Perhaps surprisingly, this week’s Common Cents isn’t about the awful behavior in the markets over the last couple of days. Frankly, it has been so bizarre as to make a simple explanation virtually impossible. Let’s just say short sellers, inflation worries, Federal Reserve scares, British foibles, and overall geopolitical angst are all in there.
Nope, I am going to focus on a different topic altogether. One that will be the prevailing trend over the next century. Pretty heavy stuff, huh? So, here goes.
On my up I-65 to Nashville yesterday, I called my parents to help pass some windshield time. When my mother asked where I was going, I told her the truth: “I am going to talk about the economy and the markets at an Italian restaurant in Nashville.” There was a short pause before she asked: “is that really an effective use of your time?” I laughed and replied: “I am going to speak to a group of business professionals. I am not going from table to table with a monkey on my shoulder pestering the normal lunch crowd. Bwahaha!”
Oh boy, did I get a good belly laugh at that. As for mom, she simply said she was happy I am so simple and easily entertained.
The thing about presentations is you never really know your audience, even when you think you do. I was speaking to a group called the Association of Financial Professionals. So, I knew those in attendance would be familiar with much of what I would be discussing. However, I couldn’t be certain just how attuned they would be with global events and economic releases.
I will cut to the quick and tell you the questions the group had were really thought provoking. One particular attendee had what I consider to be one of the better ones I have gotten this year. It was, and I paraphrase: “although the US media is focused on the war in Ukraine, it seems the geopolitical shift this century will be towards APAC (Asia-Pacific). Why don’t our policies better reflect this, and what does this mean for our economy?”
Whew. That is a doozy, isn’t it? All the more so when I typically try to be as apolitical as possible. Although I readily admit I am not terribly good at it.
The simple truth is Lisa, the name of the person who asked, is/was spot-on accurate. The world is shifting away from a Eurocentric focus. Asia’s indifference to the turmoil in Europe is kind of proof of this. Don’t get me wrong, the conflict in Ukraine gets headlines. However, when push comes to shove, indifference is apt word here.
Consider this. On April 7th, the UN General Assembly voted for the “suspension of the rights of the membership of the Russian Federation in the Human Rights Council.” This was the UN’s toothless attempt of being tough and showing contempt for Moscow. Somewhat embarrassingly for the western “allies,” 93 countries voted ‘in favour,’ 24 voted ‘against,’ and an eye-popping 58 abstained.
Those voting ‘against’ in Asian APAC countries were: China, Democratic People’s Republic of Korea, Lao People’s Republic, Russia (duh) and Vietnam. Those Asian APAC countries abstaining were: Bangladesh, Bhutan, Brunei, Cambodia, India, Indonesia, Malaysia, Maldives, Mongolia, Nepal, Pakistan, Singapore, Sri Lanka, and Thailand.
With the exception of Japan, South Korea, Philippines, Timor-Leste and Myanmar (?), Asian APAC basically voted (or not) to sit this one out. The population of those Asian APAC countries which failed to denounce Russia is an estimated 2.356 billion. Obviously, that is a significant percent of the world’s total population. Even more, it is 87.33% of the population of Asian APAC countries. Just as a point of elucidation, the remainder of APAC countries are known as Oceania. These would include countries like Australia, New Zealand, Fiji, etc.
But why is Asia so ambivalent?
From what I have read, and I inconveniently can’t find the source today, it appears Asia views the situation in Europe as just that…the situation in Europe. It is between two countries which are half a world away and which have minimal cultural connections. The combatants look different, they speak different languages, they eat different food, and they worship differently. I suppose you can say Asians think what happens in Europe should stay in Europe, for a change this time.
This has longer-term ramifications, particularly as China redefines its position in the world and India emerges as a greater power. Further, given Russia’s apparent military shortcomings, does it make sense for the US to focus as much as it does on Moscow, as opposed to bigger problems in East Asia?
This was the heart of Lisa’s question.
