Mao was speaking, of course, about an economic dynamic transferring from one class to another, for capitalism was then, as it is now, nothing new to China. It has been part and parcel of Chinese culture for centuries, carrying the Celestial Empire through the cycles of production and consumption over several dynasties. It continued into the Communist era with only a relatively short, but very turbulent, interruption.

After Mao’s attempts to curtail private, for-profit ownership turned disastrous, his successor, Deng Xiaoping, set about to revive it under the equivocal epithet “Socialism with Chinese characteristics.” Deng allegedly proclaimed that “to get rich was glorious.” He felt that a socialist state could safely harness the benefits of capitalism, and that communism might work if everyone first got wealthy together. But what he failed to realize – and what Mao understood – was that unchecked capitalism produces social division.

After decades of headlong growth inaugurated by Deng’s reforms, a question once thought consigned to the pages of history after the Great Leap Forward and the Cultural Revolution has come back to haunt China’s communist leadership. Are capitalism and socialism really compatible, especially in a country with a colossal population and comparatively few resources? The answer seems to be emerging with alarming clarity as the gulf between China’s “classes” grows wider and more pronounced.

The most recent global financial crisis hasn’t helped. Throughout it, China has played a stabilizing role in the global economic system, thanks to the concerted effort of a centralized government willing to stay a pragmatic course. While some economists boldly predict that China’s growth engine will pick up and continue as before, there are signs that it may be running out of steam. If it does, the Chinese “economic miracle,” and those carried by it, including millions of poor migrant workers from China’s countryside who rely on factory jobs for income, are about to drift into uncharted waters.

For decades, China has built its economic strategy based on four pillars: exports, foreign direct investment (FDI), fixed-asset investment and domestic consumption. Of these, exports are central. They draw in FDI and support investment in fixed assets and domestic consumption. But exports have slowed dramatically and there’s mounting evidence that a fundamental change is under way.

China has long been inclined to regard itself as self-sufficient. This attitude frustrated British merchants when, in the 18th century, they made early attempts to establish trade and diplomatic relations with Beijing on an equal footing. The Qing court liked to believe that Western nations had little, if anything, to offer that China needed; it held the view that it granted trading rights only as a mark of favor to tributaries. China today has comparatively limited natural resources to support a population of its size. Foreign trade on a large scale, once regarded with distain by Qing mandarins, has become vital to China’s well-being, if only to sustain its massive importation of food, energy and raw materials.

To keep exports moving to its biggest customers – North America and Western Europe – China knows that two basic conditions have to be in place. First, Chinese goods must be cheap. Second, Western consumers must have disposable wealth to buy them.

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Why the resistance to allowing Huawei, already a large investor in the commercial telecom industry in Australia, into the NBN? Prime Minister Julia Gillard evasively explained that the decision was made to “[stand] up for Australia's national interests.” What Gillard’s vagueness reveals above all is the difficulty Huawei has convincing the world it is trustworthy, and the equal difficulty foreign governments have explaining why it isn’t.

This isn’t the first run-in between Huawei and a foreign government attempting to protect what it sees as national interests. The United States has been at the forefront of efforts to check Huawei’s penetration into national telecom networks. The U.S. Committee on Foreign Investment prevented the company from acquiring U.S. telecom companies 3Com and 3Leaf in 2009 and 2011, respectively, and the U.S. commerce secretary reportedly intervened in 2010 to block Huawei’s involvement in a contract to supply equipment to Sprint. Late last year, U.S.-based Symantec broke off a profitable four-year partnership with Huawei, allegedly over fears that it could lose corporate customers fearful of Chinese hacking and cyber espionage.

The nail in the coffin for the NBN deal seems to have come from Huawei’s recent troubles in the United Kingdom. As reported in The Australian, the Australian government cited recent revelations that the British intelligence services "felt compelled to put in place an expensive and resource-intensive auditing structure in order to ensure that Huawei didn’t steal state secrets" after it was allowed to provide equipment for a large broadband project. This came in spite of BT, the U.K.’s largest telecom provider and lead in the project, insisting that it was allowed to check all of Huawei’s contributions for security threats and that the relationship was “managed strictly in accordance with UK laws and security best practice.”

