China, India should coordinate macroeconomic policies

THE gloating was predictable. When China's stock markets crashed and when China devalued its currency, Western commentators - who had long resented China's continuing economic success - could not resist gloating over China's economic stumble.

Paul Krugman, the Nobel Prize winner in economics, triumphantly said about China, ". . . the nation's rulers have no idea what they're doing". Really? Does anyone in the world truly believe that the Chinese leaders are clueless? But the Chinese leaders need not worry about Prof Krugman. He has a near perfect track record of misunderstanding East Asia.

Stephen Leeb, writing in Forbes, has described well the unique blindness that Prof Krugman has on Asia. Dr Leeb said: "Back in 1994, Krugman similarly assessed the Singapore economy. 'Singapore is an economic twin of the growth of Stalin's Soviet Union', he wrote in Foreign Affairs (Nov/Dec, 'The Myth of Asia's Miracle'). In 1994, remember, the Soviet Union shone chiefly as a massively failed economic experiment. Prof Krugman simultaneously offered duplicate reasoning on the other fast growing Asian economies, Taiwan, Hong Kong and South Korea. The Krugman argument, nearly a generation ago, on the Asian Tigers closely parallels his current reasoning on China. They had expended or were on the verge of consuming their entire available capital and labour resources, he contended, and lacked any signs of future productivity improvement. He wrote that they had already achieved most of their potential, and for Singapore, he wondered only how fast it would fall. Of course, things did not work out that way. Singapore and the other Asian nations have since grown voluminously. By virtually every …