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Transfer of Power Revisited

Pramit Pal Chaudhuri January 10, 2012

Earlier this week, one of the founders of the World Economic Forum in Davos and a long-time India enthusiast, Claude Smadja, spoke in New Delhi about what he felt was going on in the world today.

His basic argument was that the transfer of power from West to East, or more accurately, from the developed economies to the emerging economies, was going to accelerate and take place at an even faster pace than expected.

We can thank Greek government account-keeping, Silvio Berlusconi and Lehman Brothers for much of this. Much of the acceleration is because the West is doomed, he argued, to several years of sclerotic growth, high unemployment and too much red ink.

He also argued that the emerging economies, who used to interface with each other economically via the Western countries, now increasingly do so directly. Finally, there is a second-rung of emerging economies – Turkey, Mexico, Indonesia and the like — who are also becoming a force to reckon with even if they are not one of the BRICS or BASIC countries.

Smadja’s broad argument is something one hears quite often these days. The great power shift is on, but now it is in fifth gear and turbocharged. More micro examples are how Europe and the United States have both run to China and asked to be BFFs and, while we’re here, would you like to buy a few trillions worth of bonds? Or how Hu Jintao was feted by the French and pretty much everyone else during the G-20 summit at Cannes.

While I don’t disagree that the raw economic numbers will change decisively over the next decade, I am skeptical that policy-making is going to be an active preserve of the nouveau riche nations.

Accumulating the raw materials of power – money, warships, technology and so on – is not that difficult. What is difficult is having the political structures, domestic stability and able management and leadership to convert these raw materials into actual policy. Walk the talk. Even better, punch the talk.

What is noticeable is how reluctant the emerging powers are to do exactly that: take their newly found power and convert it into policy, chivvying other countries to do things their way. Yes, there was Copenhagen and a few other cases. But then, obstructing is easier than actually getting things done.

The social stresses that countries like India and China are experiencing seem to be increasing. They also have found their middle classes, well-heeled and full of options, more troublesome than expected. The past few years of economic turmoil have been noticeable in many emerging economies not for their effect on growth figures but rather for their impact on domestic society and politics. Anti-corruption movements have broken out in almost all of them, crippling their govenerments. They have struggled with inflation (especially in India) and demanded more rights and better governance from their harassed governments.

This is not conducive to running around and shaping the world to your devices. It is more often a recipe for isolationism. This has been most pronounced with the case of India, but Brazil and even mighty China are not immune to the street demonstrations and worse.

I see this getting worse over the next several years: emerging economies absorbed by the homefront as they sort out their political status.

So, yes, power is shifting but responsibility is not, or at least not in quite the same haste. The West will be around and it will remain the big enchilada for much longer – if only because it can project and use power in a way that the emerging economies can’t.