A Tri-Polar World:
USA, China And India
Arvind Virmani
(views are personal)
Introduction
• Index of Power: Economic, Overall
• Review of Our Past projections
– Globalization: Major driving Force
• New Developments
– Effect of Global Crisis
• Revised estimates: Changes
• Transition: Multi-polar or Bi Polar
• Peace: Asian Balance of Power
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Nations Power
• Traditional: Industry, Population,
Fiscal-Debt, Economy(Kennedy),
Technology, Military, Navy, Nuclear.
• Complex Models: Tellis(2000)
• Simple model: Two level index-VIP
– Foundation/base: Economy
• Basic modern economics -> VIP2
• Apply all countries, over millennia
– Upper level: Strategic Assets/Tech
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Economic Foundations of Power
• Growth Theory and Experience
– Convergence (PcGdp):Intra AE only
– LDCs: Divergence, Shooting stars
– HGEs: Gr. persistence, Catch-up Growth
• Globalization and Reform
– Asia (Japan;NICs,Asean;China,India,Vietnam)
• Global Technology Frontier
• Shares in world (GDP- Population)
– Europe, Japan, USA=>China, India, Indonesia
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Global Growth Experience
• Sustained high growth over decades rare.
• Inter-decadal growth persistence (correlation)
low (0.18)
• Complete mean reversion in three decades (0.06)
• Exceptions: Asian high growth economies (Japan,
NIEs, ASEAN, China, India, Vietnam)
• GrPcGdp > 7.5% for 30 (20) years: 2% (4.5%)
ctry
Per
Capita GDP: Corellogram of Average decadal growth rates
1950s
1.0
1960s
0.26
1.0
1970s
0.07
0.34
1.0
1980's
0.02
0.12
0.15
1.0
1990s
-0.04
0.06
0.21
0.18
1.0
182
1950s
1960s
1970s
1980's
1990s
Countries
66
89
127
129
Note: No of countries varies because of data availability
Data: Penn World Tables, ver 6.2; Chain index, const price
1126/10/0711
April, 2007April,
2007
AV
Indices of Power: VIP2, VIP
• Size of Economy (GDP)
– Gdp = Population * Per capita Gdp
– Population(demography)
– Quantity Comparison: PPP
• Economic Power : Index(VIPP/VIP2)
– General Technological capability: Prod
Fn. (K/L, Hs/L, A(t)) = Per capita Gdp
• Overall Power: Index (VIP)
– Strategic Technology and Assets
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Uni- Polar to Bi Polar
• US NIC
(Dec 2004)
– Based on Goldman Sachs October 2003
– China’s GDP(US$) could be 2nd largest by 2020
– India’s GDP(US$) could be 3rd largest by 2035
• 2004 Paper
(ICRIER WP150)
– China and India rise faster than projected
• Demographic decline (Russia, Japan, Ger, Itly, Fra)
• Kissinger(94): US,EU,Russia,Japan,China,India(?)
– Bi Polar Transition
• China: GDP at PPP equals USA by 2015
• Power potential 70% of USA by 2035
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Bi Polar to Tri Polar
• 2005 Paper
(ICRIER, WP160, Mar. 2005)
– Rise of India:
• Third largest economy 2015,
• Real GDP=USA by 2040
• Power potential 80% of US by 2050.
– China’s Power potential = US 2030-35
– Bi-polar world by 2025, Tri-polar by 2050
– Association of States(EU): Virtual State (USSR)
• 2006 Book
(Academic Foundation)
– Weakness and threats to China, India’s growth
• China: Mercantilist Export-FDI/PSU investment led growth
• India: Governance/Public Goods e.g. Rule of Law (Police, legal system)
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US NIC: November 2008
• “The eight largest economies in 2025
will be, in descending order: the US
China, India, Japan..”
• “By 2025 China will have the world’s
second largest economy and will be a
leading military power.”
– A global multi polar system is emerging with
the rise of China, India, and others
– The development of a globalized economy in
which China and India play major roles
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New Developments: 2008-10
• Oil, Energy Price Boom
– Russia’s comeback, Brazil
• New PPP estimates from ADB-WB
– India, China: -36%/40%
• US-EU Crisis
– Differential Impact on economies
• Domestic vs. Export oriented
• Fiscally constrained vs. non-FC
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Fiscal Impact
• Fiscal Deficits: USA, EU (Japan)
– Foreign Aid, Military expenditures
• China: Fiscal Surplus, CAS
• Global rebalancing(US CAD)?
