The 'new' economic powers

throughout history man has had to pass through tense and uncertain times. Very frequently, political conflicts, commercial interests and rulers' personal ambitions have led to wars. Generally speaking, until the 19th century, wars were localised, affecting only particular geographical regions.

Different historical periods were dominated by two major antagonistic powers, which led in time to another set of rival powers. For example, Greeks and Romans, Romans and Carthaginians, Christians and Ottomans, English and French, French and Germans, until we reach the post-World War Two cold war between Soviet Russia and the United States.

With the fall of communism in 1989 this 'twinning' factor seems to have ended. Now we have only one superpower whose social and cultural norms, research and technology, economic and military power, are second to none. But does that mean that, because of its all-round superiority the United States will have unilateral influence on other countries in all fields for all time, or that the world is on the threshold of a new era of two potential economic and political powers?

This is not an easy question to answer. As the US has based all its progress on the development of human resources that is nurtured to challenge accepted norms and improvise through experimentation, the implication and significance of these facts are that it is in a position to make further breakthroughs and, thus, it always appears to be far ahead of all potential competitors who might challenge its lead.

Significantly, the US is very conscious of its superiority; it was made explicit by the new Bush doctrine that delineated its three points that mainly deal with the new political/military impasse with Saddam Hussein. These are: the US may take pre-emptive measures; US military superiority is not allowed to be challenged; and that unilateral measures may be taken to prevent the spread of nuclear weapons. The US, however, so far has always acted following resolutions taken by the United Nations before undertaking any unilateral action.

According to some American journalists, these three points exhibit haughtiness and arrogance, may be a causal factor that alienates friendly countries and are likely to affect foreign direct investment. Their underlying consideration is that the US does not contemplate that any country or a combination of countries should challenge its superiority in any field, particularly its military might.

But it is debatable whether this position can be tenable for long because America's tremendous advance can be whittled in various ways, especially through a mixture of information and economic power coupled with other relevant factors.

Today television, and even more so the Internet, have brought information within the reach of all. As a result, the US advantage in all spheres is likely to be eroded in time. Furthermore, other elements of innovation and the creativity of other countries might equal or even overtake the inbuilt advantages currently enjoyed by Americans. Japan and Singapore made great advances in the economic and technological fields because of these two elements; the small Asian tigers have adapted modern technology to suit their purposes and succeeded.

Of greater significance is the market power. In the past, the United Nations created many commissions and specialised agencies to cater for social, economic and demographic development. But that was the time when information was not as widespread, when many countries used to rely on their own resources, when public policies were generally inward looking and when technology was not as far advanced and applied as it is today.

The modern trend is to set up economic blocs to ensure that within geographical regions there will be economic growth. Typical examples are the ASEAN, CARICOM and COMESA relating respectively to East Asian countries, Caribbean states, and east and south African territories. NAFTA, too, was created. The EU is more than just an economic bloc.

These changes in the approach to tackling economic, political and social developments that are taking place and that affect market power and, ultimately, tend to challenge American all-round superiority, are not limited to the creation of economic blocs. India and China, with a combined population of more than 2.3 billion, are fast becoming economic powers.

The US is already importing a large number of Indians who are very well versed in information technology. Of course, it is employing these expatriates who have the required expertise because they are cheaper to employ; but India is benefiting as well in the process as there are spillover effects on the Indian economy.

Besides the remittances that will flow into the Indian economy there are the expectations and aspirations of the people who have remained at home. Thus, the only apparent "mistake" committed by Mahatma Gandhi of relying more on the practical side of life rather than the development of human resources through better education, finally appears to be rectified. The Indian economy is showing signs of consistent growth and it is certainly a force to be reckoned with in the near future. Economic power is directly conducive to other spheres; unfortunately to military might as well.

China, too, seems to be making greater and faster progress. By giving more importance to the market economy and less to political ideology, they have become more acceptable to the West: the 2008 Olympics will be staged in Beijing and now the WTO has accepted China as a member. Once Napoleon Bonaparte referred to China as a sleeping giant and endeavoured not to wake him up as he presumed China would create new and unpredictable problems to him.

But now China has certainly woken up; in fact, they are creating new economic problems to their Asian neighbours and to the industrialised world at large as they can produce goods at a much lower cost. When Deng Xiaoping took over, China started to expand business opportunities, loosen central control of regional governments and encourage private domestic investment. The Chinese have embarked on industrialisation and have also introduced modern technology in some respects. Chinese labour is still extremely cheap.

As a result, they are becoming more competitive; in fact, they are undercutting competition. Many Japanese, Western and American corporations and firms, as well as Europeans ones, have realised that the only way to counteract this new phenomenon is to set up shop within China itself and import their needs from there.

In this way China is benefiting from value added, development of human resources, new export markets and better standard of living to the people. No wonder that China has experienced high economic growth rates for quite some time now. Not only the Chinese are benefiting. Those wise countries that took note of these developments have created new niches for themselves and are doing good business as they have a new market of nearly 1.3 billion people. It was recently reported that China is the country that has attracted the highest foreign direct investment.

Though many economic scholars predict that India and China are likely to be the new economic powers of the world in the not too distant future, they do not imply that the rate of change in growth will be the same or that they can equally maintain their present rate of economic expansion.

One has to remember that pockets of poverty exist in regions of both countries. But further progress will get them the financial resources required to address new problems that crop up and, given that information is accessible to all, both countries will indulge in modern technology to keep abreast of what is happening around them.

Having very large populations that will certainly be trained to meet the prevalent market conditions and considerable natural resources that provide the means for economic and technological advances, it is presumed that they will certainly catch up with the present American superiority if they follow Japan's and Germany's example of not diverting resources to war purposes.

Provided that they do not contrast each other militarily, India and China have a bright economic future. That is why people, firms, corporations and countries are vying against each other to enter these two markets, particularly that of China, because they are likely to benefit handsomely in both the economic and financial spheres and the countries that do enter will certainly reap great economic advantages.

Dr Borda is an economic and political analyst.