Financial security in Asia Pacific

Vannarith Chheang, EWC-APLP 2008-2009

When I am writing this short paper, many people are panic by the current financial crisis in the United States and its impacts on the global financial markets. US Presidential debates are overwhelmed by this crisis. The US government quickly intervenes into rescuing the Wall Street. The bailout is discussed and approved by the US congress after failed first time attempt.

Asia Pacific has experienced two big financial crisis, Asian financial crisis in 1997-8 and US and global financial crisis in 2008. Learning from the Asian financial crisis, the US started its own version of financial solution by quickly identify the issues and intervene. Is it crony capitalism? Yes it is. The government uses the taxed money from the whole population to help few big financial companies. Millions of American middle and low classes are living in difficulties and without health insurances. Do financial crisis really hurt the poor? Well not really, but it is a rule of the game. The state needs to maintain its power/institution/power through financial stability.

Since long time the West believes in laissez fair/free trade and market economy with less state intervention. Liberation of economic system and let the market determines equilibrium by itself. Productive and perfect equilibrium exist the market mechanism so it is no need to intervene by outside forces. Are these believes true? Not quite. Now we see the tendency towards a stronger role played by the sate to deal with market troubles. Developmental states model from the East Asian region could be reinvigorated and learned by other parts of the world. The globalization now reaches the point where strong institution is necessary. In addition, regional and global institution must prove more effective and collectively response to the crisis. Governance is the core concern here.

Besides the role of the state, in order to have financial security in the future, we need to balance between tangible and intangible economy. Tangible economy comprises real products and process of manufacturing and supply chains of goods. Intangible economy is financial services which could not be seen but powerful. If we let the intangible economy goes much faster than real economy for instance the case of the US then it is hard to avoid financial crisis/collapse. Restructure economic system would be necessary to reduce risks.