Will Asia save global capitalism?

China rises as the US declines, leaving the rest of the world wondering which economic model to attempt to emulate.

By Pepe Escobar (extract) Aljazeera

“Suppose you're a developing country, shopping in the developmental supermarket. You look at China and think you see something new - a consensus model that's turning on the lights everywhere - or do you? After all, the Chinese version of an economic boom with no political freedom may not turn out to be much of a model for other countries to follow.”

More than ten years ago, before 9/11, Goldman Sachs was predicting that the BRIC countries (Brazil, Russia, India, China) would make the world economy's top ten - but not until 2040.

Skip forward a decade and the Chinese economy already has the number two spot all to itself, Brazil is at number seven, India tenth - and even Russia is creeping closer. In purchasing power parity, or PPP, things look even better. There, China is in second place, India is now fourth, Russia sixth, and Brazil seventh.

No wonder Jim O'Neill, who coined the neologism BRIC and is now chairman of Goldman Sachs Asset Management, has been stressing that "the world is no longer dependent on the leadership of the US and Europe".



After all, since 2007, China's economy has grown by 45 per cent, the US economy by less than one per cent - figures startling enough to make anyone take back their predictions. US anxiety and puzzlement reached new heights when the latest International Monetary Fund projections indicated that, at least by certain measurements, the Chinese economy would overtake the US by 2016. (Until recently, Goldman Sachs was pointing towards 2050 for that first-place exchange.)

Within the next 30 years, the top five will, again according to Goldman Sachs, likely be China, the US, India, Brazil, and Mexico. Western Europe? Bye-bye!

A system stripped to its essence

Increasing numbers of experts agree that Asia is now leading the way for the world, even as it lays bare glaring gaps in the West's narrative of civilisation. Yet to talk about "the decline of the West" is a dangerous proposition.

A key historical reference is Oswald Spengler's 1918 essay with that title. Spengler, a man of his time, thought that humanity functioned through unique cultural systems, and that Western ideas would not be pertinent for, or transferable to, other regions of the planet. Tell that howler to the Egyptians in Tahrir Square.

Spengler, of course, captured the Western-dominated zeitgeist of another century. He saw cultures as living and dying organisms, each with a unique soul. The East or Orient was "magical", while the West was "Faustian". A reactionary misanthrope, he was convinced that the West had already reached the supreme status available to a democratic civilisation - and so was destined to experience the "decline" of his title.

If you're thinking that this sounds like an avant-la-lettre Huntingtonesque "clash of civilisations", you can be excused, because that's exactly what it was.

Speaking of civilisational clashes, did anyone notice that "maybe" in a recent TIME cover story picking up on Spenglerian themes and headlined "The Decline and Fall of Europe (and Maybe the West)"? In our post-Spenglerian moment, the "West" is surely the United States, and how could that magazine get it so wrong? Maybe?

"Think of the present global capitalist moment not as a 'clash', but a 'cash' of civilisations."

After all, a Europe now in deep financial crisis will be "in decline" as long as it remains inextricably intertwined with and continues to defer to "the West" - that is, Washington - even as it witnesses the simultaneous economic ascent of what's sometimes derisively referred to as "the South".

Think of the present global capitalist moment not as a "clash", but a "cash of civilisations".

If Washington is now stunned and operating on autopilot, that's in part because, historically speaking, its moment as the globe's "sole superpower" or even "hyperpower" barely outlasted Andy Warhol's notorious 15 minutes of fame - from the fall of the Berlin Wall and collapse of the Soviet Union to 9/11 and the Bush doctrine.

The New American century was swiftly throttled in three hubris-filled stages: 9/11 (blowback); the invasion of Iraq (pre-emptive war); and the 2008 Wall Street meltdown (casino capitalism).

Meanwhile, one may argue that Europe still has its non-Western opportunities, that, in fact, the periphery increasingly dreams with European - not American - subtitles. The Arab Spring, for instance, was focused on European-style parliamentary democracies, not the US presidential system. In addition, however financially anxious it may be, Europe remains the world's largest market. In an array of technological fields, it now rivals or outpaces the US, while regressive Persian Gulf monarchies splurge on euros (and prime real estate in Paris and London) to diversify their portfolios.

Decline or not, it might find a whole new lease on life by sidelining its Atlanticism and boldly betting on its Euro-Asian destiny. It could open up its societies, economies, and cultures to China, India, and Russia, while pushing southern Europe to connect far more deeply with a rising Turkey, the rest of the Middle East, Latin America, and Africa (and not via further NATO "humanitarian" bombings either).

Otherwise, the facts on the ground spell out something that goes well beyond the decline of the West: It's the decline of a system in the West that, in these past years, is being stripped to its grim essence. Historian Eric Hobsbawm caught the mood of the moment when he wrote in his book How to Change the World that "the world transformed by capitalism", which Karl Marx described in 1848 "in passages of dark, laconic eloquence is recognisably the world of the early twenty-first century".

In a landscape in which politics is being reduced to a (broken) mirror reflecting finance, and in which producing and saving have been superseded by consuming, something systemic comes into view. As in the famous line of poet William Butler Yeats, "the centre cannot hold" - and it won't either.

If the West ceases to be the centre, what exactly went wrong?

Are you with me or against me?

It's worth remembering that capitalism was "civilised" thanks to the unrelenting pressure of gritty working-class movements and the ever-present threat of strikes and even revolutions. The existence of the Soviet bloc, an alternate model of economic development (however warped), also helped.

