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The world in 2021..

Summary of the conversation regarding the world in 2021.

Yesterday, I attended an interesting conversation about the topic “The World in 2021” which was organized by Founding Fuel. The panel consisted of eminent thinkers and intellectuals such as Frank Richter from Zurich, who is the chairman of Horasis, Sundeep Waslekar, President of Strategic Foresight Group, Niranjan Rajadhyaksha, Research Director and Senior Fellow at IDFC Institute,and Prof.G Venkat Raman, IIM Indore. The talk was hosted by the business journalist and editor, Indrajit Gupta. Here is the YouTube video link:

The world in 2021

The conversation highlighted the discussion on the issues which dominated in this year, 2020, and based on the current world scenario, the panel shared their insights about how the world will be shaped in 2021. Frank started the conversation with the impact of Covid-19, and how this pandemic has changed the world, especially considering the ever growing importance of digitization and automation. He also shared his concern about the rise in racial inequality seen in this year. But also the fact that President-elect Biden will soon be in the White House, this will certainly lead to the comeback of multilateralism.

Sundeep Waslekar, however, surprised the viewers by expressing that during 2020, there were three major impacts which dominated this year, and which will impact the coming years as well. In his list, the least severe is Covid-19! Yes, I heard right. The least disastrous is Covid-19 even though it has impacted millions of people and crumbled the economy into recession. According to Sundeep, the second most dangerous event which happened during 2020 was that 2020 was the hottest year in the history of the world. The readers can refer for more info: https://www.carbonbrief.org/state-of-the-climate-2020-on-course-to-be-warmest-year-on-record

So, this has led to an unprecedented rise in global warming. But the good thing is as Trump has lost the election, and President-elect Biden has affirmed to bring back the USA into the Paris Climate Agreement. And Sundeep also stressed the fact that Mr.Biden wants to align the economy to a more energy efficient, renewable source based, and sustainable model. Even Europe and China have decided to make their economies carbon free by 2050 and 2060 respectively. So, in a nutshell, thanks to the defeat of Trump, our Mother Earth is going to be saved from a catastrophic disaster.

According to Sundeep Waslekar, the third and most disastrous event which happened in 2020 is not Covid or global warming, but the race for development and testing of hypersonic missiles. So far, Russia, USA, China and India have successfully tested the hypersonic missiles in this year.

Hence, the race for hypersonic missiles which can carry nuclear payloads coupled with the ongoing cold war between USA-China, and USA-Russia ( which is the new cold war continued after the disintegration of Soviet Union) and rising tensions between India-China has created a perfect breeding ground for germinating this into a burning hot war. The panel raised their concerns about the growing escalation of weapons manufacturing, including nuclear warheads, which the new President would have to give due attention to calm down the rising tensions between countries.

The panel answered questions from the audience, and one of the most asked questions was regarding the role of China in 2021. As per Niranjan and Prof. Venkat, China has risen in Asia as an economic and technological power, and who wants to challenge the position of the USA as the world’s only remaining superpower. China has dug its feet too deep into the global supply chains, that it will be impossible for the world to isolate China. The panel illustrated a few examples such as the dominance of China in rare earth elements which are used in smartphones, wind turbines etc. https://qz.com/1924282/how-china-became-dominant-in-rare-earths/ In short, the world may like or hate China, but cannot avoid China.

The panel discussed the upcoming challenges President-elect Biden will have to face as soon as he enters the White House. It will be interesting to see how he leads America in this multi-polar world, where America has retreated from the world leadership during the Trump Presidency. As Sundeep rightly said, that “Donald Trump looked at the world as a place of risk, and not a place of opportunities” That America’s interests were at risk was the psychology behind Trump’s actions to ban immigrants, sell arms, retreat from world organizations etc. “Even though Biden has favored multilateralism, still it is not clear how his worldview is going to be. Is he going to look at the world, especially at China and Russia from cold war’s perspective, or would have a completely new view?” Hence, Sundeep assured the Indian audience who are particularly concerned that Biden will bring up the kashmir issue again, that Biden will certainly look at India from America’s strategic interest, and simply kashmir, H1-B immigration or any human rights issue would not drive his administration’s agenda.

