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Fuel Crises Force Asian Leaders to Choose Welfare or Deficits

So we now seem to have fuel price caps and three airlines in emergency management in South Korea, have had school closures in Bangladesh and Pakistan, jet fuel rationing and a push to work-from-home in Vietnam, alternate-day driving for private vehicles in Myanmar, and water pumps stalling out in rural Thailand because of fuel prices or shortages ... At some point soon, we surely are going to hear a lot more about the hard policy tradeoffs and fiscal constraints that will ensue, especially for Asian governments. I was thinking a lot today about Indonesia, where Prabowo has had much riding on the fuel subsidy, a free nutritious meals program, and so on. Imagine a world of budget constraints where leaders like him may now have to curtail signature programs that, in turn, risk welfare gains, or else blow through fiscal constraints and run fresh budget deficits. In Indonesia's case, for example, there is actually a statutory requirement preventing this by ostensibly holding the deficit to 3% of GDP. So there is going to be a lot in train that touches prospective tradeoffs around the region. Meanwhile in Washington, where I work, there seems to be a debate conducted in a parallel universe—focused mostly on "back footing China" by "picking off its allies like Iran." This debate is already quite ideological, with the war mostly just reinforcing people's priors—either Beijing "needed" Iran and Venezuela and so is on the back foot from Washington's "ingenious" 473D chess, or else the United States has "overreached" and Beijing is going to swoop into claiming superpower status as some sort of ocean of "stability" and "predictability." Frankly, this very American debate seems at once self-satisfied, out-to-lunch, and highly abstract given the actual tradeoffs that are likely to preoccupy Asian policymakers, firms, and people in the days ahead—like, say, whether to blow through a free nutritious meals program and a fuel subsidy (with all the political risks this will entail) or else blow through the budget (with the various market risks this may entail). Isn't it just fantastical to think that the double-whammy of (1) American trade policy and tariffs, which have undermined many of the prevailing developmental assumptions in Asia, and (2) American Middle East policy, which now may wreck Asian energy security while forcing these kinds of fiscal and programmatic choices will have zero effect on U.S. posture in the region? Whose debate are we having here in DC? I used to write a column for India's financial newspaper, the Business Standard, called "DC Diary." I'm thinking of starting a new column called "DC Delusions," in which other people's realities are extrapolated away while Washington projects its strategic debates about competing with China onto everyone and into everything. Anyway, there could be tough choices ahead and it's not as if we can just talk about U.S. posture in the region as if these won't affect perceptions and outcomes. https://t.co/IskOV2pUxc