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Posts tagged ‘United States of America’

G 20 summit: Not India’s turn to eat

ivanka G20

President Trump’s implicit assessment of the value of the G20 Hamburg summit was best illustrated by letting his daughter replace him, whilst he was away from his seat at the summit and to spend double the budgeted time, holding President Putin’s hand. We should take note.

Did Trump try and devalue the G20, President Xi or both by letting Ivanka replace him?

Despite his oddities and his rhetoric, President Trump is a businessman. He cannot but recognize that his real fight is with China. So occasional side swipes to emphasize US dominance over China are par for the course. But the US is too fat to keep pace with China. Its entrepreneurial juices have dried up, bled by the strain of keeping the American Dream alive – an endlessly aspirational, middle class and a voraciously, acquisitive elite, albeit both sets being more meritocratic than elsewhere. But the strain shows. If there is no public money for infrastructure and Facebook needs to build a village to increase the supply of affordable housing in Silicon Valley, there is something very wrong with institutional incentives in the US.

The football “huddle” to plot strategy

Trump

President Trump’s instincts to deal with a problem is to “huddle” in a group of “familiar” friends. Co-opting Russia into a loose friendly alliance of northern hemisphere countries could be an outcome of such “huddling”. After all, there are the cultural bonds. The UK will be supportive. It was Tony Blair, who persuaded Russia to join the rich country club of G7, which thereafter became the G8. Russia was expelled, in 2014 over its muscular action in Crimea. But the G7 was already in decline, post 2009, whilst the G20 gained leverage, as a more inclusive forum with economic heft.

Russia better as a friend than an enemy

Putin2

Bringing Russia in from the cold, makes sense. It is no longer an ideological threat to the West – just a shade smarmier in its management style. But no more so than other upper middle-income countries. Its GDP, in constant terms, has barely moved from US$ 1.5 trillion in 1989 to 1.6 trillion in 2016 – though it has doubled since 1998, when it reached its nadir at US$ 0.8 billion. Russian expatriates live happily in the US and in Europe.

Hypertension, made in China

china air craft carr

Expansionist Germany was the muscular outlier in the early part of the last century. In the early part of the current century, it is China. Scale matters. Consider that the world’s largest mall, 19 million square feet of space, has come up in Chengdu, western China.

The Chinese manufacturing engine has surplus capacity to feed the world over the next decade with goods, targeted at the price points and quality requirements of local markets, across the globe.

China applies the late CK Prahalad’s principle of, “finding the fortune hidden at the bottom of the pyramid” by supplying consumables and consumer durables to 3 billion humans at the bottom of the economic food chain. And they do it better than local manufacturers, located in countries where the poor exist, including India.

India’s dharma

So where does this leave India? It is not in India’s DNA to kowtow. So, we are a poor fit with China. It is in India’s political DNA to be ideological. Remember Non-Alignment? Ideologically committed bureaucracies are a menace. They must be tamed. To come out tops, from the ongoing international churn towards a transactional future, we need to reign-in our tendency to grandstand. There is virtue in being supremely transactional. But transactions must be anchored in public interest. We have not been very good at that.

Had we been better, we would have got rid of poverty faster than we have. We would have cared more about creating physical and social (education and health) infrastructure and jobs. And we would have exploited every growth opportunity, which came our way, rather than choose to sit out the 1970s and the 1980s on our elitist, immaculately manicured hands.

We do not have the luxury, unlike Latin America and large parts of Africa, of being natural invitees to the western, Christian table of nations. Nor do we fit the dismal, backward looking club of Islamic nations. And we are too large to be helped economically. So, like China, we have no option, except to fend for ourselves.
International trade is our entry point to becoming more competitive.

We need cheap Chinese goods more than China needs our market. We import just 3 percent of China’s exports. We should be trying harder to become part of global supply chains to pull-in foreign investment, technology, jobs and increase net exports. Our traditional links with Russia are valuable but need to be lubricated.

With the US and its West European allies, we share a tradition of democracy – a generic, clunky, artifact to safeguard citizen rights versus the State via an elaborate architecture of self-balancing, institutional power centers. These links can be deepened.
Going under the radar and setting-off no red alerts till we have accumulated critical economic heft is sensible.

Playing second, or even seventh fiddle, to achieve targeted outcomes is better than to compromise outcomes by being top-dog in process matters. But low profile economic diplomacy does not come easy to our colonial style Foreign Policy establishment. Best to remember that we rank seventh in nominal GDP and are a lower middle-income country. We should punch our weight. Doing more is unsustainable.

Adapted from the author’s article in TOI July 9, 2017Blogs http://blogs.timesofindia.indiatimes.com/opinion-india/g20-trumped/

 

 

 

 

PM Modi’s Foreign Policy “Trilema”

Trilema

(photo credit: http://www.financialexpress.com)

Reposted from Asian Age May 15, 2015 http://www.asianage.com/columnists/modi-s-trilemma-1

India’s bland foreign policy has traditionally been based on the principle of “please all and offend none”. Things changed under Indira Gandhi when we pivoted to the Soviets and teamed up against the “capitalists” in the West. But post-1990, once the Soviet dream evaporated, we reverted to the “offend none” tactic. The UPA years were a continuation of this approach, which suited the soft-spoken, nominal Prime Minister Manmohan Singh.

