Asia’s Achilles Heel
In a article for Newsweek, David Victor argues that the big challenge in the coming century may not be the strength of Asia’s emerging economic powers but rather their weakness.
Victor shows how China’s recent power crisis was caused by the tensions between China’s burgeoning free-market sector and its residual state-owned and regulated industries. India faces a similar problem: Its state-owned power utilities are supposed to be run for a profit, but incessant political meddling with electricity prices has pushed most into bankruptcy. In both China and India, dynamic economic growth has masked these governance problems. But the power sector conveys a warning: Vestiges of the statist tradition can still obstruct progress.
“Market reforms are making Beijing less and less relevant to what’s really going on in the economy, threatening to turn China into a ‘weak state.’ And it’s not just China - India, too, is having trouble regulating its industry and economy. The phenomenon is a dark cloud on the Asian century.”
