Asia Rises, America Distracted

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WASHINGTON – Five years into the invasion of Iraq, defined by its proponents as an essential component of the ongoing War on Terror, the outside world may rightfully conclude that the conflict between the West and the Islamic terrorists and their real or assumed supporters is the defining issue of our times. But is it really?

In historical developments there never is just one narrative. There are many and they may intersect and influence each other. It is only after the fact, sometimes long after the fact, that historians may be able to detect the main theme, the theme that was or was not addressed with the awareness that, among many, “this” was the issue, the challenge that deserved priority status.

Islamic Radicalism: Important but not crucial

Without waiting for the dust to settle, I dare say that this conflict with Islamic radicals, while obviously important, is not the defining issue of our times. The defining issue of our times is the epochal shift of the global balance of power –economic power first– from West to East. This is not taking place in the form of a “conflict”; but as progressive changes that are transferring clout from the West to Asia.

The loss of western technology monopoly: opening for Asia

The West used to have a virtual monopoly on know how, innovation and capital instruments. Primacy in these areas is slowly moving to the East. Asia is progressively assembling all of the above, with the added, intangible but crucial element of the “will and determination to emerge”; while the West is mostly characterized by the “desire to preserve” positions attained by previous generations. And these different intangible psychological drives, the first one clearly stronger than the second, may very well be at the source of the rise of Asia, while the West turns to a defensive posture –a posture in which success is measured in slowing down the progress of others. (Think about headlines as: “Trade Deficit Narrower than Anticipated”. As if losing by a smaller margin were a victory).

America is still fixated on the “War on Terror”

Of course, the news of the day would indicate that, on the contrary, the unfolding conflict with al Qaeda and associates, labeled in a rather grandiose and ominous fashion the “War on Terror”, is the issue. This conflict, sparked by the outrageous 9/11 attack, defined America’s foreign policy throughout President George Bush’s two terms.

We are now on the fifth anniversary of the American invasion of Iraq that began in March of 2003. For better or worse, this is and will be president’s George Bush’s legacy. Clearly the “expanded concept” of the “War on Terror”, as he infelicitously labeled this conflict, is the defining issue of this presidency. Unrepentant as ever, the president continues to proclaim that the invasion of Iraq was the right thing to do. It was and is the necessary manifestation of America’s “duty” to spread freedom around the world.

Justifying the ongoing effort

Thus, with or without weapons of mass destruction, (WMD), in Iraq, it was proper to topple a brutal autocrat who continued to be a threat to an already unstable region. The cost may be high; but worth every penny, including the attendant human losses. And the transformation of Iraq into a democracy, while painful and costly, will usher a broader transformation of the whole Arab world from backwater to cluster of vibrant democracies, at the same time immunizing their citizens from the noxious viruses of millenarian dreams to be achieved through violence and terror.

The “democratic cure” imposed on a reluctant patient may be hard and may seem brutal at first; but “we know” that it produces wonders, as democracies are peaceful; while democratic institutions allow people to pursue their dreams of personal growth. When democracy, following the Iraq example, will flourish the Terror nightmare will be over.

The Republicans still agree that this conflict should be our priority

Senator John McCain, the presumptive republican nominee in the unfolding race for the White House, leaving aside his strong differences with the Bush administration on the manner in which the war has been conducted, has declared time and again that the issue of our times is the struggle against Islamic radicalism. For better or worse Iraq has become a key theatre in this struggle. Conceding defeat there, argues McCain, would signal America’s weakness and will give heart to all those who wish the destruction of America, thus prolonging the struggle against a mortal enemy.

The US democratic opposition maintains now as ever that Iraq was a terrible blunder that distracted us from the real War on Terror –a war that should be fought where it began, in the inhospitable mountains at the border between Afghanistan and Pakistan. However, while not declared as the defining issue of our times, the struggle against Islamic radicalism is deemed to be a significant priority for the democrats as well.

How can this fixation endure for so long?

And it is natural that, given 9/11 and other attention grabbing events, violent radicalism should be viewed as a peril. But, frankly, it is more a peril for what it could do, should some terrorist really acquire weapons of mass destruction, than for what it is capable of doing now. But, for some reason, political violence and suicide bombers, maybe because they belong to an alien political culture, fascinate and frighten us beyond reason. The alien and in many ways incomprehensible worldview of the ideologically motivated terrorist willing to die for his cause seem to endow him with endless powers and resources and the consequent ability to inflict catastrophic damage to us all.

