It will migrate to China and India.

It is no surprise that the bursting of the credit bubble led to a global crash in consumer spending on luxury goods. The traditional markets for luxury goods in the West and Japan—where 80 percent of the world’s $228 billion luxury sales take place—have hit a wall. In the United States, where aspirational brands became everyday items, the luxury business has gone into hibernation.

Maxed out, tapped out, and facing the need to pay off the decadeslong binge, Western buyers are saving instead of splurging on status-seeking. But instead of accepting this shabby fate, the more nimble luxury-goods firms are looking to the East, where the whole cycle of luxury development is beginning anew.

To really understand the relationship between luxury goods and the economy, it is worth going back to the ideas of Thorstein Veblen, the sociologist who created the concept of conspicuous consumption. A radical utilitarian, Veblen was offended by the waste involved in luxuries. Whether it was hand-crafting furniture or keeping servants for a single function like driving a car, Veblen railed against luxury as an affront to the efficiency of industrial production.

What Veblen missed was the foundation of the modern luxury goods business. Middle-class people, roughly defined as those with enough money to cover their immediate needs and secure their longer-term goals, understood the value of well-made objects. Handbags, clothing, and potential family heirlooms like silver and china didn’t have to be baroquely wasteful of a craftsman’s time and energy—as Veblen felt—to be more desirable. They just had to be more durable.

Your grandfather’s watch reminds you of your family’s status and reassures you that it can be maintained. Luxury goods, then, were a signifier of a larger sense of property. This was especially true of a number of the long-lasting fashion houses as well as the watch, jewelry, and leather goods businesses that make up the core of the modern luxury conglomerates.

But a funny thing happened to the luxury business as the West grew wealthy enough to support a vastly larger middle class. The best-known brands went from being artisanal manufacturers—literally making objects by hand—to become aspirational brands. The aspirational brand represents the triumph of signified over signifier; buying the product is an act of participating in the overall lifestyle image that the company has created.

A handmade Rolls-Royce would have annoyed Veblen because one could get an assembly-line-made car that did the same thing—got you from point A to point B—by consuming far less labor. Those who bought one would have said they were simply buying the best-made car they could find. Today you can get a well-made handbag that will last you a long time for not much money, but you buy a handmade Louis Vuitton bag to feel like a member of an exclusive club.

As more individuals in Asia accumulate enough money to satisfy their daily needs and begin to have confidence in their long-term prospects, they’re interested in demonstrating to themselves, their neighbors, and anyone they happen to meet that they, too, have joined the club. In a very real way, Asian buyers are getting both the best-made product they can finally afford and an aspirational brand at the same time. They’re making a leap from the 19^th century to the 21^st.

The companies need Asian buyers because an orgy of overspending in the West has left many of us with aspirer’s remorse. Recent numbers bear this out: Richemont, the Swiss holding company for a group of high-end luxury brands ranging from Cartier and Van Cleef & Arpels, to watchmakers Jaeger-LeCoultre and Panerai, to fashion houses like Chloé, saw its North American sales drop by 36 percent in the spring and summer quarters of 2009. That fall comes after a 12 percent decline the previous year.

PPR, the French conglomerate, says that its Gucci Group saw business fall off 10 percent in the third quarter of this year. There was also a see-saw of sales volume between North America and Asia. Gucci Group’s sales rose 37 percent in the greater China region where the company opened 38 new stores, bringing its total to 596.

Finally, the titan of the luxury business, LVMH, was better-defended. Its most recent trading statement showed a slight—less than 1 percent—decline in worldwide sales. Its core wine and spirits business was hit hard (as were watches and jewelry), as customers in their traditional markets either held off purchasing goods or substituted cheaper alternatives. But Louis Vuitton leather goods continued to be a global engine of sales and profits for the company because of a dramatic increase in Asian buying.

Back in the mature markets, there’s a different tale unfolding. Bain & Co., the consulting firm, still believes in the luxury story, but the plot is going to be different here. Claudia D’Arpizio, a Bain partner and its luxury guru, says, “One of the biggest changes we’ve seen in consumers is that ‘price’ and ‘luxury’ are no longer synonymous.” In other words, the aspirational buyer is now also a price-sensitive buyer.

In the West, brands that can “reach down” to the aspirational buyer at a lower price-point but still maintain the feeling of participating in a broader lifestyle seem poised to thrive. That may portend a fracturing of the aspirational market. While the true luxury companies—watch and jewelry makers and other high-end products—retreat back to the province of the very wealthy, small and medium fashion businesses will be at risk. We’ve already seen the recent failures of Christian Lacroix, Escada, and Yohji Yamamoto.

On the other end of the spectrum, companies like that can maintain a clearly articulated hierarchy of brands and exercise disciplined financial and managerial controls will also thrive. Ralph Lauren (RL), which announced results this week, has increased profits even though its sales are down. But we can begin to see the emergence of new low-priced luxury brands in the remarkable success of J.Crew (JCG), which recently doubled the estimates on its third-quarter earnings and projected same store sales growth in the “high single digits.”

What allows J.Crew to thrive while other fashion and luxury businesses collapse? A preppy aesthetic of understating one’s affluence. That’s something Veblen could get excited about.