Another topic which was talked about was regarding the RCEP – Regional Comprehensive Economic Partnership, which has been formed among the Asian nations including Australia and N.Z, but dominated by China. For India, this is another organization in the lines of One Belt One Road, CPEC, or AIIB. Prof.Venkat and Niranjan shared their views that even though India looks at China led organizations from the prism of threat to its economic and national concern, but considering the need to revive the economy, India should either think of joining or have a Plan B with US or Europe market collaboration.

Finally, the panel discussed the world economy which lies in doldrums. Even though the world economy will bounce back in 2021, but still it will reach only to the pre-covid level. But the important concern is how the economy will be shaped after this pandemic. Though it is clear that the emphasis on automation and digitization will be preferred, the basic problem lies with the way the economy was functioning. The working class struggled with the low wages, and which led to protests from many parts of the world to increase wages. While on the other side, the CEO’s and BOD’s earned huge profits due to increase in productivity, driven by automation and the internet. But they spent the major chunk of profits in share buyback or giving hefty bonuses to themselves. Hence, profits vs wages will be the main concern in front of many world leaders.

The conversation ended with Frank’s comment that there is hope to rebuild the world based on multilateralism, that nationalistic movements have started to retreat especially with the exit of Trump from the White House, and people can live together again in harmony. While Sundeep concluded his thoughts with a question for the viewers to wonder that the world could not predict about Covid in 2019. So, what will be the next thing/event that might happen in 2021, which will change the world? Let’s hope that whatever happens is positive!

#Worldin2021 #FFMasterclass

Please do watch this conversation on YouTube as the ideas and worldview from eminent intellectuals and scholars are the perfect food for our thoughts!

Rise of nationalism, once again!

Looking at the past few years, it is becoming quite evident from the events that have occurred worldwide that the trend of nationalism has risen, once again. History repeats itself, and it has done so for the arena of nationalism. The last time when nationalism was rampant in the world were the turbulent years after Great Depression, rise of Hitler and World War 2. Now, what surprises most of the intellectuals more than this trend is how fast the trend of globalization and liberalization have faced severe backlash in a mere span of 25 years or so.

Lets delve back into history to understand why the era of nationalism and separatism based on country, ethnicity and even to certain extent religious extremism have emerged. Not far back, just 29 years before, in 1991, the world saw the collapse of Soviet Union and its political communism. Today, only handful of countries are communist, such as N.Korea, China, Vietnam, and with the exception of N.Korea, all the others have embraced state capitalism, on the economic front by discarding the socialistic state planned economic model. In 1989, the Berlin Wall fell, and it led to the domino effect of the plummeting of the communist satellite countries in East Europe, and Russia at the end. The world saw this rare, bizarre event and the west proclaimed its supremacy in the ideals of free market capitalism, democracy and globalization. Francis Fukuyama even went ahead with its book, “The end of History and the Last man” with a false, short term belief that with this victory, there will not be any war, or crisis in the world, and hence, the whole world will be one planet with one political system (democracy), one economic system (capitalism). What he actually meant was one planet under one superpower (USA)!

Anyways, it didn’t take long enough for the world to see a new crisis in the form of 9/11. Soon, the superpower was at war( as it always has been after every few years or so), and with that event, new conflicts emerged. As early as 2007, it was slowly becoming evident that the world is becoming more and more multi-polar. In fact, in the Munich conference in 2007, Putin famously brought this to the world’s attention. This is because the rise of Putin to the Presidency of Russia, was itself the first blow to the USA led world. Before Putin, during the Yeltsin years, the world saw how Russia suffered immensely under its corrupt government ( which was supported by USA), and billionaire oligarchs. With Putin, who became President in 2000, it all ended, and that was the first rise in nationalism ( in the form of Russian patriotism) in the world.

