Opinion

Asia can re-design global economic order

Rajiv Kumar | Updated on March 18, 2020 Published on March 17, 2020

Transition imminent Asia is at the cusp of becoming a dominant global economic and trading powerhouse istockphoto   -  primeimages

Trans-Atlantic powers and global institutions can no longer facilitate an open economic regime. Asia must lead in this regard

It is now beyond argument that in this century, Asia, and more specifically India, will regain its share, both in the global economy and pari passu in global trade. According to Angus Maddison’s celebrated work, Asia contributed more than 60 per cent to the global output and commerce prior to 1857. India’s own contribution was a hefty 17 per cent; it has now come down to 5 per cent in global output and less than 3 per cent in international trade flows.

Europeans were attracted to Asia because of its thriving coastal trade, that spanned across the vast region from the east coast of Africa up to Indonesia, including China and all of South-East Asia. It was by far the most thriving trade anywhere in the world at the time. This part of the world has always believed in open economy and trade.

Examples of trade openness are visible everywhere, from Vietnam to Indonesia to Myanmar. In Myanmar, Indian Odia traders would come up the Irrawaddy river and the Chinese traders sailed down from Kunming and Yunnan to trade at Bagan. This generated enormous wealth and riches, which is embodied in the thousands of temples and pagodas that dot the Bagan skyline. India and Asia have, since times immemorial, believed in open economies, free trade and eschewed violence for commercial gains.

Unfortunately, this came to an end around the middle of the 19th Century. India suffered enormously from colonial exploitation and wealth drain; China was forced to accept opium and pay for it in silver; and South-East Asia experienced impoverishing trade flows with Europe. Asia’s decline in global rankings was rapid and precipitous.

Global economic transition

Now, Asia is at the cusp of becoming a dominant global economic and trading powerhouse. This transition, which will also by definition see a decline in global output and commerce of the trans-Atlantic economies, is certain. The speed may vary, but the direction is clear. The critical question is whether the global order is ready to accept and absorb such a transition.

The rise of “Trans-Atlantic” economic powers in the latter half of the 19th Century and the first half of the 20th Century saw violence and widespread misery that cannot even be contemplated now. Asia’s economic rise cannot follow that trajectory.

Post World War-II, prosperity was very largely — if not completely — based upon an increasingly open trading and investment global regime. This was underpinned by the Bretton Woods Institutions (BWIs), which have now been in serious trouble for several years. The global community has been reluctant to accept BWIs’ loss of legitimacy and effectiveness.

We have also shied away from asking whether the BWIs, even if tweaked to some extent, will suffice to facilitate Asia’s emergence? Also, can existing institutional mechanisms achieve this in a win-win, positive sum and co-operative framework?

The BWIs, especially the WTO, are not suited to achieve this mandate. Asia has the onus — and thankfully, the capacity — to re-design global institutes that will better serve the purpose of a rule-based global economy.

Tenets of new century

There are four fundamental tenets which make the 21st Century completely different from the 20th, for which BWIs were designed.

A clear understanding of these four tenets must underline the thought process of building new global institutional architecture, which does not depend upon the legitimacy drawn from any one hegemonic power, but from a set of rules that are backed by a coalition of global players.

First, the carbon constraint. We have only one planet. Emerging economies, making their transition from low- or middle-income status to higher levels, cannot possibly follow the path traversed by the present group of OECD economies. This carbon constraint is real. It has to be taken fully on board in the development blueprint. For example, in India, there simple cannot be a shift from 20 cars per 1,000 people to the American average of 838 cars per 1,000 people. There will be no planet left to live on. Therefore, the NITI Aayog has been pushing for electric, shared and connected mobility. The binding carbon constraint has to be integrated and focused upon in any global trade and commerce discussion.

The second tenet which was absent during the BWI regime is the complete unambiguous unacceptability and unequivocal rejection of of rising inequalities, both between nations and within them. Society, armed with the powerful and all-pervading media, will simply not permit this in years to come. ‘Antyodaya’, which is the cornerstone of the Indian government’s policy, has to be ensured. It is not a choice any longer.

The third tenet is that emerging exponentially-transformative technologies, including AI/ML, robotics, optical sensing, satellite imaging, quantum computing, threaten to make humans virtually redundant. Can we come together to avoid the trade-off between sharp productivity growth in some regions/sectors and rising unemployment elsewhere? BWI masters did not have to deal with this dimension, and could dispense with the need for creating a global coalition to stave off conflicts that rising inequality are bound to generate.

The fourth tenet is even more important. Given what has been happening in the last 3-4 years, the Marxist concept “that force will be the midwife of every change”, which has its roots in the Hobbesian concept of humans being brutes, simply cannot be applied. Human extinction is guaranteed if force is allowed to become the midwife of the forthcoming transition.

Asia’s new global architecture

These four fundamental tenets now require us to rethink what the global open multilateral trading order will be, what its rules will be and how Asia will engage in these forums. The Trans-Atlantic powers, whose share and influence in the global system is surely declining because of demographic and other reasons, cannot be the leaders in designing the new architecture. Asia, with its demographic advantage, dynamic institutions, razor-sharp intellect and, above all, a tradition of non-violence, has to take the leadership. Given the Asian genius in creating inclusive coalitions, this leadership will also be exercised in an open-source design with flexible roles which suit the talents of the coalition members. Hierarchies, that stifle creative thinking, will be jettisoned in favour of collective pursuit of a common cause.

To borrow from Ramesh Mashelkar’s recent treatise, we have to be prepared for institutional pole vaulting. We cannot afford any longer to work incrementally within the confines of inherited structures that have lost both their intellectual edge and their global mandate. India can and must play an important role in this task.

The writer is Vice-Chairman, NITI Aayog. Based on an address given at the PIC Conference on Asia Economic Dialogue, Pune, on March 1.

Published on March 17, 2020
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