Sunday, May 4, 2008

the rise of the rest

Fareed Zakaria is back on Newsweek with a feature-length version of his upcoming book, "The Post-American World." Zakaria's piece is largely optimistic about the world at-large, but that doesn't mean he overlooks its problems -- he simply places these concerns in their proper context -- and advises the world's actors -- namely the US -- on how to best advance their interests.

Americans aren't quite sold on Zakaria's story of shared prosperity, as Zakaria quotes a figure of 81% of Americans believing the country is on the "wrong track." He argues that while the financial panic, war in Iraq, and terrorism are the hot topics of the day, Americans are actually disoriented by the greater changes at work -- the tallest building is in Taipei, biggest refinery is in India, largest passenger airplane is built in Europe, biggest movie industry is in Bollywood, etc.

Intellectuals wax about the 'decline' of the United States. An upcoming book asks if America is to follow the self-destructive path of the Roman Empire.

This is a sexy story, as there are certainly plenty of savory, superficial parallels between the US and fallen powers of the past.

Zakaria provides a different -- less American-centric -- narrative about the "rise of the rest," complete with insights into what the next steps are for global prosperity and American competitiveness.

Below, I will excerpt liberally from Zakaria's piece to skip to the juicy parts:

Rise of the Rest

  • The US has succeeded in its great, historical mission—globalizing the world.
  • The world will be enriched and ennobled as they become consumers, producers, inventors, thinkers, dreamers, and doers.
  • This is all happening because of American ideas and actions. For 60 years, the United States has pushed countries to open their markets, free up their politics, and embrace trade and technology.
  • Now, the underlying reality across the globe is of enormous vitality.
  • Share of people living on $1 a day has plummeted from 40 percent in 1981 to 18 percent in 2004 and is estimated to drop to 12 percent by 2015.
  • The global economy has more than doubled in size over the last 15 years and is now approaching $54 trillion.
  • Global trade has grown by 133 percent in the same period.
  • There are more power centers, with nearly all are invested in order, stability and progress.
Remaining Challenges
  • There remains real poverty in the world—most worryingly in 50 basket-case countries that contain 1 billion people [ED: This is where Paul Collier comes in...]
  • Global growth is also responsible for some of the biggest problems in the world right now. It has produced tons of money—what business people call liquidity—that moves around the world. The combination of low inflation and lots of cash has meant low interest rates, which in turn have made people act greedily and/or stupidly.
  • Prices are rising because of growing global demand; the effect of more and more people eating, drinking, washing, driving, and consuming will have seismic effects on the global system.
  • As economic fortunes rise, so inevitably does nationalism. [ED: China, India...]
  • Whether the problem is a trade dispute or a human rights tragedy like Darfur or climate change, the only solutions that will work are those involving many nations. But arriving at solutions when more countries and more non-governmental players are feeling empowered will be harder than ever.
  • The G8 does not include China, India or Brazil—the three fastest-growing large economies in the world—and yet claims to represent the movers and shakers of the world economy.
  • If China, India, Russia, Brazil all feel that they have a stake in the existing global order, there will be less danger of war, depression, panics, and breakdowns. here will be lots of problems, crisis, and tensions, but they will occur against a backdrop of systemic stability.
The US still has a lot going for it...
  • Currently ranked as the globe's most competitive economy by the World Economic Forum.
  • Dominant in many industries of the future like nanotechnology, biotechnology, and dozens of smaller high-tech fields.
  • Universities are the finest in the world, making up 8 of the top ten and 37 of the top fifty
  • If you exclude the car mechanics and repairmen—who are all counted as engineers in Chinese and Indian statistics—the numbers look quite different. Per capita, it turns out, the United States trains more engineers than either of the Asian giants.
Secret to American success
  • Immigrants! Most of these engineers are immigrants. Foreign students and immigrants account for almost 50 percent of all science researchers in the country. In 2006 they received 40 percent of all PhDs.
  • Faced with the new technologies of foreign companies, or growing markets overseas, it adapts and adjusts. When you compare this dynamism with the closed and hierarchical nations that were once superpowers, you sense that the United States is different and may not fall into the trap of becoming rich, and fat, and lazy.
Challenge to the US
  • American society can adapt to this new world. But can the American government?
  • Yet just as they are beginning to do so, we are losing faith in such ideas. We have become suspicious of trade, openness, immigration, and investment because now it's not Americans going abroad but foreigners coming to America. Just as the world is opening up, we are closing down.
  • London is now the world's leading financial center, because they have became more friendly to foreign capital and better regulation
  • Or take the U.S. health care system, which has become a huge liability for American companies. U.S. carmakers now employ more people in Ontario, Canada, than Michigan because in Canada their health care costs are lower.
  • Twenty years ago, the United States had the lowest corporate taxes in the world. Today they are the second-highest. It's not that ours went up. Those of others went down.
My takeaways are the importance of cutting the fat of the American economy, embracing talented, hard-working immigrants from other countries, continuing our higher-education dominance, and acknowledging the multi-polar world we have helped to create.

So far the story of the 21st century is the "rise of the rest," whether it is also the decline of the US depends on us.

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