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Asia — The New Centre of Gravity By Rashid A Mughal

FOR more than two decades now with the rise of China, as major economic engine in the East and its rising political and economic role and clout, particularly in the neighbouring countries and generally in the entire world, the importance of America and European powers has been on the decline. In the recent past two major events, the economic meltdown in 2008 and the Trump’s disastrous policlinics during the last four years further dented the American image and the Brexit controversy which lingered on for years, leading to exit of the UK from the European Union, caused immense harm in terms of uncertainty and economic fall-out and political fragmentation. This situation not only helped China, which continued its spectacular rise and became the major economic power, replacing US and with its OBOR initiative, is connecting to the entire world.

Countries like China, India and Indonesia, thanks to enormous populations, have some of the world’s biggest economies, and have become economic and political powers. According to the trends shown by economic indicators it seems that most of the growth in the world economy in the next decade will be seen in Asia. This will have far reaching implications not only in improving the lot of the poor and reduction of poverty globally but also in striking a balance between the rich and the poor. Unfortunately this narrowing of income gaps will do little or nothing for the world’s poorest population miserably living in African countries whose only involvement in the global economy has been through the exploitation of the natural resources seem to be facing a bleak future but even for some of them there could be hope for two reasons. The first is growth in consumer spending in Asia and China in particular which may lead to a higher commodity price. The second is the possibility that Europe and Asia may finally agree to re-examine and rationalize their protective policies for food and agriculture sector. If this happens this would open up unprecedented possibilities for advancement of the poor in Africa, North America and the Caribbean. Health sector has not achieved much. While it is less increasingly become difficult for most of the people to afford quality medical treatment it is equally impossible to meet the quality educational cost for the children for large portion of population.

Much ink has been spilt in analyzing the rise of these Asian economies. The main factors were their export-orientation, good education, macroeconomic stability and strong government leadership. But geopolitics also played an important role in the context of the Cold War, as the US offered official assistance and opened its markets to friends in Asia. And all of these successful economies — the economic tigers of the East, were motivated to become strong and stable. China stunned the world with three decades of over 10% growth rates, following its opening up, which began in 1978 (more recently, Vietnam launched a similar opening to the world economy). Today, the future of the Chinese economy is bright, as the government seems to be tacking the social and political risks of undertaking reform, prudently. India is the other Asian giant, with an enormous population. It began its reform in the early 1990s and has since achieved good economic growth. While there is a lot of positive momentum in the Indian system, it also faces immense challenges — both social and political.

You only have to look back to the nature of some of the factors driving emerging Asia’s high-growth period to glean insights. As populations are aging in the West, there will be less energetic, youthful populations to drive growth. This will help Asian countries which have a strong and formidable base of young population of working age. Now that many countries are already highly urbanized, there will be less new movements of people from the rural areas to the city. Overtime, the benefits of backwardness also fade as countries have copied the easy lessons from world leaders. The growth in China, the most important trading partner for virtually all other Asian economies, is driving the economic growth potential of everyone. However arrival of Donald Trump at the leadership of the US and his trade wars with China resulted in a deterioration of some of the key factors that have driven Asia’s development—an open US market, a relatively benign security environment and a stable global economic system.

But digging behind the mechanical story of economic growth is a deeper story of institutions and politics. What is required for successful economic development are “inclusive economic institutions”, as argued by Daron Acemoglu and James A. Robinson, noted economists. Such institutions “allow and encourage participation by the great mass of people in economic activities that make best use of their talents and skills and that enable individuals to make the choices they wish”. They “require secure property rights and economic opportunities not just for the elite, but for a broad cross-section of society” And behind inclusive economic institutions are inclusive political institutions. The enemy of economic development is “extractive political institutions” which “concentrate power in the hands of a narrow elite and place a few constraints on the exercise of this power”. This elite then usually structures economic institutions in order to extract resources from the rest of society.

Population — young population in fact — plays an important role in Asia’s economic development. Asia has enormous economic size, with 55% of the world’s population, Asia’s rapid economic growth has enabled it to grow its share of the world economy from 13% in 1960 to 31% in 2015 (the West, represented by the OECD member countries, accounts for only 18% of the world’s population, and has seen its share of world GDP decline commensurately). And there are a plethora of projections from organizations like the Asian Development Bank, the OECD and PWC which predict that in the coming decades, Asia will account for more than half of the world economy. It is true that their enormous economic size gives countries like China, India and Indonesia “market power” which attracts Western and other businessmen. China has large pools of investible funds that can be used for both economic and political purposes like establishing the Asian Infrastructure Investment Bank, and the Belt and Road Initiative. Large economic resources can also finance militaries which can project power and intimidate smaller neighbours, as reflected in the arms race presently underway in Asia. China, India, Japan and Korea all figure among the world’s top ten for military expenditure.

Perhaps the greatest limit on Asia’s power comes from the poor relations between Asian countries — for example, China-Japan, Japan-South Korea, Vietnam-China, India-Pakistan, India-China and North Korea. Asian countries may together account for half of the world economy in a few decades time, but they are unable to join forces in a way that they can become a dominant force. The very low trust among Asian countries means that they have difficulty cooperating with each other to make Asia a dominant force.

— The writer is former DG (Emigration) and consultant ILO, IOM.

Source: https://pakobserver.net/asia-the-new-centre-of-gravity/

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