Fragile U.S. economy faces threats from both hemispheres
The fragile U.S. recovery is now facing economic threats from both the Eastern and Western hemispheres: As the eurozone union appears to be on the verge of cracking apart, Thailand is just putting out the flames of an internal revolt that may not only smolder for years, but may be the first signal of trouble in the region.
If you think that's fear-mongering, just look back a couple of months and read the commentary of economic experts who said that Greece doesn't matter, because it's smaller than California.
But why should we care about Thailand?
Thailand is not a big dog in trade with the U.S., ranking only as the 29th-largest export market for the U.S.
That said, Thailand has been a keystone of pro-U.S. stability wedged in between unstable and unsavory Burma to one side, and relatively peaceful but socialist Laos on the other. Already, Thai officials estimate the economic cost of the 10-week "red shirt" revolt at $1.5 billion. And Thailand scholars predicted the red shirts aren't going away, a fact that will impact the tourism-dependent economy for years:
"I think this is a new beginning for the Red Shirts," Kevin Hewison, a Thailand expert at the University of North Carolina, told the AP. "It will be a darker and grimmer time of struggle and less-focused activities. By no stretch of the imagination is the movement finished."
And, just as Greece was the beginning of Europe's sovereign debt contagion, Thailand could be the first Southeast Asian nation to experience unrest, as many of its neighbors share similar conditions, according to this fine piece in the Los Angeles Times.
"Many of the underlying concerns are the same throughout the region, including slower growth, poor investment in human capital and skewed income," Michael Montesano, a visiting research fellow at the National University of Singapore's Institute of Southeast Asian Studies, told the L.A. times.
The piece wraps it up nicely:
An earlier generation of rising Asian economies -- Japan, South Korea, Taiwan and Singapore -- saw many poor farmers find well-paying factory jobs in the cities, as have millions recently in China, but most such people in Southeast Asia have never gotten that opportunity. Economies in Southeast Asia are smaller, and most governments failed to use a rush of foreign investment before the 1997 Asian financial crisis to jump-start education, upgrade skills and leapfrog beyond cheap-labor economies. Now, as China booms ahead with higher efficiency and plentiful investment capital, many Southeast Asian nations find themselves increasingly squeezed, leaving those at the bottom with low-paying jobs in tourism and related service sectors.
The U.S. gets 34 percent of its imports from Pacific rim countries. And it sends 22 percent of its exports there. Granted, most of that is China, but not all. Southeast Asian nations such as Thailand account for a material amount.
Now, in the interest of fairness, I must present the alternative viewpoint: That the revolt in Thailand means little and will remain self-contained:
"The risk that the political instability is prolonged, and spreads beyond a small area of Bangkok, will stay very high for a while," analysts at Capital Economics said in their 'Emerging Asia Economics Update' report earlier this week, according to MarketWatch. "Nevertheless, we continue to expect that the latest crisis will be resolved soon and that the conflict will not spread." So we "anticipate that the impact on the economy will be relatively small and that the sell-off in Thai markets will fade," they said.
I hope they are right. The last thing a fragile U.S. economic recovery needs right now is a spreading fire in both hemispheres
May 20, 2010; 3:15 PM ET
Categories: Deficit/debt , The Ticker
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