Asia's Economy Could Use Its Own Gordon Brown: William Pesek

Commentary by William Pesek

Nov. 14 (Bloomberg) -- As leaders meet in Washington to rescue the global economy, Asians face a touchy question: Who speaks for us?

It's a highly valid one as U.S. President George W. Bush hosts many of the big powers today and tomorrow. Vital, too, with strategists such as Albert Edwards of Societe Generale SA in London writing: ``We are all Japan now.''

The Japan-like funk that investors said could never befall the U.S. or Europe is now dangerously plausible. So is the idea that Asia's boom could fizzle as the richest nations drag developing ones down with them.

Risks aside, Asian leaders should be riding high. Many boast what wealthier nations lack: rapid gross-domestic-product growth; vast savings; room to cut interest rates and boost public spending; and a dynamism only found in economies destined for major things.

China, flush with currency reserves roughly equivalent to the combined GDP of India and Australia, will surely be asked to play a sugar-daddy role for the global good. President Hu Jintao may be asked to inject money into the International Monetary Fund or support U.S. Treasuries.

So will Asia really enjoy increased influence as world leaders gather? Not nearly as much as it should, and the region deserves some of the blame.

G-7 Cartel

The Group of Seven countries is a cartel not unlike OPEC, and a dying one at that. The time when Canada, France, Germany, Italy, Japan, the U.K. and the U.S. had their way with markets has passed. It's struggling to cling to power.

Consider this summit the end of the G-7's dominance. It's being replaced by the Group of 20, a changing of the guard that's long overdue. Put this firmly under the category of better late than never.

Consisting of G-7 members plus Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey and the European Union, the G-20 is a more logical framework for such talks. Its leaders oversee almost 90 percent of global GDP.

Asia should be a bigger player than it's likely to be. Why? The region lacks a Gordon Brown of its own.

``In the U.K., Gordon Brown until recently was a failing prime minister,'' Richard Dobbs, senior partner at McKinsey & Co. in Seoul, said at a conference there on Nov. 12. ``He managed to rehabilitate himself with his handling of this global crisis.''

Leadership Gap

Brown's plan to buy equity stakes in banks became an international template for stabilizing financial systems. Even U.S. Treasury Secretary Henry Paulson, who initially ruled out such a step, followed Brown's lead.

This isn't a hero-gram for Brown. Critics wonder why Brown didn't do more to cap skyrocketing debt, regulate markets and see troubles brewing at banks such as Northern Rock Plc in his decade as chancellor of the exchequer.

Yet there's something to be said for Brown's leadership at a time when others failed to take the initiative.

Dobbs says Asia needs such leadership, or at least a spokesman of sorts. Groups such as the Association of Southeast Asian Nations, or Asean, are impressing no one.

Japan would seem an obvious choice, as it's the world's second-biggest economy. For all its might, Japan hasn't mustered the courage or vision to speak for the region. Neither has China or South Korea. Also, leaders in Beijing, Seoul and Tokyo are barely on speaking terms.

Speaking for Asia

What about India? Its economy isn't big enough or open enough, many in East Asia might argue. Australia? Too Western a power, some may say. Indonesia, Southeast Asia's biggest economy? President Susilo Bambang Yudhoyono has his hands full stabilizing a strategically important nation.

How about Gloria Arroyo? The Philippine president, to her credit, has spoken out about the need for an Asian response to the global crisis. Her economy lacks the size or efficiency needed to be taken seriously elsewhere.

Lee Myung Bak of Korea? ``Could President Lee, a former CEO, be the Brown of Asia?'' asked Dobbs. ``As Western leaders talk about a new global architecture, why should Asia be left out? Why should Asia let this happen in the U.S.?''

The U.S. approach to risk management, regulation and corporate governance turned out to be wildly overrated. Gone are the days when U.S. officials could demand this or that from Asia.

Designating a Brown

``This crisis is the last nail in the coffin of the so- called Washington consensus,'' says Park Sang-Yong, a professor at Yonsei University in Seoul.

``Washington consensus'' is often code for IMF policies. Asia is where much of the money needed today and much of the growth of the future will come from. The very idea that Belgium and the Netherlands together wield more power in the IMF's voting structure than China is just ridiculous.

An IMF with more emerging-market power and less U.S. dominance ``would be a very different organization, the beginning of a more multilateral financial world,'' said Stephen Green, head of China research at Standard Chartered Bank Plc in Shanghai. ``But who knows if we are ready for that yet?''

Designating an Asian Gordon Brown or two to make the case would help.

(William Pesek is a Bloomberg News columnist. The opinions expressed are his own.)

To contact the writer of this column: William Pesek in Seoul at wpesek@bloomberg.net