As there seems to be no end to the Western financial crisis, any number of conferences like Davos will not bring up answers. I say Western deliberately. It is a crisis of the Western economies caused by Western financial imprudence. Gone are the days when â€˜When America sneezed and the world caught fluâ€™. Now Asian economies have enough robust internal demand and domestic growth to ride out an economic depression in the US. To me the greatest indicator is domestic tourism. As people have more surplus income, those that take holidays and travel within their countries spread that income around and at the same time people become culturally inclusive. The boom in domestic tourism in India makes me wonder whether we need to now run a campaign called â€˜Incredible Indiaâ€™ any more. It has not worked all these years any way as even Thailand gets more tourists every year !!
My recent travels to mainland China and Hong Kong confirmed this. In The Forbidden City at Beijing, Chinese tourists with the latest digital cameraâ€™s, babyâ€™s and picnic baskets in tow, far outnumbered western tourists. In Hong Kong cooing and giggling mothers and daughters could not stop taking pictures of my daughter. She was surrounded by Chinese people and I realized they were all from Mainland China and had never seen an Indian child before – they just marveled at her big eyes.
(Of course there is a environmental issue in tourism that must be very carefully handled)
Back to why Davos is losing value. Because the fundamental issue with the Western Financial crises is that they can no longer afford the standards of living that they have become used to. Not only in absolute terms but also in relative terms. Because standards of living often are determined by â€˜how the others liveâ€™. When I was being educated, our standard of living was mirrored by how an American family lived. Our education mirrored by American and British standards of education. Our cultural desires and aspirations too mirrored by American music, movies etc. I am sure that the rising number of billionaires in India, the incredible rise of telecom in India, the stranglehold of China on Rare Earths, that the largest search engine in the world in not Google but a Chinese co, and the huge investments China is making in resources in Africa, outbidding the US at every step etc etc, is all causing consternation.? For the West can no longer console itself by calling this a â€˜rising potential marketâ€™ for itâ€™s products. It is nothing less than a transfer of economic and therefore political power.
We are along long way from achieving those Western standards for all our people . Far from it. Because the western economies did attain a certain minimum standard of living for all, and for us in India and most of Asia, dis balanced and non inclusive growth is becoming a bottle neck. However the power of the Asian economies is rising so fast that at any negotiating table Americans and Europeans find themselves uncomfortable and unused to people who speak a slightly different economic language. Not only India and China, but now also Vietnam and Indonesia.
What is that different economic language ? That Asians have so long been living with tightened belts and higher saving/lower consumption patterns that in an economic downturn there is far far greater political manoeuvre room for the government than in the West. The political repercussions of President Obama saying that the only way now is for Americans is to forget the heady days of over consumption, and settle down to a couple of generations of lower benefits, loss of pensions, more unemployment and less goods, is political suicide.
The Western leaders are unable to state (or perhaps even to accept ) the truth. Till the voters in the West are able to accept these facts, all conferences like Davos will be just politcal and economic rhetoric.
Its is not that the West must now embrace China as a power, as the head of the World Economic Forum stated. It is that China must embrace the West. The rhetoric is all a little too late. The European economic doldrums can be lifted by China investing in the Euro and In Europe, not by the United States as was the case for the last 50 years.
The US does have pockets of economic resistance, fighting back. Mainly technology. Though it must be said that most new technology and high value business like Social Media and Computer technology etc does not generate high employment potential. It creates high wealth for the few, and if that is not is not invested back into the economy there is little value in it. Much of it is not. Most technology corps have moved their headquarters to tax havens, their production facilities overseas, and even their research centres abroad. They are in essence no longer US corporations.