Global political power systems and alliances are changing. Journalist and political scientist, Fareed Zakaria, has been reporting on these changes from the frontlines. He recently spoke to our clients during a Barclays Asia Forum webcast, and in the latest instalment of our “3 Point Perspective” series, he shares his views on the new world order, differences in dealing with the pandemic and India’s possible ascent.
Of the many global trends that are reshaping our lives, one of the most significant has been the changing of the world order that had largely been in place since the end of World War II in 1945.
This was a world characterized by American power, globalization and the information revolution. These three forces combined then grew – each one accelerating the other – first in the US and Western Europe. Then around 1990, after the collapse of the Soviet Union, these forces reached a wider swath of the world.
Fast forward to today, American power shares the stage with other actors that are capable of pushing back, the benefits of globalization are being called into question, and we are looking at a world that is, in the short term, being technologically decoupled.
Part of this is due to the natural tendency of what I call “the rise of the rest.” Other countries – particularly China, but also India and Brazil – have developed economically, educationally and socio-politically in ways that would have once been unthinkable. Yet, it remains to be seen how this disruption of the world stage will play out over the long-term.
The COVID-19 pandemic has revealed an economic divide between two groups of countries: those that can print money and those that cannot. We are entering a new world of structural hyper-indebtedness. It works for countries like the US, but others will struggle, particularly third world countries.
In other words, economies that have the ability to generate debt in a stable manner in their own currency, including the UK, the US, Japan and China, are in a more secure position than countries that cannot, such as Argentina, Lebanon and India.
At the same time, you see another stark division between economies: those that have dealt well with the public health crisis of the pandemic, and those that have not.
Take a look at Taiwan: it welcomes millions of mainland Chinese tourists annually and its population is roughly the same as the state of New York. Taiwan has had just seven deaths in total, while in New York alone, there have been more than 32,000 deaths.
The pandemic has highlighted significantly different outcomes for economies – both economically and socially – as they grapple with its effects.
Shifting focus to India, its rapid economic growth has been widely commented upon. But India's economy still lags behind China. Why is that? Partly, India is a very large country. It is consumed by its internal divisions that span 15 languages and a hundred dialects. Elections in the states of Tamil Nadu and Karnataka have nothing to do with the elections in the states Punjab and Uttar Pradesh. Holding the whole country together is so difficult that it makes having a purposeful, positive, and strategic orientation to the rest of Asia and the world even tougher.
The Indian economy is one fifth the size of the Chinese economy. To compete, India could look toward stronger trade or defense ties with the US. As democracies, both nations should have a strong connection, and closer relations could make Indian prosperity easier to achieve.
Huge investments from the big technology companies are also a possibility. Many feel they missed out on China’s tech boom and will be eyeing what they see as the next big market.
Ultimately, India has to recognize it has not caught up with China. There needs to be a greater sense of urgency for both economic reform and strategic thinking. If this happens, India’s prospects are limitless and much better than China’s in the long run because of the demographic differences.