Transfer of power revisited
Earlier this week, one of the founders of the World Economic Forum in Davos and a long-time India enthusiast, Claude Smadja, spoke in New Delhi about what he felt was going on in the world today.
His basic argument was that the transfer of power from East to West, or more accurately the emerging economies to the developed economies, was going to accelerate and take place at an even faster pace than expected.
We can thank Greek government account-keeping, Silvio Berlusconi and Lehman Brothers for much of this. Much of the acceleration is because the West is doomed, he argued, to several years of sclerotic growth, high unemployment and too much red ink.
He also argued that the emerging economies, who used to interface with each other economically via the Western countries, now increasingly do so with each other. Finally, there is a second-rung of emerging economies – Turkey, Mexico, Indonesia and the like who are also becoming a force to reckon with even if they are not one of the BRICS or BASIC countries.
Smadja’s broad argument is something one hears quite often these days. The great power shift is on, but now its in fifth gear and turbocharged. More micro examples are how Europe and the United States have both run to China and asked to be BFF and, while we are hear, would you like to buy a few trillions worth of bonds? Or how Hu Jintao was feted by the French and
pretty much everyone during the G-20 summit at Cannes.
While I don’t disagree that the raw economic numbers will change decisively over the next decade, I am skeptical that policy-making is going to be an active preserve of the nouveau riche nations.
Accumulating the raw material of power – money, warships, technology and so on – are not that difficult to accumulate. What is difficult is the political structures, domestic stability and good management and leadership to convert this raw material into actual policy. Walk the talk. Even better, punch the talk.
What is noticeable is how reluctant the emerging power are to do exactly that: take their new found power and convert it into policy, chivvying other countries to do things their way. Yes, there was Copenhagen and a few other cases. But then obstructing is easier than actually getting things done.
The social stresses that countries like India and China seem to be experiencing seem to be increasing. They also have found their middle classes, well-heeled and full of options, more troublesome than expected. The past few years of economic turmoil have been noticeable in many emerging economies not for their effect on growth figures but rather for their impact on domestic society and politics. Anti-corruption movements have broken out in almost all of them, crippling their govenerments. They have struggled with inflation, especially Indians, and demanded more rights and better governance from their harassed governments.
This is not conducive to running around and shaping the world to your devices. It is more often a recipe for isolationism. This has been most pronounced with the case of India, but Brazil and even mighty China are not immune to the street demonstrations and worse.
I see these getting worse over the next several years: emerging economies absorbed by the homefront as they sort out their political status at home.
So, yes, power is shifting but responsibility is not, at least not in quite the same haste as the former. The West will be around and it will remain the big enchilada for a lot more time – if only because it can project and use power in a way that the emerging economies can’t.