Then, with the disastrous Iraq war from 2003 to the Great Recession in 2007-08, USA started losing its economic clout, and was soon challenged by China. China since 1979, with its opening up to the world, had been silently making its pockets deeper with the US dollars, and the whole world realized this only in the last decade. The last decade, from 2010, led to the increase in nationalistic fervor all over the world. This is because of many reasons. One of the them is the loss of economic clout, and the moral superiority of USA. The world admired USA for its success and moral responsibility to protect the freedom, and human rights during the two world wars. Then, after WW2, it was its war against communism which made the world choose the former, due to the lack of freedom and democracy in USSR’s Iron curtain. But after the collapse of Soviet Union, there was no enemy left against USA. Suddenly the vacuum which was created made USA arrogant of its supremacy. In political vocabulary, there were no ‘checks’ on its actions. Even the UN, UNSC were dominated by USA and its allies.

But after the 9/11, Afghanistan-Iraq war under the incompetent Bush regime, and the economic recession, the ‘American Dream’ slowly started losing its glory. The world started accepting the fact that USA was not in its best position as it used to be before to protect the other nations. This led to the triggering of the nationalistic sentiments, however small they might be. Even in USA, the people were fed up with the country’s role as defacto ‘world’s policeman’, and they wanted to keep their country away from world affairs. This was a huge shift in the country’s outlook, unlike the years during world wars or cold war, when USA used to take lead in the world affairs, and even frequently interfered in other country’s internal matters.

Then, the Arab springs revolution happened in 2011, which led to overthrow of USA backed dictators in Middle east and North Africa. Russia’s annexation of Crimea in 2014 added fuel to fire to the rising nationalism, and the world did nothing about it. Also, worth noting is the fact that during this time, from 2010 to 2013, with the Wikileaks, and whistleblowers like Ed Snowden and Bradley/Chelsea Manning, the world came to know about the spying program USA had been doing on the world for many years. This led to more concern about the sovereignty and integrity of the nations. Even the allies were spied and this led to the further loss of the trust among the nations with United States. Then the next two events turned to be pivotal in the rise of nationalism as we see today. They were the Brexit in 2015 and Donald Trump’s surprising victory in 2016. Infact, such was the effect of these two events over the world, that most of the escalation in nationalism, right wing, alt-right and tensions all over the world can be attributed to these two events.

Since, 2016, we have seen the rise in new Cold aka Trade war between USA and China, USA’s withdrawal from many treaties and organizations, rise in conflicts between countries like India-China, USA-Iran, and even rise in racial and ethnic tensions in USA and some parts of Europe as well. It seems that the liberal order since 1991 is slowly disintegrating all over the world. Today, we see that many countries have either elected right-wing, nationalistic, anti-establishment ( anti liberal and globalization establishment) leaders or the leaders have proclaimed themselves to be the defacto supreme dictators who can rule the country till their last breath. The first group includes countries like India, where Narendra Modi has been elected twice in 2014 and 2019, with huge majority. He is known for his ardent patriotism with ties to the right wing group, RSS. Besides, we see Brazil with the election of Bolsenaro, PM Boris Johnson in UK, Benjamin Netanyahu in Israel, PM Viktor Orban in Hungary and many more in Europe as well. Even respected liberal German chancellor, Angela Merkel will step down in 2021, and there has been rise in neo-nazism and hatred of immigrants from the middle least, especially Syria and Afghanistan. Only Canada and France remain liberal with their leaders Trudeau and Macron. But even they are challenged by right wing parties in their respective countries.

While the other group includes countries like Russia, China, Saudi Arabia and Turkey, where Putin, Xi Jinping, MBS and Erdogan have become dictators respectively. On one side even though Russia is criticized by the liberal, left media for Putin’s dictatorship and for its killing of opposition leaders ( the most recent being the poisoning of Alexei Navalny), but on the other side, we see the right wing media praises Russia for reviving the nationalistic trend, and even lauding it to the only country to preserve the good old Christianity values. For the right wing believers who watch Fox news, USA has become dominated by the minorities, immigrants and Jews, and the old USA ( white, Waspy, protestant) establishment has dwindled over the years. No wonder Trump and its followers are in good terms with Putin.

