termed Anglo-American economic thinking (basically, the primacy of the market). Or whether behind the curtain, the Asian economy works in its own way diverging from the American and British economic schools. Since demographics and sheer economic scale mean that Asia will dominate the global economy in the years to come, the nature of the Asian economy will be of crucial importance for the future global economy. The conclusion of this paper is that “Asia†in many respects differs — and fundamentally so — from market economy principles. How this prospect should be interpreted is also evolving, as circumstances change. Certainly, the repercussions of COVID-19 have not been the same in the US, Europe, East Asia and South Asia — and this may suggest that socio-political structures have a stronger impact on economic outcomes than economic theory teaches, thus calling into question the global validity of market economy principles.