Travis Kupp, a member of our Emerging Fellows program checks the sustainability of Asia’s economic growth in his second post for our EF blog. The views expressed are those of the author and not necessarily those of the APF or its other members.
What goes up must come down, or so they say. Asian economies have expanded over the last half-century, especially in the South and East, positioning the continent as the modern leader of global economic growth. Much of the rest of the continent has an imminent opportunity to benefit from this success in exchange for certain concessions. Regardless, the region must now discover how to make this position sustainable in two senses: maintaining its trajectory while weathering societal and political change and addressing the impacts of increased consumption on the environment. Contrary to popular belief, there exists no technological silver bullet to solve for this conundrum.
China is the posterchild of Asia’s economic potential. Since opening up to the world in the 1970s, its growing production and trade has lifted hundreds of millions out of poverty leading to a massive increase in standard of living and therefore, critically, consumption. India is on a similar course. In both countries, the rise in disposable income for these many millions has created an extremely attractive market for goods and services along with a favorable financial climate for entrepreneurship. A wealthier and better educated populace has led naturally to a rise in more skilled labor and associated jobs. Southeast Asia is set to reap the benefits of this shift as demand for its low-end manufacturing increases.
Asia’s growth has led to regional integration and a vast realignment of international economic alliances. If geo-economics is in fact war by other means, then China is rapidly becoming one of the most battle-hardened nations on earth. The state is simultaneously flexing its influence through the Belt and Road Initiative (BRI), so called “trade wars,” and other significant foreign investments while learning from its mistakes in each area. The BRI may project the benefits of East Asia’s growth more intensely into the Central and Western Asian nations. Then again, it could also entangle China in far-flung conflicts to protect its investments if it does not carefully manage its relationships, especially with its neighbor India.
The central importance of China to Asia’s economic hopes presents a major systemic risk. The rest of Asia, and much of the world, has become to varying degrees vulnerable to abrupt changes in the nation. Over the next decade, for instance, China needs to find a solution to its population’s declining birth rate and increased life expectancy. A more favorable policy toward immigrants could help mitigate this looming crisis but may require or introduce societal liberalization that could be politically destabilizing. Sudden regime change, however triggered, would create a significant hurdle to sustained economic growth across the region.
The deeper existential risk lies in the impact of growth on the environment. While modern technologies have made significant strides toward lessening the ills of industry, they are unlikely to keep pace with the increasing demand for goods. Environmental concerns only influence consumption patterns in wealthy nations to the extent that they are economically viable to the consumer and do not compromise standards of living. The question then becomes whether the ruling parties of Asian nation states are prepared to sacrifice their economic gains in the name of environmental stewardship. The broad multilateral cooperation required to effectively mitigate climate change and environmental degradation makes it is possible, and dangerously plausible, that continued development may ultimately win out.
Asian economic leadership has an uncertain future, but the outlook is not without hope. Even if the Chinese engine of Asia’s economic miracle stalls and internal and external political realignment ensues, it is possible that this could usher in a wave of more sustainable growth, in both senses of the word. New policies, rather than technologies, to address shifting demographics and a changing global climate are likely to be the key deciding factors of what future unfolds. Asia’s economy may have room to grow yet.