January 31, 2008

The decline of the West? We've heard this one before...

The current turmoil in the U.S. economy has led some to argue that America is in decline. Writing in Pakistan’s Daily Times, Heather Stewart and Ruth Sunderland make the case: 

With Wall Street in crisis and banks begging for cash, the West has lost its swagger. 

The current crisis has raised fundamental questions about the merits of the American model. For many years, the US has lived beyond its means: borrowing heavily to gobble up cheap Chinese consumer goods; splashing out the proceeds of a decade-long housing boom; and preaching the benefits of liberated markets. 

Now the rest of the world is anxiously glancing eastward, in the hope that as America slides towards recession, the rising economic powers of Asia - in particular, China - will help to forestall a full-blown global crisis. 

Parag Khanna, a New York Times columnist, outlines the new world order in a rambling piece entitled “Waving Goodbye to Hegemony.” Here’s a sample: 

The East Asian Community is but one example of how China is also too busy restoring its place as the world’s “Middle Kingdom” to be distracted by the Middle Eastern disturbances that so preoccupy the United States. In America’s own hemisphere, from Canada to Cuba to Chávez’s Venezuela, China is cutting massive resource and investment deals. Across the globe, it is deploying tens of thousands of its own engineers, aid workers, dam-builders and covert military personnel. In Africa, China is not only securing energy supplies; it is also making major strategic investments in the financial sector. The whole world is abetting China’s spectacular rise as evidenced by the ballooning share of trade in its gross domestic product …Aided by a 35 million-strong ethnic Chinese diaspora well placed around East Asia’s rising economies, a Greater Chinese Co-Prosperity Sphere has emerged. Like Europeans, Asians are insulating themselves from America’s economic uncertainties. Under Japanese sponsorship, they plan to launch their own regional monetary fund, while China has slashed tariffs and increased loans to its Southeast Asian neighbors. Trade within the India-Japan-Australia triangle — of which China sits at the center — has surpassed trade across the Pacific. 

This is a line that we have heard before. 

A decade and a half ago, America was riding out the recession of the early 1990s. At that time, some authors suggested that the West would was about to be eclipsed by another Asian power: Japan. John Wharton’s Jobs in Japan (Global Press, 1991) cites the following gloomy statistics: 

“Unemployment in Canada soars past 10%. More Australians are out of work since the near-depression of 1983. UK mortgage rates of over 12% more than triple foreclosures in 1990. Today, in 1991, over eight million American men and women are without work while homicide kills more teenage boys than all other causes combined.” 

We all know what happened, of course. The Western economies rebounded in the mid-1990s, and Japan sank into a decade-long recession.  

Now history seems to be repeating itself. Only this time, China is cast as the Asian power set to overtake the United States and the rest of the West. 

To be sure, the West has much to learn from the East. In the 1980s, American manufacturers desperately needed to study the Japanese disciplines of lean production and total quality control. Many aspects of Japanese corporate management are in fact superior to the American ones: American management is based on top-down, command-and-control principles. Japanese managers rely more on consensus. And there is comparatively less disparity in compensation between a top manager in a Japanese company and the staff professionals who work for him. (Even President Bush has criticized the astronomical CEO compensation packages in the U.S.) These differences contribute to the company loyalty which is taken for granted in Japan---but almost unknown in the West. 

From a macro view, however, America possesses certain strengths that make it more competitive than Japan. America is more entrepreneurial. We encourage risk-taking. Because we don’t like working for others (one of those CEOs with the rock-star salaries, for example), many of us dream of being our own bosses. This spirit produces the Bill Gates, Steve Jobs, and Michael Dells of the American economy. 

Undoubtedly, America also has much to learn from China.  As the aforementioned Stewart and Sutherland note, American consumers habitually spend beyond their means. And a revision of our absolute faith in free trade is long overdue. 

But China also faces internal pitfalls. The country is still coping with the legacy of sixty years of Communist dictatorship. (And let us not forget that the Chinese system is still a one-party dictatorship.) 

Demographically, China faces enormous challenges as a result of its harsh family planning practices, and traditional preferences for sons. (India faces a similar challenge, as noted in the excerpt below from the International Herald Tribune.)  

The most populous nations in Asia, including China, India and Pakistan, have acted upon their deep cultural preference for sons by culling daughters from their populations through the use of ever more efficient sex selective technologies. 

The technology to select male offspring before birth began to spread in the late 1980s, and the birth sex ratios began to rise. In China, the official ratio is 117 boys born for every 100 girls, but the reality is probably 120 or more. In India, the official birth sex ratio is 111-114 boys per 100 girls, but spot checks show ratios of up to 156 boys per 100 girls in some locales. For comparison, normal birth sex ratios are 105-107 boys born per 100 girls. 

The mortality rate for girls and young women is also much higher than normal in these countries, further exacerbating the deficit. For example, the U.S. Bureau of the Census estimates excess deaths among Chinese females in the first year of life alone to be close to half a million. In India, almost one million more girls than boys die in the first five years of life. 

Indeed, the very type of government to which a nation can aspire is affected by a sex ratio abnormally favoring males. History demonstrates that such societies cannot be governed by anything less than an authoritarian political system. Furthermore, high-sex-ratio societies typically develop a foreign policy style crafted to retain the respect and allegiance of its bare branches — a swaggering, belligerent, provocative style. 

Societies with a very low status for women cannot emulate normal sex-ratio societies either in terms of the form of government or in their tendency towards peacefulness. Any attempt by normal sex-ratio societies to project their own security logic onto a high sex-ratio society leads to miscalculation. Abnormal sex ratios do not in themselves cause conflict — the sex ratio of Rwanda in 1994 was normal, for example — but they definitely create societal instability and severely aggravate conflict when it does arise. 

--- International Herald Tribune 

China (and for that matter, India) have come a long way. But these Asian countries aren’t yet ready to serve as models for the rest of the world, when they hold women’s lives in such low regard. This is not only immoral---it is also impractical. Societies that deny basic rights to women are plagued by violence and instability. (Read the complete article here about China’s history in this regard.) Or, as Gloria Steinem noted: What is bad for women usually ends up being bad for men, too. 

Yes, we have our problems in the West. But compared to the fundamental human rights issues in China and India, our current financial problems seem minor. When it comes to human rights and freedom, the West still stands alone.