• China
– Domestic caution (Ec-tech): Financial
– External Assertion(Pol-Mil nationalists)
• S China Sea, Arunachal-Kashmir
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Impact on Exports
• Global GDP & Import slowdown
– Export oriented => Export neutral
• Development strategy, Growth model
– E, S E Asia: FDI-Export or Public
Investment-Export led growth model
• India: Domestic Entrepreneur led gr
– Export Neutrality, Investment neutrality
– Continue Policy, Institutional Reform
• Mid-decade Gr. Rt.: China<India
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1a Economic Size (GdpPpp)
1.6
Rleative Size of Economy: GDP PPP
1.4
USA
China
India
Japan
Germany
Russia
1.2
Brazil
1.0
0.8
0.6
0.4
0.2
2027
2026
2025
2024
2023
2022
2021
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2020
2019
2018
2017
2016
2015
2014
2013
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2012
2011
2010
2009
0.0
Difference: 2010 from 2004-5
• Impact
– Lower Gdp Ppp estimates
– Offset by faster growth
• China: GdpPpp = US in 2017(+2 yrs)
• India 3rd largest in 2012
– Equals USA in 2034 (-6 yrs)
• India’s (trend) growth rate faster
than China’s by mid-decade.
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1b Economic Size (GdpPpp)
0.6
Rleative Size of Economy: GDP PPP
USA
China
India
Japan
Germany
Russia
Brazil
UK
0.5
0.4
0.3
0.2
0.1
2027
2026
2025
2024
2023
2022
2021
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2020
2019
2018
2017
2016
2015
2014
2013
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2012
2011
2010
2009
0.0
Difference: 2010 from 2004-5
• Russia
– Overtake Germany by 2020
– 5th in Size and Power Potential
– Reason - Oil/Gas prices: Faster growth
• Non-market power of energy cartel
– Actual Power higher: Strategic Technology
• Brazil
– Overtake France and UK by 2012.
– Positive effect of natural resource endowment
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Difference: 2010 from 2004-5
• Power Potential (VIP2)
• China VIP2 =USA 2027
• India: VIP2 80% of USA in 2040
– 10 yrs earlier than in first prediction
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Long Term Evolution: Power Potential VIP2
1.0
0.9
0.8
Power Potential: VIPP
USA
China
Japan
Germany
UK
France
India
Russia
0.7
0.6
0.5
0.4
0.3
0.2
0.1
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
0.0
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Global System: Long Term
• Global Power: VIP2 > 25%
– China 2010, India 2025 (Japan -09)
• Super Power: VIP2 = 40% - 50%
– China 2015-18
– India 2031-34
• Uni-polar: US Sole super-power
– Peak 1999 (1990-2010)
• Bi-Polar: 2020, Tri polar: 2035
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Long Term Evolution:
Power Potential VIP2
1.8
1.6
USA
China
India
Japan
Germany
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0
2010
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2035
Quadri-Polar: Unlikely
• Virtual State: Unified decision
making w.r.t external relations
– Comecon/E block (USSR+ E Europe)
• EU is not Virtual State(VS)
– Move in opposite direction: Referenda
– Only in Trade (WTO) does it act as one
– Financial crisis: Mixed signals
– Politically and Militarily: Nil
• No EU seat in Multilateral organizations
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Multi-Polar Transition
• Multiple descriptions: Competitive fringe
– Pluri-polar, Multi-polar, A-polar, US and Rest
• Globalisation
– Change in relative importance of Economic,
military, social elements of power
• Economic, social(?) Multi-polarity
– USSR disintegration 1990=> Russia
– Ec. decline of allies: Large, increasing Gap with
2nd rank Japan, 3rd rank Germany etc
– Ec. rise: Non-allies China, Brazil, India
– Formation of Euro, expansion of EU
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Overall Power
• Actual Power: VIP=(VIP2,Strategic Assets)
– Strategic-military technology/assets/capability
• USA even more dominant
• Russia: Legacy strategic assets immobilised
• Overall: US pre-dominant power
– Monopoly with Competitive Fringe
• Future: Strategic assets
– Russia: Gradual depreciation
– China: Systematic build of strategic capability!
– India: Political Will to build, exercise power?
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Transition: Power Potential
2 VIPP
PowerVIP
Potential:
0.8
0.7
0.6
USA
China
Japan
Germany
UK
France
India
Russia
0.5
0.4
0.3
0.2
0.1
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
0.0
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Net Assessment: Preliminary
• S1 Uni-polar – Multi polar
– G20; G9(1+1+3+1+3)?
• S2 Bipolar (USA-China)
– S2a(Jelly spine) Action(appeasement)-Reaction China
(declining respect/fear) expands strategic space in Asia.
