By Mahbubani, Kishore
Newsweek , Vol. 156, No. 23
As they try to recover, the U.S. and Europe could use a refresher course in Eastern studies.
For most of the 20th century, Asia asked itself what it could learn from the modern, innovating West. Now the question must be reversed: what can the West's overly indebted and sluggish nations learn from a flourishing Asia?
First and foremost, the West should relearn the virtue of pragmatism. Just a few decades ago, Asia's two giants were stagnating under faulty politico-economic ideologies--strict Marxism in China, Nehruvian socialism in India. However, once China began embracing free-market reforms in the 1980s, followed by India in the 1990s, both countries achieved rapid growth. Crucially, as they opened up their markets, neither China nor India threw the proverbial baby out with the bath water--instead, they balanced capitalism with judicious government direction. As the Indian economist Amartya Sen has wisely said, "The invisible hand of the market has often relied heavily on the visible hand of government."
Contrast this levelheaded middle path with America and Europe, which have each gone ideologically overboard in their own ways--and whose utter lack of pragmatism helped precipitate the global financial crisis. Since the 1980s, America has been increasingly infatuated with the ideology of unfettered free markets and dismissive of the role of government--following Ronald Reagan's dictum that "government is not the solution to our problem; government is the problem." Former U.S. Federal Reserve chief Alan Greenspan took this ideology to the extreme by refusing to regulate the large new market in derivatives that emerged under his watch and that quadrupled between 2002 and 2008 to 12 times the size of the total world economy. Of course, when the markets came crashing down in 2007, it was decisive government intervention that saved the day. Despite this fact, many Americans still espouse a deep ideological opposition to "big government," as evidenced by the current wave of antitax Republicans and Tea Party candidates who swept into Congress during the midterm elections.
If Americans could only free themselves from their antigovernment straitjackets, they would begin to see that the U.S.'s problems are not insoluble. A few sensible federal measures could put the country back on the right path. …