Sunday, July 05, 2009

Asia Rising - Part One

The esteemed Foreign Policy magazine has been putting out great perspectives on the rise of Asia, both as an economic power and militarily, albeit the latter is much more fragmented. The first part looks at the realistic predictions of China or India as economic powers in their own right. While growth rates and population strength have been often cited, its still a long way off.

Asia is nowhere near closing its economic and military gap with the West. The region produces roughly 30 percent of global economic output, but because of its huge population, its per capita gdp is only $5,800, compared with $48,000 in the United States. Asian countries are furiously upgrading their militaries, but their combined military spending in 2008 was still only a third that of the United States. Even at current torrid rates of growth, it will take the average Asian 77 years to reach the income of the average American. The Chinese need 47 years. For Indians, the figure is 123 years. And Asia's combined military budget won't equal that of the United States for 72 years.

In any case, it is meaningless to talk about Asia as a single entity of power, now or in the future. Far more likely is that the fast ascent of one regional player will be greeted with alarm by its closest neighbors. Asian history is replete with examples of competition for power and even military conflict among its big players. China and Japan have fought repeatedly over Korea; the Soviet Union teamed up with India and Vietnam to check China, while China supported Pakistan to counterbalance India. Already, China's recent rise has pushed Japan and India closer together. If Asia is becoming the world's center of geopolitical gravity, it's a murky middle indeed.

Those who think Asia's gains in hard power will inevitably lead to its geopolitical dominance might also want to look at another crucial ingredient of clout: ideas. Pax Americana was made possible not only by the overwhelming economic and military might of the United States but also by a set of visionary ideas: free trade, Wilsonian liberalism, and multilateral institutions. Although Asia today may have the world's most dynamic economies, it does not seem to play an equally inspiring role as a thought leader. The big idea animating Asians now is empowerment; Asians rightly feel proud that they are making a new industrial revolution. But self-confidence is not an ideology, and the much-touted Asian model of development does not seem to be an exportable product.

"Asia's Rise Is Unstoppable."

Don't bet on it. Asia's recent track record might seem to guarantee its economic superpower status. Goldman Sachs, for instance, expects that China will surpass the United States in economic output in 2027 and India will catch up by 2050.

Given Asia's relatively low per capita income, its growth rate will indeed outpace the West's for the foreseeable future. But the region faces enormous demographic hurdles in the decades ahead. More than 20 percent of Asians will be elderly by 2050. Aging is a principal cause of Japan's stagnation. China's elderly population will soar in the middle of the next decade. Its savings rate will fall while healthcare and pension costs explode. India is a lone exception to these trends-any one of which could help stall the region's growth.

Environmental and natural resource constraints could also prove crippling. Pollution is worsening Asia's shortage of fresh water while air pollution exacts a terrible toll on health (it kills almost 400,000 people each year in China alone). Without revolutionary advances in alternative energy, Asia could face a severe energy crunch. Climate change could devastate the region's agriculture.

The current economic crisis, moreover, will lead to huge overcapacity as Western demand evaporates. Asian companies, facing anemic consumer demand at home, will not be able to sell their products in the region. The Asian export-dependent model of development will either disappear or cease to be a viable engine of growth.

Political instability could also throw Asia's economic locomotive off course. State collapse in Pakistan or a military conflict on the Korean Peninsula could wreak havoc. Rising inequality and endemic corruption in China could fuel social unrest and cause its economic growth to sputter. And if a democratic breakthrough somehow forces the Communist Party from power, China is most likely to enter a lengthy period of unstable transition, with a weak central government and mediocre economic performance.

p/s photos: Yuna Ito


easystar said...

Seen this sort of argument before but the article probably use the past 3%ish real growth for European/US. I am less pessimistic about US, but for Western Europe, the gap with Asian living standard may be closing at an alarming rate. Gives a few years of negative growth, and a few years of 8% at China, Western Europne US35kish income will become $25kish in a decade while China $4k ish will become $12.5k ish in a decade. Give that another lost decade, China per capita GDP will exceed those of Western Europe.

US Government will be insolvent by 2030 ish given its current social and medicare commitment. God knows how that will affect the real GDP per capita...

There is of course no sure bet that Asia will rise and rise, but it is an equally complacent thing to do to say that Western World is far and far ahead...

solomon said...

I hope joint prosperity of the world could materialise. But, those who had seen to rule the world might not want to see their captain armband off.

Political instability (especially their neighbouring countries) and natural resources supplies could deter the dreams of China and India in coming years. I bet India is watching closely how the American is battling the Taliban in Pakistan. Any insurgent retaliation could hurt India too. Same like the Korea peninsula conflict.