There can be no underestimating the scale of the human devastation wrought by Asia’s horrific tsunamis. Family members have been lost, homes destroyed, and livelihoods ruined. As is often the case in natural disasters, the poor are suffering the most.
And yet, even with damage to infrastructure such as road and rail links, the tsunamis’ overall economic impact is expected to be minor. In the worst hit parts of India, Indonesia, Sri Lanka, and Thailand, the immediate interior was unaffected, while the tourism and fishing industries – the lifeblood of wrecked coastal areas – account for only a tiny share of these countries’ GDP, as liberalizing reforms have fueled economic diversification and rapid growth.
It was not always this way. Historically, it has been difficult to convince Asians that international trade is not a zero-sum-game, with Asia invariably the losers. This is one reason why, after Mao Zedong’s communists triumphed in China in 1949 and other Asian nations gained independence, most Asian countries adopted protectionist inward-looking economic policies aimed at building domestic strength, keeping the “imperialists” out, and achieving self-reliance.
Historical experience incites this suspicion. In 1820, Asia’s share of global GDP was 60%, with China accounting for slightly more than half. That was two decades before the first Opium War. With the emergence of truly global world trade over the ensuing century and a half, Asia’s economic dominance withered. By 1950, China’s share of world GDP had fallen to under 5%, while all of Asia accounted for just 18%, the biggest chunk of which was attributable to Japan, despite its defeat in WWII.