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There is a recent TED Talk on YouTube featuring Niall Ferguson. Niall is a Professor of History at Harvard University and a Professor of Business Administration at the Harvard Business School. I guess that part of his agenda was to promote his recently published book – Civilization; the West and the Rest. His talk was about the growth of the East – China in particular.
These days, it is tough to escape all the rhetoric about the shift of wealth and power from the West to the East. It is perhaps equally difficult to avoid the chatter about the West buckling under the weight of almost unimaginable debt levels. Opinion on the best way forward seems to fall into two camps. On one extreme, some think that it is the government’s responsibility to maintain spending levels to maintain aggregate demand and prevent a downward spiral into, God forbid, another depression. On the other extreme, others believe that we need to prepare for a sustained decline in global economic activity. As such, drastic cuts are required to bring government spending in line with a new reality.
It would take a psychic to predict what will eventually happen. I remain suspicious of the predictions (or so-called forecasts) of the big rating agencies and investment banks who seem to have been blind to recent economic bubbles. Niall Ferguson does not hold back when he blows the trumpet for China. He explained that China’s had been the biggest and fastest of all the industrialization revolutions. In the space of 26 years, China’s GDP grew by a factor of 10. Ferguson points out that it took the U.K. 70 years after 1830 to grow by a factor of four, but according to the International Monetary Fund, China’s share of global GDP (measured in current prices) will pass the 10% mark in 2013. Goldman Sachs continues to forecast that China will overtake the U.S. in terms of GDP in 2027, just as it recently overtook Japan.
Simultaneously, some critics remind us of the 1980s predictions about Japan’s inevitable rise to the top. I remember entering university in 1991, and there was so much admiration for the Japanese business and economic model. Of course, we know what happened to them. So many things could happen to divert us into a new reality. Coming back home, I believe that Trinidad and Tobago are wise to maintain a close relationship with China while not alienating the United States. My personal credo is to hope for the best but prepare for the worst. Our Finance Minister is wise to keep a tight grip on the nation’s purse strings and an eye on the deficit regardless of the clamor for big spending increases.
Personally, what I predict is not a big flow of wealth and consequent power from West to East, but a global rebalancing. There will be stumbling but no massive demotion of the West to the back of the class. I count myself among those that see an emerging multipolar reality. I was chatting with a friend of mine born in India but now lives in Trinidad about her securing Indian passports for her children. To me, that sentiment is a powerful symbol of this rebalancing. When I was younger, it was all about having an American, Canadian, or British passport. As we move forward, however, some are seeing advantages to having Indian and Chinese passports.
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Here in the UK, I see the daily signs of this rebalancing. Factory doors closing, so many empty units in shopping centers, rising unemployment levels, softer real estate prices (outside of the South East), and falling wages for unskilled and farm labor caused by Eastern European immigrants’ inward flow. It still surprises me that there are those in Trinidad and Tobago that genuinely believe that this great rebalancing would leave the country untouched. They are clueless about the potential for declining demand, and therefore prices, for oil and gas from traditional markets. Blind to the declining demand for our manufactured goods from Caribbean neighbors and, therefore, the government’s critical for supporting our Caribbean neighbors. It is a failure to recognize the highly interconnected nature of the new global reality. What affects one of us – affects us all.
Trinidad and Tobago’s ‘national budget’ is not meant to be a Strategic Plan, but it should be based on some workable strategy for taking the nation forward. Whether the Finance Minister’s approach is realistic, given the wider global challenges, is seen. My name is Derren Joseph, and I love my country and my region. Despite our challenges, I continue to have the audacity of hope in the future of our beloved country.
Feel free to email me at derren43@yahoo.com
You can reach me as well at derren@advancedamericantax.com.
