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A Tri-Polar World: USA, China And India Arvind Virmani (views are personal)

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Presentation on theme: "A Tri-Polar World: USA, China And India Arvind Virmani (views are personal)"— Presentation transcript:

1 A Tri-Polar World: USA, China And India Arvind Virmani (views are personal)

2 9th February 2011CarnegieEIP:av Introduction Index of Power: Economic, Overall Review of Our Past projections –Globalization: Major driving Force New Developments –Effect of Global Crisis Revised estimates: Changes Transition: Multi-polar or Bi Polar Peace: Asian Balance of Power

3 Nations Power Traditional: Industry, Population, Fiscal-Debt, Economy(Kennedy), Technology, Military, Navy, Nuclear. Complex Models: Tellis(2000) Simple model: Two level index-VIP –Foundation/base: Economy Basic modern economics -> VIP 2 Apply all countries, over millennia –Upper level: Strategic Assets/Tech 9th February 2011 CarnegieEIP:av

4 Economic Foundations of Power Growth Theory and Experience –Convergence (PcGdp):Intra AE only –LDCs: Divergence, Shooting stars –HGEs: Gr. persistence, Catch-up Growth Globalization and Reform –Asia (Japan;NICs,Asean;China,India,Vietnam) Global Technology Frontier Shares in world (GDP- Population) –Europe, Japan, USA=>China, India, Indonesia 9th February 2011 CarnegieEIP:av

5 26/10/0711 April, April, 2007 AV Global Growth Experience Sustained high growth over decades rare. Inter-decadal growth persistence (correlation) low (0.18) Complete mean reversion in three decades (0.06) Exceptions: Asian high growth economies (Japan, NIEs, ASEAN, China, India, Vietnam) GrPcGdp > 7.5% for 30 (20) years: 2% (4.5%) ctry

6 Indices of Power: VIP 2, VIP Size of Economy (GDP) –Gdp = Population * Per capita Gdp –Population(demography) –Quantity Comparison: PPP Economic Power : Index(VIPP/VIP 2 ) –General Technological capability: Prod Fn. (K/L, Hs/L, A(t)) = Per capita Gdp Overall Power: Index (VIP) –Strategic Technology and Assets 9th February 2011 CarnegieEIP:av

7 9th February 2011CarnegieEIP:av Uni- Polar to Bi Polar US NIC (Dec 2004) –Based on Goldman Sachs October 2003 –Chinas GDP(US$) could be 2nd largest by 2020 –Indias GDP(US$) could be 3rd largest by Paper (ICRIER WP150) –China and India rise faster than projected Demographic decline (Russia, Japan, Ger, Itly, Fra) Kissinger(94): US,EU,Russia,Japan,China,India(?) –Bi Polar Transition China: GDP at PPP equals USA by 2015 Power potential 70% of USA by 2035

8 9th February 2011CarnegieEIP:av Bi Polar to Tri Polar 2005 Paper (ICRIER, WP160, Mar. 2005) –Rise of India: Third largest economy 2015, Real GDP=USA by 2040 Power potential 80% of US by –Chinas Power potential = US –Bi-polar world by 2025, Tri-polar by 2050 –Association of States(EU): Virtual State (USSR) 2006 Book (Academic Foundation) –Weakness and threats to China, Indias growth China: Mercantilist Export-FDI/PSU investment led growth India: Governance/Public Goods e.g. Rule of Law (Police, legal system)

9 9th February 2011CarnegieEIP:av US NIC: November 2008 The eight largest economies in 2025 will be, in descending order: the US China, India, Japan.. By 2025 China will have the worlds second largest economy and will be a leading military power. –A global multi polar system is emerging with the rise of China, India, and others –The development of a globalized economy in which China and India play major roles

10 9th February 2011CarnegieEIP:av New Developments: Oil, Energy Price Boom –Russias comeback, Brazil New PPP estimates from ADB-WB –India, China: -36%/40% US-EU Crisis –Differential Impact on economies Domestic vs. Export oriented Fiscally constrained vs. non-FC

11 9th February 2011CarnegieEIP:av Fiscal Impact Fiscal Deficits: USA, EU (Japan) –Foreign Aid, Military expenditures China: Fiscal Surplus, CAS Global rebalancing(US CAD)? China –Domestic caution (Ec-tech): Financial –External Assertion(Pol-Mil nationalists) S China Sea, Arunachal-Kashmir

