Can Asia Lead the World?

KISHORE MAHBUBANI

Speech delivered on 27 March 2017

For me, the biggest decision I have to make is whether or not to start a speech with a joke, the way Americans do. In Asia, you start with an apology. I think I will actually do the Asian thing and start this speech with a genuine apology. My apology is this: What I say here may take you out of your comfort zone a bit. But, at the same time, if I don’t take you out of your comfort zone, you won’t understand the world that is coming, because the world that is coming is outside our comfort zone. I do, however, have a happy ending for you, so don’t worry.

Since we’re talking about Asia and the world, this is how I propose to structure my remarks. First, I’ll try, in a sense, to understand what’s really happening in our world. Part one is about my view of the state of our world. Part two deals with some global contradictions that have arisen. In part three, I’ll talk about some of the solutions we have and which we can use. I’ll try to do that in the thirty or forty minutes available to me.

Let me therefore begin with part one. We’re all aware of the strange world we live in, and are all struggling to find answers to what’s going on. I’ve come up with a theory that one reason why the world is so confusing today is that three major structural shifts are happening in human history at the same time. Any one of them would be very difficult to handle, but to cope with all three simultaneously is a big challenge. That’s why our world appears to be confusing.

So what are these three major structural shifts? The first – and this I consider to be the most fundamental structural shift and one that, surprisingly, is spoken about the least – is the emergence of a new era in world history. How do I characterize this new era? With two points. Point one is that it marks the end of the era of Western domination of world history. I emphasize the word “domination” because the end of Western domination is not the end of the West. One aspect I must stress to avoid any misunderstanding is that Asians actually want to see a strong West. Signs that the West is weakening are not being cheered by Asia. We would actually like to see the West go back to being very strong.

The second point is the return of Asia. The reason I call it the return of Asia rather than the rise of Asia is that, as British historian Angus Maddison pointed out, from the year one to the year 1820, in other words, for 1,800 years, the two largest economies of the world were those of China and India. It is only in the last 200 years that Europe and North America have taken off. So if you view the past 200 years of world history against the backdrop of the past 2,000 years, the last 200 years have been an aberration. And as you know, all aberrations come to a natural end. It is, therefore, perfectly natural to see the return of Asia.

What is surprising, though, is how fast this is happening. In 1980, in terms of purchasing power parity (PPP), the United States’ share of global GNP was 25 per cent and China’s share was 2.2 per cent. But in 2014 – within thirty-four years – China’s share became larger than that of the United States. That is quite remarkable. And today, in PPP terms, the number one economy in the world is China, number two is the United States, number three is India and number four is Japan. So out of the top four economies in the world, three are already Asian.

Now, why is it important to speak about this change? Because with this change, the world is going to change. I’m sure we all have our own theories of why Trump and Brexit happened. My own view of why Trump and Brexit happened is that the elites of the world kept telling their people: “Hey, we’re still number one. We can carry on doing what we’re doing.” But the masses and the working classes could feel that the world was changing. They felt that they were struggling to hang on to their jobs and didn’t anticipate any improvements in their lives. The fundamental change that was happening was the return of Asia – which obviously caused many dislocations.

Another structural shift that made this situation even more difficult to deal with was, of course, globalization. As you all know, globalization was a gift from the West to the rest of the world. It was the West that said: “If you want to succeed in this world, the way to do it is to open up your economies, compete, have free trade, and you will do very well.”

When I was ambassador to the UN for the first time, from 1984 to 1989, I went to the Second Committee – the economic committee – where all the speeches were given. It was the American delegation, the European delegations that would preach the virtues of free trade. All the developing countries were very suspicious, very wary. They said: “No, this is a Western plot to take over our economies.” So the developing countries resisted globalization. But then they saw the success stories. They saw how Japan succeeded by opening up. They saw how the four tigers – South Korea, Taiwan, Hong Kong and Singapore – succeeded. They saw how the ASEAN countries succeeded. Then China opened up and everyone said: “The way to succeed is to open up and join the global economy.”

Of course, when that happened, everything changed. Clearly, globalization has had a massive effect on the world. Let me just give you one statistic that illustrates how dramatic the change was. Writing in the London Review of Books, R. W. Johnson said: “Between 1948 and 1973, productivity rose by 96.7 per cent and real wages by 91.3 per cent, almost exactly in step.” This was in America. “Those were the days of plentiful hard-hat jobs in steel and the auto industry when workers could afford to send their children to college and see them rise into the middle class.”

But, in Johnson’s words, “from 1973 to 2015 – the era of globalization, when many of those jobs vanished abroad – productivity rose 73.4 per cent while wages rose by only 11.1 per cent.” That’s a dramatic shift, where the elites saw their incomes go up and the working classes didn’t. He also said: “On average in 1965 an American CEO earned twenty times what a worker did. By 2013, on average, the number was 296 times.” Almost 300 times. Again, another massive shift.

So you can see how structural shifts have been happening to which we haven’t paid attention. I can give you an example: I was in New York in 2001 when 9/11 happened. Everybody was focused on 9/11 and its impact on the world. But nobody was focused on something that also happened in 2001 and which would have a far more lasting impact – namely China’s entry into the WTO. 9/11 will eventually be forgotten. Although China’s entry into the WTO and the injection of almost one billion workers into the global production system obviously shook up the world, nobody paid attention. That’s why it’s important to also take notice of structural shifts and not only of discrete events like 9/11.

Then there is the third structural shift: the dramatic revolution in technology. I don’t need to say much about this, because Switzerland is leading the world in technological change and you already know the situation. It’s amazing how fast new technology is spreading. Just to give you one indication: India has a population of 1.2 billion people. In 1990, India had almost zero mobile phones. By 2015, this figure had risen to almost one billion mobile phones. Two years ago, there were only 15 million smartphones in India. By 2020, a couple of years from now, India will have 500 to 600 million smartphones.

As you all know, when you have access to a smartphone, even if you have access to just one website – Wikipedia – everything is suddenly available to you. And the leap in human productivity that this is creating is phenomenal. That’s why the return of Asia, as a result of a combination of these three factors, is unstoppable. It is not being driven by charismatic leaders. It is being driven every day by individuals waking up in China, India and South East Asia who are suddenly seeing a world of unlimited possibilities. They wake up dreaming of a better world, and it’s actually happening. The improvements they’ve seen in their living conditions in the last twenty to thirty years are far greater than those that have taken place over the past 2,000 years. For those experiencing this, the energy and the drive are extraordinary. I can tell you that twenty to thirty years from now the world will look very different.

So that’s part one. Part two talks about some fundamental contradictions. When you have rapid change, one of the natural consequences of rapid change is that contradictions develop. This has happened throughout history. I’ll give you just two or three examples of contradictions in the world today.

The first of the global contradictions is the most obvious – one that will preoccupy us quite a bit, especially in the next three to five years. It is, of course, the geopolitical contradiction. World history is driven by the relations between the world’s number one power, which today is the United States, and the world’s number one emerging power, which today is China.

As already mentioned, China has overtaken the United States in PPP terms. In nominal terms, it may well pull ahead of the United States within a decade. Throughout history, whenever the world’s number one emerging power has risen above the world’s number one power, there has been a concomitant rise in levels of tension between those two powers. It would...