The coming of internalised Superpowers
China and India are the most talked about emerging economies of the world today. China is already the second largest economy in terms of Purchasing Power Parity (PPP) and India is close to edging out Japan to be number three. And US, despite the continuing financial growth, is not seeing much change when it comes to the purchasing power of its common citizens. This is quite an interesting development. Most western economies today as is China to an extent today is based heavily on cross border trade. US perhaps to a lesser extent than say Germany – which incidently happens to be the world’s biggest cross border trader, but viewing it using similar approach as PPP, they are quite dependent on International trade. But the two emerging economies – India and China – what is amazing about them is that they have so much potential to grow domestically, that with just domestic growth they are in a position to become the top economies, very unlike the case today with US and other OECD countries. Indian economy perhaps more than the Chinese is already an interesting case in this regard. Most of India’s growth, including the amazing growth of the BSE Sensex – which grew from almost 7500 to over 10000 today in just as short as 12 months – is fuelled by Internal demand. As quite a few analysts groan over and over again, FDI flow into India has been limited compared to that to China. But nevertheless there seem to be no end in sight to the growth. This leaves me wondering about two scenarios. One, where will this lead
to? Most western economies got heavily into international trade after more or less saturating growth potential in their domestic market. Now that state will take a while to reach in case of both China and India. But by then the economies would have grown substantially to dwarf rest of the world. What does that mean? What will be the effect of such growth on global trade? Both India and China can be expected to act in pure self-interest for a much longer period of time than the rest of the world has ever experienced. Most of the developed world soon were forced to act in a more civilised manner due to their reliance on mutual trade, which perhaps will not be the case for China nor for India. The recent case of Google, Yahoo and Microsoft with respect to censorship of Internet perhaps shows signs of what is to come. China is not going to give in anytime soon on these aspects. And why should they? The only thing that works in situations such as these are not laws, but rather international pressure. But I have not yet seen anything that would make them give in to pressure. That will not happen unless the world becomes relevant to them in quite a different way than it is today. And to come back to what I said earlier, this I think will be a while before it happens! The second question, again leading from the first one is how will the Chinese and Indian foreign policy develop. China and India, both unlike Japan or Germany after World War II, are quite free in terms of strategic thinking. India after its long flirtation with the erstwhile USSR is now cosying up quite well to the US. But the internal debates on their handling of Iran does show that this is not necessarily written in stone. I don’t think there are any precedences to the emergence of either India nor of China. They both are going to disrupt the global scene – both with their tremendous growth and their use of foreign policy to fuel this growth. Moreover, unlike the US or the ersthwile USSR, neither India nor China has any over powering mission to over throw regimes or impose either communism or democracy anywhere in the world – at least not yet! My gut feeling is that we are only beginning to see what the promoters of pure Capitalism were hoping for. The behaviour of both these two countires will be based purely on their Market requirements – which is ultimately what the concept of Capitalism propsed. And yes they are going to be superpowers – but lot more internalised than US today is. The next couple of decades will be quite interesting to watch as this game gets on its way!