Global Power Shift – West to East?

How far east of Washington, DC is east? The question arises from the report of the US-based National Intelligence Council 2025 Project, published in December, which foresees “the unprecedented transfer of wealth roughly from West to East:”

The whole international system, the report says, “as constructed following WWII – will be revolutionized,” according to the council. “Not only will new players – Brazil, Russia, India and China (BRICs) – have a seat at the international high table, they will bring new stakes and rules of the game.”

Wealth as material objects means nothing unless a nation acquires the appropriate knowledge to use it. From the Neanderthal age to the Computer age, the story of civilization and prosperity is marked by the progress of technological knowledge. In this sense, the US symbolizes the west for its technological prowess. It is the only state that, according to Neil Postman, can be called a technopoly – totalitarian technocracy. Less so are France, Germany, Russia, et al. Following the NIC pointer far to the east, can India and China overcome the US technopoly?

Anyone from outside the US has reasons to be elated at the possible decline of the “Big Boys” supremacy, since the observation comes from a highly influential US agency – the NIC, and not from agencies of weaker economies. Taken seriously, the observations require careful consideration. Consider:

India and China have crossed the US$1 trillion-plus gross domestic product, the latter far exceeding the former. Indian GDP grew at 9.2 percent, close to double digits, during 2007 according to the IMF. China did even better at 11.4%. They lend money to the US government. Both achieved all this with export-led growth, not by catering to their own population. India achieved high growth by exporting service sector products like IT and IT enabled services. China exported small-scale and large-scale industrial products – steel, garments, toys, milk products, electronic products, etc. Exportable goods are highly susceptible to demand fluctuation abroad, as evident from the onset of the current worldwide recession. Export-dependent growth will remain wobbly. Stability of growth has to be found in the two countries’ own backyard.

None of these Asian giants is blessed with endogenous technical progress, the key to sustained high growth of wealth. The Indian industrial sector depends heavily on adoption of foreign technology in large-scale industries. The small and medium scale industrial sectors in India succumbed to the onslaught from alien technology and have decayed rapidly since the 1990s. At present 250,000 such Indian industries, employing more than a million workers, are declared sick.

Though China integrates large scale with small scale industrial production, her technological progress is not exemplary either. In fact, the quality of Chinese products does not match the world standard. Electronic hardware that China produces for the world depends on designs and materials supplied by US firms. It is imperative that the countries intensify technology research and development, suited to local conditions, and not depend on imported technology. The Indian space project Chandrayan II and China joining the club of Nuclear Supplier Group are not complete dossiers of their technology spectrum. Lacking technology, India in the recent past was compelled to sign a “123 Agreement” with USA in order to obtain civilian nuclear technology, when the US herself is not expanding nuclear energy facilities. Obviously, India will be served with outdated nuke technology.

This corroborates a long standing grievance among economists that imported technology is often outdated and its crucial knowhow is never shared. This is where the West dominates the East. Control of modern technology is crucial to western business corporations’ competitive edge. And the US corporations lead the pack in three crucial areas – war technology, software and biotechnology.

Seeking geopolitical control of space the US “war technology” often strikes us dumb. During the Iraq war in 1991 US army abundantly used sophisticated war technology, unmatched by any other country in the world. It even outmaneuvered French and Russian technology used by Iraq. This the USA is never going to share with the world. Nor do we wish to see many more countries develop war materials at the cost of people’s lives.

In everyday parlance we are faced with a technology spectrum, be it software or biotechnology, all of which are controlled by US transnational corporations.

Computers and software have become part and parcel of our modern data-handling and communication. Both hardware and software technologies are controlled totally by the US giants. Processor manufacturers of Intel Pentium, AMD are located in California’s Silicon Valley. Microsoft Windows and UNIX are the two oft used software platforms, controlled by US firms. On such platforms, application softwares, like - Oracle, Adobe Photoshop, Adobe PageMaker, etc. are produced by US firms. These all are patented products.

Biotechnology is another major area where the US industries dominate. Monsanto, Dow Chemicals, Amgen are some of the US market leaders. According to recent reports, the US biotech corporations generated revenue of US$70 billion plus – more than half the world’s revenue of the industry, whereas Indian biotech industry generated a paltry $2 billion. Chinese biotechnology research is still at a nascent state.

The abovementioned crucial high tech areas put the US in an unassailable position. Without technological might the east will remain where it is today. With all the accolades earned from the NIC, growing Asian giants are not in the reckoning of economic power.

Instead, economic power will probably shift to countries like France, Russia and Germany, to the east of Washington, DC. Though biotech research in Europe is yet to match the US supremacy, as admitted by the European Association of Bioindustries, France and Germany are in a fiercely competitive mode.

In other fields of science and technology too, France, Germany and Russia, the countries according to George W Bush that constitute the “Old Europe” are growing as potential technological powers. If these countries can dismantle NATO, the impact of US “war technology” will be neutralized. Ultimately technological control, in turn economic power, will shift to “Old Europe” to the east.

Sarajit Majumdar is a Calcutta-based economist and former member of the faculty of the Madras Institute of Development Studies, Madras.