Yesterday I went to Birkbeck College to hear Professor Andrew Jones talk about
The Asianization of the Global Economy.
Professor Jones is Professor of Economic Geography at Birkbeck, and is author of the
Dictionary of Globalization as well as several other books on the topic and about thirty-five articles.
The lecture began with a brief review of globalization over the last twenty years and the growing view that globalization was unraveling because of nationalism, protectionism and the fragmenting of the EU.
This view, although understandable, is not valid. Far from faltering, globalization is entering a new phase of intensity. Two examples of relative European decline - the IMF is no longer in the forefront of globalization (for obvious reasons related to the arrest of Dominique Strauss-Kahn); Glaxo Smith Kline are undergoing a global restructuring, and not only closing their production facilities in Europe, but also moving their research to China.
We are witnessing a rebalancing of the world economic activity, especially as over the last five years the global downturn has not really affected the emerging economies. The West is failing to appreciate what has happened. We are probably at a tipping point in the shift of the centre of gravity from West to East.
If you put the word "globalization" into the Amazon search box you get tens of thousands of books but the focus is very narrow. Globalization has been confused with Westernization or Americanization. Now definitions need to be widened to include political, technological and cultural aspects as well as just economics.
What we are seeing is the growing inter-connectedness of human society. Times have changed since Peter Dicken wrote the highly-influential book
Global Shift. We are now in a new sort of globalization.
Especially the global economy has become very complex - complicated, uneven, geographically dispersed.
This has masked what is really happening in the world, so that almost unnoticed we have arrived at a tipping point.
Why has this happened?
We need to look back over the last five years at the economies that have been growing and the economies that have been contracting. This has been a very unusual recession - the rest of the world did not follow the US into recession. Over the last five years The West has had non-existent or very low growth while all the time China has been booming.
We are now looking at the Asianization of the global economy - a period of far-reaching change with perhaps Asia approaching dominance.
Five factors to consider:
1 In 2010 China leap-frogged over Japan to become the world's second largest economy. By 2020 China is expected to overtake the US as the largest economy. Over Asian economies are following so that we are looking at a majority of the top 20 economies to be Asian (Australia is the only Western economy still growing, and this is as a result of growth in Asia).
2 Look at the growing size, number and dominance of Asian corporations: eg five of the top ten investment banks are Japanese (the Bank of China is number 14); nine of the ten largest steel firms are Asian-based; five of the top ten car manufacturers are Asian-based etc.
3 Be aware of the on-going upskilling and capacity of the Asian economies to do what the West is doing in terms of services. Consultancy, IT and software companies have mushroomed across Asia. Also finance and business services - they will not be looking to western consultants for much longer.
4 Consider the rising power of Asian capital. When George Osborne talks about "the need to appease the markets" he is talking about China. The largest holder of UK sovereign debt is China.
5 Asian countries are a growing power in the governance of the world economy. They want voting rights on the World Trade Organization, the World Bank and the UN. The recent challenge by emerging economies to European dominance of the IMF is an indication of how things are likely to develop.
There will be limits to the Asianization of the global economy, and these will depend on a number of issues - economic, political, cultural, linguistic. But Western dominance looks ever more fragile. What will count is the absolute size of economic activity.
In the future Western companies may have to adapt to Asian capitalist norms.
The talk came to an end. In an adjoining area white wine was available. When I left the Clore Management Centre it was pouring with rain.