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Home / Business

Is the West's era of dominance slipping away to China and India?

By Ambrose Evans- Pritchard
Daily Telegraph UK·
10 Sep, 2018 11:53 PM7 mins to read

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Workers assemble the BAIC Jeep chassis frames at the Chinese automaker BAIC ORU assembly plant in Beijing. Photo / AP

Workers assemble the BAIC Jeep chassis frames at the Chinese automaker BAIC ORU assembly plant in Beijing. Photo / AP

Brace for a shattering shock. Westerners will discover within a generation that the fleeting 200-year era of Euro-American dominance is over.

"The Asians are coming back and the chemistry of the 21st century will be completely different. You will have to make choices," said Kishore Mahbubani, the prophet of Eastern ascendancy and Singapore's former UN ambassador.

The rules of the world order will be set in the East. International law will mutate. The financial institutions and global trading structure will be run by China and India. Westerners will have to adapt, nolens volens, to the Confucian-Hindu way of doing things.

That, at least, is the argument. Doubters say the world has been waiting for the Asian century since Marco Polo. Something always seems to intrude. Usually autocracy.

Prof Mahbubani's new book – Has the West Lost It? – asserts that the West has made a string of unforced errors since the end of the Cold War.

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"It is a paradox: the US has the best universities in the world, and the best think tanks, and yet has the worst strategic thinking," he told The Daily Telegraph, speaking at the Ambrosetti forum on global affairs and finance at Lake Como.

These blunders accelerated the shift in power already under way as developing Asia was going through an economic leap forward of red-hot intensity. Donald Trump has compounded the damage.

Unlike most works of this genre, his book is not an indictment of everything the West stands for and every sin committed over a quarter millennium. Prof Mahbubani says Asia owes a huge debt of gratitude to Euro-American civilisation.

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"You shared with the world your beautiful advantages. You shared the gift of reasoning and we learnt from you. If the West had not succeeded, we would not have succeeded. We would still be in extreme poverty," he said.

"We have seen more progress in 30 years than the last 3,000 years, and that is why there is so little anti-Western feeling today in Asia."

It is a soothing assurance for the guilty liberal psyche, but not one always heard on the ultra-nationalist wing of the Chinese media.

Prof Mahbubani says nothing so captured the mood of hubris at the end of the Cold War as Francis Fukuyama's End of History, with its eschatological presumption that Western liberal democracy was the final form of human government. "That book did serious brain damage to the West," he told me.

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I am not so sure. Fukuyama, a Japanese-American as it happens, once admitted to me that his vaulting claim was a joke that got out of hand. But yes, it marked the times, and went to peoples' heads in Washington.

Russia was badly mishandled on the assumption that it would glide naturally into the democratic camp once the heavy hand of Bolshevism was lifted. The twin effects of Nato and EU enlargement supposedly forced Russia into a corner.

Prof Mahbubani pushes this too far, asserting that "Putin felt that he simply had no choice but to take back Crimea." Really? The competing aspirations of the Ukrainian people fall by the wayside in such a broad-brush treatment of great power interests.

It is arguable the West should have bathed Yeltsin's Russia in a Marshall Plan rather than economic "shock therapy", though it is far from clear the country could usefully have absorbed the money under a deformed oligarchy and without the rule of law. The "who lost Russia?" debate presupposes that there was any workable formula, other than letting Putin assert his Tsarist sphere of influence.

The second blunder was to overreact to the 9/11 terrorist attacks in 2001, invading a country that had nothing to do with the event – Iraq – and doing so illegally without a UN resolution. This consumed the strategic energy of the US for a decade, and ate into the credibility of Pax Americana.

It happened to coincide with the moment when China joined the World Trade Organisation, bringing 800m workers into the global labour pool, what he calls "the most consequential episode in human history".

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We all know now that this depressed global inflation and distorted the monetary regimes of central banks, causing them to let rip with dangerous asset bubbles. We know too that it let multinationals grow fat on "labour arbitrage", raising the profit share of GDP to extreme levels. It shifted a big chunk of income from labour to capital.

Failure to grapple with these forces early on – that is to say, failure to look after globalisation's losers – has now led to an existential crisis for the Western democracies themselves. Here he again moves into suspect territory, since he cites Brexit and the election of Trump as the prime exhibits of the failed democratic model.

This is to confuse matters. Whatever else you say about Brexit, it is a thunderous affirmation of popular democracy against the deracinated anomie of the elites.

Parliamentary systems decay when the protest of the people is suppressed. In person, Mahbubani is more sympathetic to Brexit. "I can understand the political reasons for it. The EU is legalistic and inflexible. Brexit wouldn't have happened if they had stuck to the 'ASEAN Minus' principle" (a form of brake, based on consensus). But I wish you could have done it without paying such a high price," he said.

There is a parallel of sorts with Singapore's traumatic exit from the Malaysian Federation in 1965, when the enclave seemed threatened with loss of its rubber trade and its core market, and risked an internal uprising by irredentist Malays.

The pessimists said it would be reduced to a "tropical slum", at risk even of losing its fresh water lifeline from the mainland. Sound familiar?

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"The idea that a small island city-state of two million people with no hinterland could survive in what was then a difficult and troubled region – the 'Balkans of Asia' – seemed manifestly absurd," he said.

Prof Mahbubani said the first four years were hellish. Nobody expected the wirtschaftswunder that followed. "There was one key word that all our leaders used: sacrifice. No British leader has dared use that word in 2018," he said. Perhaps they should.

Behind the professor's world view is a tendency to impute bad motives to America, and an equally strong tendency to give the benefit of doubt to China, all within a framework of extrapolated GDP growth curves.

He takes it as a given that president Xi Jinping is pursuing "rational good governance", guided by a Confucian ethic. Xi's chutzpah at Davos last year – where he claimed to be the Fidei Defensor of the globalist multilateral faith, as America abdicates – is taken at face value.

What is actually happening is that Xi is carrying out a ferocious repression against the Uighurs in Xinjiang, where a million people languish in internment camps.

The Chinese navy is militarising international waters in the South China Sea. It has ignored a tribunal ruling in favour of the Philippines under the Law of the Sea. It picks and chooses when to respect the global rule book.

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Xi's regime has become an autocratic surveillance state, and here it runs headlong into the "impossible dilemma". Events have yet to show that a closed regime without free exchange of ideas can break out of the "middle income trap" and reach the elite league of advanced economies.

China may yet defy this soft law of political economy, but the air is already getting thinner. The low-hanging fruit of catch-up growth has been picked. Beijing has kept the game going with fresh bursts of credit creation, yielding less growth each time.

The workforce is contracting. The demographic crunch will deepen each year from now on, running into the 2020s and 2030s.

Michael Auslin has already leapt ahead to the counter-case in his book – The End of the Asian Century – arguing that China's miracle is essentially over and the window is closing. "Western observers assumed in the Eighties that Japan would continue to grow forever; a similar assumption still dominates discussions of China," he says.

"We are on the cusp of a change in the global zeitgeist, from celebrating a strong and growing Asia to worrying about a weak and dangerous Asia," he concludes. Two drastically different forecasts: take your pick.

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