Asia's Economic Power Is Highly Misjudged

Many believe that the success of the Asian countries lies in the capability to produce goods at a low costs, which in turn is due to the abundance of relatively cheap low skilled labour. Since the 1960's, the Asian economies have been growing substantially, with annual growth rates that are 5 times higher than the West they surely have left a strong impression in the minds of the Western leaders. According to a survey by Fleishman-Hillard, a world leader in marketing and communications, 70% of the world politicians, scientists and businessman have the perception that Asian countries will have a dominant position in the world economy within a decade. In addition, business analysts predict an economic rise for Asian corporations. However, are these predictions justified? Asian economies certainly have experienced improvements growth rates. However, can one truly speak of an Asian myth? This essay will elucidate why the predicted Asian economic dominance is highly overrated by comparing the total Asian output, the size of their exports and financial sector in relation to the rest of the world.

To start with, the predominant difference between Asia and the western world lies in the mentality. Because the West emphasizes on the performance of the market mechanism, Asian countries deem that long run economic prosperity derives from focusing on the interest of the common good (Krugman, 1994). The common perception is that Asian living standards have improved substantially since the 1960's. However, it is still considerably lower than the Western countries. These views are supported by the GDP per capita figures. Since the mid 90's the real GDP per capita of Asian economies have grown twice as fast as their Western counterparts, even after taking into account the Asian financial crisis of the 90's. The predictions are that the growth rates will keep on growing with an average of 7% for this year. In contrast, the predictions for Europe and the United States of America are only 1.2% and 3%, respectively (The Economist, 2010). Nevertheless, it is highly misjudged that Asian will converge or even bypass the West in the near future. If one takes into account the effect of the drop in the value of the Asian currencies, then the ratio of Asia's total GDP to the rest of the world has in fact decreased from 29% in 1995 to 27% in 2009 (The Economist, 2010). This suggests that Europe and United States of America are still producing significantly more than the Asian countries.

Furthermore, while the perception is that the Asian exports volume are expanding at a great pace, the export data show that the increase is merely 3% in 2009 higher than the figure in 1995(The Economist, 2010). Asia's total output and exports declined exponentially in 1980 and early 1990s despite of the fact that China's output and exports account for a significant portion in recent years, meanwhile, the rise has been cancelled out by the great drop of Japanese exports. Though tremendous export restructurings