The contradiction between BT’s statements and the British government’s actions are a common theme for Huawei. The company is, ostensibly, employee-owned, and no evidence has ever been put forth publicly linking it to cybercrimes, espionage, or direct control by the Chinese government. Yet suspicions persist. Huawei’s founder, Ren Zhengfei, was a deputy director in the Chinese People’s Liberation Army’s engineering corps before establishing the company. Its meteoric expansion was largely underwritten by enormous government-backed loans, and the transparency of its funding and management operations has consistently fallen short of international best practice.

Australian National University’s Desmond Ball insists there’s “no doubt” Huawei is involved in cyber espionage, and New Zealand-based security analyst Paul Buchanan says the notion that Huawei is truly independent of the Chinese government is “ludicrous.” Yet the company has succeeded in gaining entry to government-backed projects throughout the world, including in New Zealand’s ultra-fast broadband (UFB) project in Christchurch and central North Island. Dismissing cyber security fears, New Zealand Prime Minister John Key has said all aspects of Huawei’s involvement in the UFB were carefully considered and that his government is “comfortable with the current arrangements'” with the company.

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Five years on, after bank failures and bailouts, foreclosures, and rising unemployment, the crisis that started as an obscure financial scheme has led to an unusual triple failure in all three of the world’s traditional growth engines, the United States, Europe and Japan. Though boom-bust cycles are nothing new, they tended to peak and trough at different times. Germany’s early 20th century malaise was paired with America’s roaring twenties. Japan’s first lost decade of the 1990’s coincided with a western tech-driven high.

Now, industrialized nations are facing their greatest economic threat in nearly a century – a troubled middle class losing its purchasing power to drive world growth. If current trends aren’t reversed, and soon, 2012 may be the year the middle fails and a century of economic modernization grinds to a halt.

The upwardly mobile middle class is a relatively new phenomenon. For most of history, the wealthy stayed rich and most everyone else never had a chance. Over the last sixty years, the U.S. as world consumer of first resort created a golden age of opportunity along with a strengthening Europe and Japan. The new middle class that emerged bought homes, cars and appliances powering mass-market adoption of every major innovation of the time – from electricity and the telephone to medical technology and the Internet.

Without this purchasing power, investing in innovation loses its main appeal – the ability to profit from new products and ways of doing things sold into a mass market that can afford to buy them. Notice the shift already underway. Companies like Proctor and Gamble are diversifying their product mix to appeal to budget consumers and premium brand buyers, while the middle market shrinks. They’ve introduced low-priced dish detergent and expensive replacement razor blades while their laundry brand Tide has become so expensive it has attracted thieves that sell it on the black market or trade it for drugs.

Contrary to the decline of the West, rise of the rest narrative in vogue these days, even fast growth economies like China, India, Russia and Brazil can’t pick up the slack. Burdened with years of lax planning and excessive state ownership of diverse industries from banks to airlines and steel mills, the BRIC’s middle class purchasing power remains weak. Even overly optimistic forecasts of a new Asian century routinely use unsustainable growth rates that are already beginning to slow. Note China’s revision to a more modest 7.5 percent growth target and India’s struggle to keep growth alive.

A shift is now underway, risky but necessary for developing economies that looked to industrialized nations for demand. When Chinese President Hu Jintao addressed the National People’s Congress last month, he emphasized the need to re-direct the economy towards more domestic consumption. The World Bank in a recent report warned that China faces increasing risks of a hard landing if policies changing the role of government in the economy aren’t enacted soon. Several leading economists believe that day has already come. Growth fueled by investment and infrastructure spending has done little for small and medium sized enterprises, the core job creators, a social safety net or healthcare.

A triumphant Vladimir Putin in his election victory speech declared a shift in growth away from Russia’s state-owned enterprises and towards more free market reforms. Burma has started to free up its state owned economy after decades of dictatorship. Hotels in Rangoon are filled with businesspeople eager to get in early to the unveiling of a relatively untouched Southeast Asian gem. Here, too, state capitalism appears on its way out, not up.

