Rewriting economic theory

Travelling up on the small mountain train to take a good view of Hong Kong from the Victoria Park is indeed a very thrilling experience. Milton Friedman aptly remarked that if you wanted to observe capitalism at work then go to Hong Kong. There were no restrictions of the financial flows in or out of the territory. The international financial centers were abuzz with calls for exploring the Eastern markets. The nineties were good times when the experts around the world would give advice to the Wall Street and other international investors to head for the Asian markets. But in the ensuing years the entire gains made through decades of international negotiations would start crumbling and begin a vicious circle of turmoil in the international economy.
The market principle of business flowing to better lucrative environment is a time tested rudiment of economic realities. The thriving market economies of the region are a testament to that truth. But then the economic tumult of recent years in the world ought not to have happened. The economic theory has always managed to catch up with the shifts in archetypical models in the known history of the economic eras during different times. It is indeed surprising that suddenly all the answers that should be coming from the quarters engaged in the process are somewhat quieter or not forthcoming with an eagerness that should be a part of the exercise.
An entrepreneur would take his savings to a bank to raise a loan and then launch his business venture. It is after this initial preparation involving some significant steps of putting to make use of your business acumen that the final approach to raise further finances in the securities markets was made. Somewhere along the line the whole process got convoluted in a way that its essentials were lost to the urgency to not only shorten the distance from the first to the second but eliminate totally the formal distance that was always maintained between the two very important steps. It was when the investment function of the financial market got amalgamated with the side of the financial market that had traditionally been involved in taking care of the deposits by the customers the economic realities of the market economy began to slip through the fingers.
Development of the economic theory between the two sides of the Atlantic did take care of going along the economic problems or issues that arose from time to time. At the time of the oil crisis of the seventies many significant developments had taken place in the international economy. The gold standards had been earlier given up by the international community and the economic activity at the western side of the Pacific Rim had begun to send ripples in to the world markets. This was when the specific economic realities of the Asian markets should have been taken on board to revise and rewrite economic theory.
There has been a misjudgment about the specific nature of make-up of varied markets in the Asian region. The recent experience in the eurozone has amply exemplified the fact that all indigenous markets function and act in their own specific environments. Any attempt to push them under one umbrella or label is likely to hinder a better understanding of individual economies. Gathering a few general statistics about an economy does not give out a complete picture of its performance. When the world economy was divided into two broad regions of economic systems through the major part of the last century the economic thinking around the world continued to hover to find better solutions to the economic woes. The events of the last two decades have narrowed down the space that is required for the interplay of a vast number of variables that are important to be taken seriously. The economies in the Asian region are taking a dimension where their influence on the international economy would continue to grow in the days to come. They need to be watched closely at the macro and micro level of performance.

The writer has served as a consultant to the United Nations and other developing economies on the issues of trade and development and can be reached at