America is just a utopia of Europe that has succeeded. Jacques Attali

What Dreams May Come

While the West engages in serious navel-gazing, the rest of the world is moving ahead. Don’t judge the state of the world economy by Western GDP growth.

Europe risks to miss great opportunities. The global shift of focus towards East Asia and the rise of new powers must finally shake up our lethargic selves. The United States have already recognized the signs of the future, and have adjusted their geopolitical strategy accordingly. Europe needs courageous geo-strategists and roadmaps that define its position within a multipolar world – a world with several centers that does not revolve around Europe anymore.

The current shifts should not come as a surprise. Already, Australian students study Chinese and Hindi. Their country invests in China, India, Vietnam and Indonesia and has capitalized on the opportunities afforded to foreign investors by the booming Asian economies. Hundreds of thousands of Africans have migrated to China to seek work in factories. Hundreds of thousands of Chinese students have moved abroad to study elsewhere, especially in the US. China and East Asia have become growth hotspots of the global economy, partially due to gigantic investments by Western transnational corporations. Entrepreneurs who ignore the region miss their chance to invest in growing markets.

The West and the rest

In the US and in Europe, economic growth has slowed or slumped. Our focus for the past several years has been on dealing with the crisis. At the same time, countries like China and India – and other emerging powers, from Indonesia to Malaysia, Vietnam, Kazakhstan and Chile – have pursued economic growth and ascended on the technology ladder as well. Their productivity growth is outpacing global averages; their exports are increasingly focused on the technology sector; their investments into education have fueled the rise of a scientific-technological elite. The newly emerging middle class in those countries is ready to reap the rewards of smart policies and steady growth.

Especially China is already benefitting from modernization and urbanization. More than fifty percent of Chinese now live in cities. Twenty years hence, that number will have climbed to seventy percent. We’re looking at structural change of truly societal proportions, and it will set into motion a range of secondary dynamics and developments. That’s why the world is looking to China rather than to India or Brazil. The latter countries still have significant weaknesses: Their populations are large but relatively poor. Brazil remains dependent on the export of raw materials and natural resources (not unlike South Africa, Kazakhstan and Indonesia). India has struggled to reduce poverty levels as the countries continues to suffer from bad infrastructural and educational systems. India’s industry isn’t (yet) competitive globally.

Still, all the aforementioned countries have managed to utilize the fallout from years of economic growth and have increased their global influence. The West is experiencing the limits of its economic dominion over the rest of the world.

But economic stagnation isn’t the only problem of the West. What’s more important, it has ceased to be a model for poor nations to aspire to. China has replaced the West as the role model of choice. China and other countries were successful because they looked beyond the narrow-minded policies of the Washington Consensus. For example, they sought to imitate the South Koreas industrial protectionism of the 50s and 60s. Contrary to Western textbook opinion, China and others are successful despite heavy state interference in economic policy. Their policy toolkit is more diverse than in many Western countries, as rigorous interventions in markets, currency manipulation and the widespread use of subsidies indicate. Many companies from those countries are owned by the state: They claim subsidies, secure government contracts, and push out foreign competitors.

Europe has lost its balance, to put it rather mildly. The continent has turned inward: The focus is on internal deliberations and negotiations. The problems of the future are being addressed by looking at other European nations while new global powers speed past Europe. They are winning the economic race, and they are increasing their influence in global bodies like the World Bank, the International Monetary Fund, the G20 or the United Nations.

Wanted: economic pragmatism

New global power dynamics require new Western thinking and the quick development of new strategies. While our influence has certainly declined, the new powers have not yet presented a credible alternative model to the multi-polar world order. Despite their recent success, they have to confront their own internal problems – which are often the result of processes of transformation – and it seems unlikely that income level gains will continue in linear fashion. The evidence suggests that most countries (with the exception of China) will struggle to significantly increase the prosperity of their populations.

Because of these internal dynamics, their global flexibility is more limited than we might think. Governments in Beijing and Brasilia are well aware of their limitations, and often demand cooperative solutions on the international stage. This is as true in the area of global trade as it is in relation to climate change, poverty reduction, and other questions.

Additionally, emerging powers have thus far rarely acted in concert, despite organizational structures like BRICS (Brazil, Russia, India, China, South Africa) and IBSA (India, Brazil, South Africa). Their political and cultural differences remain large.

Fact is: The world is becoming a more networked place. Over the last half-century, it has become more wealthy, more fragile, and more interdependent. This requires a healthy dose of pragmatism and flexibility from all actors. Europe, the world’s largest economic community, must not stand aside.

The rest of the world expects more constructive engagement from Europe. Our politicians must not just gaze at their own navel but must turn outward to anticipate new developments, to produce solutions to global problems, and to continue to strengthen European core ideas about democracy, market economics, and sustainability.

Read more in this debate: Russ Roberts, David Sloan Wilson, Mary Kaldor.


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