12 9th February 2011 CarnegieEIP:av Impact on Exports Global GDP & Import slowdown –Export oriented => Export neutral Development strategy, Growth model –E, S E Asia: FDI-Export or Public Investment-Export led growth model India: Domestic Entrepreneur led gr –Export Neutrality, Investment neutrality –Continue Policy, Institutional Reform Mid-decade Gr. Rt.: China

13 1a Economic Size (GdpPpp) 9th February 2011CarnegieEIP:av

14 9th February 2011CarnegieEIP:av Difference: 2010 from Impact –Lower Gdp Ppp estimates –Offset by faster growth China: GdpPpp = US in 2017(+2 yrs) India 3 rd largest in 2012 –Equals USA in 2034 (-6 yrs) Indias (trend) growth rate faster than Chinas by mid-decade.

15 1b Economic Size (GdpPpp) 9th February 2011CarnegieEIP:av

16 9th February 2011CarnegieEIP:av Difference: 2010 from Russia –Overtake Germany by 2020 –5 th in Size and Power Potential –Reason - Oil/Gas prices: Faster growth Non-market power of energy cartel –Actual Power higher: Strategic Technology Brazil –Overtake France and UK by –Positive effect of natural resource endowment

17 9th February 2011CarnegieEIP:av Difference: 2010 from Power Potential (VIP 2 ) China VIP 2 =USA 2027 India: VIP 2 80% of USA in 2040 –10 yrs earlier than in first prediction

18 Long Term Evolution: Power Potential VIP 2 9th February 2011CarnegieEIP:av

19 9th February 2011CarnegieEIP:av Global System: Long Term Global Power: VIP 2 > 25% –China 2010, India 2025 (Japan -09) Super Power: VIP 2 = 40% - 50% –China –India Uni-polar: US Sole super-power –Peak 1999 ( ) Bi-Polar: 2020, Tri polar: 2035

20 Long Term Evolution: Power Potential VIP 2 9th February 2011CarnegieEIP:av

21 9th February 2011CarnegieEIP:av Quadri-Polar: Unlikely Virtual State: Unified decision making w.r.t external relations –Comecon/E block (USSR+ E Europe) EU is not Virtual State(VS) –Move in opposite direction: Referenda –Only in Trade (WTO) does it act as one –Financial crisis: Mixed signals –Politically and Militarily: Nil No EU seat in Multilateral organizations

22 9th February 2011CarnegieEIP:av Multi-Polar Transition Multiple descriptions: Competitive fringe –Pluri-polar, Multi-polar, A-polar, US and Rest Globalisation –Change in relative importance of Economic, military, social elements of power Economic, social(?) Multi-polarity –USSR disintegration 1990=> Russia –Ec. decline of allies: Large, increasing Gap with 2 nd rank Japan, 3 rd rank Germany etc –Ec. rise: Non-allies China, Brazil, India –Formation of Euro, expansion of EU

23 9th February 2011CarnegieEIP:av Overall Power Actual Power: VIP=(VIP 2,Strategic Assets) –Strategic-military technology/assets/capability USA even more dominant Russia: Legacy strategic assets immobilised Overall: US pre-dominant power –Monopoly with Competitive Fringe Future: Strategic assets –Russia: Gradual depreciation –China: Systematic build of strategic capability! –India: Political Will to build, exercise power?

24 Transition: Power Potential VIP 2 9th February 2011CarnegieEIP:av

25 9th February 2011CarnegieEIP:av Net Assessment: Preliminary S1 Uni-polar – Multi polar –G20; G9( )? S2 Bipolar (USA-China) –S2a(Jelly spine) Action(appeasement)-Reaction China (declining respect/fear) expands strategic space in Asia. G2 => Matrix (India-Asean-Japan-Korea; Medium powers, G6) –S2b(Velvet glove-iron fist) China-hard Realism(SCs core nat int) US reacts(Open seas, alliances, dvlp partners) S3 Tri polar –S3a Jelly Spine: G2 USA-China –S3b Velvet Glove: Key role of USA-India Partnership –S3c China-India (Buddhist): => G3 or G4 (+EU) –S3d Independent(all): Un-stable disequilibrium, danger

26 9th February 2011CarnegieEIP:av Velvet Glove Scenario: US-India Partnership Dangerous Decade( )=> S3b Partnership: Globalization- multifaceted interaction ( Economic, military, social) Global Economic Organizations –Legitimacy, credibility and governance –Fair democratic rules that will last IMF: Bop support/ST Loans –Crises: Macro imbalances=>Macro mgt. –European Institution, Power base WB: Aid/social: India (7)

