03/12/2012
Book Review
The Rise of Nations: The Race For Progress and Winning The Future is the title of a new book recently published in Arabic by The Library of Arts. The author of the book is Ambassador Amr Helmy, the Assistant Minister for Foreign Affairs of Egypt. This book is the single best selling book in Arabic language at the Diwan Bookstores in Cairo, Egypt.
The book addresses a number of issues that are gaining an increasing importance within the context of international relations. The topics discussed comprise, inter alia, the changing balance of power, globalization, the Knowledge Based Economy and the new theory of growth as well as the challenges that the world economy will face in the future. The topics addressed in this book provide a ray of hope for the remaining emerging economies that are looking forward to building a better future for their people and winning the race for the future.
The first chapter of the book addresses the shift of the global balance of power and the end of an era characterized by the absolute dominance of the western countries that began around the 15th century in a period known as “The Rise of the West”. At that point Europe – living through the agricultural and industrial revolutions – was the center of production, progress and innovation especially in the fields of science, technology, trade and capitalism. It also enjoyed political dominance over many nations in the World. The onset of 19th century witnessed the gradual transformation of the United States of America into the greatest world power. The status of America as a superpower in almost every realm remained uncontested until another great power shift started taking place. This shift is better known as the “Rise of the Rest” – the rest referring to the rest of the world – and more specifically the rise of the BRICS – the acronym referring to Brazil, Russia, India, China and South Africa. The growth of these emerging economies has fundamentally changed the global economic landscape. These countries are becoming new centers of gravity attracting production, progress, innovation and capital into their national borders and away from the free world. As well, these economies are now the driving engine for global growth and are responsible for generating half of global economic growth. This shift in global power is unique because of a number of reasons. The first being that the rise of these nations has been benevolent with limited political ambitions as evidenced by the fact that the rise of China is better known as the “Peaceful Rise of China”. The second reason being that these economies have followed an economic model that is different from the prevailing models of the West. For example, the Chinese economy is based on a new model better known as “State-Capitalism”. This model has allowed China to become the second largest economy in the World, taking over Japan’s position. Not only that, but China is now poised to becoming the emerging superpower of the World. China is the main center of attraction of foreign direct investment worldwide and possesses the largest industrial base in the whole world. The level of foreign currency reserves in China has reached 2.8 trillion dollars; three times the level of the foreign reserves of all European Union member countries combined.
The first chapter also describes the fierce race between the different nations in a quest for dominance – with countries aiming at gaining greater economic power, accumulating wealth and playing a greater role in global politics. The author classifies countries into different groups; a group that is concerned about its ability to maintain its existing competitiveness and leadership, a group that is steadily developing its human resources to sustain a strong economic growth in order to surpass the exiting developed countries, a group that is standing still and finally a group that unfortunately is actually retreating.
The second chapter of the book is about globalization; its contributions and the areas of its shortcomings. Globalization is a phenomenon that has dramatically changed the world we live in since the end of the Cold War. The contributions of globalization include facilitating and speeding the movement of capital, products, individuals, services and ideas between nations and even continents resulting in greater economic integration in a “borderless” world. The book discusses the views expressed by some about the shortcomings of globalization which include the adverse effects of increased economic interdependence in creating contagions and spreading economic crisis in an unchecked manner, the inability of globalization to reduce or eliminate poverty, its limited contributions to closing the income gap between the have and the have-nots, its responsibility for the erosion of the hegemony of western nations and finally its role in contributing to disintegrating the social fabrics as a result of facilitating an increased flow of immigrants with different cultural and religious backgrounds. Yet, the shortcomings of globalization cannot be compared to its contributions. In order to maximize the benefit from the valuable contributions of globalization, the world has to concentrate on developing globalization with a “human face” that takes the needs of developing countries into consideration.
The third chapter of the book addresses the importance of creating the Knowledge Based Economy (“KBE”). When economies were based on agriculture, land was the most important factor of production; then, during the industrial revolution, raw materials became the primary factor of production. According to the New Theory of Growth, knowledge is the single most valuable factor of production. Knowledge can only be created through modern education and developing social values without obliterating the existing cultural, religious and national identities. Modern education contributes to creating “innovating minds” that can produce, innovate and create products and services that are competitive on a global scale. Developing these minds requires focusing on STEM subjects being Science, Technology, Engineering and Mathematics as well as directing efforts towards fostering the four pillars of the KBE being Biotechnology, Material technology, Nano Technology and Information, Communication, Transportation and Technology (“ICT&T”). Nations should direct a greater portion of their expenditure to education; this includes developing the infrastructure to include better equipped schools, universities, centers for research and incubators as well as developing the skill sets of teachers and providers of education and finally updating existing syllabi to better prepare the future generations and to better train their minds and their characters. It is not the size of the population that matters, but the level of education and the preparation of the productive society that will make all the difference in the creation of wealth, welfare and progress.
The fourth chapter of the book addresses the challenges that the global economy will face in the future. These challenges are expected to take place as a consequence of a large increase in the world’s population and an increasing shortage in strategic resources including water, food and nonrenewable sources of energy. Both of these factors are anticipated to increase in tensions on regional and global scales. Additionally, the fact that the centers of innovation and economic growth are moving out of the western free world; will have consequences on the international political and economic order. The existing arrangements will change. For example, it will no longer be sustainable to maintain the existing rules where the head of the World Bank has to be an American citizen while the head of the International Monetary Fund (“IMF”) has to be a European citizen. It is most likely that there will be changes at the level of the Security Council reflecting the new reality presenting itself in the power of the new emerging countries.
