An Anatomy of Asian Economic Woes – Questioning the Economist's assumption

Article Link:
http://www.economist.com/printedition/displayStory.cfm?Story_ID=13022067

Assumption
"Asia’s low rate of consumption and borrowing means that it has huge scope to make consumption the engine of growth over the next decade."

Really?
But should Asian economies, like India, make consumption the engine of growth? With how unregulated consumer spending (not Wall Street greed) has been the centre point of the recent recession (even questioning the merits of capitalism), is this a valid assumption for emerging markets with far little regulatory mechanism and much larger class and economic stratification? Are the economies strong enough to cushion the fall at times of crisis, and support such massive populations?

Why Yes?
Increased consumption definitely helps in generating more revenue for the government, increases competition, and fundamentally puts the consumer in the driving seat. The world revolves around the consumer, and so it’s all good. The governments can incent the end consumer at a time of crisis to spur growth in the economy, hoping it would lead to a domino effect (like Taiwan distributing spending vouchers to its citizens) leading to stabilization followed by a moderate or high-growth trajectory. Now, has it worked before, and will it work this time? I don’t know as I don’t have the facts.

Why No?
What are the perils of the government being overly betting on consumerism to drive growth? How has India fared with opening its markets since 1991, both positively and negatively? Has it been inclusive? Has consumer spending grown at the same rate in urban and rural pockets? What are the implications of such unequal growth on the social fabric (IT engineers with ever expanding wages to farmers depending on unpredictable rains)? Considering a very large unorganized sector in India, how does it play into this assumption derived by mere and incomplete statistics?

Thoughts
Consumerism pushed too hard creates a spending culture (with excess credit, etc) that could go unchecked, and ties a common man into the vicious cycle of consumer spending-economy-growth. With no cushion to fall back on (social security, etc), does the consumer make himself vulnerable to all the perils of an advanced economic system? Does consumer spending mean making a sustainable Rajastani weaver produce and consume more, and in turn tie him to the cycles of the financial world, something that is not part of his simple way of life as much?
Philosophical rant: The word ‘advanced’ is subjective. Is advancement purely a factor of technology and more power to consume, and being better plugged into the increasingly globalizing world? Or is it evolving as humans to live at peace with each other, and go to bed happier than the previous day?

I think the Indian government should find a balance between opening up markets too soon too fast, and being over protectionist so it doesn’t hamper productivity. I do not care about 10% or 15% growth, but rather a modest yet inclusive and sustainable growth. If it has to come with a combination of consumer spending and restraint, so be it. We need policy makers with both brains and heart, not follow advice of economists who are masters in statistical wizardry and logical thinking guided by conventional wisdom.

Oh! Clearly, it’s the Economist, and they know it all. Haven’t we thought so before?