Exaggerated perceptions aside, indeed, militant Islamic radicalism is a serious problem. We have to protect ourselves. But, while taking into full account the danger for us, radicalism and its terror methods is mostly a tragedy for the societies from which it springs, as it wastes at least some of the intellectual and human resources of a large chunk of people engaged now and in the future in a futile struggle with an imaginary enemy (us).

Understanding radicalism

Of course, the West, given its checkered colonial past and other horrible blunders, is an easily identifiable culprit for the plight of the Muslim World. But, while it has its responsibilities, the West is not the cause of the underdevelopment of the Middle East. This has to be sought in a culture (whatever the religious influence) that essentially, at some point, concluded, (even though it may not have declared this explicitly), that there were boundaries for human pursuit and achievement; thus objectively inhibiting the natural drive towards discovery and innovation that humans seem to share.

What had once arguably been the most modern, most advanced, most refined and vibrant civilization of the Mediterranean, (while Europe was still digesting the barbarian invasions, experiencing what have been called perhaps unjustly the Dark Ages), at some point stopped progressing.

How Islamic societies stopped progressing

With its self-perception of being a manifestation of religious perfection, this culture could not recognize that the Christian Infidels, the product –according to them– of an inferior religion, could possibly create something qualitatively superior. Overtime, many Western discoveries were acquired by the Islamic World; but what was not acquired in those transactions was the new western spirit of inquiry that was at their roots and that guaranteed for centuries to come an endless stream of new scientific knowledge stemming from the West.

Fast forwarding to the present, the Islamic world, with due exceptions, is not the buzzing workshop of ideas and innovation that it was when Europe was in the Dark Ages. The inner drive towards development was stopped long ago. Ossification ensued. Foreign (namely mostly Christian) books were not translated. New knowledge was not spread.

In a climate of stagnation that discouraged change, it is altogether understandable that many developed the theory that the only way to renew past glory is in reverting to the strongest conformity to the old sacred principles, attributing present decay and troubles to their betrayal.

Looking for “culprits”: the emergence of religious radicalism

Yet, while understandable, this development that yielded intolerant fundamentalism and also al Qaeda and all its offshoots is a misfortune, not just for us, the targets; but for these socities. It is a misfortune, as this retreat into an imaginary world of flawless, intransigent orthodoxy represents a gigantic escape from reality and a waste of energy; with all the accompanying sorrow brought about by completely useless, ferocious violence visited mostly on innocents, conveniently targeted as they are part of enemy nations. As in other cases of action motivated by fantastically radical ideologies, death and destruction are the most tangible fruits.

But, leaving aside the special (albeit unfortunately possible) instance of the acquisition and use of weapons of mass destruction, this threat, however significant, is not the defining issue of our times.

Asia Rising: the real systemic change that will affect everything

The defining issue of our times is the gigantic shift of the world’s propulsion center from the West to Asia. For a few centuries, the West managed to retain the technological edge, notwithstanding its own horrible wasteful blunders, (the Napoleonic Wars, World War I, World War II, to mention just the most egregious), because of its unassailable lead in new science and consequent technological applications. This edge was powered by the spirit of scientific inquiry unleashed by the European Renaissance. This gigantic lead was at the foundation of the industrial take off of Great Britain, the spreading of the industrial revolution throughout Northern Europe and North America. It also allowed for the colonial expansionism of the XIX Century, leading to the western domination of almost the whole world.

The diffusion of knowledge

But, after WWII, knowledge was no longer a monopoly. The self-perpetuation of the western unassailable lead was no longer unquestionable. Knowledge started spreading, along with political institutions less inimical to innovation and economic development. While the West retains and nurtures significant sectors of native advantages, the genie of high technology is now out of the bottle. Among other tools, the internet works as a magic transmission belt. For those who wish to take advantage, heretofore unthinkable amounts of knowledge are out there. And much of it is free.

In Asia there is now optimism about the future 

The new vistas opened up by the “democratization” of access to science and critically useful information overtime triggered the immense desire for personal betterment that clearly motivates now millions and millions of Indians and Chinese, among others. This optimism has to be compared to the widespread aspiration of coasting to a position of relaxed comfort more common in the West. The Asian drive towards achievement compared to the more conservative Western spirit, unless something changes, overtime is bound to have quantitative consequences. Not to mention the fact that there are far greater numbers of Asians. Ultimately numbers do matter.

