Asia's catch-up with the West runs into a growth bottleneck
Dan Steinbock says the real test of the so-called Asian Century will be whether living standards in the region's emerging economies can continue to improve, whatever the GDP numbers
If the 19th century was dominated by the British empire and the 20th century by the US, the "Asian Century" - the shift of global growth momentum from the transatlantic axis to the East - is said to reign now.
Some observers believe in this "irresistible shift of global power to the East", as one puts it. Others expect the shift only if certain strong economic, demographic and trade trends prevail.
In a 2011 report, the Asian Development Bank concluded that an additional 3 billion Asians could enjoy living standards similar to those in Europe today, and the region could account for over half of global output by 2050.
When the ADB released its report, emerging Asia had grown some four to six times faster than the European Union for half a decade - yet per capita income in the large emerging Asian economies was only a fraction of Europe's. This trend is expected to continue until 2020.
Moreover, easy catch-up growth is fading. As the Asia-Pacific region continues to experience slower-than-anticipated gross domestic product growth, analysts have been nudging down forecasts for much of the region.
The US-led boost can no longer fuel growth in Asia. Rather, the US Federal Reserve's impending rate hikes could destabilise growth drivers in the region.
In Europe and Japan, diminished growth prospects are the new reality. In China, growth deceleration is the new normal, even though the transition to consumption will involve new opportunities.
While industrialisation and urbanisation continue to have great potential in several large Asian economies such as India, Vietnam and Myanmar, great growth leaps are behind us.
From India and Myanmar to the Philippines, emerging Asia's demographics remain favourable. But if the increase in youthful populations do not go hand in hand with adequate job creation, "growth miracles" may be replaced by urban slums, or instability.
To deter negative scenarios, Asia needs accelerated economic integration and massive infrastructure investments. China's huge "One Road, One Belt" infrastructure projects show the way, along with the creation of the BRICS nations' New Development Bank and the Asian Infrastructure Investment Bank.
Domestically, Asia cannot continue to invest abroad rather than at home. That's how the industrial base was hollowed out in the US and Europe. In Asia, current account surpluses reflect the bygone export-led growth. What's needed today is greater tolerance of deficits; policies that centre on investment, human capital and more advanced growth models.
In an ideal scenario, the integration of Southeast Asia and South Asia would strengthen the aggregate regional might.
In the global arena, the combined bargaining power of East, Southeast and South Asia would be irresistible. In external relations, a divided Asia will not support the region's growth prospects; a united Asia will hold its own in the global arena.
Economic catch-up is a marathon, not a spurt. There is nothing inevitable about it. If the current trends continue, the Asian Century will remain the promise of the future.
At the end of the day, it really does not matter whether we call the 21st century Asian or something else. What does matter is that living standards in emerging Asia will continue to grow, even when real growth is decelerating.
Dan Steinbock is research director of international business at the India China and America Institute (US) and a visiting fellow at the Shanghai Institutes for International Studies (China) and the EU Centre (Singapore). See http://www.differencegroup.net/