Are we witnessing ‘the rise of the rest’?

It seems to be official: the baton of history is being passed from the West to the East.

On Friday last week, a communiqué from the G20 announced that it, rather than the G8, would become the main forum for the gathering of important state leaders to discuss economic matters: ‘After this crisis, critical players need to be at the table and fully vested in our institutions to allow us to cooperate to lay the foundation for strong, sustainable and balanced growth… We designated the G20 to be the premier forum for our international economic cooperation.’ (1)

Until now, the G8 (France, Italy, Britain, Germany, the US, Canada, Japan and Russia) was the forum in which the most economically powerful nations met in order to discuss economic matters. Developing nations such as India, China and Brazil had often attended, too, but only as guests. The decision to make the G20 the main forum seems to signal that the G8 is now defunct and that the rich, powerful states on their own can no longer dominate the debate about the economy. No longer simply the objects of history, it seems that the large developing nations – in particular India, China, Mexico, Turkey and Brazil – are finally joining the developed world to become the movers and shakers of history.

Certainly the discussion about a global power shift has become more widespread over the past year. Published just pre-crash, Fareed Zakaria’s book The Post-America World argued that, though America is likely to remain the dominant world power, it must also learn to share power because of the ‘rise of the rest’. The increasing economic strength of some of the developing nations means that America can no longer dictate policy and politics, argued Zakaria (2).

Roger C Altman has argued that the economic crisis signalled a ‘geopolitical’ setback for the West. (3) In November last year, the US National Intelligence Council published a lengthy report arguing that America had to prepare for a more ‘multi-polar’ world in which power will be more dispersed and diffuse, and, although America would still remain powerful, US ‘leverage’ (as the report terms it) will decline (4).

Of course, this is not the first time there has been a stream of articles and books warning of a decline in Western power. In the 1970s, as America was forced to abandon the system of dollar exchange set up at Bretton Woods, international relations theorists pondered the seeming disconnect between America’s power and its increasing incapacity to order the world (5). In the late 1980s and early 1990s, American academics warned of a new hegemon on the bloc: Japan. These fears vanished along with Japanese growth in its ‘lost decade’.

What do all these alleged shifts really tell us about the global distribution of power? I would argue that the official move from the G8 to the G20 is symbolic of the fact, that to some extent, the developed nations can no longer dictate terms to the stronger developing nations. The economic crisis has indeed further eroded the authority of the West and of institutions such as the International Monetary Fund, as Western powers have been seen not only to have mismanaged the economy but also to have gone on wild sprees of printing money in order to prop up their economies – to an extent that would make Robert Mugabe blush. This will make it harder for Western governments to insist on economic prescriptions for some of the more powerful developing nations (of course, if you are Latvia then you will still have to grin and bear the prescriptions).

More importantly, though, there has undoubtedly been a steady shift in economic power. China is now the world’s third largest economy; the top four banks in the world (measured by market capitalisation) are Chinese; the Industrial and Commercial Bank of China is the largest in the world in terms of deposits, and China holds $2 trillion in foreign exchange reserves, mainly consisting of US government debt (6). Were China to sell its dollars, the US economy would be devastated. India has also been growing at an astonishing rate. Despite the economic crisis the economies of China and India are expected to continue growing this year at a rate of about six per cent. That is certainly very poor growth compared to the pre-crisis growth of those two states, but just think about these figures: six per cent is the kind of growth that Western European economies can no longer even fantasise about in their wildest dreams.

However, the world has not quite been turned upside down yet. Despite the growth of countries such as India, China and Brazil, these are still very poor countries. China cannot save the global economy on its own, or even necessarily kickstart it. Moreover, China is as trapped by its vast dollar holdings as America is; were China to start a ‘fire sale’ of dollars then its economy would evaporate, too. Thus the theory of ‘mutually assured destruction’ is likely to hold both China and America in check. And there are more complicated things to think about in terms of economic growth: for example, China might well have manufactured most of the parts of the computer that I am writing this article on, but most of the value will still have been added in America by Apple or Microsoft.

We should also be wary of attaching too much importance to the G20. Whatever Gordon Brown might say, there is no system of global governance today. The G8 and the G20 are, in the end, little more than forums for discussion; their existence does not signify some kind of new collective rule. Whatever states might agree and promise to do at G8 and G20 meetings, it’s not nearly definite that such things will happen. We need only to look at recent national economic policies in the European Union to see that even the most institutionalised system of collective governance does not guarantee that states won’t go on to do whatever suits them. The G20 is simply a talking shop and there is nothing to bind the individual states to their commitments. Indeed, pious statements from the G20 about avoiding protectionist measures were being broken by various states even as the leaders of those states were announcing them. Moreover, within the G20 relative power will still count. The Western economies will certainly have to listen to and negotiate with China, Russia and probably India, but they will likely pay less attention to Mexico and Brazil.

Also, before anyone gets carried away by last week’s G20 communiqué, it is worth remembering that many of these shifts were well underway before the economic crisis. The crisis has served to exacerbate the relative decline of the American and European economies, but America has been in a relative long-term economic decline since the 1970s. The emerging economies have been, well, emerging at least since the end of the Cold War. What the crisis has done is highlight these trends, and perhaps accelerate them, but it has not caused them.

There is another serious and often neglected long-term trend that has hastened the relative decline of Western power – the erosion of political coherence amongst Western elites. This has also become clearer in the current economic crisis. Lack of vision and disagreement are rife. Germany and France blame ‘Anglo-Saxon’ capitalism and propose greater regulation as a way of resolving the crisis; America wants to concentrate on resolving global imbalances, which would involve surplus states such as Germany (and China) spending more and saving less, something which Germany flatly refuses to do. In the meantime, Obama made Brown and Sarkozy’s blood run cold with his suggestion that the UK and France should leave the IMF board in order to make way for rising economies. Hardly declarations of war, of course, but certainly symptomatic of incoherence.

Although historical analogies are always flawed, it would seem that the world is shifting to a system that will be closer to the nineteenth century than the twentieth. Back then, for a time, Britain was the most powerful nation in economic and military terms, as the US is today, yet this did not mean that consensus reigned amongst powerful governments – rather it was a time of shifting alliances and rivalries. Fareed Zakaria is right when he says that we are witnessing the ‘rise of the rest’, and an increasingly divided West will have to accept China and India and other developing nations as serious players.

Tara McCormack is lecturer in international politics at the University of Leicester. She is author of the forthcoming Critique, Security and Power: The Political Limits to Critical and Emancipatory Approaches to Security, published by Routledge. (Buy this book from Amazon(UK).) She is also speaking in the debate Is there a global power shift from West to East? at the Battle of Ideas festival on Saturday 31 October 2009.

(1) Full G20 communiqué, Financial Times, 25 September 2009

(2) The Post-America World: and the Rise of the Rest, Fareed Zakaria, Penguin, 2009

(3) The Great Crash, 2008, Foreign Affairs, January/February 2009

(4) Global Trends 2025: A Transformed World

(5) Power and Interdependence, Robert O Keohane and Joseph S Nye, Longman, 2000

(6) Asia banks for a world turned upside down, Financial Times, 16 September 2009