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Asian Century on a Knife-edge

Asian Century on a Knife-edge

John West

[Courtesy Asia Century Institute]    http://asiancenturyinstitute.com/index.php?option=com_content&view=article&id=1362:asian-century-on-a-knife-edge&catid=9:economy&Itemid=111

China and other Asian countries will dominate global politics and the world economy in the 21st century. Right? That’s the usual refrain.

Rising Asia

After all, Asia has stunned the world with decades of stellar growth, and by some measures, China has already become the world’s biggest economy. And while China’s economy has slowed sharply, it is still growing at the respectable rate of 6-7%.

The rise of Donald Trump to the presidency of the United States has only accelerated the global shift towards Asia. Trump’s America has relinquished global leadership, notably through its withdrawal from the Paris Climate Agreement, and the Trans Pacific Partnership, along with burgeoning protectionism, while China is positioning itself as a defender of the liberal international order.

Indeed, China is demonstrating remarkable global leadership through initiatives like the Asian Infrastructure Investment Bank, and the Belt and Road Initiative.

Today, China is increasing appearing to be a much safer and steadier global leader as Trump competes with North Korea’s Kim Jong-un in the global hysteria stakes, and the White House and Washington have descended into turmoil, which is paralysing the capacity of the Trump administration to get things done. Washington’s allies in East Asia and even Australia are now questioning the reliability of the US.

Asian Century ‘hype’

But despite all the talk of the advent of an Asian Century, a closer reading of Asia’s economy and politics suggests that there is much “over-hyping” about the rise of Asia, as I argue in my new book, “Asian Century … on a Knife-edge”.

While most Asian countries have achieved stunning economic growth over the past half century or more, the harsh reality is that Asia is suffering from stunted economic development. No major Asian economy has caught up with global leaders like the US and Germany in terms of GDP per capita, and living standards, and there is little likelihood of such catch-up occurring over the foreseeable future.

What Asia does have on its side, however, is size. Countries like China, India and Indonesia, thanks in large part to their enormous populations, have some of the world’s biggest economies. And they have been able to transform economic weight into economic, political and military power, even though their GDP per capita, and their levels of economic, business and technological sophistication are modest. But without further economic, social and political development, these countries will remain fragile superpowers.

The hype about Asia’s dramatic economic rise has only been matched by similar hype about the emergence of Asia’s middle class. And while it is true that Asian lives have improved immeasurably in tandem with economic development, only a small share of Asian citizens could be described as middle class, and the middle class is receding in Japan and Korea along with rising inequality and poverty. Today, half of Asia’s population is stranded between poverty and the middle class, living in a zone of vulnerability and precarity.

Asia faces a raft of challenges in order to realise an Asian Century, seven of which are highlighted in my book.

Seven challenges for an Asian Century

Asia appears a global leader in international trade and investment. But the reality is that countries like China, India and Indonesia are mainly undertaking lower value added activities in global value chains like assembling electronics and automobiles, “cut sew and trim” of clothing, and operating call centres. Much greater efforts are required to get better value out of value chains by opening markets, and strengthening human capital, and technological and innovative capacities.

Many of Asia’s factories and call centres are staffed by poor migrants who have moved to towns and cities in the hope of a better life. But their dreams are all too often shattered as they wind up living in urban slums. In the case of China, most internal migrants are denied access to basic social services, and their children are “left-behind” in traditional villages. And Asia’s most advanced cities like Singapore, Hong Kong, Tokyo and Seoul lag sadly behind the West in the quest to become hubs of innovation and creativity.

Discrimination, prejudice and persecution are rife in Asia, thereby by preventing economies and societies to realise their full potential, as our review shows for the cases of: Asia’s LGBT community; Japanese women; South Asian women who suffer gendercide, forced child marriages and honour killing; Asia’s indigenous peoples like West Papuans, Tibetans and China’s Uighurs; Sri Lanka’s Tamil community; and India’s lower castes.

Most Asian countries face intractable demographic dilemmas. In much of East Asia, fertility has plummeted below replacement rates, populations are ageing, workforces declining, and in Japan the population has begun falling. And yet governments are slow to react. At the same time, in South Asia, Indonesia and the Philippines, a youth bulge is bursting into the workforce, but much of this youth is not well educated and there are not enough jobs on offer. A potential demographic dividend could easily morph into an explosion of social frustration. Connecting these two demographic realities is the potential for mutually beneficial migration, and yet ethnocentric Asia is barely open to migration.

Asia is crying out for democracy and better governance to improve the foundations for stronger economies and decent middle class societies. And yet, according to some measures, there would not be even one mature democracy in Asia. Contrary to the hopes of political scientists, economic development has fostered too few democracies in Asia. Asia’s political landscape is deeply flawed with: oligarchic democracies in Japan and Korea; pro-business soft dictatorships in Hong Kong, Malaysia and Singapore; Chinese client states in Cambodia and Laos; weak and fragile democracies in India, Indonesia, Philippines, Mongolia, Sri Lanka, Bangladesh, and Nepal; military-dominated governments in Thailand, Pakistan, and Myanmar; and staunchly authoritarian states in China, North Korea and Vietnam.