Unfortunately, reorienting growth towards the middle is much easier said than done, more like changing the direction of an ocean liner than a speed boat. Russia’s great wealth has flowed to powerful oligarchies. China’s income gaps are widening into chasms and social unrest is on the rise. India’s companies are hampered by excessive government intervention, frequent power outages and corruption. Even Brazil’s rapid, but thin growth is based heavily on natural resources.

In the end, there has been no greater engine of growth than the power of the consumer. Both developed and developing economies need to get back basics – education, access to capital, rule of law, and labor mobility. Without them growth stalls, inequality worsens, and political instability rises. Absent change, our collective futures look surprisingly like a not so distant past. That was feudalism, and it’s making a comeback as well.

The great age of opportunity that was a hallmark of the 20th century can last well into the next if countries focus on winning the race back to the middle – and not to the destructive financial top.

Brian P. Klein is a macroeconomic and geopolitical strategist and former U.S. diplomat. His articles and op-eds have appeared in Foreign Affairs, the New York Times, Newsweek Japan, the International Herald Tribune and South China Morning Post, among others. He’s at work on his first book about the rise and fall of the global middle class and blogs at www.brianpklein.com

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Despite the ongoing global economic turmoil, a number of African nations have been making impressive strides in their development, a point underscored by The Economist’s decision recently to run a leader describing Africa as the “hopeful continent,” drawing a clear contrast to its cover story “The Hopeless Continent” a decade ago.

And the continent’s leaders are now looking east for their inspiration. Rwandan President Paul Kagame, for example, has said he hopes to eventually transform his country’s economy into the “Singapore of Central Africa.” Such sentiments tap into the vast and growing repository of Afro-optimism, an optimism that sees sustained economic growth as the future, even as the north of the continent is embroiled in domestic political turmoil and uprisings.

So, is it Africa’s time to replicate the economic growth feats of Asia? This may seem like a herculean task, but given the recent economic gains made in countries like Ghana, which posted 13.5 percent growth last year as it casts off the failed economic policies of the 1980s and 1990s, as well as the success of recent BRICS addition South Africa, there’s now hope for an “African miracle.”

But if Asia is the guide for Africa’s economic miracle, then the Asian foundations of a strong state and supporting institutions must be made a reality in Africa. The examples of China and Japan loom large in the minds of many African leaders and elites. Yet in contrasts with these two Asian giants, the post-independent African state is still encumbered with significant structural weaknesses, a lack of professionalism and an excess of cronyism, patronage and other corrupt practices that would make even officials involved in some of China’s most notorious cases of corruption blush. This lingering image has undermined efforts to settle on a positive economic agenda in Africa, even when visionary leaders of developmentally-oriented states such as Mauritius and Botswana have emerged.

Some argue that the East Asian model of state-driven economic growth might not be suitable for African states, given the apparent weaknesses in their leaders’ characters (this isn’t to mention the somewhat troubling view that Africans are inherently not up to the task of producing sustained and healthy economic growth). With this in mind, some argue that the social, historical and structural weaknesses demonstrated by many African states suggest that their economies would instead be better off relying on market incentives, i.e., the Southeast Asian path beaten by Singapore and Indonesia.

Regardless of the model that African nations choose to follow, achieving the enviable growth patterns of some Asian economies will require the strengthening of intra-regional trade. Africa’s recent economic gains have been mainly driven by external trade, especially with emerging economies such as China, India, Brazil and South Korea. A recent report by the McKinsey Global Institute puts intra-African trade at a lowly 12 percent, about half that achieved in Latin America. This is despite almost a billion consumers residing in the African continent, meaning that intra-African trade should no longer be perceived as an insignificant element of any country’s economy, but rather a potential path toward market consolidation and leverage for African markets in the global economy. China and other Asian economies offer clear examples of the benefits of looking local as well as outside the region.

