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"Is Asia safe from Wall Street?" asks the headline of a story in Singapore's The Straits Times newspaper this week. The answer, of course, is no. The Lehman Brothers Holdings Inc. collapse and the American International Group Inc. bailout triggered shockwaves that almost instantaneously smacked the shores of Asia, Europe and the southern island of New Zealand, for that matter.
It's the global economy at its most exposed -- and most vulnerable -- state. This is not meant as yet another paean on overly simplistic theories of global connectivity such as Thomas Friedman's flat-world thesis. The world is a lot more complicated than one big bowl of economic Jello. Nor can it be reduced to call centers in Gurgoan, India linking consumers in Georgia with products made in Guangdong, China. But the coupling of economies is a fact of life. In ways large and small, this week's financial meltdown on Wall Street was a global crisis. It scorched people half-the-world away. The real issue now is whether Asian masters -- from politicians and bureaucrats to corporate heads -- use this crisis as a lever for some economic nationalism. They probably will. In Asia, the more obvious effects of the crisis have been well chronicled: Stock markets in some cases have fallen faster and harder than in the U.S. or Europe. Central banks in Japan, South Korea and China poured in billions of dollars to help restore liquidity and staunch the damage. The Chinese government went so far as to buy shares in its largest publicly traded banks to shore up confidence and get the stock market primed. The less obvious effects are no less telling: On Thursday, the Reserve Bank of India met with representatives of large Indian banks to coordinate unwinding swap deals with Lehman. How much is anyone's guess. That day as well, hundreds of Singaporeans lined up outside an AIG insurance subsidiary, demanding that their life insurance policies be terminated and their money returned. Even more Singaporeans beseeched the Monetary Authority of Singapore about structured investment products Lehman peddled retail in the Southeast Asian city-state. In one of the most bizarre dispatches, a Manila newspaper reports that arrest orders have been issued for five employees of a Lehman affiliate for violating anti-dummy laws and illegally buying property in the Philippines. Much of Asia had its own financial crisis a decade back. It was a very tough time. The International Monetary Fund, Western banks and Washington all demanded that South Korea, Thailand, Indonesia and the Philippines undergo severe monetary discipline before extending lifelines. The countries responded, some at great sacrifice; their economies rebounded. In that Straits Times piece, the author chided American bankers for their past superciliousness. He wondered out loud whether Asian nations need to better focus on their own economies and those of their neighbors, rather than rely so much on America and Europe, and, most pointedly, Western financial institutions. The conclusion is that it's too late for this cycle, but "never too late for the next cycle." That may be largely wishful thinking. The world's economy is just too intertwined. But this crisis is likely to result in some control measures in Asia that American banks especially will find puts them at a disadvantage. They'll scream bloody murder about the need for free markets. This time, Asian nations can scream back: "Don't lecture us about market discipline. Take care of your house. We'll take care of ours." - Matt Miller Categories Deal Video
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