Additionally, this chapter focuses on that fact that it is not necessary to clone the western economic models in order to achieve growth. The modern world had confined itself in lengthy debates on three alternative economic models; being Capitalism, Communism and the so-called “Managed Market Economy”. However, after the fall of the Berlin wall in 1989, the unification of Germany in 1990 and the collapse of the Soviet Union in 1991, Communism disappeared leaving only two economic models. The first model is the “Washington Consensus Strategy For Development”. This school of thought focused on the mantra: Stabilize, Privatize and Liberalize. Where stabilization refers to stabilizing prices and limiting inflation and maintaining stable foreign exchange rate; privatization means shifting production and services to private sector management and liberalization refers to the elimination of trade barriers and focusing on facilitating free trade among the nations of the world. This model focused on the necessity to promote ideas based on a market driven economy, expanding the process of privatization along with liberalization of trade and financial markets and strengthening the role of private business institutions. This movement believed in limiting the participation of the government in production and value creation and allowing the governmental bodies to play a regulatory role and oversee all activities with the objective of maintaining stability. Unfortunately, this model generated a number of consecutive economic crisis in Latin America. The second school of thought being the “Managed Market Economy Model” focused on the importance of the role of the government in achieving growth while focusing on generating employment opportunities, achieving social justice, protecting low-income earners and eradicating poverty. This model is being applied – with various degrees – in developed market economies. Unfortunately, this model failed to prevent the international financial crisis that hit in September 2008 and from which the world has not recovered until now. However, China emerged with a new model – the State Capitalism. After assessing the shortcomings of the “Washington Consensus Strategy for Development” in a number of countries including the countries of Latin America, the shortcomings of the economic policies introduced by Boris Yeltsin in Russia and the weaknesses of the Managed Market Economy Model; the new Chinese model provides an interesting proposition. China has succeeded in maintaining an annual growth rate of 9% to 11% over the past 30 years resulting in increasing the size of its economy eight folds and achieving the highest growth rate recorded by any nation at any point in time. It has also eliminated the poverty of 400 million people in an unprecedented poverty eradication experience in recent history.
The significant changes that the world has witnessed, especially the transformation of some poor and developing countries into new superpowers, demonstrates that any community is capable of achieving progress and enhancing its positioning on a global scale. In order to achieve this progress, countries need to possess qualified and visionary politicians capable of interpreting the developments taking place around them, facing the challenges that present themselves and taking their countries and people to a different level. More significantly, these politicians need to focus on developing their most important resource; the human and scientific capabilities of their people. They also need to carefully select the best economic model that will assist them in achieving their ambitions and in winning the race for the future.
The final chapter addresses the lessons learnt from the experiences of the emerging economies, particularly those belonging to the BRICS grouping who is progressively prompting a major shift in the balance of power among the world economies reflecting what is becoming known as The Rise of the Rest in contrast to the Rise of the West. These economies provide key role models to other developing countries as they present success stories in terms of remarkable growth and production rates, efficient utilization of resources along with extensive redistribution of income.
They also display some unique models of development that are quite distinctive from the experiences of other developed and developing economies such as the Chinese model of State Capitalism. This in itself is an important lesson for other developing economies as it reflects progress that does not necessarily entail imitating the western model per say or giving up the indigenous culture and identity of the developing society.
Quite significant in the experiences of the emerging economies is their focus on such key areas that greatly reflect upon the success of development efforts and progress such as education, poverty eradication, and the efficient use of strategic resources namely water, food and energy. With respect to education, the chapter cites the examples of Japan and South Korea where education enriched the human capital with the necessary knowledge that became one of the most fundamental requirements for research, innovation, creativity and accordingly production and competitiveness. As such, the book emphasizes the necessity that the budgets allocated to improving education increasingly reflect a considerable percentage of GDP, besides directing substantial funds to such areas as Science, Technology, Engineering and Mathematics (STEM) particularly what is known as Wealth Creating Technology such as Bio Technology, Nano Technology, Material Technologies and Information and Communications Technology. In addition, it is highly recommended in this regard to establish links with the major research centers and universities through a network of joint programmes and scholarships that enable the exchange of students and ideas. In terms of poverty eradication, the chapter discusses the successful experiences of China, India and Indonesia where the social and humanitarian dimensions are quite evident in their development efforts. This involved going beyond the traditional thinking of subsidizing basic commodities and services to adopting comprehensive strategies for poverty eradication that entail equal opportunities, access to funding for small and medium enterprises, enhancing social responsibility of multinational corporations in developing their surrounding societies, and voluntary contributions of nongovernmental organizations. The chapter finally highlights the importance of the efficient use of such strategic resources as water, food and energy that are subject to increasing pressures due to the dual rise in population and growth rates. It is thus emphasized in this respect that long term plans should be adopted to ensure the future security of water, food and energy supplies through both rationalizing current consumption rates and expanding scientific research in such areas as desalination of sea water, biotechnology with the aim of increasing the production of basic crops using the least possible irrigation resources and increasing reliance on clean, renewable and nuclear energy. This in turn will enhance the prospects for developing countries to possess the necessary scientific knowledge and technological basis that is deemed indispensable to be a dynamic part of the race for progress.
