I know what they're thinking at M-Flex Singapore, a small, energetic maker of motherboards. I know what they're thinking at Iomega Corp's plant in Malaysia where they make those Zip drives we're all familiar with. It's simple: The US economy is coming back. So will our high-tech exports. Happy days are here again.
One understands the thought. Asia's exports are going to surge on the back of the US recovery that some data indicates is now under way. The graphs of last year's performance and this year's forecasts look like mirror images: Thai exports last year down roughly 7 percent, this year projected to rise by the same percentage. Same syndrome in Malaysia, same in Singapore, roughly the same elsewhere across the western side of the Pacific.
Even Indonesia is expected to show a modest gain in overseas sales, after a drop of nearly 10 percent last year. As to China, reading the official figures entails a certain act of faith, and I don't have much. But for those who do, exports are forecast to grow by 7 percent or so this year.
As a consequence, gross domestic product in Asian economies other than Japan's are expected to surge 7 percent this year.
Pinch me, please. It's as if somebody turned the clock back to the 1980s. You'd think the Cold War was still on, for goodness sake.
Well, enjoy the ride. But don't get caught in that fool's paradise of a couple of years ago. Remember? Some economists estimated that US demand for information technology products accounted for 40 percent of GDP growth in ex-Japan Asia in 2000.
Incredible -- as was the tumble that came in 2001, after the American bubble burst.
So the advice is straightforward: Asians should stay with the policies that will reduce the region's dependence on the US market and get it out of the Cold War paradigm, the export-led development model -- which was a fool's paradise in its own right.
I can't stress the point too strongly, and I learned it from the smartest people I know who think about Asia. Ride the export boom, yes, but use it as a means to transform economies and generate domestic demand, not as an end that justifies a slackening in the determination to change.
It has to happen, for one thing. Rebalanced growth is an essential aspect of any future worth looking forward to. Thai Prime Minister Thaksin Shinawatra knows this; Philippine President Gloria Macapagal-Arroyo knows it, too. A business executive and a technocratic economist: Both face rising political expectations, both are attentive to the problems of poverty in economies too tilted toward demand elsewhere. This is as it should be.
It's sound reckoning, too. Nobody can fail to have noted that the US economic surge out of recession has been partly fueled by large-scale stimulus spending after Sept. 11, when -- in the memorable phrase of one Washington pundit -- we all became Keynesians once again.
Highway construction, new school buildings, sundry municipal projects, and, of course, a 13 percent pop in defense spending -- this is some of the stuff of which the US recovery is made. And we know from our Japanese friends that stimulus spending only gets you so far on the road to sustained growth. The American economy will come back more or less gradually and more or less powerfully according to underlying conditions that public spending can alter only at the margins.
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