"Power
Is Shifting from West to East."
Not
really. Dine on a steady diet of books like The New Asian
Hemisphere: The Irresistible Shift of Global Power to the East or When
China Rules the World, and it's easy to think that the future belongs to
Asia. As one prominent herald of the region's rise put it, "We are entering a
new era of world history: the end of Western domination and the arrival of the
Asian century."
Sustained, rapid economic growth since World War ii has
undeniably boosted the region's economic output and military capabilities. But
it's a gross exaggeration to say that Asia will emerge as the world's
predominant power player. At most, Asia's rise will lead to the arrival of a
multi-polar world, not another unipolar one.
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.
"Asian
Capitalism Is More Dynamic."
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But though Asian economies-with the notable exception of Japan-are among the fastest-growing in the world today, there's little real evidence to suggest that their apparent dynamism comes from a mysteriously successful form of Asian capitalism. The truth is more mundane: The region's dynamism owes a great deal to its strong fundamentals (high savings, urbanization, and demographics) and the benefits of free trade, market reforms, and economic integration. Asia's relative backwardness is a blessing in one sense: Asian countries have to grow faster because they're starting from a much lower base.
Asian capitalism does have three unique features, but they do not necessarily confer competitive advantages. First, Asian states intervene more in the economy through industrial policy, infrastructural investment, and export promotion. But whether that has made Asian capitalism more dynamic remains an unresolved puzzle. The World Bank's classic 1993 study of the region, "The East Asian Miracle," could not find evidence that strategic intervention by the state is responsible for East Asia's success. Second, two types of companies-family-controlled conglomerates and giant, state-owned enterprises-dominate Asia's business landscape. Although such corporate ownership structures enable Asia's largest companies to avoid the short-termism of most American firms, they also shield them from shareholders and market pressures, making Asian firms less accountable, less transparent, and less innovative.
Finally, Asia's high savings rates, by providing a huge pool of indigenous capital, undeniably fuel the region's economic growth. But pity Asia's savers. Most of them save because their governments provide inadequate social safety nets. Government policies in Asia penalize savers through financial repression (by keeping deposit rates low and paying household savers measly returns on their savings) and reward producers by subsidizing capital (typically through low bank lending rates). Even export promotion, ostensibly an Asian virtue, seems overrated. Asian central banks have invested most of their massive export surpluses in low-yielding, dollar-dominated assets that will lose much of their value due to the long-term inflationary pressures generated by U.S. fiscal and monetary policies.
"Asia
Will Lead the World in Innovation."
Not
in our lifetime. If you look only at the growing number of U.S.
patents awarded to Asian inventors, the United States appears to have a
dramatically receding edge in innovation. South Korean inventors, for example,
received 8,731 U.S. patents in 2008-compared with 13 in 1978. In 2008, close to
37,000 U.S. patents went to Japanese inventors. The trend seems sufficiently
alarming that one study ranked the United States eighth in terms of innovation,
behind Singapore, South Korea, and Switzerland.
Reports of the death of
America's technological leadership are, to paraphrase Mark Twain, greatly
exaggerated. Although Asia's advanced economies, such as Japan and South Korea,
are closing the gap, the United States' lead remains huge. In 2008, American
inventors were awarded 92,000 U.S. patents, twice the combined total given to
South Korean and Japanese inventors. Asia's two giants, China and India, still
lag far behind
Asia is pouring money into higher education. But Asian
universities will not become the world's leading centers of learning and
research anytime soon. None of the world's top 10 universities is located in
Asia, and only the University of Tokyo ranks among the world's top 20. In the
last 30 years, only eight Asians, seven of them Japanese, have won a Nobel Prize
in the sciences. The region's hierarchical culture, centralized bureaucracy,
weak private universities, and emphasis on rote learning and test-taking will
continue to hobble its efforts to clone the United States' finest research
institutions.
Even Asia's much-touted numerical advantage is less than it
seems. China supposedly graduates 600,000 engineering majors each year, India
another 350,000. The United States trails with only 70,000 engineering graduates
annually. Although these numbers suggest an Asian edge in generating brainpower,
they are thoroughly misleading. Half of China's engineering graduates and two
thirds of India's have associate degrees. once quality is factored in, Asia's
lead disappears altogether. A much-cited 2005 McKinsey Global Institute study
reports that human resource managers in multinational companies consider only 10
percent of Chinese engineers and 25 percent of Indian engineers as even
"employable," compared with 81 percent of American
engineers.
"Dictatorship Has Given Asia an
Advantage."
No.
