Monday, April 02, 2012

Global Power Shift

This is just a series of observations that support my idea that we are living in what, in a few decades, will be seen as tumultous times.
Recently, there was a news item that stated that by 2020, China will become a larger economy than the US; and by 2050, India will top even China, leaving the US a distant third. This is not someone's wishful thinking, but just the magic of compounding – of economic growth, rather than of your money in a bank.
Today, we are all living at the crossroads of history. A subtle power shift, significantly visible in time frames of decades, but barely perceptible at the time frame level of a day or a week, is happening all the time. Witness the following:
  • The Arab Spring happened over a period of months and still seems dramatic. I doubt if the spring has completely spent itself. It is not yet all cool in Syria and Egypt, and it may yet erupt again in some other nation(s).
  • Technology laughs at national and geographic borders. Accountability and clean governance pressures were earlier driven within each nation's power centres, laterally. However, now there are vertical pressures that cross national borders earily – thanks to telecom, internet, satellite broadcasting and global moneychangers (both, traders and speculators).
  • Unregulated or unpoliced space soon becomes populated with groups that thrive on chaos and absence of regulation. Witness Somalia, Sudan, South Sudan, etc. to see the truth of this.
  • Unregulated pockets in otherwise regulated economies also give birth to chaos. While this is not to be taken as an approval of the concept of a police state, it is sobering to hear Paddy Ashdown cite a fact that 60% of the $4M that funded the 9/11 bombings passed through the WTC itself!
  • Now, the enemy is within each country. Thus, for properly defending a country, the defence ministry may need to speak to the Health ministry (to protect against pandemics); Ministry of Commerce and Industry (the hi-tech infrastructure of the country is sensitive and vulnerable to attack), Home Affairs (to track infiltrators), and Transportation (Air/ ship/ road security). Defending our borders is just not enough.
  • The maximum vulnerability is at all “interconnection points” (airports, docks, bus and train terminals). So defending at such points necessarily means overlap in responsibilities and powers. Hence, working with others efficiently is a capability all need to develop.
  • Defence co-operation is not enough. Nations and people living in them need to realize that war is an immensely expensive zero-sum game that can go on infintely to their collective detriment. Only then can long-festering disputes cool down sufficiently to permit normal life.
  • In 1945, when WW-II ended, there were about 100 countries. Today, there are nearly 200. We are adding almost 1.5 new  countries a year on an average over the last 67 years.  At the same, time, we have witnessed European countries lowering the borders and becoming a single currency area (that initiative is arguably in the endgame stage already).
  • Siberia has such inclement weather that in the Far East province of Russia (area double of India) less than 60 Lakh people live. Greater Mumbai has double that population! However, it is a source of power for Russia – most of its natural gas and oil is sourced from this vast area. Surprisingly, this is a source of power for China too! Global warming has given rise to vast wheat fields in Siberia – but there is no one in Russia to feed. Russia's population is shrinking. But we see that some 600,000 Chinese migrate to Siberia, cultivate wheat during the summer on vast leased farm tracts, and come back home every year. This wheat feeds a good proportion of the Chinese population.
  • China is controlling a larger and larger part of the world – without firing a shot. They are, quite literally, either buying them up, or colonizing through sheer numbers of immigrants. They are “partnering for prosperity” with several poorer countries, notably in Africa. Thereby, it is creating a China-centric circle of influence that rivals that of the US already. China has trade relationships with Korea, Japan and other countries in the neighborhood, and lower tariffs for poorer countries. In Singapore, Vietnam and Malaysia, the ethnic Chinese population is a significant, loosely united power bloc. In BRICS and in the Asian Free Trade Zone, China is assuming an increasingly dominant role. For example, on Iran, both China and Russia have vetoed UN Resolutions sponsored by the US for increased sanctions. China is still the largest customer of Iranian oil, with India being second.
  • Chinese yuan is threatens to emerge as an alternative reserve currency in addition to the dollar and euro, which (when, not if, China can get away with it) will deflate the US balloon much faster than one can imagine. When that happens, the US will be awash (not overnight, but over a finite period of, say, 3 years) with inflation of  the trillion dollars of bonds that China won't need. Thus, the US seems poised to deteriorate as a global power. Inflation robs from the poor, and shifts even more economic power to the rich, so it will exacerbate social tensions in the US, as the feeling is already rife that the US bends backwards to accommodate the rich, at the cost of the poor. The recent BRICS meet discussed this concept, but shied away from pushing immediately for it. If, and when, yuan gets adopted as an alternative reserve currency, the power shift will accelerate.
I intend to develop this line of thinking further in coming days and weeks. I welcome inputs in the form of comments from anyone who has more to contribute to this line of thinking.

1 comment:

  1. This reminds me of a book by J Galbriath where he has predicted shifts like the ones u mention to South East Asian Countries and Australian economies in the future.

    Possibly the kind of security systems that will evolve with the emerging chaos will have to mimic the human immunity system but with a global scope.