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These are the first elections for more than twenty years to include opposition party the National League for Democracy, led by Aung Sang Suu Kyi. The U.S. has already started restoring full diplomatic relations with Burma, in recognition of its ongoing political reforms. As U.N. Secretary General Ban Ki-moon said last week, Burmais giving “a strong sense of hope and expectation for the international community.”

The unleashing of Burma’s economy could boost regional growth and intra-ASEAN trade and investment. As it is, Burma’s GDP growth rate is projected to average around 6 per cent per year until 2020, with GDP doubling to $124 billion by 2020, according to IHS Global Insight forecasts.

The domestic consumer market is expected to grow rapidly, creating a fast-growing market for exports of goods and services from other ASEAN countries. Burma’s population is, after all, the fourth largest in ASEAN, at around 50 million people.

But the pace of Burma’s economic growth could be even faster if driven by more rapid economic reforms. A key risk to this more rapid growth would be rising inflationary pressures, as rapid growth and investment creates supply bottlenecks and wage pressures. Inflation is already estimated to have averaged around 9 percent in 2011, and is forecast to average around 10 percent in 2012.

Burma, like other ASEAN countries, has agreed to the tariff liberalization timetable under the ASEAN Free Trade Area agreement. From an economic perspective, Burma’s economic reforms and tariff liberalization will be important to ASEAN’s objective to create a single market for trade in goods by 2015.

Still, there are several important steps ahead for Burma.

A key macroeconomic reform will be the planned implementation of a unified exchange rate from April 1, as Burma moves to a managed float that will help to reduce market distortions and boost export competitiveness.

Burma’s draft investment bill could accelerate investment, with provisions for a five-year tax holiday for foreign investors, 100 percent profit repatriation allowances, and government guarantees against nationalization.Other key features include foreigners having the right to lease land; foreigners no longer needing a local partner to set up businesses; and joint ventures could be set up with at least 35 percent foreign capital participation. Unskilled labour employed by foreign companies would have to be 100 percent local, while domestic skilled workers would have to make up at least 25 percent of a firm’s operations after the first 5 years, 50 percent after 10 years, and 75 percent after 15 years.

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Yet, when it comes to India, the administration is dropping the ball. Although trade between the United States and India has increased, the economic relationship hasn’t yet reached its full potential. To do so, the administration should finalize a mutually beneficial investment treaty with India, and move forward on steps to negotiate a comprehensive Free Trade Agreement. These pacts would link American companies – and American workers – to important opportunities presented by India’s growing economy. In turn, this would lead to new jobs, and further link the United States to a critical Asia-Pacific partner.

To be sure, trade with India is on the upswing. Bilateral trade reached $48 billion in 2010, according to data from the Commerce Department, and the United States has become India’s third largest economic partner. With the exception of the global recession in 2009 and the burst of the dot-com bubble in 2001, total trade between the two countries has increased every year since 1991.

India’s economic transformation has been a boon for American companies and workers. In less than a decade, U.S. exports have quadrupled to $19 billion. While a broad array of American businesses now trade with India, few have benefited more from the relationship than U.S. manufacturers. The Office of the U.S. Trade Representative says that three manufacturing sectors – namely, machinery, electrical machinery, and aircrafts – account for three of the top five export categories to India. In the past two years, for example, India’s low-cost carrier, SpiceJet Airlines, purchased 33 new generation 737s from Boeing; India’s Ministry of Defense bought 10 Boeing C-17 Globemaster III airlifters; and Reliance Power ordered six turbines from General Electric Co. as part of a deal worth $750 million.

Equally important, yet seldom noticed, are the investments that Indian companies are making inside the United States. From 2000 to 2010, India was the United States’ second fastest growing foreign investor, with an annualized growth rate of 53 percent. In 2009 alone, Indian companies invested $4.4 billion into wide-ranging American sectors like pharmaceuticals, oil and coal, iron and steel, and telecommunications.

The tangible results of these investments can be seen across the United States. In Ohio, for example, subsidiaries of TATA, India’s largest company, employ over 1,200 people at diverse production facilities that manufacture steel products in Warren, and develop and deliver software technology in Milford. The same can be said in northeast Minnesota, where in 2008 India’s Essar Steal broke ground on a $1.6 billion steel plant on the state’s Mesabi iron range.