As Asian emerging markets have emerged, so has their political, economic, and military might. This means they will be less likely to blindly follow the lead of any one country, particularly a non-Asian one. All the more so if that country doesn’t care about the cultures, mores, and ways of doing business in Asia.
Consider this selection from a wonderful article on nomadcapitalist.com:
“Economic growth in the 21st century will not belong to the West. It will belong to Asia, South America, and perhaps Africa. As Western nations continue to slide into socialism-induced bankruptcy, the more fiscally sound Asian nations will continue to have less and less need for foreigners at all.
That doesn’t mean they’ll turn their back on the world. It simply means they’ll have more resources at their disposal. For example, many large firms in China are now hiring Chinese expats to serve in top management positions; positions formerly filled by Western expats believed to be more capable. These days, however, an intimate knowledge of local culture is more important than being a foreigner.”
That last line is key: “an intimate knowledge of local culture is more important than being a foreigner.” It makes perfect sense. However, I would be willing to bet a majority of Americans couldn’t name the capital cities of the larger Asian countries. Sure, most could probably get Tokyo (Japan) and maybe even Beijing (China) or even Seoul (South Korea). However, what about Malaysia, which is a country of 33 million souls with a GDP (PPP) of around $1.1 trillion? How about Indonesia, with its 276 millions and its $3.7 trillion economy?
What of Vietnam, Thailand, Singapore, Cambodia, Laos, Myanmar, Philippines, and Mongolia? Of course, I will accept Yangon for one of them. Those are just the countries in East and Southeast Asia. How many can name the capital of Bangladesh? Nepal? Pakistan? Sri Lanka? Even India? Shoot, ever heard of Bhutan? Let alone all of Central Asia and the Middle East?
Remember, all I am asking for is the capital. Nothing fancy.
To be sure, there are probably a number of people reading this who got all the capitals right without looking. But what of the average American? The ones who don’t read newsletters such as this one? I would imagine the answer is “extremely few.”
This takes me to the conclusion. After close to 300 years of dominance, the Eurocentric worldview will fade in importance over the next century. The greater the harm Europe does to itself, the quicker the fade will be. As a result, it will be imperative for Americans to learn more about the cultures, customs, and languages of other continents, specifically Asia.
That is where most of the planet’s population resides, and where most of the economic growth will occur over the next century. How am I so sure? Well, that is where it was for much of the previous millennium. While I am supposed to say “past performance is not indicative of future results,” I know those who don’t learn from history are doomed to repeat it. I don’t intend to be one of them.
So, pick up an Almanac or start surfing around on Wikipedia. You will never know when the words Kuala Lumpur, Jakarta, Hanoi, Bangkok, Singapore, Phnom Penh, Vientiane, Naypyidaw, Manila, Ulaanbaatar, Dhaka, Kathmandu, Islamabad, Colombo, New Delhi, and Thimphu will come in handy. Also, try some butter chicken, saag paneer, pad thai, tom kha kai, pho, banh mi, sushi, yakitori, gyoza, kimchi, bulgogi, and/or Chongqing hot pot. You will surprise yourself by liking more than one of those items in that list. Trust me.
Who knows? Maybe within a few years or so, I will be making economic presentations at Indian or Thai restaurants in Nashville and not Italian ones. You know what? I think I would be more than theek hai, barabara, hao de, gwaenchanh-a, wakatta, or even hotepye with that.
Thank you for your continued support. As always, I hope this newsletter finds you and your family well. May your blessings outweigh your sorrows on this any every day. Also, please be sure to tune into our podcast, Trading Perspectives, which is available on every platform.
Chief Economist & Asian Food Fan
Please note, nothing in this newsletter should be considered or otherwise construed as an offer to buy or sell investment services or securities of any type. Any individual action you might take from reading this newsletter is at your own risk. My opinion, as those of our investment committee Investment Committee, is subject to change without notice. Finally, the opinions expressed herein are not necessarily those of the rest of the associates and/or shareholders of Oakworth Capital Bank or the official position of the company itself.