Saturday, April 25, 2009

The Post American World

I recently finished reading this book by Fareed Zakaria titled "The Post American World". It was an interesting read since it presents a pragmatic perspective about the current seemingly volatile, uni-polar world we live in. In the face of a growing sense of a rise in religious fundamentalism, wars, and heightened unilateralism; the author refuses to predict an alarmist and radical future. Instead, he argues, and i quote, "today we are probably living in the most peaceful time in our species existence."

He says this is because:

- Between 2000-2007, the world economy grew at its fastest pace in four

decades. Income per person across the globe rose at a faster rate (3.2%) than

in any other period in history.

- Politics is troubled, but markets panic only over economic and not political

news. For example, Turkey which shares a border with Iraq has averaged more

than 7% growth since the war.

- Religious fundamentalism is fueled more by a "cottage industry" of

scaremongering flourishing in the west that tends to extrapolate every trend

that they dont like. In reality, he argues, it is a persistent problem, but one

involving a small number of fanatics.

Today, he says, there’s a mismatch between reality and our sense of it, primarily arising out of a revolution in Information Technology that brings us news from around the world instantly, vividly, and continuously. In short, he say's it feels like a very dangerous world. But, it isn’t. Instead, it’s a safe world with the US in charge.

And firmly in charge as well. Since the middle of the 1880's, the US Economy has been the world’s largest and by 2025, most estimates suggest that it will still be twice the size of China (in terms of nominal GDP). Its defense expenditure is more than the next 14 countries put together (current wars represent less than 1% of its GDP, so there's no drain to speak of!). A recent newspaper article put this value at $540 billion, compared to $68 billion for China and $28 billion for India. At the same time, it leads in the industries of the future. In biotech for example, revenues for US firms were $50 billion in 2005, representing 76% of global revenues. Its educational institutes are the best in the world. According to a Chinese study, eight of the top ten universities of the world are in the US. Innovations in Information Technology? Here is a sobering statistic. In India, university graduates 35-50 computers science Phd's each year; in America the figure is 1000!

The authors point is, unlike popular belief, a dramatic and tectonic shift in the balance of power to the developing world led by China and India is not going to happen. The US influence is not disappearing anywhere fast. Instead, its just that in today’s world, apart from the US, there are countries like India who are playing the competitiveness game equally well. For example:

- In 2005, 24 out of the 25 of the world’s largest IPO’s were held in countries

other than the US.

- By 2050, estimates say India’s per capita income will have risen to 20 times its

current level.

- Indian companies are becoming far more competitive and use their capital

more efficiently, in part because they do-not have access to unlimited supplies

of it. Over the last 5 years, more of the Deming Awards for managerial

innovation have been awarded to Indian companies than to firms from any

other sector.

More than anything else, he says this rise of India is unlike a quiet, controlled, quasi authoritarian country slowly opening up according to fixed diktats. It’s a noisy democracy that has empowered its people economically. Taking three steps forward and then two backwards. Boisterous, colorful, open, vibrant, and ready for change. With a commitment to act based on public opinion and no unfinished aggressive business to complete with neighbors. And this is something that governments in the west understand and appreciate. And this is why he says, countries would not only stand back and applaud this rise but would also support it. Particularly countries like the US.

Interestingly, in this influential book, the chapter on China is titled “The Challenger” and the chapter on India is titled “The Ally.” As a summary, I believe the author himself puts it very succinctly in the very first sentence of the book. He says, "This book is not about the decline of America, but rather about the rise of everyone else."

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