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November 27, 2006
International Commerce Is the True Battleground
Markets are supposed to be smart. So what are they trying to tell us?
President Bush flew
halfway around the globe last week, but in a sense he visited another
world. Bush is preoccupied almost entirely by Iraq, Iran, Israel, Lebanon,
North Korea and, if he has time enough in a day, by Venezuela and Russia.
His counterparts in Asia are focused primarily on something quite different:
their own economic growth. And while roadside bombs may be what makes
the daily headlines, it's ultimately economics that's likely to determine
the international balance of power.
Consider a paradox: over the past five years, political
turmoil has swept the world. It began with the attacks of 9/11, followed
by bombings in Bali, Casablanca, Istanbul, Madrid and London. There have
been two major American-led wars, in Afghanistan and Iraq, which are ongoing,
protracted, expensive and increasingly destabilizing. Add to this the
war between Israel and Lebanon, deadlock in Palestine, Iran's bid for
regional supremacy, North Korea's nuclear test and Russia's growing clashes
with some of its neighbors.
During this same period, the world economy has experienced
its fastest five-year growth spurt in more than three decades. In fact,
per capita GDP growth during these stormy years has been 3.2 percent,
which is higher than any comparable period in recorded history.
Remember how terrified Israel was during its war with Hizbullah
this summer—a war many Israelis say they lost? Well, both Israel's
stock market and its currency, the shekel, were higher on the last day
of the war than on its first day. This year Thailand had an old-fashioned
coup, complete with a military takeover, tanks on the streets and a media
blackout. The country's currency, the baht, barely dipped.
Markets are supposed to be smart. What are they telling us? That the current
era of globalization is more powerful, widespread and resilient than many
people realize. Today we are living through something practically unique—simultaneous
growth worldwide. The United States, Europe and Japan are all doing well,
but so are China, India, Brazil, Turkey and a whole slew of former Third
World countries. Their rise is powering the new global order. Emerging
markets now account for 30 percent of the world economy and for 50 percent
of global growth last year. One important benefit has been that advanced
industrial nations have maintained extremely low interest rates for almost
two decades, enabling some countries—such as the United States—to
grow faster than many experts predicted.
This could not have happened without two global deflation
machines, China and India, which keep prices low in goods and services,
respectively.
If this sounds as if everything will work out fairy-tale
style, it won't. Global growth has its own complications. Demand for raw
materials and energy is high and will keep rising. Countries that possess
such resources—Iran, Russia, Venezuela, Saudi Arabia—become
islands of exception to the very rules of markets and trade that are sweeping
the world. Thus global capitalism produces its own well-funded anti-capitalists.
Growth is also producing environmental degradation on a
colossal scale. For those who worry about the United States' not signing
the Kyoto accords, keep in mind that China and India are already constructing
650 coal-fired power plants, whose combined CO2 emissions will be five
times the total savings envisioned by the Kyoto accords.
For the industrialized world, the new global economy produces
new stresses and strains. With hundreds of millions, if not billions of
new entrants to global markets, Western workers fear for their wages.
With new players in the global economy, industries of all kinds face new
competitors.
There is no way to turn off this global economy, nor should
one try. Every previous expansion of global capitalism has led to greater
prosperity across the world. The story of the past 100 years is one of
an ever-expanding pie. But this is a massive, complex process and requires
enormous focus and attention. And while other nations around the world,
from China to Chile, are playing to win, the United States as a government
has barely focused on any of the major challenges or opportunities that
it presents. We're too busy settling disputes between Sunnis and Shiites
in downtown Baghdad.
A century ago, another great global power was similarly occupied halfway across its world, fighting a war and organizing the constitutional arrangements of Dutch farmers in the Southern Transvaal. Great Britain eventually won the Boer War, but it lost its focus on the economic challenges it faced. And finally it lost something else: its standing as one of the great global powers.
Correction: An earlier version of this column incorrectly stated that the British lost the Boer War.
