The first Leaders G20 is now history. A communique of marked substance was released This to the good. Former Canadian Prime Minister Paul has taken some pride announcing that this was the first G20 Leaders meeting – what he’d called for for the short time when he was Canadian Prime Minister a few years back. As Martin commented in an “Introduction: The Challenge for the First L20 Summit” to the electronic publication, edited by Professor John Kirton, head of the G8 Research Group’s the G20 Leaders Summit on Financial Markets and the World Economy: “This is the beginning of a new era — one in which rising great powers are not invited for lunch and then dismissed. It is the beginning of an era where true dialogue between indispensable nations occurs as they seek to reconcile Continue reading
Sideswiped
Well now that the theory of ‘decoupling’ has been assigned to the history bin as a fanciful assessment of the global economy, we need to analyze the impact of the global financial crisis on the Rising BRICSAM. It appears to be – not good.
Most analysts have commented on the efforts most BRIC countries have undertaken to defend themselves against financial instability. The BRIC countries have all built large surpluses of foreign reserves. Examine the figures on foreign exchange reserves below.
- China $USD 1.9 trillion (September 2008) +33% change in year 2007
- Russia $USD 485 billion (November 6, 2008)
- India $USD 253 billion (October 2008) +65%
- Brazil $USD 205 billion (August 31, 2008) +106%
These figures, by the way, come from a presentation by Prashant Pathak the managing partner of ReichmannHauer Capital Partners here in Toronto. This week Prashant gave a marvelous presentation to our (Jim de Wilde, Jonathan Hausmann and myself) undergraduate commerce course from the Rotman School of Management entitled, ‘Globalization, Global capital markets and the Structure of the International Political Economy’ (more on that in the future).
The point here is that each of the BRIC countries had taken steps to defend their economies. Bitter lessons of Continue reading
Examining the Big Picture
Recently at CIGI we have launched three initiatives, which examine the Rising BRICSAM and their impact collectively and individually on global governance.
The first is the Princeton Summer Workshop, which in collaboration with our partners at Princeton University (Dean Anne-Marie Slaughter and Professor John Ikenberry) we held from August 25th through the midday of August 27th. This Conference was an opportunity for authors to present and discuss their first draft efforts. The title of the Conference and the future volume identifies the meeting focus – ‘Rising States; Rising Institutions.’
There are chapters on the largest of the emerging powers – Brazil, China and India and how these three impact global governance. There is a chapter examining the development of a number of emerging power organizations; a chapter on Continue reading
A Call to Arms?
Prime Minister Gordon Brown has seemingly risen from the ashes. His actions to protect the financial institutions in the United Kingdom and his call for global cooperation and a kind of Bretton Woods II have revitalized his leadership image.
On October 17th, in the Washington Post Prime Minister Brown penned an op-ed, “Out of the Ashes” The Financial Crisis is also an Opportunity to Create New Rules for our Global Economy.” In the opinion piece Brown casts a view back Continue reading
Testing the Thesis
For some time now, as the financial storm clouds approached, various analysts have touted the view that the emerging markets and the rising powers – China, India, Brazil and Russia, and others – are increasing decoupled from the United States and the sub-prime threat. Now that the financial meltdown is upon us, I suspect those who argued such a line would be happy to take it back (Note Dani Rodrik’s disdain for decoupling as well in his blog post ‘The Other Shoe Drops‘.)
Now it is not to say that these Rising Powers are bound to find themselves in the situations they faced in say 1997 or 1998, but they are all being buffeted in different ways by the gales of this widening financial meltdown. Contagion is upon us Continue reading
The Challenge of Capitalism in China?
One of the most insightful experts on China and it’s economic structure is Professor Yasheng Huang. Professor Huang teaches international management at the MIT Sloan School of Management and he is a ferocious analyst of the Chinese economy. His most recent book, Capitalism with Chinese Characteristics: Entrepreneurship and the State (New York: Cambridge University Press, 2008) is a must read for anyone interested in understanding how China became the emergent power of the BRICSAM.
Since I’m in the midst of it, I can not provide a final evaluation, but let me take a first cut at this study. There’s a hint early on by Yasheng Huang of the analysis to follow. Yasheng writes: “…- the Chinese economy is so complicated that what appears to be straightforward and obvious on the surface is not at all so once we dig into the details.”