Things have changed since then. Prime Minister Narendra Modi is a muscular, energetic man and wants his foreign policy to reflect that energy and purpose. But he faces the classic problem of managing an “impossible trinity” comprising the US, a weakening Russia and an emerging China, which today attracts allegiance from countries cutting across traditional power blocs.

East Asia, other than Vietnam and Australia, feeds off China’s economic growth. China will likely add $6 trillion of new wealth (GDP increase over 2015) in the period 2015-24 and this is a powerful magnet that dulls the pain of negotiating with China over “disputed territory” in the South and East China Sea.

Similarly, Sub-Saharan Africa increasingly depends on Chinese investment “aid” and mineral export to China. Even Russia prefers to diversify its energy exports away from Europe to China, but not to India or Japan.

China is an immediate neighbour of India. A dispute over border demarcation in the west and east lingers. Neither party is really willing to resolve it because it is convenient for both.

For China, the ongoing border dispute presents it with the opportunity to build roads through Pakistan-occupied Kashmir (PoK), linking into Karachi on the Arabian Sea and the still-to-be-built Chinese port of Gwadar in Balochistan province, next to the Iranian border.

For India, the border dispute and China’s dodgy moves to build infrastructure through PoK, with the concurrence of Pakistan, is a package problem. It serves to legitimise a tit-for-tat aggressive development of Arunachal Pradesh, a border territory claimed by China. The area has significant hydro potential estimated at around 30 GW and is of strategic importance to safeguard the north-eastern states of India to its south.

It is fashionable to couch India’s need for China in commercial terms — trade and investment. But China is a much more efficient manufacturer than India and hence a trade deficit ($40 billion doubling to $80 billion in three years) is inevitable, with India as the junior exporting partner. Seeking investment from China is one way of plugging the hole created by the trade deficit. But such investment benefits China as much as India.

India’s growth story, whilst not as impressive as China’s, is sufficiently dramatic in these economically hollow times to garner eyeballs. New value creation (cumulative value addition to GDP over 2014 levels) of $1.4 trillion over a decade from now is not a trifle. A share of just 20 per cent (similar to its share today) in India’s new value creation could feed an annual growth of 0.3 per cent for China.

Growing economic ties with India — soon to be the fourth largest economy in the world (after the US, China and Japan) — enhance China’s “strategic prestige”. This is the “pull” factor. There is also a “push factor” which Indian strategists tend to emphasise — China’s paranoia that India may become part of a US effort to encircle China along with Japan. This “fear factor” is over hyped.

China knows well that the Indian psyche favours reconciliation rather than confrontation. India routinely prefers turning a Nelson’s eye to occasional intransigence but abhors subjugating its sovereignty to any foreign influence — a hangover of our colonial mindset. India could never be a link in an American chain to “contain” China.

China is unconcerned about future competition from the US. Over the next 30 years, the US will morph demographically into being dominated by fast-growing Hispanic and African-American communities; an ageing, minority white population; the inherited disadvantage of high wages and even higher citizen expectations; degrading infrastructure and increasing inequality. What this will mean for the “can do” spirit and mojo which defines the US, is unclear.

Despite such uncertainties, the US remains a long-term natural ally of India. Its plural culture, democratic values, federal institutional arrangements, history of innovation and grounded belief in religion and “family first” gels well with India.

A weakening US and a strengthening India make a perfect combination. The combined GDP of the US, India and Japan will be double of China’s GDP in 2024 and their future value addition — a key “convening” factor for attracting allies — will be higher than that of China.

Finally, the significant Indian community and private sector investment in the US and Europe provide a ready base for developing P2P (people to people) and B2B (business to business) contacts.

All this is reflected in the determined efforts of Mr Modi to establish a trade, investment and communication bridgehead with the US, Japan, Germany and Australia.

The traditional third leg of the impossible trinity has been Russia. But the gains from trade or strategic alignment are scarce. A close strategic friendship with Russia elicits no apprehension in Beijing because Russia is today a “toothless bear” plagued by a natural resource-export dependent economy. Russia, ruled by “grasping” oligarchs, has to reform and shed its macho image. Its best bet is to integrate into Europe, where it belongs. Consequently the “real” third leg of the trinity in future is Europe, with Germany and Russia as possible focal points.

Mr Modi’s strategy to navigate the impossible trinity of US, China and Europe-Russia is clear. Engage with the US, Japan and Germany aggressively and integrate into their value chains. Keep expectations low but exchange lofty targets with the Chinese and the Russians. But, most importantly, keep your powder dry and gear up India’s economy, because our best friend is our own strength and resilience.

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