America’s lead, no longer unquestioned

At the moment, in the United States we can still have a model that can be summarized as “Designed in Silicon Valley, Made in China”. Yet, unless we postulate the ability to retain, forever, the lead on innovation and breakthrough technologies that will continue to give the West the edge and thus fund a high standard of living based on our continuing pre-eminence in the global knowledge economy, this satisfactory division of labor –“we invent, you make”– may not work for much longer, as the maker (Asia) is developing the ability to invent.

No one has a fixed monopoly on creativity. While hard to assemble, the critical components that yield creative and innovative environments with the attendant venture capital capable of bringing innovation to market in the form of new, advanced products, by now are known. Evidence of many failures to replicate the successful American model is no sure indication that new equally formidable competitors will not sprout, at some point.

Judging purely on the basis of incentives and motivation, we see that Asian societies have created a new, catchy cultural model in which scientific education is viewed as the golden road towards higher economic and social achievements for millions who until recently could not envision being more than manual laborers.

Asia’s enduring weaknesses

Of course, to date, most of the Asian academic institutions are of inferior quality, at least compared to the elite Western ones. However, the fact that our “super” schools are still better than theirs constitutes no long term guarantee; as all this may change. Given more talent available and strong motivation, these new generations of Asian eager scientists, many of them fortified by experiences in the West, will improve upon the available assets.

True, the Indian ICT boom started with the outsourcing by western companies of the least important processes to cheap “techno-coolies”. But this was only the first step. Bangalore is not Silicon Valley. But it may become Silicon Valley. The human talent is there. The Indians and millions of other Asians are moving up the value chain. The twin blockages of cultures suspicious of change and of lack of access to information have been eroded. The internet is the great equalizer. By no means a perfect instrument, the internet keeps getting better and cheaper, in large part because the efforts of western science have reduced costs and increased speed.

For all these reasons, the main narrative of our times is the fundamental readjustment of economic relevance in the global economy. And this presents at least two large problems for the West.

What will America do?

The first one is: can America’s “We are Number One” cultural postulate adjust to a situation in which this will no longer be true? And, if so, how? Will we accept the challenge and decide to really compete in this radically new environment in which we will no longer enjoy the inherent advantage of being by far the pre-eminent economy? Or will we retreat into protectionist fantasies, blaming our lost primacy on the unfair practices of the dishonest competitors?

Hubris

This is the main challenge for a civilization now so accustomed to primacy to the point of regarding it as a birthright; not as something that needs to be nurtured and reinvented in order to be kept alive and vibrant. Unfortunately, the growing protectionist sentiment, fed by a host of stories of personal misfortune of the many of who have seen their jobs outsourced, seems to indicate that many tend to appreciate mostly the negative elements of globalization; with a growing generic wish to get out of this train, as if we could really retreat into some kind of special place, magically protected from global competition.

The necessary reshaping of the international relations system

The second one is: We live in a world largely shaped by the victorious Anglo-Saxon West, after WWII. Most of the institutions (the UN, the World Bank, The IMF, the FAO, etc.) and modalities to conduct international relations and business have been influenced (if not entirely shaped) by the western conception of fairness and rationality. Will these institutions and modalities be viable in the new Asia dominated world? And, if not, what changes can we expect? It would be preposterous to assume that eager, powerful, new comers will not want to make changes to systems that were given to them at a time in which their bargaining powers were modest.

But, of course, all this, the ultimate shrinking of the West, and the rise of Asia, although there are quite visible signs now, is still largely in the future. And it may be a fairly distant future. Indeed, the last time we checked America was and is still Number One. Deep in debt, a bit battered with a devalued currency and somewhat fiscally challenged, but still Number One.

Faint hope: Asia will stumble and fall back

And there is comfort in thinking that, who knows, maybe this change will not happen. We feared being swallowed by the “Japanese Monster” in the 1980s; whereas Japan was beached by its own internal social contradictions. Thus, we can find comfort in hoping that maybe China, given the contradictions between its economy and its outdated political institutions, will go through a major crisis. Or, maybe the Chinese environmental crisis will turn into an immense catastrophe that will halt development.

Maybe the Indians will be unable to modernize their horribly messy political institutions that objectively act as enemies of progress. Maybe they will be unable to modernize their infrastructure. Indeed, all this is possible. Historical developments are generally non linear. There will be ups and downs. The trick is to grasp the basic tendencies.

