The Asian century: reality or hype?

Position:A SYMPOSIUM OF VIEWS - Gross domestic product

For some time, conventional wisdom has argued that the twenty-first century will be dominated by Asia while America's global importance declines.

The narrative is this: Asian GDP will soon grow to more than 50 percent of global GDP, while America's percentage will slip to perhaps less than 15 percent. The new Asian century will therefore entail a dramatic global power shift. Even if economies such as China slow, their growth will still overwhelm the rest of the world.

Yet some strategists argue that this narrative is faulty. Clyde Prestowitz of the Economic Strategy Institute argues that the notion of "Asian GDP" makes no sense given the region's lack of unity and commonality. While it is true that the combination of India, China, and Japan yields a total GDP that is a major percentage of the global economy, this is a "meaningless combination." These countries are unlikely to be allies even in a loose sense. Besides, the United States, the European Union, Canada, Mexico, and South America already comprise more than 50 percent of global GDR These economies are not going away.

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Prestowitz concludes that the pan-Asian century narrative is mostly "journalistic hype." Look at today's Asian-dominated global supply chain. Supplies primarily still go to U.S. and EU markets.

Yet others counter that the Asian economies enjoy benefits that are sure to expand. China is graduating at least three times as many science and engineering students as the United States, and India twice as many. Chinese outbound direct investment--particularly in mining, energy, and agriculture--is on the upswing.

Are we living in the second decade of an Asian century?

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ZBIGNIEW BRZEZINSKI

Counselor and Trustee, Center for Strategic and International Studies, and former U.S. National Security Adviser

The predictions of the Asian Century fundamentally misunderstand the meaning of that term. It is derived from the fact that over the last several centuries every century tended to be either European or American-European. That was largely due to the fact that Europe, later buttressed by America, was the dominant center of political power and that could mean hegemony over the world. That era came to an end with the appearance of nuclear weapons as well as a global political awakening, both of which I discuss fully in my most recent book entitled Strategic Vision.

What has to be recognized is that politics is also important in shaping world affairs and today the world is politically stirring, volatile, and not subject to anybody's control. If by the "Asian Century" all that is meant is its relative GNP to the total GNP, so be it. That tells us something, but only a very partial aspect of global realities. The far more likely reality is Nobody's Century, and--even worse--probably a very much contested century of considerable international instability.

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JACQUES DE LAROSIERE

Advisor to the Chairman, BNP Paribas, and former Governor, Bank of France

Demography is a major factor behind the shift of economic power in favor of Asia over the coming five decades.

The average increase in working population of countries such as India, Malaysia, Pakistan, Bangladesh, Philippines, and Indonesia will be in the order of 40 percent to 50 percent. This trend, together with progress in education, is bound to have a large impact on GDP developments.

On the other side of the spectrum, most European countries as well as Japan will see a significant decline in their working force by 2050 (around -40 percent in Japan and -35 percent in Germany). This is because of poor birth rates and high life expectancy.

The fact that China will be receding demographically will not prevent it from overtaking the U.S. economy in twenty to twenty-five years, absent major and unpredictable shocks.

The notion that Asia is not politically unified does not seem to be a relevant factor. It has not prevented the rise of that continent over the past decades. History to the contrary shows that economic growth is in large part the result of national competition.

Furthermore, it is difficult to argue that the present "mature countries" are united. So in my view, the Asian "lack of unity and commonality" does not alter the main trends at work towards what you rightly call a "dramatic global power shift."

By 2050, some two-thirds of world GDP will originate from the emerging markets (against one-third today), and Asia will account for half of that.

The composition of the G-7 group will profoundly change. Four European countries will have left the group (unless the eurozone unites politically), while China, India, Brazil, Russia, and Mexico will become major players alongside the United States, which would become number two.

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JAMES E. GLASSMAN

Head Economist, Commercial Bank, JPMorgan Chase & Co.

The Asian "century" is reality. The Asian "miracle" is not about its fast growth, which will gradually slow. The miracle is about its rising living standard. Certainly the Asian story inspires a degree of journalistic hype, but it's hard to exaggerate the historic meaning of an event that is lifting half the world's population out of poverty. There's much more to come. For all that the last decade brought, the living standard of the developing Asian economies has climbed to only 20 percent of the U.S. level. In other words, Asia still is in the dawn of a new economic day and there's much more in store as Asia plays catch up.

Asia's development has considerable momentum. That's because China chose some time ago to accelerate her modernization program by opening her borders and welcoming the assistance of the global business community. Of course, today's Asian-dominated global supply chain is directed at supplying primarily the United States and European Union, but that's only the first step toward building a self-sufficient domestic economy. Financial liberalization surely is high on the agenda. Now China must remain committed to its modernization agenda in order to promote social stability.

Still, the truth is that the Asian century is really a global century, because the broadening of the economic prosperity that the Industrial Age brought to the West and now is lifting Asia and others benefits all who are connected to the global economy. For one, rising global prosperity promises greater geopolitical stability. Economic prosperity strengthens the incentive to avoid conflicts. That is an important implication from the wars and conflicts in Europe in the first half of the twentieth century that affected millions of people. At the same time, the emergence of new economic giants is intensifying global competition and doing for nations what it does at the individual level, checking protectionist instincts and encouraging pro-growth policies.

Asia's rising economic might stirs anxieties about what the future holds for the United States and others as the global economy expands. If half the world's population lives in the Asian region and those economies succeed in catching up to the living standards in the West, the GDP of the developing economies, where one-fifth of the world's population lives, will become less relevant, goes. GDP matters of course, because it is a measure of the global footprint of an economy. But the size of a country's GDP is not a good measure of its global influence. The living standard, GDP per capita, captures better the global purchasing power of an economy. Even at current growth rates it will be decades before living standards in developing Asian economies approach the levels the West has achieved.

Ultimately, however, global economic influence derives less from the size of a country's GDP and more from its character, its flexibility, its resilience, its tolerance for risk taking, and its innovativeness. No system is perfect, of course, but the market-oriented principles, including the rise of securitized finance, that guide how resources are managed in the developed economies, which build on the principle that the pursuit of self-interest offers the greatest benefit to society as a whole, have a proven historical record. Their success rests as well on the checks and balances that come with the rule of law. It remains to be seen whether the rising Asia stars can that performance in their own image after they catch up with the West.

We are riving in the second decade of an Asian century, because the region lags far behind the West and welcomes outside help. What will follow when living standards converge remains to be seen. Surely there is more to cheer in Asia's success than to fear.

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CARLA A. HILLS

Chair and CEO, Hills & Company, and former U.S. Trade Representative

Are we living in the second decade of an Asian Century? Will Asian nations push the United States and Europe into a secondary status? No one has perfect foresight, but I think it unlikely.

Definitions matter here. There is no question that Asian economies will secure a higher percentage of global GDP. A 2011 study by the Asian Development Bank forecasts that Asia could double "its share of global gross domestic product (GDP) to 52 percent by 2050."

But primacy rests on more than which nation has the largest share of the global economy. Even GDP per person, where the United States is likely to lead for many years, is not an accurate measurement of primacy. Globalization will continue and intensify. Rather than the "American Century" or the "Asian Century," this century might well be called the "Multi-Polar Century," for we will require partnerships to solve twenty-first century challenges such as nuclear proliferation, food security, environmental degradation, pandemics, terrorism, and so much more. These issues cannot be solved by a single nation or even a single region. Solution of today's global issues will require partnerships between and among the nations of the East and the West.

Now is the moment...

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