Emanuele Schibotto, ACI's Director for Development, recently interviewed John West on the Asian Century, Asia and Europe, for a book he is writing on the Asian Century. Here is the interview:
What are the most important features of the Asian Century?
The most important feature of the Asian Century is the renaissance of the Asian economy, after a couple of centuries of relative decline.
Asia's economy has been on an upward trend since Japan started its post-war recovery. Asia's weight in the world economy has risen from about 20% to 30% of global GDP these past couple of decades. But it is still well below its share of the world population, about 60%. If Asia's economic renaissance continues, it could account for 60% of the world economy sometime in the second half of the 21st century. Another way of expressing the same idea is that Asia's GDP per capita is well below the global average. Thanks to its dynamic economic performance, it is realising its potential to catchup to and possibly even surpass the global average.
This increase in Asia's economic weight is changing economic and political power relationships between Asia and the rest of the world, especially the West, with China and perhaps India now emerging as new global powers. It is also changing power relationships between the West's Asian allies (like Japan and Korea) and other Asian countries, notably China.
Will the Asian Century result in a "return of history" to Asia's pre-colonial dominance, or will we see a mere steady growth of Asia's global influence?
Historically, Asia always had the world's largest population and GDP. But its GDP fell behind the West through the 19th and 20th centuries, due to adverse effects of Western and Japanese colonisation and internal unrest in countries like China. The rapid economic progress of the West, thanks to the Industrial Revolution, meant that Asia slipped even further behind in relative terms.
Although Asia always had the world's biggest economic weight, it was never a global power in the past. Until the past few centuries, it was virtually impossible for countries to become global powers, like the US is today, because of the limited level of technological development. Even during the Ming Dynasty, China never had the naval or military resources to colonize Europe, in the same way that European powers were subsequently able to colonize much of the world. In East Asia, China was arguably a regional power, through its tributary (suzerainty) relations with many of its neighbors.
While Asia will overtake the West in economic size in the coming decades, it is quite unlikely that Asia will overtake the West in terms of GDP per capital or level of technological development for a very long time, if ever. Asia will long remain a continent with a large population, which is less prosperous and technologically advanced than the West.
At the present moment, it is also difficult to say that Asia is a coherent region, in the same way that the West is a coherent group. Asia does not have deep forms of political and economic cooperation like NATO (North Atlantic Treaty Organization), EU (European Union), ANZUS (Australia, New Zealand, United States Security Treaty) or even NAFTA (North Atlantic Free Trade Agreement). Indeed, the strongest Asian international relationships are the US-Japan Alliance and US-South Korea Alliance.
As it is today, Asia is defined by its diversity in terms of political systems, economic development, and culture. It is also defined by the rivalries and tensions that exist between many of its countries. We can validly question whether Asia even exists!
In short, it is very difficult to see how Asia could become a world leader, in the same way the West has been. Asia is very big, but not very powerful. Most Asian countries are more concerned with domestic problems, than international ones. No Asian countries are promoting universal values, like the West has done. Moreover, Asia has been a great beneficiary of the Western designed international system as it is, and does not appear to have any alternative to propose.
In conclusion, we are moving into a multi-polar world, where the West and the Western-designed international will still dominate, but where power is increasingly shared with Asia and other emerging economies. What is most striking in this geopolitical landscape is the decline in Europe's influence and relevance, as it is preoccupied by internal EU problems, and also as its military spending declines.
In its 2012 Asian Century White Paper, the former Australian government places the country's future squarely in Asia. Is it a statement of intentions or reality? Is Australia turning away from the US and Europe towards Asia?
Australia has been deepening its economic and political relationships with Asia ever since Japan began its post-war recovery. The 2012 White Paper should be seen as just another step in Australia's progressively closer linkages with Asia. Asia is now a much more important Australian trading partner than Europe or North America. Although Asian investment in Australia is on the rise, the stock of European and North American investment is still much higher. Asian migration to Australia is increasing strongly, making Australia a proudly multicultural country.
Australia has very close political relationships with some Asian countries like Japan, Korea and Singapore, and is developing relations with others. But Australia's political relationships remain strongest with the US, UK and other Western countries -- that is, countries with which Australia shares common values, like pluralist democracy, respect for human rights and market economy.
How do you see prospects for the Australian economy? Can it achieve a path of sustainable development?
There is every reason to believe that the Australian economy will continue to perform well in the years ahead. Indeed, Australia has had one of the best performing economies of the advanced OECD group for over two decades. As for every economy, continued success requires sound macroeconomic management, investments in human capital and infrastructure, and structural reform.
Australia has benefited greatly from the Asian Century boom, through the high demand for its natural resource exports. But as Asia's middle classes become a growing feature of the region, Australia should seek to take more advantage of the opportunity of exporting services to them, and rely less on exporting natural resources. Indeed, Australia's natural environment has suffered from its resource-based development. Much greater attention will be required to ensure that Australia achieves a path of sustainable development.
What are the main incentives and risks of investing in Australia?
Australia has always been a very attractive destination for foreign investment. In fact, modern Australia has been substantially built through foreign investment from Europe, North America and more recently Asia. Australia offers investors a relatively open market, rule of law, good infrastructure, a well-qualified work force, a vast range of natural resources, and a prosperous local market.
Once an investment is accepted in Australia, there are very few risks for investors, beyond normal business risks. Foreign investors must however do their homework because the investment environment is different in each and every country.
Investment proposals, especially in the natural resources area, may be closely scrutinised by environmental activists, labour unions and the media. Investors must be prepared for this. There have been cases of investors from non-democratic countries who have experienced challenges navigating the complexities of a vibrant democracy, with an active civil society.
What should European companies and entrepreneurs understand and know about Australia?
Australia is similar to Europe in many respects. It has a parliamentary democracy and a legal system based on the British system. It has a multicultural society, formed through several waves of migration from Britain and Ireland, continental Europe, and now Asia. Australia is a "new world" country, with a pioneering spirit, and is less bound to traditions than Europe.
Despite these obvious points, European countries and entrepreneurs should also do their homework before they come to Australia. Europeans should not imagine, because they have a longer and deeper history than Australia, that they are more sophisticated than Australians. Australia scores better than most European countries in the OECD's PISA exercise (Programme for International Student Assessment) for the level of education of 15 year old students. There have also been fifteen Australian winners of the Nobel Prize.
Australians also have a more "sunny" disposition than most Europeans, perhaps reflecting the agreeable climate. However, this invariably hides a tough, pragmatic and realistic nature. Australia's fighting spirit is on display for the world to see every four years at the Olympic Games, where Australia regularly outperforms most European countries.
Do you consider Australia a "globalization winner"?
Modern Australia is a product and a symbol of globalisation. Its modern development was propelled by migration, trade and investment, initially from Europe. Australia gradually forged its own identity over the decades. With the abolition of the "White Australia" policy some four decades ago, and the arrival of modern globalization following the end of the Cold War and the renaissance of Asia, Australia is becoming a microcosm of globalisation.
Australia's successful economic, social and political development should serve as a model for much of today's globalizing world. The US should look closely at Australia's prudent banking sector, and restrictive gun laws. Europe would benefit from Australian policies for sustainable public debt management and harmonious multicultural societies. And Asia would gain from Australian-style open markets and democratic politics.
At the same time, to remain a winner of globalization, Australia could learn many lessons from the rest of the world -- like East Asia's excellence in education, Northern Europe's concern for environmentally sustainable development, and the US's innovative and risk-taking business culture.
John West is Asian Century Institute Executive Director