My bet is that the immense desire for personal betterment shared by tens of millions, combined with the availability of the necessary practical tools (improved education, know how) in the end will prevail in Asia. It may be messy; but the unfolding of the Asian Century is not a fantasy.

But it easy not to focus on this (or any other) gradual transformation. In large part this is due to the fact that these changes, as is the case in all systemic transformations, will be gradual; perhaps punctuated by some interesting fact here and there; but gradual altogether. Probably so gradual to be unnoticed.

The Republic of Venice: a case study of progressive decline

In the XIV and XV centuries, the foundation of the power of the Republic of Venice was in its ability to act as a commercial bridge between Europe and the East. But, later on, the discovery of new sea routes to Asia, slowly but progressively eroded this economic monopoly and the ensuing strategic advantage. This and other developments overtime shrank Venice’s relevance within Europe and the larger Mediterranean. But it is hard to point to one particular event that resulted in a historic turn. (After the fact we know that, in a broad sense, Venice’s loss was accompanied by the rise of the Dutch United Provinces and later on by the affirmation of England as the pre-eminent maritime power that built an Empire founded on the felicitous combination of capitalistic enterprise and the best navy. Contrast this with the fortunes of Spain and Portugal. They had the maritime spirit; but no capitalistic spirit. Britain brought capitalism to North America. Spain and Portugal brought feudalism to South America; and the effects of these complete different cultural legacies are still here today).

The end of purpose

Venice’s decline was a slow decline. But decline it was. The maritime city state did not go under overnight. It just lost influence and power. Along the way it also lost its old courage and its famous bluster. Overtime, the descendants of the rich patrician-merchants –that leadership who did not think a minute about risking everything on the bridge of Venice’s ships– had opted instead for beautiful Palladian Villas in the countryside. Painting and art had replaced the dogged, if futile, resistance displayed by the Venetian defenders in the siege of Cyprus. Marc’Antonio Bragadin, skinned alive by the Turks after Famagosta had fallen in 1572, was “replaced”  later on as a cultural icon by Giacomo Casanova.

The last Doge

In 1797, Doge Lodovico Manin, the last one in a proud line of those rulers who, along with the “Senato Mar”, the “Senate of the Sea”, for centuries could dispatch effective naval power all over the Mediterranean, presided over the surrender of Venice to the strutting newcomer of the time, a young Corsican artillery officer named Napoleon Bonaparte. It may not be entirely accidental that Manin came from the mainland and did not descend from the seafarers and that his family had purchased at a high price accession to the city’s aristocracy. It is also tragic irony that Manin’s ceremony for his accession to the seat of Doge was recorded as the most expensive ever in the history of the Republic. In the end, the “Serenissima”, the “Most Serene” Republic, surrendered to Napoleon’s superior power without firing a shot. A history that had lasted almost a thousand years was over.

Needless to say, there is still a Venice today. But it is a large scale tourist trap that has the residual, if sad, charm of great things that have been.

How do civilizations “lose it”?

But why cite examples of long ago? Because Venice had not been just a city of fat merchants enriched by trade. It had become a political leader strengthened by its mastery of the technologies of the time. State of the art shipbuilding, of course, but also glass works, the printing press, textiles. Its government, while just an embryonic rudimentary form of democracy by our standards, was light years ahead of the often obtuse autocracies that prevailed in Europe. The Venetian Foreign Service was in a class of its own. The Venetian Ambassadors had the obligation of writing daily reports on everything that they noted wherever they were. There was genius and industry along with courage and a fierce sense of one’s own independence and place in a difficult world. A place conquered with intelligence and not just force.

Nowadays there is still a Venice. But the Venetians have been downgraded to ice cream sellers only too happy to overcharge unsophisticated tourists who associate Venice with the Carnival and the relaxed mores of the last decades of the Republic. Which is to say that “the good” does not have a life of its own. It needs to be nourished and its value passed on to those who were not materially there, “at the creation”, as it were.

Are we westerners “losing it”?

So, let us go back to where we started. What will be the narrative of the early XXI Century? The rise of Asia, most definitely. But it is worrisome to note that, while many young Asians enthusiastically go and fill the ranks of tomorrow’s technocrats, we are not taking stock of this and what it will mean for us. Bill Gates of Microsoft goes to Capitol Hill asking for the relaxation of visa rules for highly educated foreigners needed to fill the ranks of American industries, because the American education system does not produce enough of them. Microsoft, as well as most other US high tech companies, needs them.