“Is there any reason to think that the general economic success of China has been a result of institutional forces dramatically different from those that have favored growth elsewhere?”
There are two explanations for China’s emergence. The first – now traditional view suggests, according to Yasheng Continue reading
Thinking about Global Governance with Chinese Characteristics
At one time, not that long ago, writing about or advocating global governance in China was a sensitive matter. Much has changed.
Just as China’s international policy has moved from an almost exclusive emphasis on bilateralism to growing regional and global governance, global governance and China’s role in multilateral contexts has become an acceptable subject for China’s inernational relations experts.
It’s why the focus of Wang Zaibang’s 2007 article is so interesting. Entitled, ‘China and Global Governance,’ this Continue reading
The End of ‘Chimerica’
In a rather ‘crowded’ little piece (meaning that there are a number of currents flowing through the article), Niall Ferguson of Harvard, Oxford and Hoover Institution fame, has declared ‘Chimerica’ at an end. As Niall points out in his article in the new journal Standpoint out of the UK, the growing financial crisis puts this most important driver of global growth at risk. Chimerica which has represented one-third of GDP and over the past 6 years 50% of global growth, is threatened by the credit and liquidity crisis of Wall Street.
Niall begins his declaration of Chimerca’s demise, a term he suggests was birthed by himself and German political scientist, Moritz Schularick with a trip through Chongqing Sichuan, China – arguably the largest city in the world – with a tale of enormous infrastructure building. This tale of Chongqing presumably is to highlight the Chinese government’s continuing flow, if not flood, of public expenditure especially in China’s west.
The Chongqing description is a reminder that public financing in China is a key component of economic growth, and presumably now a substitute and alternative to American export trade. It is also a warning that China and its economic planners pay scant attention to China’s environment. Niall compares the public infrastructure and the motivation behind this palnning is the worst excesses of Stalinism and Soviet industrialization with all its consequences.
Niall’s article chronicles the geopolitical consequences of the demise of Chimerica and more directly the financial meltdown in the United States. First he points out that high indebtedness and slow growth is the enemy of a reserve currency. He suggests the financial turmoil may well require years of workout and consigning therefore the US to sustained slow growth. With the alternative available – the euro – the United States may pay a much greater penalty than just slow growth.
With slower US growth and presumably sustained greater Chinese growth, the second geopolitical consequence, according to Ferguson will be a more rapid convergence between the US and China with China closing the GDP gap not in 2040, as predicted by Goldman Sachs in its report in 2003, but 2027.
And a further geopolitical consequence is the likely growing presence in the globe – Africa, Latin America and Asia – of China, and possibly some others, in search of secure commodity sources. With the growing demand on commodities – for sure oil – but also minerals and foodstuff – China will be out there as a new Great power presumably.
Niall leaves the reader to wonder whether the future of US-China relations will be troubled by Great power rivalry. Maybe, but maybe Chimerica is not a ‘chimera’ as Niall so cutely ends. Indeed China and America may not be as decoupled from the United States as Niall would like us to believe. The symbiotic closely coupled relationship of the two may be much tighter than suggested in this article. Niall may be ‘jumping the gun’ on China’s Great power status.
He’s Back!
Well, it was summer! And I must say I put it to good use. In particular I used part of August to take the family – and me – to China to travel down the ‘Silk Road’ spending time in Xinjiang, Gansu and Shaanxi. This part of China is extraordinary. At least in the West, it is being in Central Asia with a Chinese accent.
With a four hour flight out of Beijing you find yourself in Urumqi or Wulumqi as the Chinese call it. However, it is a capital without a Han majority – the majority instead held by Uighurs. One of the first things you note – this on the highway in from the airport to the City of over 2 million souls is that signs are in three languages – Uighur, which uses an Arabic script, Cyrillic – for all those Russians so close – and Chinese.
The travel down the Silk Road is magical though how I’d feel about traveling by caravan through this desolate Continue reading
Now I’m Sailing Away
I apologize to all those known and unknown eyeballs. Unfortunaley, not really but I am off with family to the wilds of Xinjiang, Gansu and Shaanxi. And oh yes off to Hami for the total solar eclipse. And oh yeah, the Olympics. Back with you on or about August 16th.