By Cameron Barr, writer of The Christian Science Monitor
The Christian Science Monitor
An American economist based in Jakarta says his children sometimes ask him why all the trouble in Indonesia is such a big deal. In other words: Why should they care?
"Well," he tells them, "there are 200 million Indonesians who are good people and who can do a lot for the world, and they need help."
There are less altruistic reasons to be concerned about Indonesia: Beginning last summer, several East Asian economies, including this one, slowed significantly as the value of their currencies depreciated. This Asian stagnation has trimmed the pace of growth in the US and is a contributing factor in Japan's enduring economic malaise. Late last year, economists worried aloud that contractions in the region could set off a deflationary spiral that would cause bankruptcies and unemployment around the globe. And while two of East Asia's more important economies, South Korea and Thailand, seem as if they are on the road to recovery, a collapse in Indonesia could turn that trend around. Just yesterday, concerns over the future of an international rescue package for Indonesia drove down the South Korean stock market, which this year has been encouragingly robust. In the global economy, there are no safe distances. Japanese and German banks hold big chunks of the $74 billion in foreign debt that Indonesian companies cannot pay off at the moment. A Japanese bank that cannot recover its Indonesian loans might be tempted to sell its US Treasury bonds to meet obligations. If other Japanese financial institutions did the same, Indonesia's financial turbulence would rumble through Wall Street. Despite these economic woes, Asia remains a dynamic region. The US, Japan, and China compete with one another, generally with great subtlety, to ensure that the post-cold-war order emerging here suits their interests. …