Influence follows money out of west, into east
In a discussion of U.S. competition in a world where economic power and growth is steadily flowing out of the west and into the east, the focus of the “End of Influence” panel was centered on America’s growing need to adjust to the new global economic reality and do what America has always done well: innovate.
That an economic shift is taking place seemed a foregone conclusion, as moderator Michael Mandel, Editor-in-Chief, Visible Economy, opened the discussion.
“We have an ongoing massive shift in wealth and growth,” Mandel said. “There’s a lot of gloom in the developed world, a lot of optimism in the developing world.”
Mandel asked if in light of the U.S.’s poor economic performance of the past decade, the massive global shift of wealth and power is permanent, or cyclical.
“This is not the decline of the west but the rise of the rest,” Ambassador Ford Fraker, Senior Advisor & Chairman, Middle East and North Africa, Kohlberg Kravis Roberts & Co said, using a term coined by Newsweek’s Fareed Zakaria. “I think it is that the rest of the world… are stepping up and will play a much more significant role long term.”
Without a fundamental fix for the natural resources gap between the east and west, New York Times financial columnist Andrew Ross Sorkin said that there will be no way for the west to compete.
“I do think we’re having a shift,” Sorkin said. “It’s a result of natural resources, that’s fundamentally what it’s about. Question is whether they are able to innovate with their resources and whether we — the west — can innovate out of it and I don’t think we can.”
Searching for solutions to the growing gap through innovation, Mandel asked the panelists to consider whether the U.S. should turn away from free-market capitalism and embrace the state capitalism that has worked so well for both China and Russia.
“Look at the stimulus in China and the one here,” Sorkin said. “Look how much more successful that approach was. They should eventually be able to out-innovate, frankly, the free market.”
One panelist questioned whether China should be used as a model for economic growth at all.
“Personally, I think that the Chinese model is yet to be proven.” Fahd Hamidaddin, Director, Saudi Arabian General Investment Authority, said. “We consistently hear doubts from people and companies that have been invested for more than five or ten years about how sustainable that market is.”
Though the panelists agreed that emerging markets are on a genuine upswing, the outlook for U.S. cultural and ideological influence was not completely dark.
“I don’t think the U.S. will lose what has kept them ahead of everyone else -– innovation,” Hamidaddin said. “I think winning is staying at the leadership seat and if the U.S. doesn’t lose sight of that, I don’t think their influence will be taken dramatically down.”
Conversely, Mandel acknowledged that the U.S economy is just as vulnerable as any other to stagnation.
“Japan was once the only country that had been able to grow consistently for 100 years,” Mandel said. “And then it ended.”
