Column

The world is entering a new period of acute instability from which there is no immediate escape. Five tectonic forces will influence the emerging world order, and India will probably be the balancing factor in giving it the right direction.

The first change is the shrinking of America and the west. America’s economy is in deep trouble and the only way it can rise from the ashes of the financial meltdown is to lower its consumption and export more. America’s problem is that it is consuming more than it produces, and it meets the gap between income and expenditure by borrowing — largely from China. If Americans don’t consume less, their economic mess will get worse. If they do consume less, the world (largely China) will feel the heat.

Whichever way you look at it, America will have to decline economically — and with it will come down its ability to impose Pax Americana. America has to scale down its overconsuming military to improve its economic situation.

Britain is in a mess similar to the US, and western Europe is a sclerotic economy with high unemployment and an innate inability to adjust to changing economic winds. The prognosis for the west, and especially America, is a prolonged Japan-like deflation where the economy is largely stagnant.

The second change is the peaking of the Chinese growth engine — and its militarisation. China’s economic might grew the same way the Russians’ and Asian tigers’ did: by using up larger and larger amounts of capital. This is like running on steroids. It cannot continue forever. The Chinese engine has been chugging away since 1980, and it has to seize some time. The crisis in its main export market (US) could provide one such trigger. China’s export model was always less sustainable than that of the Asian tigers because of its sheer size. The world can absorb the exports surpluses of small tigers, but China is T-Rex. Which is why its growth will peak as America downsizes, and Europe stagnates. In the next five years, Chinese growth rates will start falling as capital investment rates hit unsustainable levels and export demand starts flagging. To keep internal discontent from leading to chaos, China will militarise faster than ever — both to terrorise its own people and the world around it.

The third force is the rise of Islamic fundamentalism — often with fascist overtones, as evident in the unending growth of terrorism. A decade after 9/11, the terror threat to the world has multiplied rather than reduced, thanks to the existence of undemocratic regimes in much of the Middle East. The lack of democracy aids the forces of fundamentalism in two ways: the regimes in power use Islam to cow down the masses; the masses then get radicalised because they get pushed to the periphery of politics. This phenomenon in the Islamic world is creating parallel fascist forces in the form of Christian fundamentalism in the US, and our own intolerant version of Hindutva.

The fourth factor is the rise of Africa. Africa is the last frontier of civilisation and one half of it is ruled by vile men — from the badlands of genocidal Sudan to the autocratic tribalism of Mugabe’s Zimbabwe. As the repository of many vital natural resources, the world will be fighting its more bitter wars here — with China leading the way. It could also be China’s waterloo.
The fifth force is the rise of India — mildly secular, imperfectly democratic, and with a messy economic focus that is neither capitalistic nor socialistic. It is from the messiness of Indian ideas that the world could stumble into a new order after a few decades because it is done with “isms”. There is no capitalism worth hanging on to, and communism is anyway discredited. The world is searching for a new type of pragmatism that is driven by reality. Which is where India comes in.

India’s economic policies are not driven by any particular idea, but by what is possible. They thus veer in one direction for a while and then lurch to the other when the public mood changes. The final synthesis is usually the result of trial and error — and therefore more enduring.

Take, for example, economic reforms over the last 10 years. The NDA government tried to hasten public sector disinvestment, but faced a backlash as it was moving too fast. The UPA slowed things down and started a spending spree in the name of the aam aadmi. When this spending reached its limits, and when government coffers started looking empty, selling public sector assets returned — and with less political opposition.

It is impossible to predict how the five vectors will interact and reach a new equilibrium, but one thing is clear: the rise of India is the most positive force among them all. It is up to us to play the balancing role right.