Decoupling 2.0?

The resurrection of the concept of decoupling shows the fickleness of much economic and financial analysis.

In the years running up to 2008 the concept of “decoupling” came into vogue. The most sophisticated exponents of the idea argued that Asia was becoming less vulnerable to an American economic downturn. Asia was becoming a larger and more integrated economic region.

Then came the crisis of 2008. Although America was hit first other economies, including Asia, suffered too. Pundits confidently declared that decoupling was over – if it had existed in the first place.

Now the big Asian countries seem to be recovering while the developed world is still in the doldrums. Therefore decoupling is back on the agenda.

Those who argued for decoupling in the first place should have stuck with it. Asia is becoming less dependent on America. The two regions are not totally separate but the balance between them is clearly shifting.