The Sky's The Limit

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The only way out, according to Courtis, may well be for the Bank of Japan to print more money. That approach to dealing with the debt load, he said, would cause a torrent of wealth to leave Japan and push international stock markets higher (or at least put a floor under their decline). But it would also mean a lower yen and thus more attractive Japanese exports. Though other economies might be leery of that, Courtis suggested they should prefer a low yen to a deeply indebted Japan. "You can't have it both ways," he said.

While Japan is still in trouble, the rest of Asia "has come out of the bottom of the valley," claimed Victor Fung, chairman of the Hong Kong Trade Development Council. Export growth is so strong, in fact, that Fung was concerned that "we may have come out of recession too early to get fundamental reforms." The region remains enthralled by a familiar theme: the emergence of China. Its entry into the World Trade Organization later this year, said Fung, "signifies China's taking its full place in the world." The prospects for growth are immense. Fung noted, for instance, that services currently make up only 30% of the Chinese economy, as against 85% in Hong Kong. The Internet revolution is a clear avenue for change: 80 million Chinese already have cable access, and the number of Internet users is doubling every six months. The other economies of the region are also on the rebound.

If Asia has begun to search for new paths back up the mountain to prosperity, much of Latin America is only in the foothills. No region offers a more sobering picture of how volatility translates into vulnerability than Latin America. In 1999 it was nature that buffeted the region--El Nino, the effects of 1998's hurricanes Georges and Mitch, the floods of coastal Venezuela--but a collapse on Wall Street could have a no less devastating effect. Moises Naim, editor of the journal Foreign Policy, based in Washington, noted that 1999 set a series of dismal records for Latin America: the highest unemployment rates ever recorded, the highest fiscal deficits in a decade, a near unprecedented collapse of foreign investment and trade. By necessity, said Naim ruefully, "Latin Americans are now the best in the world at managing crisis."

For all that, Naim saw growth possibilities of 2% to 3% in the region. U.S. trade and foreign investment have made Mexico a comparative bright spot, and Brazil has begun to recover from a slump. But the improving prospects depend on continuing prosperity outside the region. "It is wrong that a stock-market crash in the U.S. could benefit emerging markets," said Naim. "When there is a correction, money flows out of the American stock market into bonds--not to emerging markets."