27 9th February 2011CarnegieEIP:av Initiatives: Economic Positive Levers: Traditional Polity Fiscal constraints on USA –Indian Aid Organization –R&D & Joint Production Health care costs (US) Energy: Thorium breeder, non-conventional sources; Use efficiency (Bldgs, AC, Refrig) Cyber Security (Indian IT)

28 9th February 2011CarnegieEIP:av Initiatives: International Security Fiscal Def =>Vacation of strategic space =>Strategic partnership (Asia) Freedom of Asian Seas Initiative –Suez to South China sea –Naval co-operation: broaden, deepen UNSC: Permanent member with veto Technology access: Membership of NSG, MTCR, Wassanar, Australia Group

29 9th February 2011CarnegieEIP:av Initiatives: International Security Global Anti-terror Strategy –Create consensus in UN and other forums Travel, financial ban on Intelligence agents, military officers (rogue?) involved with terrorists –Definition of Aggression and Self defense Irregular/Guerilla warfare from territory –Elimination of Terrorist networks Arms embargo on countries sheltering terrorists Counter-terror expertise –Deterrence capability: Pariah State, Non-State actor, state sponsored; finance source/channel

30 9th February 2011CarnegieEIP:av Medium Term: Geo-Political Rules New Rules for an era of globalization Economic: Macro decision making –Quadri polar? G4 (US, China, EU, India) Social: Democracy Initiative (G6) –Independent body: Degree of democracy (index) to adjust 1 person 1 vote Security: Institutions (rules): –Vote proportional to power –Economic(VIP 2 ) or Ec + Strategic (VIP)

31 9th February 2011CarnegieEIP:av References 1 From Uni-polar to Tri polar World: Multi polar Transition Paradox, Academic Foundation, New Delhi, Propelling India from Socialist Stagnation to Global Power: Growth Process, Vol. I (Policy Reform, Vol. II), Academic Foundation, – A Tripolar World, India, China & US, Lecture delivered at India Habitat Centre on May 18, –Economic Performance, Power Potential and Global Governance: Towards a New International Order, Working Paper No. 150, ICRIER, December ( atId=233). atId=233 –A Tripolar Century: USA, China and India, Working Paper No. 160, ICRIER, March, ( atId=233). atId=233 –Chinas Socialist Market Economy: Lessons Of Success, ICRIER Occasional Policy Paper, April, 2005 ( –VIP 2 : A Simple Measure of Nations (Natural) Global Power, ICRIER Occasional Paper, July, 2005().

32 9th February 2011CarnegieEIP:av References 2 Chinas Socialist Market Economy: Lessons Of Success, Working Paper No. 178, ICRIER, December Global Power From The 18th To 21st Century: Power Potential (VIP2), Strategic Assets & Actual Power (VIP), Working Paper No. 175, ICRIER, November &SubSubCatId=233. &SubSubCatId=233 World Economy, Geopolitics and Global Strategy: Indo-US Relations in the 21st Century, Economic and Political Weekly, Vol. XLI No , November 4-10, 2006, pp ( =11&filename=10717&filetype=pdf ). =11&filename=10717&filetype=pdf Trilateral Nuclear Proliferation: Pakistans Euro-Chinese Bomb, IDSA Monograph Series No. 1, Institute of Defence Studies and Analysis, New Delhi, December 2006.

33 9th February 2011CarnegieEIP:av References 3 The Economic Foundations of National Power: From Multi polar to Tri-Polar World? in V. R. Raghavan (Editor), Economic Growth & National Security, Centre for Security Analysis, Chennai, Future Economic Contours of the Asia-Pacific and South Asian Region and Thier Impact on Global Security Architecture, USI National Security Lecture, 2006, in National Security, Global Strategic Architecture and Information Security, National Security Series, 2006, KW Publishers Pvt Ltd, New Delhi, Evolution of World economy and Global Power: From Unipolar to Tripolar World in Economic Diplomacy, Editor I. P. Khosla, Konarak Publishers, Globalisation, Economic Growth and National Security chapter in, Comprehensive Security for an Emerging India, Editor AVM Kapil Kak, CAPS 2010 The Sudoku of Indias Growth, BS Books, New Delhi, 2009.

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