The rise of Asia, the break-up of Europe?

Lord Green, former Group Chairman at HSBC and UK Minister of State for Trade & Investment. Chairman at Asia House, London.


The rise of Asia, the break-up of Europe?

Lord Stephen Green is former Group Chairman at HSBC and UK Minister of State for Trade & Investment. He currently serves as Chairman at Asia House, London.

Destructive colonization paved the way for Eurasia

Lord Green begins his talk with the first empire in the Eurasian region: Persia, or more commonly known, Iran. Iran is home to one of the world's oldest continuous major civilizations, with historical and urban settlements dating back to 7000 BC. Green describes Iran’s often, problematic relations with its closely-intertwined neighbors as a significant hurdle in the future development of Eurasia.

The Mongols, Greeks, and Islam all saw their empirical peaks throughout the region's history, but cultural differences and inevitable war led to a collapse of every major power in the area.

Fast forward some couple hundred centuries, and the Eurasian power struggles remain consistent with their historical theme of colonization and vastly differing cultures, only now the Russians begin to “play” in the Eurasian area.

“The map of Europe and Asia, solidified by the late 20th century only, into what we now see as a small number of large, dominant powers, controlling regional areas.” - Lord Green.

Asia remains one of the most culturally diverse regions on the planet. Differing ideologies from politics to economics has ushered in a complex power-struggle that Green notes, “must be overcome in order for the region to prosper.”

We see Russia straddling both Asia and Europe, yet, fail to sustain political and cultural compatibility. Iran, with its central position geographically, but problematic relations with the Islamic world as well as the West, make it difficult for the nation to prosper.

Turkey faces extensive political pressures from Europe and the Middle East, and is recently trying to cope with the tragedy that is Syria and all subsequent circumstances such as the refugee crisis.

Europe, prosperous but struggling to achieve cohesion, and unsure of what it stands for, faces a number of pressures such as the potential impedance of the EU resulting from Britain’s exit, and vastly different political and cultural ideologies which make progress increasingly difficult.

In other words, Europe and Asia respectively, are beginning to look more like as the westphalian settlement. Cultures differ, identities differ, governments may differ. Several obstacles present themselves to the development of Eurasia, Green says.

Despite the region’s problematic history, Green has an optimistic, yet very pragmatic outlook for a 21st century Eurasia.

Global power is shifting to the East, but can Eurasia handle it?

Throughout his presentation, Lord Green notes that “balance in Eurasia is not stable.” Although trends point to an increase in Asian global influence, Green retains his realistic observation on the region, and asks, “how will this balance of power in Asia makeout?”

More specifically, Green asks: "The Rise of Asia? Or the break-up of Europe?

Green poses us with a monumental uncertainty here; both circumstances can either prove to be catastrophic, or entirely beneficial.

The convergence of economic opportunity that arises really from the catch-up from countries that missed out on the industrial revolution for specific reasons. In 1820, the largest economy in the world was China’s, second largest was India.

After that came the Industrial revolution, which widened out the potential of economic growth to deliver benefits and raise people's living standards. During this period in history, Green notes a hierarchy of political and economic dominance: Europeans first, Americans second, Japanese third. This pattern continued until at one point, 75% of the world’s output was coming from those 3 countries, which collectively, never made up more than 20% of the world’s population; change was imminent.

What we are now seeing, is a convergence back to a more normal level of distribution. Meaning Asia’s share of output is going to continue growing until we meet a new global equilibrium.

Because they are modern economics, Green explains they are able to overleap older developed economies. “This is particularly obvious with physical infrastructure” Green says. China has a high quality road network, an efficient rail network, and a great airline system. When compared to the crumbling infrastructure network in the US, it’s easy to see why more and more global prowess is converging onto China and subsequent regions.

