We should stop talking of an Asian century

kristy Reforming Global Finance

March 6, 2012 7:22 pm

We should stop talking of an Asian century
By Chandran Nair

As economic power shifts from west to east, talk of an Asian century is once again in the air. President Barack Obama’s unveiling of a new defence strategy with the Asia-Pacific region at its heart merely underlines the trend.

The US clearly wants to ensure its “exceptionalism” allows it to keep playing a leading role in what almost everyone believes will be the world’s centre of economic gravity. Such thinking is muddle-headed. No region or nation will dominate the 21st century. The next century will not be Asia’s – or anybody’s. Even if China and India become economic powerhouses, they will not be able to dominate global politics the way the west – particularly the US – did in the 20th century.

The US, regardless of who wins this year’s election, looks determined to go on using the military, economic and political tools that helped it so well in the 20th century. But these will be inadequate for the challenges of this century. The reason for this is the scarcity of resources – and the demands that will be put on them. Last year the world’s population hit 7bn. It will rise to about 9bn-10bn by mid-century and then peak somewhere between 12bn and 15bn in 2100.

Already resources are stretched to their limits. Since Britain started the industrial revolution, one country after another has launched itself on to the world stage by plundering the world’s land and seas while polluting its air, either in their own borders or overseas through colonies, investment and trade.

Despite three centuries of growth based on exploitative economics as well as the underpricing or giving away of resources, governments and companies continue to refuse to talk about limits or constraints. Instead the mantra is of continuing growth through the promotion of ever more consumption. But if Asia copies this western model the 21st century will turn out to be nobody’s century.

What we need is to look again at how the world manages resources. Asia can play a crucial role. The 5bn Asians who will be alive mid-century cannot consume as Americans do now. Encouraging those who are alive now to aspire to such a goal in the name of rebalancing the global economy is the height of irresponsibility.

Asian leaders must reject that model of growth and create economies where use of resources is constrained via a true pricing of the environmental consequences. This calls for a constrained capitalism – one under which people are still encouraged to pursue prosperity, but in a different framework.

This does not mean reintroducing central planning but rather having the state take the lead in shaping incentives under which companies and individuals make decisions, so as to protect public goods. Using taxes and fees, resources – be they energy, fisheries, forests, water or land – must be made more expensive.

Companies can continue to do the things they now do – develop and produce the goods and services people need or want. But they must do so in a world where the external impact of their activities is properly priced. This means fully incorporating everything from resource extraction and waste disposal to manufacturing costs, building transport that emphasises public mobility rather than the right to car ownership. Water should no longer be seen as a free public good.

Across Asia capitalism does not need replacing but must be reshaped if it is to meet the needs of all its people. There must be constraints on consumption, with externalities priced in and, where necessary, with curbs on certain resources. Only then can economies run in ways that ensure everyone has fair access to the resources they need. This can ensure everyone has a future beyond the 21st century. It might get the US and China to come to terms with the most obvious challenge – self-interest will be best served by accommodating others’ interests, not by flexing military muscles.