Does wealth equal power? Or is it a necessary, but not sufficient, condition of global domi-nance? In her keynote speech at Davos, Angela Merkel, the German Chancellor, pointed to the “enormous changes” under way in India and China and declared: “What we have is a completely new balance of power in the world today.”
In most Western discussions of emerging markets in general, and Asia in particular, you encounter similar talk about the shifting of financial tectonic plates, as ownership of the world’s savings migrates southwards and eastwards. Last week Chatham House devoted two fascinating days to a seminar on the “changing dynamics of global financial power”. It asked anxious questions about the capacity of developing and emerging economies, which among them have built up foreign exchange reserves worth $3,000 billion (£1,500 billion) — 70 per cent of the global total — to disrupt global financial markets.
To lump all these countries together is unenlightening. I will not bank on Brazil until the Brazilians do; they have yet to disprove the old saw about Brazil being a country with a great future always ahead of it. Vladimir Putin is behaving as though Gazprom were the 21st-century equivalent of the Gatling gun, but Russia remains a sick society that got lucky with energy prices. India is a hugely exciting rope trick, in which the Mittals, Tatas and telecom billionaires perform their magic watched by huddled rural masses, venal local politicians and far too many bureaucrats. Its impact on the global economy will be modest for some time yet, China is in a class of its own, with its trillion-dollar piggy-bank of foreign exchange reserves, $1,760 billion of annual trade and double-digit growth. Its appetite for foreign direct investment apparently knows no limits, and its thirst for raw materials could soon also make it a big overseas investor. Not all of this is good news, for China or for the rest of the world. But it makes China’s rise the dominant factor in the debate about changes in the global power balance.
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