While I expect China and India to weather the slow down in US consumption reasonably well, perhaps even benefiting from a relief of inflationary pressure, others are more sanguine about the central role the US economy still plays in the global economy. This linked article, A Subprime Outlook for the Global Economy, by Stephen Roach is worth consideration, not least because of his excellent and long track record as Chief Economist for Morgan Stanley and now its Asia Chairman. In it he outlines his expectation of the impact of the US sub-prime meltdown on Asian economies (China, Taiwan, Japan …) and recommends a more considered approach by policy makers to management of asset markets.
The theme of increasingly interconnected economies upon which he touches also suggests that this is where solutions might arise. This coupled with a more thoughtful approach by policy makers might encourage decision makers to look beyond standard measures of performance. I remain open to the idea that Africa will replace Asia as Asia rises and that non-financial measures will become more important to people and governments as issues such as climate change, health, education and lifestyle are taken more seriously.