To counteract the USSR, Washington's and Europe's ruling groups had to buy the support of their masses in defending what no one blushed about calling "the Western way of life". A complex social contract was forged, and it involved capital making concessions.

No more. Not in Washington, that's obvious. And increasingly, not in Europe either. That system started breaking down as soon as - talk about total ideological triumph - neoliberalism became the only show in town. There was a single superhighway from there and it swept the most fragile strands of the middle class directly into a new post-industrial proletariat, or simply into unemployable status.

If neoliberalism is the victor for now, it's because no realist, alternative developmental model exists, and yet what it has won is ever more in question. Meanwhile, except in the Middle East, progressives the world over are paralysed, as if expecting the old order to dissolve by itself. Unfortunately, history teaches us that, at similar crossroads in the past, you are as likely to find the grapes of wrath, right-wing populist-style, as anything else - or worse yet, outright fascism.

"The West against the rest" is a simplistic formula that doesn't begin to describe such a world. Imagine instead, a planet in which "the rest" are trying to step beyond the West in a variety of ways, but also have absorbed that West in ways too deep to describe. Here's the irony, then: Yes, the West will "decline", Washington included, and still it will leave itself behind everywhere.

Sorry, your model sucks

Suppose you're a developing country, shopping in the developmental supermarket. You look at China and think you see something new - a consensus model that's turning on the lights everywhere - or do you? After all, the Chinese version of an economic boom with no political freedom may not turn out to be much of a model for other countries to follow.

In many ways, it may be more like an inapplicable lethal artefact, a cluster bomb made up of shards of the Western concept of modernity married to a Leninist-based formula where a single party controls personnel, propaganda, and - crucially - the People's Liberation Army.

At the same time, this is a system evidently trying to prove that, even though the West unified the world - from neocolonialism to globalisation - that shouldn't imply it's bound to rule forever in material or intellectual terms.

Or let's say our shopper looks to the United States, that country still being, after all, the world's number one economy, its dollar still the world's reserve currency, and its military still number one in destructive power and still garrisoning much of the globe. That would indeed seem impressive, if it weren't for the fact that Washington is visibly on the decline, oscillating wildly between a lame populism and a stale orthodoxy, and shilling for casino capitalism on a side street in its spare time. It's a giant power enveloped in political and economic paralysis for all the world to see, and no less visibly incapable of coming up with an exit strategy.

Really, would you buy a model from any of them? In fact, where - in a world of escalating disarray - is anyone supposed to look these days when it comes to economic or democratic models?

One of the key reasons for the Arab Spring was out-of-control food prices, driven significantly by speculation. Protests and riots in Greece, Italy, Spain, France, Germany, Austria, and Turkey were direct consequences of the global recession. In Spain, nearly half of 16- to 29-year-olds - an overeducated "lost generation" - are now out of jobs, a European record.

That may be the worst in Europe, but in Britain, 20 per cent of 16- to 24-year-olds are unemployed, about average for the rest of the European Union. In London, almost 25 per cent of working-age people are unemployed. In France, 13.5 per cent of the population is now officially poor - that is, living on less than $1,300 a month.

As many across Western Europe see it, the state has already breached the social contract. The indignados of Madrid have caught the spirit of the moment perfectly: "We're not against the system; it's the system that is against us."

This spells out the essence of the abject failure of neoliberal capitalism, as David Harvey explained in his latest book, The Enigma of Capital. He makes clear how a political economy "of mass dispossession, of predatory practices to the point of daylight robbery, particularly of the poor and the vulnerable, the unsophisticated and the legally unprotected, has become the order of the day."

Will Asia save global capitalism?

Meanwhile, Beijing is too busy remixing its destiny as the global Middle Kingdom - deploying engineers, architects, and infrastructure workers of the non-bombing variety from Canada to Brazil, Cuba to Angola - to be much distracted by the Atlanticist travails in the Middle East and Northern Africa.

If the West is in trouble, global capitalism is being given a reprieve - how brief we don't know - by the emergence of an Asian middle class, not only in China and India, but also in Indonesia (240 million people in boom mode) and Vietnam (85 million). I never cease to marvel when I compare the instant wonders and real-estate bubble of the present moment in Asia to my first experiences living there in 1994, when such countries were still in the "Asian tiger", pre-1997-financial-crisis years.

In China alone, 300 million people - "only" 23 per cent of the total population - now live in medium-sized to major urban areas and enjoy what's always called "disposable incomes". They, in fact, constitute something like a nation unto themselves, an economy already two-thirds that of Germany's.

The McKinsey Global Institute notes that the Chinese middle class now comprises 29 per cent of the Middle Kingdom's 190 million households, and will reach a staggering 75 per cent of 372 million households by 2025 (if, of course, China's capitalist experiment hasn't gone off some cliff by then and its potential real-estate/finance bubble hasn't popped and drowned society).

Americans may find it surreal (or start packing their expat bags), but an annual income of less than $10,000 means a comfortable life in China or Indonesia, while in the United States, with a median household income of roughly $50,000, one is practically poor.

Nomura Securities predicts that in a mere three years, retail sales in China will overtake the US and that, in this way, the Asian middle class may indeed "save" global capitalism for a time - but at a price so steep that Mother Nature is plotting some seriously catastrophic revenge in the form of what used to be called climate change and is now more vividly known simply as "weird weather".