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The mood in America, the momentum in Asia

Updated On: Jan 09, 2010

Americans are worried about their future, but confidence in Asia is running high 

I flew back from the United States to Singapore on Christmas Eve and, in the process, marked two key events about the mood in America.

The first is whether consumer demand has returned for American consumers. Despite the heavy snowfall, streets in Manhattan were packed, especially around 5th Avenue stores. Queues formed outside the famous Saks window displays.

But how much of this was merely window shopping?

Or, with a global meltdown averted, had the American consumers returned to drive global demand?

The second was the failed bombing of Northwest Flight 253 by a Nigerian terrorist suspect. Despite heightened security checks for these many years since 911, the incident showed up flaws in airport scrutiny.

But is this sufficient when intelligence agencies still fail to share information? Or is it a marker of renewed fears for safety?

Despite the festivities, the mood in America was mixed. People wanted to celebrate after a tough year and, yes, Christmas sales were slightly up this year by 3.6 per cent.

But this is modest, considering the benchmark was 2008, after Lehman Brothers collapsed and demand fell away sharply. Retailers also reported a move towards sale items and more practical gifts. To prosper, stores had to manage inventories better, avoid overstocking and cut costs.

Caution also mingled with fear. New York's Times Square was a sign of the times. Millions still gathered to watch the iconic Ball fall to mark the end of the year but just hours before that, there was a security scare over a parked truck.

This turned out to be a false alarm but the mood was sober, and not just because alcohol was banned at the event.

Many Americans are anxious about the future. Sixty-one per cent believe the USA is in decline, according to the latest NBC News/Wall Street Journal survey.

Less than one-third are confident that their children's generation will be better off than the present.

Americans are losing confidence in their leadership.

President Barack Obama's ratings have fallen from the euphoria of inauguration to about 50 per cent. Public support moreover is shifting away from many of his policies on a range of issues, from health care to Afghanistan. Worse, state governments are failing and confidence in Congress is near an all-time low.

Economic and security concerns are translating to political anger. The Democrats, who control both Houses and occupy the White House, will likely pay a high price when the mid-term elections come at end 2010. If so, this will rebound on President Obama.

When you fly from New York to Asia, there is a time difference of 12 or more hours, and the contrast in attitudes is like night and day.

Confidence in Asia is running high. Even in the worst of times, the larger regional economies continued to grow last year, especially China. They have helped pull up smaller and medium-sized economies like Singapore and Malaysia, which improved towards the year end.

Asia is leading the global recovery and some believe the region can continue to gain momentum, even if America is in the doldrums.

Momentum, however, can have its dangers.

The huge stimulus packages that China and others introduced to ward off recession in 2009 cannot be sustained.

Public expenditure is often wasteful and too much easy credit can lead to bubbles in asset prices.

Evidence is already showing up in various Asian cities and sectors like housing.

Rather than riding and building on momentum, Asian governments must look in 2010 for the moment to switch course.

Governments must ratchet up credit and ease off on their public spending.

The judgment of when to do this - and the coordination between different economies - will be one of the key challenges for Asia and also America in the months ahead.

Simon Tay
About the author: 

Simon Tay has returned to Singapore after his 2009 Schwartz Fellowship with the Asia Society in New York. He serves as chairman of the Singapore Institute of International Affairs and teaches international law and public policy at the National University of Singapore.

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