And we need foreigners by default, because, as Gates had already noted, the once coveted US education system is both too small and outmoded. Below the few elite universities, the American schools are not so good; while Americans just do not go and study science and technology in sufficient numbers.

We are in a “crisis”, but nobody is saying it

In and as of itself, to the extent that this facts indicate a systemic trend, this is a crisis, as it tells us that we are lacking today and we shall lack tomorrow the foot soldiers and the officers necessary to fill the ranks and compete in the global economy. But who defines this trend as “a crisis”? Where are the headlines, the grassroots movements of concerned citizens taking action in order to reverse all this?

The current version of the American Dream is for more consumption without too much regard for the means necessary to finance it. The recent real estate bubble, with all the public policy responsibilities that allowed it, was the perfect excuse for continuing a level of consumption not justified by income. The dream for a while was that ever increasing real estate values would allow people to use their growing equity as an endless ATM machine. What made this worse is that this new real estate equity, this “found money”, was rarely used for productive investments. It was more often utilized to finance a life style otherwise not affordable. Hence the growing chasm between static income and excessive consumption, temporarily masked by the illusion of new real estate created wealth.

Pipedreams of an easy life without producing wealth replaced by misplaced goals of wealth redistribution

Now the whole dream of an easy life funded by the magic of ever growing real estate equity has vanished. But now, as we are in the midst of untried rescue operations aimed at preventing this disaster from engulfing the whole economy, the political discourse in this electoral campaign is about redistribution of wealth and the offering of new services to those who did not enjoy the bonanza of the last few years.

Nothing wrong with advocating improved conditions for those who struggle. But there is fuzziness in describing how all this will be paid for. And publicly funded relief is unfortunately not the most appropriate policy message, without confronting head on the fact that we are no longer in an era of plenty.

There is much less wealth available for redistribution these days. Individual savings rate: zero on average. We have significant private debt; significant public debt; significant and ever growing balance of payments deficit. And also two costly wars underway.

More equity is a nice idea, but you need excess wealth to be shared

Equity and fairness should have a place in a democracy. But first we need to agree that, in this new, fiercely competitive global environment, collectively we need to produce more wealth by being more competitive. At the same we have to acknowledge that, while the modern armies of young Asian technocrats grow, we have difficulties forming and recruiting our own. Likewise, while Asia saves more, we spend more. And as we do not have enough money, we go into debt. Redistributive public policy by itself, while well meaning, will do nothing to change this lack of ability to produce more resources.

We are not finished, yet

Of course, the picture is not entirely bleak. In truth, America has many world class, truly competitive, multinationals. But this is less the national asset that one might think it is. Nowadays, US multinationals, precisely because they operate on a global chessboard, regard America as one of their markets. Their objective is their own growth and competitiveness, not necessarily America’s. As the US economy slows down, the multinationals increase their efforts in other markets. And they build their subsidiaries and R & D centers where convenient.

Indeed, just by looking at investment decisions by US multinationals one could detect the underlying systemic transformation discussed so far. When General Electric or Caterpillar state that they are beginning to invest more abroad than in the US and that they expect a larger and larger share of their sales and profits to come from foreign markets, this is an indication. Of course, these trends may change and multinationals have the flexibility to adapt. But will they change?

Looking at all this, the sad conclusion is that while a systemic shift is taking place whereby Asia is destined to affirm at all levels its new self-confidence, the leading power of the West is almost entirely focused on fighting Islamic radicalism, while the dream of the opposition is to re-direct the funds used for the military to finance new social programs to benefit their political base. 

We should focus on competitiveness issues 

The discourse in this political season is framed in a myopic introverted context in which our position vis-à-vis the outside world is rarely seriously discussed. It looks as if America is self-contained and affected by the world only in a negative way, due to the alleged stupidity or greed of misguided leaders who have caused unnecessary suffering through ill conceived free trade policies that serve the interest of the elites at the expense of the people. In this type of inward directed political debate, very little is said by all about the need to dramatically foster US competitiveness, the only real source of future prosperity and the essential precondition that determines our ability to do anything, including funding improved education for all or universal health care.

While we obsessively debate Barak Obama’s credentials as a true post-racial leader capable of healing old racial wounds, larger numbers of Asian youth go to school and get engineering degrees in a new world in which for them birth is no longer destiny, while a solid higher education is a proven key to success. The Asian Century is upon us and we are not ready.

 

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