World leaders are speculating that America's time of global dominance is finished, and that new powers, such as China, India and Russia, are poised to take over. It's an idea that has had as much currency within the United States as elsewhere.
A World Bank analysis predicts that both China and India "could almost triple their economic output" in the next ten years or so. By the late twenty-twenties, China could overtake the United States as the world's biggest economy.
There are good reasons for skepticism about such grand forecasts. Economic statistics in autocracies such as China are notoriously unreliable, and it's worth recalling all those predictions, a few decades ago, of Japan's imminent global domination. George Soros says that as the U.S. is in danger of a recession, China is in danger of an asset bubble--one that could easily lead to a financial crisis. But Soros thinks that China in much better situated than the U.S. because they have the power to stimulate domestic consumption (via government spending).
But many are quick to write off America's cultural, political, economic, and military clout because the American economy has to rely on infusions of cash from China, Singapore, and the Gulf states suggests that something important is taking place. Exactly what is happening, and with what consequences, are matters of dispute.
About twenty years ago, there was a common belief that military power meant little, that the soft power of Germany and Japan would rule the world. This was a mistake. But hard power can easily be overrated, as the war in Iraq and the "war on terror" demonstrate.
A rising power no longer needs a strong military to secure natural resources. They can be bought on open markets, or acquired from unsavory regimes in exchange for easy credit. And the democratic countries have business interests that are at odds with a staunch opposition to autocracies that have poor human-rights records. Here is the U.S., we like those cheap Chinese imports.
However fast the economies of new powers are growing, forecasts of their world domination leave out a great deal. China has a demographic problem--too many boys--compounding its potentially catastrophic ecological problems. Russia's wealth is dependent on the price of oil. India, with its messy democratic system, might well have staying power, but no one sees it as a threat to the United States.
When asked if he was still bullish about the U.S. for the long term, Warren Buffet said, "The American economy is going to do fine. But it won't do fine every year and every week and every month. I mean, if you don't believe that, forget about buying stocks anyway. But it stands to reason. I mean, we get more productive every year, you know. It's a positive-sum game, long term. And the only way an investor can get killed is by high fees or by trying to outsmart the market."
The one nation whose presence still guarantees a measure of stability in Asia is the very one whose influence commentators are so quick to write off: the United States of America. The Chinese may not like the fact that the U.S. has so many bases in Japan and South Korea, but they still prefer it to a nuclear-armed Japan. But how long can the U.S. continue to play that role?
Democracy would be a far more persuasive model than Chinese or Russian autocracy if some of its main proponents were less eager to believe that the open society comes out of the barrel of a gun.
Sources: The New Yorker, April 21, 2008 and FORTUNE, April 28, 2008