Recession Speeds Shift In Balance Of Power

The rise of China and India is redrawing geopolitical lines.

The Ascent of Asia

Nomura Global Economics

February 2010

This is the fifth and last in a series of edited excerpts from Nomura's recent report, "The Ascent of Asia."
 
World history has been dominated not by singular events but by processes that have gradually wrought fundamental paradigm shifts. In other words, human history, like geology and geomorphology, tends to be evolutionary rather than revolutionary. However, occasionally the earth's crust presents us with an apparently sudden seismic event, though this may be the result of tectonic tensions that have built up over a protracted period.

Historians are likely to identify Dec. 11, 2001--the date on which China joined the WTO--as the geopolitical equivalent of just such a seismic event, perhaps even more so than the terrorist attacks of Sept. 11 of that year.

This perspective--broadened to include Asia's other emerging major power, India--was summed up by authors Ronald Findlay and Kevin O'Rourke in their 2008 book, Power and Plenty: Trade, War and the World Economy in the Second Millennium, as follows:

"The gradual rise of India and China to their natural roles as major economic and political superpowers...[promises] to raise a variety of geopolitical challenges which as yet remain unpredictable. Indeed, history suggests that this could turn out to be the greatest geopolitical challenge facing the international system in the 21st century.

China has been aiming for comprehensive national power--i.e. economic, scientific, military, cultural, etc.--for more than 30 years, with economic growth the principal motor of these ambitions. And although India's evolution since its own seismic moment--the balance of payments crisis of 1991--has differed from China's, it too is pursuing a path towards comprehensive national power, also with the economy as its principal motor.

The consequent shift in the global economic center of gravity was already well underway before the beginning of the financial crisis--a crisis that has accelerated the change.

China today is much more self-confident and assertive than the pre-crisis model. As Sinologist professor David Shambaugh remarked to the International Herald Tribune: "[China] is not proving to be the global partner the United States and E.U. seek."

This was apparent at the December 2009 Copenhagen climate change summit, where Beijing proved to be the main obstacle to a comprehensive political agreement. Such assertiveness is not without its risks. Since then, China's relations with the West, particularly the U.S., have been at a low ebb, risking fueling protectionist pressures in the U.S. and the E.U.


As Charles Grant of the Centre for European Reform noted in a recent paper: "China's attitude to international relations is ultra-realist. It will take what it can get, while respecting power and facts. But China's leaders may have miscalculated by underestimating the impact of their harder line on Washington and European capitals."

Turning to India, as James Lamont put it in a recent Financial Times article: "[Delhi's] confidence in the growing economy has permeated other areas, too. Over the past year, India has sought to play a greater leadership role in multilateral forums debating trade, climate change and reforming the global financial architecture." What is less clear is how India is likely to project and build on its growing economic power.
India's economic transition owes much to a liberal vision that aims to generate growth through trade and interdependence, rooted in the--by the 1980s, increasingly apparent--failure of policy based on principles rather than pragmatism to achieve successive governments' domestic objectives in particular.

However, the choices India makes from here on are likely to be far from entirely domestically determined. As Rahul Sagar suggests in a 2009 International Affairs article: "...much depends on whether the existing great powers--America and China in particular--are willing to countenance India's rise."

Citing the U.S. as a potential barrier to India's rise may seem odd in the light of the Bush administration's decision to aid India's emergence as a comprehensive national power. But the oft-repeated rationale that India is America's "natural ally" may yet prove somewhat simplistic and/or short-sighted.

For now, Washington's focus remains largely on Beijing. But this could change if India succeeds in building the low-cost manufacturing base it needs to drive inclusive growth and provide employment for the additional 150 million people set to join the workforce over the next decade. In these circumstances, India stands increasingly to be America's--and Europe's--bete noire.

In the wake of the financial crisis, it remains to be seen whether the West can rise to the related challenges quickly enough to satisfy the aspirations of the emerging Asian powerhouses. As Philip Stephens of the Financial Times puts it:

"What can be said with moderate certainty is that a global system designed in 1945 will not survive the coming age of discontinuities. An order centred around the political, cultural and economic hegemony of the West can scarcely outlive the redistribution of global power."

Geopolitical uncertainty is likely to persist--and, indeed, escalate--in the years ahead.

Alastair Newton is senior political analyst at Nomura International. Before that taking the post in October 2008, he worked at Lehman Brothers and spent 20 years as career diplomat with the British Diplomatic Service. This is the fifth and last in a series of edited excerpts from Nomura's recent report, "The Ascent of Asia."
 
Source: SAlastair Newton, http://newscri.be/link/1044650