The Southern Supermen.

Author:Walker, Martin

For the past two centuries, the path followed by the bulk of world trade saw the raw materials of the developing world flowing to the production centers of the "civilized" world and these products flowing back, in a more limited stream, as vastly transformed finished goods found some markets where their components had begun. No longer. The next quarter century will, for the first time, see a revolution in every conceivable path of the world's commerce. Now and for the future, the South will be trading directly finished goods not only with the developed countries of the North, but with their fellows of the South, changing not only the traditional pattern of world trade but the entire global balance of power and wealth.

This is a historic tide, too big to be called a mere trend, which will continue little interrupted by the global recession that now appears to be under way. It may slow the way in which the countries of the South develop their industries, intensify their trade, and sharpen their competition, but it will not derail it. Deep underlying forces of demography and technological spread, of the power of gigantic consumer markets and capital accumulation, are driving this tide. Its energy is plain, in the way that a sharp recession that shrinks the gross domestic product (GDP) of Europe and North America is but slowing the GDP growth of China, India, and Brazil. The power of Southern nations' new capital is equally apparent, in the cheapness of Western equities contrasted with the dramatic increase of Chinese and Gulf state capital reserves. A majority of the shares of General Motors, for example, could (in December) be bought with the proceeds of two days of China's trade surplus. The United States and the countries of the West, of course, retain the sovereign power to prevent or dilute such investments. But the importance of the South in the new world order was clearly recognized in the heavy symbolism of the G-20 summit in Washington in November 2008. Global financial crises had traditionally been left to the G-7 finance ministers. This time, China and India, South Africa and South Korea, Argentine and Brazil, Turkey and Saudi Arabia, Indonesia and Mexico joined the usual masters of the universe to confront the challenge to a global economy that had outgrown its G-7 founders.

Over the past 25 years, several events have been described as epochal: the end of the Cold War, the rise of China, the coming of the Internet, the new terrorism of mass carnage, HIV/AIDS, and climate change. Each in its own way has been transformative. But now, looking forward, the emergence of the South as a distinct and dynamic hub of commerce and wealth creation is perhaps the least expected, and the most profound for human development in general. This process promises to shift fundamentally the familiar structures of power, wealth, and trade, fueling a new locomotive of local and regional growth, and unsettling creaky political, diplomatic, social, and even military relationships. The emergence of South-South relationships will be a critical new factor in global politics.

It is important to realize that the emergence of the South represents more than the sum of its parts. Asia may be over-hyped these days. The briefly fashionable theory of de-coupling, suggesting that the emergent economies of Asia would thrive independent of the troubles of the advanced Western economies, is looking suspiciously hollow. The Asian economies depend heavily on Western export markets, technology, and investment. Some 60 percent of Chinese exports are from firms wholly or partly owned by Western companies.

So China has been bruised, but not battered, by the decline in U.S. imports. Indeed, the United States was replaced three years ago by the EU as China's top trading partner. And, according to the 2007 report of China's General Administration of Customs, Japan, Hong Kong, South Korea, and Taiwan are its next biggest trading partners, in that order. Singapore and Malaysia are also in the top ten of China's trading partners, and India will certainly break into the elite ranks this year.

Having diversified its foreign exchange reserves away from the dollar into a basket that includes euros, sterling, and other currencies, China has also diversified its trade. Brazil and Argentina are likely soon to join Thailand, the Philippines, Malaysia, and Australia among the top ten exporters to China. Indeed, among 2007's top ten, Western nations account for some $161 billion, while Asia and the South account for $434 billion. Even among China's top ten export markets in 2007, a similar pattern emerges: the West takes in some $352 billion, while Asia and the South account for $423 billion. However much the United States may target China as the focus of its trade deficit, Beijing's perspective on trade is far more Asian, while at the same time becoming far more global, as it too responds to the growth of the other regions of the South.

Despite the cliche of this being the Asian century, it may start to look in 50 years more like the African century. Africans will likely outnumber Asians by 2099, and their continent is more richly endowed with raw materials. If Africa can avoid religious wars between its Christians and Muslims, the future could be very bright. Meanwhile, in South America, Brazil seems finally to be emerging from its traditional growth-inflation trap and has developed world-class corporations like Vale and Embraer.

The point is that the South as a whole, rather than Asia or Africa or Latin America or the Middle East, seems poised for success. And it is investments of South-based corporations in other regions of the South that seem likely to provide the bulk of this growth. That, at least, is the thinking of new transnational corporations like China's Qingdao-based Haier, which started with a joint venture in Indonesia in 1996 and now has subsidiaries across the world, including in Pakistan, Jordan, Turkey, Iran, Italy, and Russia, not to mention a small assembly plant in South Carolina.

The impact of this development is already plain in the erosion of the once-dominant position of the West in general and the United States in particular. In addition to their raw materials, the countries of the South now command the liquid savings, growth markets, even the technologies that can be leveraged into influence on the global scene. They can increasingly define the terms of international trade and have--in the course of the Doha Round negotiations--demonstrated that they have a veto over world trade rules.


But there is no certainty that this will continue. There are already clear signs of divergent interests among the countries of the South that are likely to prevent them from exercising their collective weight. The oil exporters of the Middle East, Latin America, and Africa have an interest in high energy prices, while China and India would prefer cheaper energy. China's exports are already suffering from the high cost of raw materials that benefits Africa and Latin America. And, beyond their rivalry for resources, China and India have sharply different security interests in Southwest and Central Asia.

Over the next 25 years, one of the salient factors of international relations will be the management of China's sense of foreboding. Its workforce will cease to grow by the end of the next decade, and it will face fast-rising numbers of elderly. In 1950, nearly 14 percent of China's population was four years of age or younger. This proportion had been halved by 2000 and is expected to fall further, to 5...

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