But China with its desire of empire expansion and to become the next superpower, has been facing a great deal of opprobrium, especially since the outbreak of Covid-19 pandemic, which allegedly originated from Wuhan. Further, its border tensions with India, after it purposefully incited violence on the Indian soldiers, led to heightened tensions between the countries. China has aggressively silenced the pro-democracy supporters in Hong Kong, and annexed the island. It continues to blockade Hong Kong and Taiwan from foreign support, and has led to forced detention of Uighur Muslims in Xinjiang province. Further, it has extended economic support to third world countries which usually result in ‘debt trap’ or ‘debt diplomacy’ under the disguise of sophisticated marketing of Belt and Road or The new Silk Road . The world saw how Sri Lanka lost the Hambantota port to China, and the same is happening in other countries in Asia and Africa. Hence, the seeds of future conflicts are being sowed.

Finally, we see the conflict in the middle east as the sands and winds of middle east have always been hot and turbulent. Besides, the age old Israeli-Arab and Iran-Saudi Arabia conflict, now we see its getting more and more complicated with the US vs Iran, Iran-Syria vs Israel, and a new player in the form of Turkey, under the dictatorship of Racep Tayyip Erdogan. Recently, he converted the two museums into mosques and has challenged the Saudi led Muslim world with a new hub of Muslim leadership under Turkish banner. Even MBS have consolidated his richest empire and have become the defacto ruler in the family of Saud. Hence, earlier the middle east was divided into three camps, with Saudi Sunni Arabs, Persian Shia Iran and Zionist Israel. Now, the fourth entry is that of Turkey with its ambitions of a Neo-Ottoman empire.

Thus, it looks like this trend of nationalism is here to stay. The geopolitics has already been covered by the differences and conflicts among the nations, and unless, a peaceful and promising resolution is figured out, there seems to be no end to this trend. We hope that this does not lead us to another catastrophic world war, whose chances have been never been higher before. Many liberals, centrist and left intellectuals have been perplexed by this sudden rise of right wing forces, and many of them are burning the midnight oil to understand what went wrong in their liberal, globalized, world order, which seemed to be omnipotent, just 25 years back. Lets see how the world and its geopolitics unravels before us.

© Abhishek Karadkar and abhiknotes.com, 2020. Unauthorized use and/or duplication of this material without express and written permission from this site’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Abhishek Karadkar and abhiknotes.com with appropriate and specific direction to the original content.

Why China became “the world’s factory”?

Today, China is known as “the world’s factory”. China accounts for more than 28% of global manufacturing output. There are many economic reasons to explain this such as illustrated in this article. https://blacksmithint.com/how-did-china-become-the-worlds-factory/ But, the rise of China has also been led by a lot of other factors, few of these events did play a vital role which has resulted in today’s global scenario.

Nixon-Kissinger’s visit to China, and adopting the policy to create a wedge between Soviet Union and China
Japan’s rise in late 1970’s and 1980’s as an economic giant, based on the capitalism and unique Japanese industrial model.
Globalization and financialization of America after Reagan’s win to Presidency
Fall of Soviet Union in 1991, leading to the complacency towards China after winning the cold war
Tech revolution in silicon valley, California
Bush accidental election in 2000, 9/11 and the subsequent dragging of America in Iraq-Afghanistan war
Finally, the global recession in 2007-08

It all started with Nixon and his cunning advisor Henry Kissinger. In order to defeat the Russians in the cold war, they thought to create a wedge between the communist powers, USSR and China. This is because America had already suffered severe setbacks in Vietnam war ( due to the covert assistance of Soviets and Chinese to the Vietnamese communists). Then, India had defeated the US supported Pakistan in the 1971 Bangladesh liberation war, and to the very disgruntled Nixon, it was like a punch in the face. Besides, civil protests, anti-war movement against US involvement in Vietnam and new age movement had ravaged the public perception of Nixon ( though Watergate scandal surpassed all the limits later). Hence, this move to befriend China was initiated to create a diversion in US foreign policy which until had been vehemently focused on Soviet Union and Vietnam during the 1960’s decade. Though this did work later, but in the long run, as we see, this decision acted as a trigger for a whole new conflict, erupted today.

