Leadership change could loom for most of Asia this year – from tiny Kiribati to giant China. Wrap in Russia, the Gulf and the Pacific, and Asia’s power transitions could affect a third of the planet’s population, and the same share of GDP. As in the United States, income inequality and growth are the dominant political issues. In 2012, therefore, pro-growth populism is likely to drive economic policy.
First to the polls are Kiribati’s 40,000 registered voters on January 13. Taiwan follows the next day. Russia will get a chance to re-elect Vladimir Putin as president in February, and Japanese Prime Minister Yoshihiko Noda is on the verge of calling snap elections any day. Several Indian states are holding legislative elections.
Then there are countries like Thailand and Saudi Arabia whose monarchs are frail octogenarians. Even China is gripped by campaign fever. Vice Premier Li Keqiang and Vice President Xi Jingping have embarked on public relations blitzes ahead of their expected, unelected rise to the top of China’s ruling Politburo in late November.
The economic backdrop does not favour the political status quo. Nomura estimates that Asia-Pacific’s GDP will expand by 5.8 per cent in 2012, down from 6 per cent in 2011. That sounds strong, but developing economies like India and Indonesia need growth above 6 percent to keep unemployment from rising. Asian voters have similar gripes to American voters. The growing gap between rich and poor will help determine the outcome of elections from Taiwan, to Turkey in August.
Poorer governments, like those in East Timor and India’s Uttar Pradesh, have few resources to placate voters, auguring ill for incumbents. Wealthy exporters like Kuwait and South Korea have options. They can let their currencies appreciate, boost citizens’ spending power and then channel government funds into creating non-export related jobs.
The most expedient course, though, is to cut rates and subsidise exports. That’s bad for equality and long-term growth, but when the top spot is up for grabs, pro-growth quick fixes may be hard to resist.