Why the call of Asian tigers is muffled

Is it really one world economy? Or will different ideas continue to distinguish the different regions? And if it is one world, will there be a dominant zone, the one which determines the future direction of the others?

These are a set of questions posed by the chaos in East Asian financial markets over the last two months and which continued last week, if anything at a more intensive pace.

Start with information. There is certainly one world in information in the sense that a powerful story or an image can be flashed instantly anywhere on the globe and seen by billions of people - as I suppose the dreadful story of the last week reminds us. A full range of economic information, on the other hand, is instantly available only to the tiny group of people who are prepared to pay the price of subscribing to the wire services. And that information is pretty raw; for judgement and help in interpreting the information people need access to the research departments of the various bodies that study economic data.

So what looks like a world of infinite and immediate information is far from that. Sure, there is plenty of data available to all, but useful judgements are harder to find. There is therefore a hierarchy: vast amounts of dross and a tiny number of valuable nuggets.

When one moves from economic data to the practical information which businesses use in their normal commercial activities there is a parallel hierarchy. Most of the information needed to develop a product, get it produced, and market and distribute it is also available. For simple products you just take it: many countries in East Asia established whole industries by reverse engineering more advanced countries' products: they bought a product, took it to bits to see how it was made, and then made a copy. In East Asia, the markets are full of fake Rolex watches.

But even more complex industries can be established, and legally too. A country wishing to establish a car industry can buy the designs, hire the expertise to build the plants and market the product: all it has to do is supply the land and the labour. Thus South Korea, which has no tradition of motor manufacture, has in one generation built an industry which may overtake that of Germany.

There are, however, other types of practical information which are harder to acquire. Some of this is high-tech: the skills needed to build a pharmaceutical or defence industry. And some industries move so quickly that leaders keep developing a new body of knowledge which, by the time it is transferred, has become obsolete. A good example of that is mobile phone technology, where Ericsson in Sweden and Nokia in Finland have been able to hold a disproportionate amount of the world market for companies from such small countries, simply because they have been able to move with astonishing speed.

Finally there are activities where there are such profound cultural barriers to entry that even though in theory the knowledge could pass across national boundaries, in practice it does not. The prime example of this is Hollywood, which dominates the movie trade. Technically it is possible for any country to make a movie and just about every country does. Countries like India make many more movies than the US. But the revenues are tiny compared with America's.

Now apply this hierarchy to the turmoil in East Asian markets. Perhaps the first point to make is that there has been no transfer of the jitters to the markets of the other two continents: North American and European securities markets have continued to remain strong. Had the market movements started in the US, they would certainly have spread. It seems that intellectual leadership in financial markets remains in the States.

That is unsurprising. Though the US is a net debtor and so receives the rest of the world's savings rather than distributes cash, much of the decision-making is driven by US-owned institutions. Physically the largest centre for cross-border investment happens to be in London, so maybe the American dominance has an Anglo tinge to it too. As you might expect, enthusiasm for investment in what are in short-hand known as "emerging markets" swings pretty widely. The graph (which covers markets in Latin America as well as East Asia) shows how enthusiasm reached a peak at the end of 1994 and has subsequently waned. That may be as much a reaction to the renewed self-confidence of US and continental European investors in their own markets as a collapse of confidence in others. Never- theless, I think it is a reasonable assumption that the swings of fashion between investment in emerging markets and established ones are driven by people in the established ones.

Finance, of course is different from the real economy. It may be that the financial world is dominated by ideas in the US and Europe, but what about the economic world, the real economies of the regions? How much has power shifted to East Asia?

I have been looking at some figures for world exports. Between 1970 and 1979 the US averaged 12.4 per cent; this year the IMF estimates its share will be 13.2 per cent. So the US is more important in world trade, not less. European countries are down a bit: Germany from 10.3 per cent to 8.8 per cent, France 7 per cent to 5.4 per cent, ourselves from 6 per cent to 5.2 per cent (Italy has increased its share from 4.4 per cent to 4.8 per cent.) But the big increases are in East Asia. For example, Hong Kong is up from 1 per cent to 3.6 per cent, Malaysia from 0.5 per cent to 1.4 per cent, China from 0.7 per cent to 2.6 per cent.