But as US needed China against Soviet Union, so did China needed USA as well. This is because of the rise of Japan as an economic power. Japan had started dominating in industries such as electronics and automotive, with the capitalistic model blended with Japanese work ethic. As China and Japan had been rivals for a long time, and China had not forgotten the brutal massacres and genocides committed by the Japanese forces during world war 2, it was natural for China to fear about history to get repeated again. Though, post WW2 Japan had been significantly different as compared the pre WW2, but the economic model of manufacturing, self-reliance and capitalism with unique Japanese culture acted as a symbol of Japan’s resurgence in the Asia, and thereby becoming once again the dominant power as it was before. Japan took less than 3 decades to transform from a poor, devastated country after WW2 to become a rich, industrial superpower. On the other side, China also had been ruined by the WW2, and on similar parallel, they had still remained a poor, backward country as compared to Japan. Due to Mao’s embrace of communism, China neither became an industrialized nation, nor a self-reliant one. Of course, there were vast differences between both the nations in terms of population, size, resources etc. But the fact that a resource deficient, small country like Japan can rebounce in such a small duration, with the capitalistic, manufacturing model compelled China to drift away from USSR’s communism and embrace capitalism in order to lift its humongous population out of dire poverty. Hence, finally, China under the leadership of Deng Xiaoping, opened up in 1979.

The next factor which accounted for the rise of China as a manufacturing hub is the globalization and financialization era which had started after Ronald Reagan got elected to become the President in 1980. It was during his presidential two terms, that the theories of Milton Friedman http://umich.edu/~thecore/doc/Friedman.pdf, https://medium.com/@jonmertz/on-business-milton-friedman-is-wrong-about-social-responsibility-9fef2c749643 and other conservative republicans got implemented in the American economy. The companies started manufacturing in other parts of the world such as China, Taiwan and Korea, and companies in US got more involved in simply making profits as per Friedman’s theory. By manufacturing abroad, laying off local employees, shutting down local branches and disbanding trade unions, USA handed over a large chunk of manufacturing to China. As China provided an ideal condition of cheap labor, along with long hours, lack of regulatory compliance, low taxes and fast production, American companies ( which means shareholders and investors) were more than happy to mint dollars. Even Japanese competition compelled Americans to manufacture in China to reduce cost of production and labor, and thereby compete with the Japanese. Due to which, many American SME’s got shut down or eventually went bankrupt amidst this. One of the famous examples for a successful manufacturing company to transition to a financial firm is GE to GE Capital, under the leadership of Jack Welch. The company not only lost its manufacturing share, but also suffered from bankruptcy ahead in 2008 crisis. Here is one insightful article on GE’s failure: https://chiefexecutive.net/who-killed-ge-not-jeff-immelt/

Then, the fall of Soviet Union and the end of cold war in 1991 proved out to be another factor for the continuation of US reliance on China for manufacturing. Due to the unexpected disintegration of former USSR, USA suddenly became the world’s only remaining superpower. This led to complacency in US outlook towards the other countries of the world. As no nation after Soviet Union (Japan did so only economically, but suffered stagflation in the beginning of 1990’s) had the capability to challenge USA ( USSR had confronted and even exceeded USA in many fields. Refer to my post for more info on this: https://abhiknotes.wordpress.com/2020/07/15/why-did-soviet-union-lose-the-cold-war/) Hence, USA continued the scaling up of the manufacturing in China and even naively assumed that like Russia, China would also embrace democracy as Russia had done so in 1990’s ( which failed on an epic scale). Also, as China’s economic model was based on capitalism, and having allowed American companies to manufacture and invest in China, the industrial lobby did not want for another conflict to arise in Asia. Thus, wall street led economic interests led to the continuation of the “Made in China” policy.

