Global Power Shift Since Industrial Revolution

The Industrial Revolution marked the beginning of a major shift in economic, military and political power from East to West.

  A research letter written by Michael Cembalest, chairman of market and investment strategy at JP Morgan, and published in the Atlantic Magazine shows how dramatic this economic power shift has been. The size of a nation's GDP depended on the size of its population and labor force in agrarian economies prior to the Industrial era.  With the advent of  the Industrial revolution, the use of machines relying on energy from fossil fuels dramatically enhanced labor productivity in the West and shifted the balance of power from Asia to America and Europe.

The shift in power was not just in economic terms. Enabled by machines such as steamboats and weapons like the repeating gun, the West engaged in long distance trade and warfare that led to the colonization and exploitation of Asia and Africa. The new colonies were used as a source of  cheap raw materials for European factories and the colonized people served as captive customers for their manufactured products.

History of Per Capita GDP of Selected Countries. Source: Angus Maddison

While development of Asian and African nations stagnated and their share of world GDP dropped precipitously, their colonial rulers in the West prospered. Social indicators like literacy and life expectancy showed little improvement in the colonies, according to data compiled by Professor Hans Rosling.  For example, his Gapminder.org animations show that life expectancy in India and Pakistan was just 32 years in 1947.  In Pakistan, it has  jumped to  67 years in 2011, and per Capita inflation-adjusted PPP income has risen from $766 in 1948 to about $3000 in 2011. Similarly, literacy rate in undivided India was just 12% in 1947. It has increased to about 67% in India and 62% in Pakistan for people 15 years and above.

Indicators such as per capita energy consumption and Internet usage confirm the rise of Asia, particularly Asian giant China's. China's per capita energy consumption now stands at 68 million BTUs, about a fifth of US per capita energy consumption, but it's rising rapidly. Pakistan is at 15 million BTUs per capita, Bangladesh at 6 million BTUs and Sri Lanka at 10 million BTUs.In terms of Internet access, China now tops the world with over 500 million users, more than twice the number of Internet users in the United States.  Among the world's top 20 are South Asian nations of India with 120 million Internet users and Pakistan with 30 million users, according to Internet World Stats.

While there has been progress on economic and social fronts in South Asia, the combined GDP of SAARC nation is still  accounts for less than 4% of the world GDP. China has significantly increased its share and now accounts for more than 10% of the world GDP marking the biggest economic shift since the Industrial Revolution. China's growing economic clout will ultimately translate into political and military power in the international arena.

All indications are that the pendulum of power has just begun its swing  eastward in the last decade. It could be a century or more before the effects of this swing are truly felt in terms of the exercise of economic, military and political power on the world stage. Meanwhile,  the 21st century is shaping up to be another American century in which United States'  extraordinary power will not go entirely unchallenged by multiple potential adversaries, including China.


Here's a video discussion on the subject:

http://vimeo.com/117657383



Vision 2047: Political Revolutions and South Asia from WBT TV on Vimeo.

Here's a video of a BBC documentary about Al Andalusia or Muslim Spain:

 

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Pakistan Military Industrial Revolution

China's Checkbook Diplomacy

Education Attainment in South Asia

Pakistan Needs Comprehensive Energy Policy

Social Media Growth in Pakistan

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World Economy Worst in Sixty Years

In a candid interview in late August with Guardian Weekend magazine, British Finance Minister Alistair Darling warns that the economic times faced by Britain and the rest of the world "are arguably the worst they've been in 60 years". To deepen the sense of gloom, he adds: "And I think it's going to be more profound and long-lasting than people thought."

While Mr. Darling's candor is rare for such a senior government official, what he revealed are off-the-record feelings shared by many top economic officials around the world. The dramatic impact of a severe, worldwide credit crunch, and sharp rise in the price of basic commodities, including food and fuel, are taking an unprecedented toll on the world economy. Economic growth has either stopped or slowed to a crawl, major stock markets have crashed, unemployment is on the rise, and the increasing world hunger and poverty are threatening global security and stability.


South Asia's economy is no exception. Economic growth and stock markets are down and unemployment and inflation are up. In Pakistan, the KSE-100 has lost 34.6% of its value this year, as investor confidence has been been hurt by political uncertainty and a long list of economic troubles, including skyrocketing inflation, disappearing foreign exchange reserves, declining rupee and a soaring deficit. Putting it in perspective, India's Sensex is down 48%, Shanghai has lost 44 percent, Russia is down 25 percent, and Brazil, 36 percent.


Since the takeover by the PPP-PML(N) coalition, there has been a sharp decline in Pakistan's economy. While Pakistan's GDP is expected to grow at 5% or higher this year, with Pakistan's annual population growth rate of 1.8%, it is important that the GDP growth continue to be at least 1.8% a year just to stay even. Summing up the current economic situation, the Economist magazine in its June 12 issue says as follows:" (The current) macroeconomic disarray will be familiar to the coalition government led by the Pakistan People's Party of Asif Zardari, and to Nawaz Sharif, whose party provides it “outside support”. Before Mr Sharif was ousted in 1999, the two parties had presided over a decade of corruption and mismanagement. But since then, as the IMF remarked in a report in January, there has been a transformation. Pakistan attracted over $5 billion in foreign direct investment in the 2006-07 fiscal year, ten times the figure of 2000-01. The government's debt fell from 68% of GDP in 2003-04 to less than 55% in 2006-07, and its foreign-exchange reserves reached $16.4 billion as recently as in October." Please read "Pakistani Economy Returning to the Bad Old Days".


The rapidly rising unemployment and skyrocketing inflation together have dramatically increased hunger and poverty among the most vulnerable in Pakistan. At 33%, the sum of unemployment rate and inflation, known as the misery index, stands at its highest level in Pakistan's history, and it is likely to increase social strife and hurt the chances of recovery.

While the worldwide economic slowdown and commodity inflation partly account for Pakistan's current economic meltdown, the biggest indigenous problem for Pakistan is the absence of any economic leadership. Pakistan has not even had a full-time finance minister for several months, since PML(N) withdrew from the coalition. With the expected election of Asif Ali Zardari as powerful president, and his hand-picked prime minister already installed, let us hope that the PPP will seriously begin to tackle the challenges of Taliban insurgency, deteriorating economy, and political instability.