(East and Southeast Asia)
Both East and Southeast Asia have triumphed on the principle of exporting more than 33% of their GDP as exports. This Shikhandi strategy of their success is coming to its end. So far the US with its warped Keynesian point of view of living on debt to finance its prosperity is on an unsustainable formula destined for a disaster. The present reality of dropping exports and rising deficits of South Korea, Taiwan, Singapore, Taiwan and Japan attest to the end of this has-been strategy. This explains China's Wen appealing to America's honor for not reneging on its debt and Hillary going to China before Europe.
There are only a few paths to economic power. Mesopotamia, Egypt, India and China began by agriculture and domestication of animals. Persia, Alexander's Greece and Rome used military conquest. India in the early first millennium then found another way by trade. That is how Buddhism and Hinduism spread to Sri Lanka, Indonesia, Malaysia, Thailand, Cambodia, Laos, Vietnam, China and Central Asia. China then spread it to Korea, Mongolia and Japan. In the West Holland became an economic powerhouse by trade in the middle of the second millennium. Britain followed the route of the Netherlands but mixed it with exploration and colonization like Spain and Portugal (Americas). Britain industrialized first and needed to market its shoddy but cheap textiles and due to the foolishness of India and its decaying Moghul rule built an empire of forced consumers in India and Africa. A weak China and Japan were forced to trade. Other European powers followed. Large landmass, large populations, large natural resources, inventive genius, trading ability and military power are the means to economic power.
Germany was becoming an industrial powerhouse despite its later start and after unification by Bismarck, sought its own colonies and place in the world. To deny it Britain fought two world wars and bankrupted itself. It is now in the worst shape of other major European powers. Germany's experience with the thirty year war and two world wars led it to try a new method, the European Union. This required it to subsidize much of Europe and the newest ten nations of Eastern Europe to join the EU have broken the bank and jeopardized both the union and the common currency of the Euro.
America which had escaped the clutches of Britain just as India was falling into them, used colonization to prosper. It decimated the native Indians, took over their land by declaring 'Manifest Destiny'. It used African slave labor, its vast natural resources and land mass. The inventive genius of its hungry European immigrants played a part as well. All these were not enough and high tariff barriers, effective economic colonization of the rest of America (Monroe Doctrine) and grabbing half of Mexico by force were required to achieve its super economic status (read Friedrich List and Ha Joon Chang for British trade with Portugal and American trade-'Bad Samaritans' respectively). Japan played the same game. America in the last thirty years succumbed to its dollar's position as a reserve currency, by borrowing to maintain prosperity and is still printing money to jump start its economy back to prosperity. Unfortunately the world is reluctant to take any more of its IOUs. The US consumer, laden with debts, afraid of job loss, is unwilling to spend and thus the cause of trade deficits of Japan and the Asian tigers. Their prosperity was based on exporting and now the rug has been pulled from under their feet and they are toppling over and their currencies falling.
In a way it is a repeat of the competitive currency devaluation at the time of the great depression of the thirties. The yen has fallen 10% in the last month and the British Pound 30% in two years. The dollar's descent is not far. Japan and Germany have the advantage of having accumulated huge trade surpluses over decades and will weather the storm. China got its start from Hong Kong and Taiwanese manufacturers desire for greater profits. They moved their manufacturing to cheaper wage mainland China with its totalitarian government fully controlling labor unions. Japanese, American and European companies joined the gravy train. China became the world's factory. The communist party could suppress dissent by offering jobs to its restive migrant labo,r while the leaders' children got filthy rich. The problem is that the global economic downturn has put a spanner in CCP's plans and could lea to major political unrest and loss of power, especially more so if America defaults on its debt to China which financed America's buying binge.
Asian consumers are unlikely to become the world's growth engine, America is bankrupt just like Eastern Europe and Germany is frugal. All of Asia including East, South and Southeast will suffer, not decouple, and will hold on to their shrinking value dollars instead of uniting to finance their growth by co-operation and mutual trade and investment. There is one more difficult to surmount problem facing Japan and Europe and it is a demographic meltdown. Their populations are aging and falling. Both of them are xenophobic (unlike the US) and reluctant to accept, absorb and assimilate immigrants. The US doesn't face that problem but it is losing clout in its backyard of Central and South America whose governments are rightfully hostile due to past exploitation. They are banding together in ALBA and Mercosur and chucking out the World Bank and IMF, the Trojan horses of the US. If oil prices rise steeply, the world and India in particular with its rising trade deficits, falling remittance by Indians abroad, poor infrastructure, terrible primary education and stupid and corrupt leaders is likely to suffer severe problems.