In 2008, at a time of financial peril, the world united to restructure the global banking system. Last year, as trade collapsed and unemployment rose dramatically, the world came together for the first time in the G20 to prevent a great recession from spiraling into a great depression.
Now, facing a low-growth austerity decade with no national exits from long-term unemployment and diminished living standards, the world needs to come together in the first half of next year to agree on a financial and economic strategy for prosperity far bolder than the Marshall Plan of the 1940s.
Time is running out for the West, because both Europe and the US have yet to digest the fact that all the individual crises of the last few years — from the subprime crisis and the collapse of Lehman Brothers to Greek austerity and Ireland’s near-bankruptcy — are symptoms of a deeper problem: a world undergoing a far-reaching, irreversible, and, indeed, unprecedented restructuring of economic power.
Of course, we all know of Asia’s rise, and that China exports more than the US and will soon manufacture and invest more as well, but we have not fully come to terms with the sweep of history. Western economic dominance — 10 percent of the world’s population producing a majority of the world’s exports and investment — is finished, never to return. After two centuries in which Europe and the US monopolized global economic activity, the West is now being out-produced, out-manufactured, out-traded, and out-invested by the rest of the world.
Former German chancellor Otto von Bismarck once described the patterns of world history. Transformations do not happen with “the even speed of a railway train,” he said. Once in motion they occur “with irresistible force.”
If the West fails to understand that the real issue today is responding to the rise of Asian economic power by renewing its own, then it faces the grim prospect of steady decline, punctuated by brief moments of recovery — until the next financial crisis. Throughout it all, millions will be without jobs.
So why, despite this new reality, am I convinced that the 21st century can be one in which the US, by reinventing the “American dream” for a new generation, remains a magnet for the greatest companies, and in which Europe can be home to a high-employment economy?
Because, fortunately for all of us, soon 1 billion and more new Asian producers will — first in their tens of millions, then in their hundreds of millions — become new middle-class consumers, too.
The growth of an Asian consumer revolution offers the US a road to new greatness. Today Chinese consumer spending is just 3 percent of world economic activity, in contrast to Europe and the US’ 36 percent share. Those two figures illustrate why the world economy is currently so unbalanced.
By 2020 or so, Asia and the emerging-market countries will account for double the consumer power of the US to the world economy. Already, companies such as GE, Intel, Proctor & Gamble and Dow Jones have announced that the majority of their growth will come from Asia. Already, many South Korean, Indian, and other Asian multinationals have majority foreign (including US) shareholdings. This new driver of world economic growth opens up an opportunity for the US to exploit its great innovative and entrepreneurial energy to create new, high-skilled jobs for US workers.
Asian consumer growth — and a rebalancing of the global economy — can be the exit strategy from our economic crisis, but the West will benefit only if it takes the right long-term decisions on the biggest economic questions — what to do about deficits, financial institutions, trade wars, and global cooperation?
First, deficit reduction must occur in a way that expands investment in science, technology, innovation, and education. Moreover, both public and private investment will be needed to deliver the best science and education in the world.
Second, new markets cannot be tapped if the West succumbs to protectionism. Banning cross-border takeovers, restricting trade, and living with currency wars will hurt the US more than any other country. In the last century, the US domestic market was so big and dominant that it did not really have to worry much about trade rules, but, with Asia poised to be the biggest consumer market in history, US exporters — the greatest potential beneficiaries — will need open trade more than ever. In other words, the US must champion a new global trade deal.
A commitment to public investment and open trade are, however, necessary but insufficient conditions for sustained prosperity. All the global opportunities of the new decade could fade if countries withdraw into their own national shells.
In another age, former British prime minister Winston Churchill warned a world facing the gravest of challenges not to be resolved to be irresolute, adamant for drift, solid for fluidity, and all powerful for impotence. I believe that the world today does have leaders of Churchill’s stature. If they work together, drift need not happen.
The US must now lead and ask the world to agree on a modern Marshall Plan that coordinates trade and macroeconomic policies to boost global growth. It should work with the new chair of the G20, French President Nicolas Sarkozy, to revive private lending by creating global certainty about the standards and rules expected of banks.
Agreement is also needed that each country’s multi-year deficit-reduction plan will be accompanied by acceleration of consumer spending in the East and of targeted investment in education and innovation in the West. Such a plan must encourage China and the rest of Asia to do what is in their and the world’s interest: reducing poverty and expanding the middle class.
The West must also speed up structural reforms to become more competitive, while ensuring that fiscal consolidation does not destroy growth.
Through joint action, the G20 economies can achieve not just a marginal change, but growth above 5 percent by 2014. Instead of a world deadlocked over currencies and trade and retreating into the illusory shelter of protectionism, we could see US$3 trillion of growth converted into 25 million to 30 million new jobs, and 40 million or more people freed from poverty.
Gordon Brown is a former prime minister of the UK.
Copyright: Project Syndicate
Saudi Arabian largesse is flooding Egypt’s cultural scene, but the reception is mixed. Some welcome new “cooperation” between two regional powerhouses, while others fear a hostile takeover by Riyadh. In Cairo, historically the cultural capital of the Arab world, Egyptian Minister of Culture Nevine al-Kilany recently hosted Saudi Arabian General Entertainment Authority chairman Turki al-Sheikh. The deep-pocketed al-Sheikh has emerged as a Medici-like patron for Egypt’s cultural elite, courted by Cairo’s top talent to produce a slew of forthcoming films. A new three-way agreement between al-Sheikh, Kilany and United Media Services — a multi-media conglomerate linked to state intelligence that owns much of
The US and other countries should take concrete steps to confront the threats from Beijing to avoid war, US Representative Mario Diaz-Balart said in an interview with Voice of America on March 13. The US should use “every diplomatic economic tool at our disposal to treat China as what it is... to avoid war,” Diaz-Balart said. Giving an example of what the US could do, he said that it has to be more aggressive in its military sales to Taiwan. Actions by cross-party US lawmakers in the past few years such as meeting with Taiwanese officials in Washington and Taipei, and
The Republic of China (ROC) on Taiwan has no official diplomatic allies in the EU. With the exception of the Vatican, it has no official allies in Europe at all. This does not prevent the ROC — Taiwan — from having close relations with EU member states and other European countries. The exact nature of the relationship does bear revisiting, if only to clarify what is a very complicated and sensitive idea, the details of which leave considerable room for misunderstanding, misrepresentation and disagreement. Only this week, President Tsai Ing-wen (蔡英文) received members of the European Parliament’s Delegation for Relations
Denmark’s “one China” policy more and more resembles Beijing’s “one China” principle. At least, this is how things appear. In recent interactions with the Danish state, such as applying for residency permits, a Taiwanese’s nationality would be listed as “China.” That designation occurs for a Taiwanese student coming to Denmark or a Danish citizen arriving in Denmark with, for example, their Taiwanese partner. Details of this were published on Sunday in an article in the Danish daily Berlingske written by Alexander Sjoberg and Tobias Reinwald. The pretext for this new practice is that Denmark does not recognize Taiwan as a state under