“Asians are getting more self-confident about asserting that old European stroke-western models of how society should work and how markets should work are becoming more inadequate for the needs of a modern society in the 21st century”

Voices in China call attention to the defects of a popularized capitalist model that appears to be too financially oriented in the ways it goes about deploying capital investment. Rightfully so, I may add. Reliance on debt-financed operations is not sustainable in the long run, and as we saw in 2008, can and will lead to financial bubbles.

The trouble with Europe, Green notes, is that is has “no shared identity”. It is a whole series of different countries with different cultures.

Brexit is a rather dramatic example of that precise point.

“Gone are the glory days of Europe”

Europe is slowly losing market share and self-confidence on the world stage. Furthermore, the region has yet to fully recover from WWI, where they lost an immense amount of capital and resources.

The old saying “Go West Young man” can perhaps be reworded to fit a more modern world as “Go East Young Person” to fit a changing global cultural and economic climate.

What is the future for Europe? Green asks.

EU faces extraordinary difficulties in terms of refugees. In the near east and Africa, you have unstable lands, lands that are likely to produce pressures for immigration.

Furthermore, Syria is a terrible tragedy, which on its own, has produced upwards of five million refugees. Imagine however, if “Egypt broke up” Green hypothesizes. Egypt already has an unstable leadership and a population north of ninety-million. Collapse of the North-African state could be yet another blow to Europe.

Countries in the near-neighbourhood of Europe have a population of four-hundred million, yet have a combined economic output smaller than that of Belgium. Is it any wonder why there are pressures of immigration into Europe?

If we shift our focus from Europe to Asia, we know that lingering issues are also about politics and identity, not just economics trends.

A Case For Asia

Green notes that Asia has three substantial issues:

1. China is macroeconomically seriously unbalanced
2. The Korean peninsula is dangerously unstable
3. Iran is not at peace with its neighbours

The presentation dives into detail about China’s rising consumer debt; a 6.5% increase in GDP with very rapidly rising debt is not likely a sustainably proposition. Investment in China is running well over 40% of GNP, a good 15% higher than economists say it needs to be.

If China is to secure their future, they need to figure out a way to work around underconsumption, oversaving, and investment taken over by the government.

The Korean Peninsula poses numerous geopolitical threats to Asia as a region. North and South Korea border Russia, China, and is within striking distance of Japan. Green notes that stabilizing the region should be a priority on Southern-Asia’s geopolitical agenda. Furthermore, Iran, Russia, and Turkey, among others, are failing to maintain peaceful relations with their neighbors. Any instability in these country’s poses a considerable threat to the Eurasia region as a whole.

Green notes that, “we should not be too optimistic about Asia because of these issues.” But it is also highly likely that power will continue to shift Eastward.

A Case For Europe

Fundamentally, for all the differences between cultures and economies in Europe, there is an identity which you can discover which is born of its own history. A history of violent entanglement. European proposition to the world is something of value to the world.

If there is one thing the European Union has achieved, which the british has dismissed, is that it has created peace, stability, as well as modernization and opening up of a number of societies. Societies that can begin to provide for their peoples a future which is more safe, more educated, and more comfortable.

Green concludes his presentation with repeating the main theme; a rise of Asia deserves a question mark. And the breakup of Europe deserves a question mark. “We do live in interesting times.”

We do live in interesting times, indeed. And after listening to Lord Green’s talk The Rise Of Asia And The Breakup Of Europe I came away with a remarkably well-informed insight on not only the History of Eurasia, but the optimistic future of the region too.

Asia Leaders Series in Zurich provides a highly unique source of insight on Asian and European economies through the viewpoints of their well-accomplished speakers such of that as Lord Green.

The talk was a remarkable insight into the economics of Eurasia, but I walked away with an urging desire to throw a cascade of questions Lord Green’s way. To all enthusiasts of Eurasian relations, I would highly suggest attending one of Asia's Leaders series’ closed-door Executive Dinners or to take a look at the filmed interview if you are in search of a new insight into the growing Asian economy.



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