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He’s back this month for his second visit in two months, with a visit to Thailand, Japan and South Korea from March 23 to 27, accompanied by his foreign minister, as well as the international trade, agriculture and international development ministers.

Just as with his visit to China in February, trade will feature prominently in this visit, with Thailand preparing to pitch Canada on its role as an entry point to ASEAN. It would be surprising if Harper didn’t also seek Thai views on developments in Burma, given Foreign Minister John Baird’s visit there earlier this month. Whether Thailand is really ready to commit to a free trade negotiating process with Canada remains to be seen given their foot-dragging on a free trade agreement (FTA) with the United States, which was eventually put on the shelf.

In Japan, it’s expected that Harper and Prime Minister Noda will announce that the two countries will begin bilateral free trade negotiations, after a preparatory study documented the expected benefits for both countries from such a deal. Both are also trying to join the Trans-Pacific Partnership (TPP) negotiations, but given the rapid rate at which these negotiations are progressing, it’s likely that neither Canada nor Japan (nor Mexico, which has also indicated its interest in joining the nine-party trade talks) will be ready to join before the substantive agreement is concluded, probably later this year.

Agricultural issues present TPP stumbling blocks for both countries (rice for Japan, dairy supply management for Canada), but since Canada doesn’t produce rice and Japan does not export dairy products, the two countries can agree to set aside these “sensitive” sectors in their bilateral negotiations.

Not so easy to set aside are automotive trade issues, and representatives of the Canadian automotive manufacturing industry (“the big three”) have reportedlyopposed Canada-Japan free trade talks. However, both Toyota and Honda have sizeable manufacturing and assembly operations in Canada, and may have a different view.

The opposition of North American car manufacturers is also the main reason that the Canada-Korea FTA talks have gone nowhere since they were announced in November 2004. Meanwhile both the E.U. and most recently the United States have concluded FTAs with Korea, even though both sets of talks began after Canada had started negotiations. The Korea-E.U. negotiation was concluded in 2009 and came into effect on July 15, 2011. The Korea-U.S. Agreement (KORUS) was completed in 2007, but was only ratified after further fine-tuning to deal with automotive issues, but finally came into effect on March 15 of this year.

With KORUS, extensive lobbying against the agreement was mounted by the Detroit auto manufacturers, especially Ford, arguing that Korea failed to provide fair access for U.S. autos to its market. The reality, however, was that Ford not only wanted Korea to relax safety standards on U.S. cars (considered a non-tariff barrier), but also sought longer phase out of protective U.S. tariffs and when it achieved that goal, it removed its opposition. If Ford U.S.A. and the U.A.W. could be brought onside by the Obama administration, it’s hard to understand why Canada could not find a formula to accommodate the concerns of Ford Canada and other auto manufacturers in Canada. Meanwhile, Canadian exporters, particularly beef and pork farmers, find themselves disadvantaged by their lack of preferential access.

While Harper’s visit to Korea is primarily to attend the Nuclear Security Summit in Seoul, it would be surprising if officials travelling with him didn’t take the opportunity to try to revitalize the moribund Canada-Korea talks. As Canada is trying to play catch-up after a decade of relative neglect for its Asian partners, don’t be surprised to see the prime minister and members of his team back in Asia again soon.

For those who believe Canada has been absent for too long from Asia, this is good news. The question, though, is whether the shift will be strategic, and have the staying power it needs.

Hugh Stephens is Principal of TransPacific Connections (TPC Consulting) www.tpconnections.com and is Executive-in-Residence at the Asia Pacific Foundation of Canada, in Vancouver.

