In one of the meeting rooms here in Davos, a wall is dominated by a stylised map of the world. It’s a look from high above the South Pole, and Asia, Africa and Latin America loom large. The US and Europe look rather small.
Going by the mood in Davos, the map seems to have been deliberately placed that way. If there was any doubt over which way the economic wind is blowing, Davos will put to rest all that. On the first day of the World Economic Forum (WEF), speakers were almost unanimous in their view that the centre of gravity in the world economy is shifting in which the West is struggling to keep up with the turbo-charged emerging markets.
Most experts say the speed of change and technological innovation taking place is breathtaking and is creating a new reality, and one of the most important factors of the new reality is the shift of geo-political and geo-economic power from North to South and West to East. The old rich world can’t take its prosperity for granted anymore and it will be overtaken by hungrier powers if it fails to do some strategic planning about the new reality.
Wipro Chairman Azim Premji said it’s good for the world economy if the developed countries understand the new reality fast enough. Asked if countries like India are fed up with the constant lecturing by the West, Premji said the West needs to give up its double standards — one set of parameters for the emerging nations and the other for the US.
It’s good, he said, that multinationals are waking up to this new reality. Citing the example of Ford Motors Company, he said the company recognised the power of the huge consumer class in India, but wanted to design a car for India by sitting in Detroit. “It’s good such companies have understood that you can’t push a product down India’s throat any more. Look at the success of Ford Figo. It worked because Ford was thinking about a new car for India sitting in India,” Premji said, adding that’s the new reality which MNCs can ignore only at their own peril.
Hope for emerging countries is clearly on the move. According to a study by Pew Research Centre, some 87 per cent of Chinese and 50 per cent of Brazilians and Indians think their country is going in the right direction, whereas only around 30 per cent of Britons and Americans think the same. Also, less than half of Americans think their children’s living standards will be better than theirs.
And a global survey done by PricewaterHouse, released today, shows how they are much more bullish on India, China and Latin America than anywhere in the West. Robert E Maritz, global chief of PricewaterhouseCoopers, says despite some concerns, the message is clear.
It’s not India and China alone, economic power is also shifting to Africa and West Asia. And that’s what is worrying the pundits. Listen to Nouriel Roubini, popularly known as Dr Doom. Speaking at a session on the New Realities, the New York University Professor said rising economic disparity and tensions could invite a social backlash. “US is recovering, but Europe is not and a prolonged period of living without economic growth could become a big problem going forward,” he said. Others said, “We have in the world a situation where the political system and the institutions are just overwhelmed by the complexity which they have to face.”
“It’s not just risks in isolation, it’s the combination of risks that can be so dangerous,” Roubini said, adding inflation is a cause for huge concern going forward for the world economy. That’s something Indian policymakers would identify with more easily.
Amidst all this hype, there are some points of concern as well. One of these is that the optimism should not become the cause for irrational exuberance.