Autocracies, mainly in East Asia, may seem to have made their countries
prosperous. The so-called dragon economies of South Korea, Taiwan, Singapore,
Indonesia under Suharto, and now China experienced their fastest growth under
nondemocratic regimes. Frequent comparisons between China and India appear to
support the view that a one-party state unencumbered by messy competitive
politics can deliver economic goods better than a multiparty system tied down by
too much democracy.
But Asia also has had many autocracies that have
impoverished their countries-consider the tragic list of Burma, Pakistan, North
Korea, Laos, Cambodia under the murderous Khmer Rouge, and the Philippines under
Ferdinand Marcos. Even China is a mixed example. Before the Middle Kingdom
emerged from self-imposed isolation and totalitarian rule in 1976, its economic
growth was subpar. China under Mao also had the dubious distinction of producing
the world's worst famine.
Even when you look at autocracies credited with
economic success, you find two interesting facts. First, their economic
performance improved when they became less brutal and allowed greater personal
and economic freedoms. Second, the keys to their successes were sensible
economic policies, such as conservative macroeconomic management,
infrastructural investment, promotion of savings, and pushing exports.
Dictatorship really has no magic formula for economic development.
Comparing
a one-party state like China with a democracy such as India is not an easy
intellectual exercise. Obviously, India has many weaknesses: widespread poverty,
poor infrastructure, and minimal social services. China appears to have done
much better in these areas. But appearances can be deceiving. Dictatorships are
good at concealing the problems they create while democracy is good at
advertising its defects.
So the autocratic advantage in Asia is, at best, an
optical illusion.
"China
Will Dominate Asia."
Not
likely. China is on course to overtake Japan as the world's
second-largest economy this year. As the regional economic hub, China is now
driving Asia's economic integration. Beijing's diplomatic influence is expanding
as well, supposedly thanks to its newfound soft power. Even China's once
antiquated military has acquired a full plethora of new weapons systems and
significantly improved its ability to project force.
Although it is true
that China will become Asia's strongest country by any measure, its rise has
inherent limits. China is unlikely to dominate Asia in the sense that it
replaces the United States as the region's peacekeeper and decisively influences
other countries' foreign policies. Its economic growth is also by no means
guaranteed. Restive secession-minded minorities (Tibetans and Uighurs) inhabit
strategically important areas that constitute almost 30 percent of Chinese
territory. Taiwan, which is unlikely to return to China's fold anytime soon,
ties down substantial Chinese military resources. The ruling Chinese Communist
Party, which views perpetuating its one-party state as more important than
overseas expansionism, is not likely to be seduced by delusions of imperial
grandeur.
China has formidable neighbors in Russia, India, and Japan that
will fiercely resist any Chinese attempts to become the regional hegemon. Even
Southeast Asia, where China appears to have reaped the most geopolitical gains
in recent years, has been reluctant to fall into China's orbit completely. Nor
would the United States simply capitulate in the face of a Chinese
juggernaut.
For complex reasons, China's rise has inspired fear and unease,
not enthusiasm, among Asians. only 10 percent of Japanese, 21 percent of South
Koreans, and 27 percent of Indonesians surveyed by the Chicago Council on Global
Affairs said they would be comfortable with China being the future leader of
Asia.
So much for China's charm offensive.
"America
Is Losing Influence in Asia."
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America's leadership in Asia derives from many sources, not just its military or economic heft. Like beauty, a country's geopolitical influence is often in the eye of the beholder. Although some view the United States' declining influence in Asia as a fact, many Asians think otherwise. Sixty-nine percent of Chinese, 75 percent of Indonesians, 76 percent of South Koreans, and 79 percent of Japanese in the Chicago Council's surveys said that U.S. influence in Asia had risen over the past decade.
Another, perhaps more important, reason for the enduring American preeminence in Asia is that most countries in the region welcome Washington as the guarantor of Asia's peace. Asian elites from New Delhi to Tokyo continue to count on Uncle Sam to keep a watchful eye on Beijing.
Whether it's over blown or not, Asia is poised to increase its geopolitical and economic influence rapidly in the decades to come. It has already become one of the pillars of the international order. But in thinking about Asia's future, let's not get ahead of ourselves. Its economic ascent is not written in the stars. And given the cultural differences and history of intense rivalry among the region's countries, Asia is unlikely to achieve any degree of regional political unity and evolve into an EU-like entity in our lifetime. Henry Kissinger once famously asked, "Who do I call if I want to call Europe?" We can ask the same question about Asia.
All told, Asia's rise should present more opportunities than threats. The region's growth not only has lifted hundreds of millions out of poverty, but also will increase demand for Western products. Its internal fissures will allow the United States to check the geopolitical influence of potential rivals such as China and Russia with manageable costs and risks. And hopefully, Asia's rise will provide the competitive pressures urgently needed for Westerners to get their own houses in order—without succumbing to hype or hysteria.