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Canada had been asleep at the switch when the TPP, which had begun life modestly as a grouping of just four small economies (New Zealand, Chile and Singapore, joined at the last moment by Brunei), expanded its membership at the APEC summit in Peru in 2008. The TPP had limited traction until the administration of George W. Bush, looking for an initiative to take on the trade front in the face of a hostile Congress, latched on to the TPP as a possible vehicle to promote trade liberalization, potentially leading to a future Free Trade Area of the Asia Pacific (FTAAP). Once the United States was on board, Peru, Australia and Vietnam all enthusiastically signed on through unilateral declarations. Malaysia expressed cautious interest and was eventually admitted. Canada, still mired in a minority government that hadn’t yet bought into the realization that Canada’s future lies as much, or more, in Asia rather than across the Atlantic or exclusively in North America, did nothing.

Over the past couple of years, though, the TPP has started to gain momentum. With the reaffirmation of U.S. commitment by the Obama administration, negotiations started in earnest in 2009, leading to a declaration in Honolulu in November 2011 at the APEC Summit that the TPP leaders had achieved the broad outlines of an “ambitious 21^st Century agreement.” They expressed the hope that the agreement will be completed by the end of this year.

As the TPP started to move toward reality, and as Canadian trade relations with Asia continued to mark time (Canada has signed a number of free trade agreements in recent years, but none with an Asian economy), Canadian officials started to realize that they were on the outside looking in. They quietly started to sound out the United States on the possibility of Canada joining the negotiations, but it’s fair to say that Canadian participation wasn’t a U.S. priority.

First, there was the issue that adding participants would complicate a negotiation that was already challenging, given the varied economic interests of the participants, ranging from fully developed economies like Australia and New Zealand to emerging, state-directed economies like Vietnam. Second, there were some very real concerns regarding Canada’s willingness to make a positive contribution to achieving the kind of ambitious outcome the U.S. was seeking. Canadian intellectual property rights (IPR) laws were notoriously lax, and several attempts to update them had gone nowhere. Canada has also always been keen on carving out a wide exception for a broadly-defined range of “cultural industries.”

This is something not designed to appeal to important interests in the U.S. and, perhaps of more importance to New Zealand than the United States, Canada clung to an outdated supply-management system for dairy, eggs and poultry, the effect of which was to more or less seal off the Canadian market for these products (with the exception of specialty items that couldn’t be produced in Canada). In short, Canada wasn’t really welcome at the table, although no one wanted to say so publicly, and Canada didn’t want to run the risk of a rebuff by asking publicly.

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For many, the brokers are the ugly side of the business sector, claiming large commissions for linking up buyers and sellers.

“The market is hot, they need somewhere to work, so they set up here,” sighs the 34-year-old teashop owner, as he clears cups from a table beneath a graceful but discolored colonial-era apartment building dating back to the 1920s. “But they scare off my other customers with their behavior.”

The swagger of the brokers isn’t unfounded, however. Yangon is in the middle of what appears to be a property boom, fuelled by the wealth of those who grew rich under the former military regime, a sense of anticipation that formerly isolated Burma is set to open up to Foreign – and in particular Western – investment and business, and a good dose of speculation. But like the country’s political future, it’s not clear what’s in store for the property market: has it overheated, fuelled by optimism, or is it at the start of a prolonged period of growth?

Land in the city’s downtown area, a patchwork grid of decaying buildings, eight-storey walk-up apartments and new condominiums with a population density approaching 50,000 per square kilometer, has always been highly sought after. Prices in some areas are as much as K2 million ($2,500) a square foot – more expensive than similar locations in Bangkok – while space in the few available office buildings is as high as $200 a month for a square foot.

However, in the final months of 2011 prices also shot up – in some cases by four times – in outer suburbs of the city that were previously undesirable because of poor public transport and infrastructure.

“Land prices have tripled or even quadrupled over the past six months,” says Tin Moe, a freelance business journalist who has lived in East Dagon for the past eight years.

“Sometimes the buyers are businessmen from Yangon, but mostly they are [naturalized] Chinese and Shan-Chinese from Mandalay,” he says. “The locals are selling up and moving somewhere further out of the city, where prices are still quite low.”

Similar increases have occurred in other Burma towns, particularly those close to major infrastructure projects, such as Dawei, Kyaukpyu and Sittwe. But it is in Yangon, the country’s commercial capital, where the effect has been most pronounced.

