The Great Global Competition
I recently read a book called the The Post American World – which opened with the line: “This is not a book about the decline of America, but rather about the rise of everyone else.” Fareed Zakaria, the book’s author, describes a world in which the US will no longer dominate the global economy, orchestrate geopolitics, or “overwhelm” cultures.
He sees the “rise of the rest”—the growth of countries like China, India, Brazil, Russia, and many others—as the great story of our time, and one that will reshape the world. Certainly, when economists focus on the means by which we will pull ourselves away from a global recession, it is the “emerging” countries that are described as our saviours. Their growing middle classes are the new engine rooms of global growth which will compensate for the overpaid or work-shy economies of the “old” world.
The tallest buildings, biggest dams, largest-selling movies, and most advanced cell phones are all being built outside the US or Europe. This economic growth is producing political confidence, national pride, and with it many potential international problems as we manage the transition from ‘old’ to ‘new’ world order.
At this very moment we observe trading relations between China and the US being tested in new ways – David is becoming Goliath – and the once impregnable negotiating position of the US has been significantly weakened. The US still retains a significant advantage over the rest of the world as the largest GDP growth contributor, with almost 25% of global GDP, and as the controller of the world’s reserve currency. But as Zakaria points out, there is a gradual erosion taking place.
Ironically the US led push for more open international trade and freer movement of capital has empowered countries like China and India to create export led economic growth – and with China’s trend growth rate having pushed towards double digits for the past decade, it won’t take long for the world’s most populous country to become the economic powerhouse it should be. PWC has predicted that the Chinese economy could be as large as the US by as early as 2020.
What does it mean to live in a truly global era? While the changes we are seeing are bound to produce international conflicts – hopefully of a non-violent nature – the benefits of a globalised world are extensive.
At a micro level the internet age and open capital markets make a powerful combination. I received an email last week from a group called Kiva, who I’ve mentioned before in this blog. They operate a micro finance lending business from the UK targeted at small business development in emerging countries. The email was in relation to my portion ($25) of a $675 loan to a lady called Patience Johnbull who lives in Delta State, Nigeria. She runs a bread making operation, and was looking for a loan in order to expand her enterprise.
The power of the internet is clearly demonstrated by the fact that I can be connected (and hopefully helpful) to a lady I will probably never meet, in a part of the world I’m unlikely to visit anytime soon.
The content of the email was as follows:
Patience Johnbull in Nigeria (Activity: Food Market)
You Loaned: $25.00
Newly Repaid: $3.13
Total Repaid So Far: $12.50 (50.00% of your loan)
Repayment Status: Paying back on time
View loan profile at:
http://www.kiva.org/lend/166553?_te=ru
To me this represents the best form of venture capitalism there is. The difference between this loan working and not doesn’t matter much to me – it’s a punt; a true ‘venture’. At the other end, I’m sure it makes a world of a difference for Patience Johnbull to achieve her worthy ambitions, but fundamentally it is not charity. In the globalised world that we live in Patience is competing for capital against entrepreneurs of different types all over the world. She is demonstrating that she is good enough in that competition and I’m glad she has the chance to better her situation for herself and her family.
In great contrast – across the so-called Western world we are entering what is being termed by the Financial Times as the Age of Austerity. The UK is about to embark on cut backs in public spending that are virtually unprecedented. There will be undoubted recrimination amongst those who lose out. These countries simply cannot afford to sponsor, in what I would term a charitable fashion, the bloated public sectors that are now disproportionate to the size and growth rates of the private sectors that support them. We all want to have better healthcare, roads, childcare and the like – but as Patience Johnbull knows living in Nigeria – the state can’t necessarily afford to pay for it.
As Fareed Zakaria pointed out in the Post American World the next 20-30 years in the world economy will not be about the decline of the fortunes of those in first world countries like the US and the UK, but more about the “rise of the rest”.
I take a great deal of heart about the idea of people like Patience Johnbull being empowered to make a difference in their own worlds, and as the sort of people who will help emerging economies grow their way out of poverty. In the context of their existence I have little sympathy for the relative austerity that is going to be deposited upon the West. The austerity period will hopefully focus the minds of those affected that our previous standard of living shouldn’t be taken for granted.
We are in competition. Check out www.kiva.org and see some of who we’re up against.
3 Responses
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JB says:
Africa is the true sleeping giant. Beyond capital cost of production, the real goal is to create viable consumers. Africa has gazillions of them… Up till now, the western world economy has yet to properly realise that in order to sell africa more than cans of coke, they have to boost their buying power, by investing money in job creation. Do that and a whole new demographic of ipod/lcd/plasma/pc/ipad/etc/etc consumer will be born….
It really is a global competition. Today a blue collar worker on the German factory floor costs €3000 a month minimum. In Spain, €1500 minimum… and in China €200… for a whole year. Are we ten times as productive? Are we getting more productive faster? I think we might find the answers to be “no” and “no”.