Wendy Dobson's Gravity Shift: How Asia's New Economic Powerhouses Will Shape the Twenty-first Century was one of five books nominated for Canada's 2010 National Business Book Award. The award was established in 1985 to recognize the outstanding talent in Canadian business writing. The $20,000 prize is sponsored by PricewaterhouseCoopers, BMO Financial Group and media partner The Globe and Mai. Jeff Rubin's Why Your World is About to Get a Whole Lot Smaller: Oil and the End of Globalization won the award on June 9.
Dr. Wendy Dobson is Co-director of the Institute for International Business in the University of Toronto's Rotman School of Management. Read an excerpt and listen to a reading from her book below.
Excerpted from Gravity Shift: How Asia's New Economic Powerhouses Will Shape the Twenty-first Century, by Wendy Dobson. Reprinted by permission of Rotman/UTP Publishing.
The United States, China, and India in 2030: First among Equals
The conduct of the U.S.-China relationship is central to the global recovery and to long-term economic prospects. Uncertainty will continue about how the United States will pay for its recovery packages and whether China will rebalance its economy. Judging by its behavior to date, China has chosen to play a stabilizing role. Both countries find themselves in the same boat and, barring serious inflation in the United States, are likely to remain there for the next decade.
By 2030, however, the world economy should have been reshaped and the outlines of a new world order have become clear. China has begun to take on global responsibilities. India, not yet a player, is still learning to balance its domestic agenda and regional objectives. There will be tensions: protectionism emanating from the United States, and competition for influence in Asia among the United States, China, Japan, and India. The world of the next two decades will have two remarkable features: first, despite their rivalry, the key Asian players will be committed to globalization and the peaceful development of Asia and to projecting Asia's voice in the rest of the world; second, they will be seeking a common purpose and a shared strategy. Surprisingly, perhaps, the United States will help to set both purpose and strategy as its attention shifts back to Asia's growing geopolitical significance. The U.S. economy will be down but not out. It will be slower growing, as taxpayers foot the bill for rescuing the economy from financial collapse. But the U.S. dollar will still be the reserve currency. The United States will still be the global policeman. The United States will still provide global leadership, albeit in a cooperative manner that treats Asians as equals. It will also be the author of trans-Pacific initiatives, particularly in trade and security, which will counterbalance Chinese ambitions.
China is further along than India in having the economic strength to be another 'dragon in the sky,' and in 2009 raised its global profile astutely. Both countries will grow more rapidly than the United States, but both will be able to sustain growth only if they address their lopsided economies. China's is unbalanced because its monetary and financial system supports high investment at the expense of consumption and the environment. Its dependence on the United States as a place to invest its foreign assets has deepened their interdependence for the foreseeable future. India's economy is lopsided because of its rigid labor market institutions whose impacts are serious but felt entirely in the domestic economy. How each country reconciles industrial growth with these domestic weaknesses will also affect its soft power and international standing. China's economy in 2030 will be larger and richer than India's, but the gap could be narrower than projected if government continues to direct and own much of China's financial system and if India were to have greater-than-expected success in educating, connecting, and financing the integration of Second India into more productive activities.
Progress will be slow and things could go wrong. The Chinese government's commitment to rebuild the social safety net that was dismantled during reform and opening the economy might be sufficient to head off social unrest, but it will take many years to rebuild people's trust in the state sufficiently for them to save less and consume more. Neither is it clear how local officials, used to years of industrial growth projects from which they benefited directly, will respond to new marching orders to step up social services and redistribute incomes. There could be significant social discontent. India's indifference to opening the door to good jobs for Second India will cause similar inertia unless spreading discontent sparks protests and internal disruption - the worst nightmare for both governments. India's political nightmare is twofold: increasing communal violence and Islamic terrorism, and internal fragmentation caused by organized, disaffected, and marginalized groups in more remote areas.
The global financial crisis marks a turning point in reshaping the world economic order. It has accelerated the decline of U.S. economic influence and shocked Asian governments into reducing their export dependence on U.S. consumers and to explore ways to rely more on their own domestic and regional demand. The world order of 2030 likely will be a multi-polar one with no dominant power. The new order will need a common vision and a shared strategy that attracts Asian governments into global institutions. The United States will continue to lead, but it will have to learn to listen and cooperate as an equal, not only with China, its major creditor, but also with India. With the recognition of Asia's new economic powerhouses as equal voices at the G20 leaders' summits, the gravity shift is well under way.
Read excerpts from all of this year's National Business Book Award nominees: