Asia-centric approach to development
PAKISTAN’s policymakers, preoccupied as they have been with handling repeated economic crises, haven’t spent much time on thinking strategically about their country’s future.
When they do get around to doing that, it would be appropriate to look at Pakistan’s future in terms of the country being a part of ‘rising Asia.’ That is important not only for Pakistan but other Asian countries as well.
However, even for those countries that think long – and China is certainly one of them – strategic considerations still focus on old ties. That is a mistake.
If the two recent visits by Xi Jinming, China’s president-to-be, can be seen as guide to rising Asia’s aspirations, it can be summed up as follows: to stay connected with the old world. The United States, visited by Xi in mid-March remains not only the world’s largest economy, it is also its most innovative. Ireland, the tiny country in Europe’s northeast, offers an opportunity to enter the continent. Xi visited it after his tour of America.
He brought along 150 Chinese businessmen with him and invited Enda Kenny, the country’s prime minister, to Beijing. It appears that the fast rising and changing China wants to leave one thing unchanged: its connection with America and Europe.
This makes little sense if Asia’s prospects are viewed from a different perspective. Some Japanese economists some time ago came up with the notion that the flying geese offer a good way to describe how the prevailing order among nations changes with time. The pattern flying gees follow is known to all those who watch the sky as birds fly from one distant place to another. The bird in the lead can stay in place the lead for only a short time. When it is in that position, it faces the most air pressure, in a way protecting those that are behind. After a while, when it is overcome by fatigue, it just slips back, taking the last position while the bird right behind it goes in the lead. This was evolution’s way of teaching the flying birds how to cope with long-distance travel and air pressure.
This behaviour is only a slight fit for what happens to world economies. We have known for many decades that the country or countries in the lead eventually lose their position to those that are right behind. This happened to Britain after it had taken a big lead following the Industrial Revolution. France caught up with it. Later Germany did the catching up with both Britain and France. Later still, the United States not only caught up with Western Europe but overtook it. Europe did not retreat to the back row but stayed right behind. There was much learning done in the catching up process.
Now the catching is being done by Asia, in particular the eastern part of the continent. But this latest episode of ‘catching up’ has been messier than those that came before it and is likely to profoundly affect the working of the global economy.
The previous catch up periods were the result of technological advances. This is what happened to Britain because of the Industrial Revolution or to the United States because of the introduction of standardisation and mass production, first introduced by the automobile industry. Constant innovation became the main reason for the continuous dynamism of the American economy. Or the catching up happened because of the government of the day decided to play an aggressive role in reshaping the economy.
In France as well Germany, public policies helped domestic industries to move ahead and catch up with those in the leading economies. The catching up, in other words, was the consequence of what happened to the economies in the second row. This time around, however, it is the first row economies that have begun to stumble. This is certainly the case in Europe and may also happen in the United States.
For most of Europe rapid decline is the consequence of important structural changes, not all of which have been fully understood by the continent’s policymakers. The most significant of these relates to the demographic structures of most European societies. They are experiencing rapid fertility declines that are tuning the population pyramids in these countries upside down. The proportion of old people has increased at the expense of those who are very young. This has several consequences. Two of these are particularly important.
With the share of the young in the population declining, it becomes increasingly difficult to run educational and entrepreneurial systems that retain the cutting edge. And the social system constructed over the last several decades that pay very well to the retirees cannot be sustained with fewer people in the working age and therefore fewer people paying taxes. The only long-term solution to the European problem is for the continent to admit more migrants and this is proving to be difficult because of the strong biases against cultural dilution.
But the Europeans have opted for what the economist Paul Krugman describes as “pain without gain” approach to address their crisis. Some European nations are suffering Great Depression-level pain: Greece and Ireland have had double-digit declines in output, Spain has 23 per cent unemployment, Britain’s slump has now gone on longer than its slump in the 1930s. “Worse yet, European leaders — and quite a few influential players in America — are still wedded to the economic disaster responsible for this disaster…Specifically, in the early 2010 austerity economics — insistence that governments that should slash spending even in the face of unemployment — became all the rage in European capital,’ wrote Krugman recently in his New York Times column.
It appears, therefore, that there will not be an orderly rearrangement of the flying geese; that the European stepping back from the front line of the global economic structure is likely to be more painful and chaotic than need be the case. All the previous periods of catch up occurred when the world was not as well connected as is now the case. Any major adjustment and any major structural change reverberates around the globe. Pain in Europe is being felt in other parts of the world.
This is particularly the case in Asia – and in Asia more in the continent’s eastern part than in other parts – that has built up industrial structures based on the markets in the world’s more developed parts. West’s economic decline is coming at a rate more rapid than was envisaged even by those who saw the 21st as Asia’s century. Asia should figure not only on the travel itineraries of aspiring Asian leaders but in the economic plans and thinking of all policymakers. Asian countries should adopt Asia-centric approach to economic growth and development.
For Pakistan, placing Asia in the centre of strategic thinking means forging investment and trade links with the countries in the neighbourhood. Once that is done, Pakistan will have to reorient its economic and industrial policies so that it takes advantage of the fast-paced changes in many parts of Asia, in particular the eastern part of the continent. Also, in developing future ties with Europe and America attention should be given to developing the industries that have growing demand in these older economies.