The fifth factor to add in this is the tech revolution in silicon valley. The 1990’s decade was the dot com era and internet was the buzz word in the valley. Hundreds of startups were opened everyday, and today’s tech giants such as google, ebay, paypal, amazon were started during that era. Later, facebook, twitter, snap, whatsapp dominated the 2000’s decade of tech revolution. Due to this tech boom, the traditional manufacturing dependent US economy was replaced by the software revolution. Manufacturing became out of fashion, and with the sole exception of Elon Musk, everyone was busy starting companies and funding the software and social media startups. Hence, this also proved detrimental for the US to cut down its manufacturing, and embrace service based model. Even hardware giants like Apple and Dell switched over to manufacture their Iphones and PC’s in China. As famously said by Peter Thiel, “We wanted flying cars, instead we got 140 characters” https://som.yale.edu/blog/peter-thiel-at-yale-we-wanted-flying-cars-instead-we-got-140-characters Only Elon Musk stood out of the silicon valley’s internet savvy crowd with his bold attempts to get his hands dirty in manufacturing by starting Tesla and SpaceX. Today, fortunately for America, Elon Musk stands as an inspiration for “Make in America” movement ( though he came in US as an immigrant…unrelated to this topic, we can cover later someday..)

Then, Bush election, 9/11 and US involvement in Iraq-Afghan war led to tremendous military expenditure and drifted US away from looking into the flaws it had created by its dependence on China. Bush and his team boasted over-confidently about US superiority and due to the Bush & Family obsession with Iraq, Saddam Hussein & oil, China took advantage of the US policy, copied US products, and violated the trade agreements by the continued IP theft. On the other side, China started its own companies to compete with US ( such as Alibaba against Amazon).

Finally, the global recession and sub-prime crisis in 2007-08 led to the eventual collapse of many US firms ( financial as well as manufacturing), and which thereby led to increased dependence on China for imports. In 2010, China’s global manufacturing exceeded more than USA. Since 2008, Chinese dragon has transformed itself into a giant, and unlike the passive Chinese policy before 2008, China today has been very aggressive in pushing its policies across the world. It has achieved”World’s factory” status and with its Belt & Road Initiative (BRI), it has challenged USA and the western world (+Japan) with its gigantic construction projects of railroad, bridges, ports, highways, pipelines in different parts of the world. Having world largest US Dollar reserves apart from US, China’s strategy to loan money to poor countries and then forcefully acquire their strategic resources under the pretense of loan repayment default has widely gained notoriety (Sri Lanka had to handover the Hambantota port https://www.csis.org/analysis/game-loans-how-china-bought-hambantota

Starting from 1979 with the opening up of China to the world, until 2019, when the trade war between USA and China had boiled up, and by the end of year, coronavirus from China made the news, it took 40 years for China to rise to the current economic superpower status. The dragon has risen, and its ambitions are like expulsion of fire to engulf the world. That fire has burnt ( still burning..) the world in the form of coronavirus. Also, there are many other reasons besides economic one to get concerned of chinese ambitions.

China, has border conflicts with most of its neighbors such as India, Taiwan Vietnam, Hong Kong etc.
It has consistently supported North Korea, a terrorist state and assisted its nuclear programme.
With its “String of Pearls” theory, it plans to block India and thereby control the Indian ocean. This is of high security concern, not only for India, but also for the other QUAD nations, including USA, Japan and Australia.
China has committed human rights violations against the Xinjiang province Uighur muslims
China uses face recognition and AI technology to spy on its own citizens and has transformed the country into a “ironwall”
China manufactures and exports products ( and virus as well..) to other parts of the world, but does not allow other countries imports to compete with its own products. We can see google being banned in China, and replaced by Baidu. Similarly, Wechat, Tiktok, Alibaba, Huawei have replaced its US and other customers, with the assistance of communist government.
Most recently, the suppression of information regarding coronavirus, and its delayed acceptance of the existence of virus, coupled with yielded influence of China over WHO has alarmed the world of China’s menace.

Thus, it has become imperative for the world to adopt a new policy towards China, and actively confront in the realpolitik game.

Below is the youtube video link explaining China’s economic rise (for Indian audience in Hindi) https://www.youtube.com/watch?v=gFmRP3whXmU