In East Dagon, 2400-square-foot plots along a nearby arterial road that’s being upgraded have sold for as much as K130 million (about $162,000) in recent weeks. When Tin Moe moved to East Dagon eight years ago it was freshly reclaimed paddy fields with an irregular electricity supply and only “a handful of residents…it was very quiet.”

While it remains relatively undeveloped, roads are slowly being paved and wooden houses replaced with two-storey concrete dwellings. A nearby economic zone is expected to provide more jobs for residents if and when manufacturing takes off.

“The buyers are speculating…they expect this area will become more developed in the future. Some are even buying farmland off the map based on its location – you can see them out in the paddy fields past North Dagon University, trying to work out exactly what they’ve bought,” Tin Moe says. “We never expected it would be like this when we moved here.”

One particularly hot area is Thanlyin, located across the Bago River from Yangon. The military government proposed establishing a special economic zone in the area more than a decade ago but it never materialized, disappointing prospective investors. However, the project has been revived by Thein Sein’s administration, which is keen to attract investment and create jobs as part of its poverty alleviation drive.

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Amid the optimism about this “Burmese Spring,” investors have turned their eyes towards the potential of the Burmese economy – Southeast Asia’s slumbering giant. As others in these pages have noted, interest is gathering in this untapped market of 50 million, stunted for decades by colossal mismanagement and Soviet-style central planning. Recent visits by U.S. Secretary of State Hillary Clinton and British Foreign Secretary William Hague have raised the prospect that economic sanctions banning Western trade with Burma will soon be scaled back or removed. In the meantime, Asian investors are already making moves into the market, and a Japanese business delegation led by Economy, Trade and Industry Minister Yukio Edano traveled to the country this month.

The country offers massive potential in just about every imaginable sector, from banking, telecommunications, and power generation to agriculture, natural resources, and construction. Douglas Clayton, founder and CEO of Leopard Capital, which operates in emerging markets, wrote recently that “an epic economic catch up marathon seems set to start, and could morph into a sprint if Burma creates the right investment framework.”

Of course, there’s still a long way to go before that framework is firmly in place. As many have pointed out, the country still lacks the foreign investment rules and predictable governing apparatus necessary to attract investors. The banking system is in disarray – most of the country’s overwhelmingly rural population lacks any access to credit – and the local currency, the kyat, is still set artificially at a value more than a hundred times higher than that available on the black market. Import restrictions mean that buying a car – even a battered 1980s Toyota – can still cost tens of thousands of dollars.

Ultimately, however, the health of the Burmese economy should be of interest not just to investors and economists; it could also have a crucial bearing on the country’s political reforms and the long-term sustainability of the “Burmese Spring.” Historically, economic hardship and political unrest have been closely linked in Burma: in September 1987, the government’s decision to demonetize 25-, 35- and 75-kyat notes wiped out the savings of thousands, providing ready kindling for the following year’s seismic anti-government protests. The “Saffron Revolution” of 2007 was similarly sparked, at least in part, by hikes in the price of gas and diesel fuel.

Assuming the government can negotiate the thickets of currency reform and other basic structural changes, the longer-term economic challenges are thorny. Much of the country’s economic dysfunction is a result of the massive fiscal distortions created by the Burmese military, an institutional behemoth that consumes just under a quarter of the national budget, according to official figures. David Scott Mathieson, a Burma researcher for Human Rights Watch, says that while the current political changes have so far been more or less frictionless, few people are willing to discuss this “ultimate reform.”

Military personnel, according to some, are still embedded throughout the country’s governing apparatus.“In the most fundamental way, the state bureaucracy has been thoroughly militarized, that is, run by military officers and ex-officers,” says Maung Zarni, a visiting fellow in the Department of International Development at the London School of Economics. “Honest, capable technocrats and bureaucrats don’t survive in this militarized system of governance.”

Decadesof military rule also mean there are relatively few officials with the necessary education and experience to manage such a complex transition. “It’s a mindset problem. These are people who are used to taking orders, used to being part of a command economy,” Turnell says.

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