Upheaval in western financial system means that the new world centres are Asian and Latin American
EVERY SO often, our species produces profound transformational changes. The switch from nomadic hunting to agriculture and the industrial revolution are two examples. Opting for democratic government is another.
These all challenged established systems in a dispersed, chaotic fashion. Few commentators saw the emergence of manufacturing from the mid-18th century as the harbinger of social and political upheaval that it inevitably entailed. Revolutions have normally been bloody, and while this upheaval is chaotic, it shows no signs of bloodletting.
The daily barrage of calamitous news, job losses, departing industries and revelations that businesses that were seen as core elements of our economies are empty shells, all combine, paraphrasing Keats, to numb the senses. Yet if we stand back, it becomes clear that we now face a truly global revolution as yesterday’s immutable order swirls around the pan before being flushed away.
We have to address practical and profound questions. Our collective focus of attention is, understandably, riveted on immediate measures. This must not prevent us from considering the equally important questions of how our world is changing and how we adapt. Selecting a collective term for what has dominated our planet for at least the last half millennium is tricky. Racial, geographic or religious? White, European, or Christian?
Whichever term you find most acceptable, Europe and her children in the Americas and Australasia have determined global economic, cultural and military parameters since the 15th century. Those countries’ populations, even including all their indigenous peoples, adds up to around two billion people, or a bit less than one-third of our planet’s population.
We should be grateful and humble that the emerging two-thirds of humanity do not seem bent on exacting revenge, but are rather focused on the future. The early signs from the Obama administration, in its gestures towards the Sunni world, Israel and Iran, suggest it has grasped some of this reality.
The figures speak for themselves. Ireland’s Central Bank is forecasting that our economy will contract by almost five per cent this year, while Germany’s will contract by 2.5 per cent. Contrast with International Monetary Fund predictions of eight per cent growth for China, 6.5 per cent for India, and 3.5 per cent for Brazil. Those three emerging economies, with a combined population of around 2.5 billion, will grow by an average six per cent.
It is true that Chinese growth is down from its record 13 per cent in 2007, but Beijing is now two months into its €450 billion domestic stimulus programme. This is about 14 per cent of China’s 2008 economic output compared to the six per cent level of the Obama package. The US package requires additional deficit borrowing, while China is funding its efforts from its cash reserves – estimated at €1.5 trillion last December.
Chinese exports have shrunk as world demand contracts, but not quite as quickly as Chinese imports, so its trade surplus hit a record €225 billion in 2008. China is spending €67 billion on intercity rail lines this year, up from €9 billion in 2004. It has built as many kilometres of high-speed lines in the past four years as Europe has in the last 20 years. The US stimulus package only allocates five per cent to transport infrastructure.
Beijing is undoubtedly anxious about the political impact of redundancies in its export-dependent industries, and will, according to Qu Hongbin, chief China economist at HSBC “spend like there’s no tomorrow”. Some €95 billion has been committed to providing a universal healthcare system for all citizens by 2011.
The world’s newest bus factory has just opened in the southern Indian city of Dharwad. This 50 hectare factory is capable of producing 30,000 buses a year, and is a joint venture by the Indian Tata and the Brazilian Marcopolo groups. Tata is already the world’s second largest bus manufacturer and a glance at the regions where it and its Brazilian partner focus their sales is quite instructive about our futures – Africa, the Middle East, Asia and Latin America.
In 2007, Brazil produced 26 billion litres of ethanol, or nearly half the world’s output, from sugar cane. Sugar cane is more than twice as efficient as maize (the preferred US ethanol crop) in terms of ethanol produced. Brazil plans to boost production to 53 billion litres by 2017, and to share its technology with tropical countries that have similar climates.
Brazil’s main sugar cane growing areas are in its tropical south, far from the Amazon, where it has developed machinery to replace manual harvesting. According to president Lula da Silva, ethanol represents an “historic opportunity . . .when we think of ethanol, our goal is to help the poor”.
The economic, and therefore political, centre of gravity of our planet is shifting to the South and East. Those companies and economies that have or develop goods and services to offer the new centres will thrive, those who pander to declining markets will atrophy. The new centres of our world are Asian and Latin American, not European. China and India are modest nuclear powers with impressive armed forces, but neither is expansionist, despite the desperate attempts of Washington’s drowning neoconservatives to whip up fear of “yellow perils”.
This recession will end. When it does, our societies will be different, and for the first time in human history, the position of the pivotal powers will depend more on their inventiveness than on their armed might. That’s a revolution we will have to work hard to get our heads around.