So there has been a shift, but it has been from Europe to East Asia, not from the US, which has gained ground; and while some East Asian countries are successful exporters, their absolute share remains well below that of large European ones. Only China plus Hong Kong are really significant at the moment.

One obvious conclusion would be that while East Asia is the most dynamic region there has been little or no shift of power away from the US - though there has from Europe. Another would be that while there is a global economy in which "emerging" nations have become more important, they are not yet that important. A third would be that it looks as though financial disruption in East Asia will not destabilise the world. And finally it is at least plausible that economic disruption will not be too damaging for the rest of the world either.

Yes, it is one world to a much greater extent than ever before in human history. But no, it is not a level playing field ... yet.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

SThree: Talent Acquisition Consultant

£22500 - £27000 per annum + OTE £45K: SThree: Since our inception in 1986, STh...

Day In a Page

John Palmer: 'Goldfinger' of British crime was murdered, say police

Murder of the Brink’s-MAT mastermind

'Goldfinger' of British crime's life ended in a blaze of bullets, say police
Forget little green men - aliens will look like humans, says Cambridge University evolution expert

Forget little green men

Leading evolutionary biologist says aliens will look like humans
The Real Stories of Migrant Britain: An Algerian scientist adjusts to life working in a kebab shop

The Real Stories of Migrant Britain

An Algerian scientist struggles to adjust to her new life working in a Scottish kebab shop
Bodyworlds museum: Dr Gunther von Hagens has battled legal threats, Parkinson's disease, and the threat of bankruptcy

Dying dream of Doctor Death

Dr Gunther von Hagens has battled legal threats, Parkinson's disease, and the threat of bankruptcy
UK heatwave: Temperature reaches 39.8 degrees on Central Line - the sweatiest place in London

39.8 degrees recorded on Tube

There's hot (London) and too damn hot (the Underground). Simon Usborne braved the Central line to discover what its passengers suffer
Kitchens go hi-tech: From robot chefs to recipe-shopping apps, computerised cooking is coming

Computerised cooking is coming

From apps that automatically make shopping lists from your recipe books to smart ovens and robot chefs, Kevin Maney rounds up innovations to make your mouth water
Jessie Cave interview: The Harry Potter star has published a feminist collection of cartoons

Jessie Cave's feminist cartoons

The Harry Potter star tells Alice Jones how a one-night stand changed her life
Football Beyond Borders: Even the most distruptive pupils score at homework club

Education: Football Beyond Borders

Add football to an after-school homework club, and even the naughtiest boys can score
10 best barbecue books

Fire up the barbie: 10 best barbecue books

We've got Bibles to get you grilling and smoking like a true south American pro
Wimbledon 2015: Nick Bollettieri - Junk balls and chop and slice are only way 5ft 1in Kurumi Nara can live with Petra Kvitova’s power

Nick Bollettieri's Wimbledon Files

Junk balls and chop and slice are only way 5ft 1in Kurumi Nara can live with Petra Kvitova’s power
Ron Dennis exclusive: ‘This is one of the best McLaren teams ever – we are going to do it’

‘This is one of the best McLaren teams ever – we are going to do it’

Ron Dennis shrugs off a poor start to the season in an exclusive interview, and says the glory days will come back
Seifeddine Rezgui: What motivated a shy student to kill 38 holidaymakers in Tunisia?

Making of a killer

What motivated a shy student to kill 38 holidaymakers in Tunisia?
UK Heatwave: Temperatures on the tube are going to exceed the legal limit for transporting cattle

Just when you thought your commute couldn't get any worse...

Heatwave will see temperatures on the Tube exceed legal limit for transporting cattle
Exclusive - The Real Stories of Migrant Britain: Swapping Bucharest for London

The Real Stories of Migrant Britain

Meet the man who swapped Romania for the UK in a bid to provide for his family, only to discover that the home he left behind wasn't quite what it seemed
Cheaper energy on the way, but it's not all sunshine and rainbows

Cheaper energy on the way, but it's not all sunshine and rainbows

Solar power will help bring down electricity prices over the next five years, according to a new report. But it’s cheap imports of ‘dirty power’ that will lower them the most