One of the many consequences of these flawed politics is that, as Asia has moved towards the centre of the global economy, it has also moved to centre of the global criminal economy. Asia is a major player in many aspects of economic crime like counterfeiting and piracy, Illegal drug production and trafficking, environmental crimes, human trafficking and smuggling, corruption and money laundering, and cybercrime. And while flawed politics is one of the causes, this criminality is eating away at the integrity of the state, as state actors are very often criminals themselves or are colluding with criminals.

While many factors have underpinned Asia’s renaissance over the past half century or more, the relative peace that the region has enjoyed has been perhaps the most important. But today, the relative stability of postwar Asia, led by the US, is being shaken by the rise of China, as China is now engaged in a bitter power struggle with the US and its Asian allies for the political leadership of Asia. There is much debate about whether this will lead to military conflict between China and the US. In any event, the US seems to be losing its hold over Asia, something which will likely accelerate under the Trump administration. This means that it will become ever more necessary for Asian countries to cooperate better together. But this will be a great challenge in light of the tensions involving China, North Korea, Japan, Taiwan, Hong Kong, South Korea and India.

What next for the Asian Century?

The prospects for Asia overcoming stunted economic and social development, and realising an Asian Century with advanced economies and middle class societies, depends on how Asia responds to the seven challenges identified in this book. Unfortunately, there is too little evidence of Asia’s major countries seizing the moment.

Trump’s America will also shape the contours of a possible Asian Century. Regrettably, we will likely see a deterioration in key factors that have driven Asia development — an open US market, a relatively benign security environment, and a stable global economic system.

Even post-Trump, we should not assume a return to the US as a promoter of open markets and globalisation, and a friend of democratic partners and the liberal international system. America has been struck by a wave of populism, and in particular nationalism (make America great again), nativism (secure our borders), and protectionism (protect American workers), which is unlikely to go away anytime soon.

This is a tragedy for Asia, as China, the US’s competitor, is not a promoter of open markets, good governance, and the international rule of law.

But if Asia continues to muddle through, in some decades time, the region could account for over half the world economy, far outstripping the West in total economic size. In these circumstances, no major Asian economy would have approached world leaders like the US and Germany in terms of GDP per capita, or economic, business and technological sophistication.

Moreover, Asia could remain a democratic desert, with not one full democracy, and with continuing widespread human rights abuses and restrictions on personal freedoms. In other words, Asia would have the world’s greatest economic weight, and be a leading economic and political power, but would remain a pygmy in terms of economic, social and political development. Asia’s main power comes from its enormous population, currently about 55 per cent of the world’s total, compared with only 18 per cent for the West.

Needless to say, the incongruities of such a scenario could generate even greater geopolitical tensions than we see today.

These incongruities would test the capacity of the international community to cooperate on issues like open trade and investment, democracy and human rights, the global environment, protection of intellectual property rights, economic crime, international rule of law, law of the sea, and natural disasters. Why? Because forging consensus and working together requires shared interest and values, and a culture of cooperation and trust.

Beyond these incongruities, there are endless possibilities of economic, social, political and military crises in Asia — mostly due to the likely failure to deal with our seven challenges for an Asian Century.

Economic crisis is stalking several Asian countries, most notably Japan and China with their massive debt problems. And anti-globalisation populism could break one of the most important drivers of Asia’s rapid development, namely open trade and investment. Social crisis could be on the cards for India, Indonesia and the Philippines with their bulging youth populations, if they are unable to find decent jobs. Multi-ethnic countries like India and Indonesia could easily descend into violence as groups suffering from discrimination, prejudice and persecution mobilise themselves against dominant elites. And as natural disasters and environmental problems increasingly hit Asia’s overcrowded and badly planned cities, social crises will also accelerate.

Continued authoritarian politics and social repression in China, North Korea and Vietnam could provoke political crises as citizens demand cleaner government and democratic government. Social unrest is already rampant in China, and North Korea has thousands of regime opponents locked away in secret gulags. The corruption crisis that engulfed the South Korean President Park Geun-hye and Samsung shows how fragile even Asia’s most advanced countries can be.

The future of peace in Asia could be threatened by the great power struggle between China and the US. The US and China are unlikely to engage in a traditional military conflict, although the naval collisions involving the US Navy in 2017 show how easily accidents can occur, and possibly spiral out of control. They seem destined to remain “frenemies”, that is both friends and rivals, with conflicts taking place in the areas of trade, intellectual property, international rule of law, and cyber, rather than on the battlefield.

As China progressively displaces the US as Asia’s hegemon, it will become ever more necessary for Asian countries to cooperate better together. In a region which is bristling with tensions involving China, North Korea, South Korea, Japan, Taiwan, Hong Kong, the South China Sea, ASEAN and India, this will be a great challenge.

And while China’s rise has been shaking Asia, the prospect of India’s economy overtaking China’s in the second half of the 21st century, will require further adjustments by all. By then year 2100, India’s population could at 1.5 billion be some 50% higher than China’s and there is every chance that the Indian economy will continue to outgrow China.

Asian Century … on a Knife-edge

Today, Asia is sitting on a knife edge. The potential of the region to generate good and happy lives for its citizens is enormous. But the requirements of success and the risks of failure are equally enormous. We cannot be sure of “what’s next for the Asian Century”. Indeed, anything could happen, and complacency of Asia’s elites could be the Asian Century’s greatest enemy.

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