Economics, Post-American Style

Fareed Zakaria has devoted a book to sketching in the portrait of a Post-American World. In today's Financial Times, columnist Philip Stephens --the first non-eponymous winner of a Wolf-Munch-Rock award -- gets across the economic reality of the coming multipolarity in 1200 words. "Globalisation," Stephens begins, "belonged to us; financial crises happened to them." No more:

the boot is now on the other foot. The IMF is forecasting that the advanced economies will just about keep their heads above water. With luck, growth this year and next will come in at a touch above 1 per cent. If they do avoid recession - and most of my American friends think it unlikely as far as the US is concerned - they will have to thank robust growth rates in Asia and Latin America. The forecast for China is growth of about 9 per cent in both years, for India 8 per cent and for emerging and developing economies as a whole something more than 6 per cent.

The old powers have not grasped this new reality. There are nods, of course, to a need to restructure international institutions. The rising nations, you hear western politicians aver, must be given more of a voice. More seats, maybe, at the World Bank, the United Nations and, yes, on the board of the IMF. But the assumption is that the rising powers will simply be accommodated within the existing system - a small adjustment here, a tweak there and everything will be fine again. Missing is a willingness to see that this is a transformational moment that demands we look at the world entirely afresh.

Like Zakaria, Stephens sees the world at the end of a 200 year cycle of Western dominance. Also like Zakaria, he does not regard 'decline' as a foregone conclusion. But coming changes will be wrenching:

The response of governments thus far has lain somewhere between despair and denial: there is nothing to be done in the face of global market forces; or the benefits of globalisation will eventually trickle down. The active education and welfare policies necessary to ease the adjustment have been conspicuous by their absence. How do you tell your electorates that all the old assumptions about welfare capitalism must be rethought?

Difficult. But these two sets of pressures - between nations and within them - cannot indefinitely be ignored. That way lies an inexorable slide into the beggar-thy-neighbour protectionism that would make the recent financial storm seem like a summer squall. However it is handled, the adjustment process to the new world order will be wrenching. The US and Europe, after all, have between them have enjoyed the best part of two centuries of effortless political and economic hegemony.

There is no reason they should not continue to prosper in a world where power is more evenly spread. Globalisation need not be a zero-sum game. But if the west is going to adapt, it must recognise that it can no longer expect to write the rules.

League of Democracies, anyone?

The FT columnists, collectively, are unmatched in their ability to compress broad economic and geopolitical trends into the confines of a column. They wear whatever ideological framework they subscribe to lightly, cram their columns with facts, often explore multiple points of view, and sometimes seem to be thinking their way toward a conclusion as they write. When you get tired of the bloviosphere, try parking your eyeballs at ft.com for a space. You're alloted a few articles without a login.