September 25, 2011

The Post-American World 2 by Fareed Zakaria

The Post-American World 2 by Fareed Zakaria

[Author narrates the rise of new nations which are not part of the industrial nations (or G7 countries and their rising role in the global landscape]

There have been three tectonic power shifts over last five hundred years, fundamental shifts in the distribution of power that have reshaped international life - its politics, economics and culture. The first was the rise of western world - it produced modernity, science and technology, commerce and capitalism, the agricultural and industrial revolution.

The second shift was the rise of US - the most powerful nation after Rome. US dominated global economics, politics, science and culture. The third shift is the rise of the rest. Over the past few decades, countries all over the world have been experiencing rates of economic growth..The tallest building is in Dubai, World’s richest man is in Mexico, Biggest plane builders in Russia and Ukraine, largest publicly traded corp. is in China, largest refiners is in India..

In 1985, Japan was already a wealthy nation. Many experts believed it was on track to unseat US as the largest economy, but because Japan’s market’s industries, institutions, and politics were still not fully modernized the country could not make that final step. China by contrast is a still a poor country. It has a per capita GDP of $4,300. It will certainly face many problems as and when it becomes a first world country. Same is true for India whose per capita GDP is much lower than China. Even if the average person in these countries still seems poor by Western standards, their total wealth will be massive. Or to put it in mathematical terms: any number however small, becomes a large number when multiplied by 2.5bn (population of India and China). It is these two factors - a low starting point and a large population - that guarantee the magnitude and long-term nature of the global power shift.

How did all this come to be? The earth quake that shook everything else was the collapse of Soviet Union. Suddenly there was only one basic approach to organizing a country’s economy. Alan Greenspan has described the fall of the Soviet Union as the seminal economic event of our time. The financial force that has powered the era is the free movement of capital. Most Western countries removed capital controls restricting movement of currency in and out of the borders. The result: a vast and ever-growing supply of capital that could move freely from one place to the next. This spread, independent central banks and taming of inflation. Hyperinflation is the worst economic malady that can befall a nation. It was not the great Depress that brought the Nazis to power in Germany, but rather hyperinflation, which destroyed the middle class by making its saving worthless.

In many countries outside the Western world, there is pent-up frustration with-having had to accept an entirely Western or American narrative of world history. - One in which they either are misact or remain big players. Russians have long chafed at the standard narrative about World War II, in which Britain and the Unites States heroically defeat the forces of fascist Germany and Japan. Given mainstream US historical accounts, Americans could be forgiven for believing that Russia played minor part in the decisive battles against Hitler and Tajo. In fact, the eastern front was the central arena of World War II. It involved more land combat than all other theaters of the war put together and resulted in thirty million deaths. It was where three-quarters of all German forces fought and where Germany incurred 70% of its causalities. The European front was in many ways a sideshow, but in the West it is treated as the main event.

An Indian friend explained to me.” For Brittan and America, WWII is a heroic struggle in which freedom triumphs over evil. For us, it was a battle to which Brittan committed India and its armed forced without bothering to consult us. London told us to die for an idea of freedom that it was at that very moment brutally denying to us”.

UN system represents an outdated configuration of power. The permanent members of UN Security Council are the victors of WWII that ended 60 years ago. The body does not include Japan or Germany - the worlds’ 3rd and 4th largest economies or India the world’s largest democracy or any Latin American or African country. The G-8 does not include China or India and South Korea. By tradition, IMF headed by a European and World Bank by an American. This tradition like the customs of an old segregated country club may be charming and amusing to insiders, but to outsiders it is bigoted and outrageous.

The current state of IMF and World Bank also provides a useful lesson. These institutions, dominated by US ideas and money have long been as vehicles for American influence. And today, Setser writes, “emerging economics like China, Russia, India Saudi Arabia, Korea and even Brazil not only do not need the IMF; they increasingly are in a position to compete with it. For example, Chinese development financing provides an alternative to World Bank lending.

In the past crisis the West played the part of the stern school teacher rebuking a wayward classroom. The lessons the teachers imparted now seems discredited. Recall that during the Asian financial crisis the US and other Western countries demanded that the Asians take three steps - led bad banks fail, keep spending under control and keep interest rates high. In its own crisis, the West did exactly the opposite on all three fronts.

80 years earlier to Columbus trip to America, a Chinese admiral Zheng He began the first of seven equally ambitious expeditions. He took 317 vessels, 28,000 men compared to Columbus 4 boats and 150 sailors. The largest vessel was 400 feet - more than 4 times the length of Columbus flagship, Santa Maria and had nine masts. However when the new emperor came to power who abruptly ended such massive boat building and in the few hundred years, Chinese completely lost the knowledge in building big ships. It was a fateful decision. Just as China chose to turn away from the outside world, Europe was venturing abroad and it was Europe naval expeditions that allowed it to energize itself and spread its power and influence across globe.

It has become commonplace to say that actually China and India were as rich as the West right up until the 1800s. The dominance of the West, according to this perspective, has been a 200-year blip and we are now returning to a more normal balance. This statement also implies that the West’s advantage may be largely accidental - the result of coal and colonies, that is the discovery f a cheap energy source and the domination of the rich lands of Asia, Africa and the Americas.

Why did non-Western countries stand still while the West moved forward? There are no neat answers. Private property rights, goo institutions of governance and a s strong civil society (one that not dominated by state) were clearly crucial for growth in Europe and US. In contrast, the Russian czar theoretically owned entire country. In China, the Ming court was run by mandarins who disdained commerce. Almost everywhere in the non-Western world, civil society was weak and dependant on the government. The local businessmen in India were always captive to the whims of the court. In China, rich merchants who abandon their business to master Confucian classics so that they could become favorites of the court. The moguls and the Ottomans were warriors and aristocrats who thought of trade as unglamorous and unimportant. In India this bias reinforced by the low position of businessmen in Hindu caste hierarchy. Historians have taken particular note of Hindu beliefs and practices as barriers to development. Businessmen had to keep interest rates high in anticipation of frequent and arbitrary taxation by their rulers. No one had much of an incentive to build wealth, since it was likely to be confiscated.

Europe is broken up wider rivers, tall mountains and large valleys. This topology produced many natural borders and encourages political communities of varying sizes. - City-states, duchies, republics, nations and empires. People who were mistreated or shunned in one place could escape to another and thrive. States that succeeded were copied. Over time, this completion helped European become highly skilled at both making wealth and making war.

Europe’s waterways were also a blessing. Compare to Africa, , it has the shortest costliness, much of which is too shallow to build major ports. Most of its rivers are not navigable (fast-moving, dramatic, and vertiginous)

{The books goes on comparing different aspects of European’s history of leading industrial nations which I read in many books. The book end with list of priorities set by the author which lacks supportive points and did not elaborate in detail in the book)

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