The rapid growth of an
economy can look very impressive, especially when it starts from a low base,
but the real strength of that economy can only be judged when that initial
expansionist phase is interrupted or comes to its inevitable end.
At the moment, it may
seem that the future belongs to India and China, but they have yet to be
seriously tested. Whether or not their economic progress is permanent will only
become clear when their spectacular growth is slowed or stopped – which must
happen sooner or later.
Recession is a
hallmark of all developed economies. Rapid growth, far from exempting an
economy from recession, actually brings it on. This has been the case with all
previous “tiger economies”.
Japan and South Korea
were taken aback when their growth was interrupted by economic crisis. They
were honestly amazed that it could happen to them. They have recovered
economically but have never quite regained their old confidence.
The United States, on
the other hand, has always had the capacity to bounce back.
Much of this is due to
a genuine enterprise culture that instils positive attitudes towards business
in most of the population.
Political stability is
also a factor. One of the big question marks about China’s growth is whether it
can survive a recession if that undermines confidence in market reforms and
leads to an increase in the influence of traditional leftists within the ruling
China and India must
also cope with the challenges of population growth, environmental change, and
scarce natural resources – any of which could reveal the fragility of their
growth. Only time will tell.