• G2 => Matrix (India-Asean-Japan-Korea; Medium powers, G6)
– S2b(Velvet glove-iron fist) China-hard Realism(SCs ‘core
nat int’) US reacts(Open seas, alliances, dvlp partners)
• S3 Tri polar
–
–
–
–
S3a Jelly Spine: G2 USA-China
S3b Velvet Glove: Key role of USA-India Partnership
S3c China-India (Buddhist): => G3 or G4 (+EU)
S3d Independent(all): Un-stable disequilibrium, danger
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Velvet Glove Scenario:
US-India Partnership
• Dangerous Decade(2025-35)=> S3b
• Partnership: Globalization-multifaceted
interaction (Economic, military, social)
• Global Economic Organizations
– Legitimacy, credibility and governance
– Fair democratic rules that will last
• IMF: Bop support/ST Loans
– Crises: Macro imbalances=>Macro mgt.
– European Institution, Power base
• WB: Aid/social: India (7)
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Initiatives: Economic
• Positive Levers: Traditional Polity
• Fiscal constraints on USA
– Indian Aid Organization
– R&D & Joint Production
• Health care costs (US)
• Energy: Thorium breeder, non-conventional
sources; Use efficiency (Bldgs, AC, Refrig)
• Cyber Security (Indian IT)
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Initiatives: International Security
• Fiscal Def =>Vacation of strategic
space =>Strategic partnership (Asia)
• Freedom of Asian Seas Initiative
– Suez to South China sea
– Naval co-operation: broaden, deepen
• UNSC: Permanent member with veto
• Technology access: Membership of
NSG, MTCR, Wassanar, Australia Group
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Initiatives: International Security
• Global Anti-terror Strategy
– Create consensus in UN and other forums
• Travel, financial ban on Intelligence agents, military
officers (rogue?) involved with terrorists
– Definition of ‘Aggression’ and ‘Self defense’
• Irregular/Guerilla warfare from territory
– Elimination of Terrorist networks
• Arms embargo on countries sheltering terrorists
• Counter-terror expertise
– Deterrence capability: Pariah State, Non-State
actor, state sponsored; finance source/channel
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Medium Term: Geo-Political Rules
• New Rules for an era of globalization
• Economic: Macro decision making
– Quadri polar? G4 (US, China, EU, India)
• Social: Democracy Initiative (G6)
– Independent body: Degree of democracy
(index) to adjust 1 person 1 vote
• Security: Institutions (rules):
– Vote proportional to power
– Economic(VIP2) or Ec + Strategic (VIP)
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References 1
• From Uni-polar to Tri polar World: Multi polar
Transition Paradox, Academic Foundation, New
Delhi, 2009.
• Propelling India from Socialist Stagnation to
Global Power: Growth Process, Vol. I (Policy
Reform, Vol. II), Academic Foundation, 2006.
–
–
–
–
–
“A Tripolar World, India, China & US,” Lecture delivered at India
Habitat Centre on May 18, 2005.
“Economic Performance, Power Potential and Global Governance:
Towards a New International Order”, Working Paper No. 150, ICRIER,
December 2004.
(http://www.icrier.org/page.asp?MenuID=24&SubCatId=175&SubSubC
atId=233).
“A Tripolar Century: USA, China and India,” Working Paper No. 160,
ICRIER, March, 2005.
(http://www.icrier.org/page.asp?MenuID=24&SubCatId=175&SubSubC
atId=233).
“China’s Socialist Market Economy: Lessons Of Success”, ICRIER
Occasional Policy Paper, April, 2005
(http://planningcommission.nic.in/reports/wrkpapers/rpwpf.htm).
VIP2: A Simple Measure of Nations (Natural) Global Power, ICRIER
Occasional Paper, July, 2005().
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References 2
• China’s Socialist Market Economy: Lessons Of Success,
Working Paper No. 178, ICRIER, December 2005.
• Global Power From The 18th To 21st Century: Power
Potential (VIP2), Strategic Assets & Actual Power
(VIP), Working Paper No. 175, ICRIER, November
2005.
http://www.icrier.org/page.asp?MenuID=24&SubCatId=175
&SubSubCatId=233.
•
World Economy, Geopolitics and Global Strategy: Indo-US
Relations in the 21st Century, Economic and Political
Weekly, Vol. XLI No. 43-44, November 4-10, 2006, pp.
4601-4612
(http://www.epw.org.in/showArticles.php?root=2006&leaf
=11&filename=10717&filetype=pdf ).
•
Trilateral Nuclear Proliferation: Pakistan’s Euro-Chinese
Bomb, IDSA Monograph Series No. 1, Institute of Defence
Studies and Analysis, New Delhi, December 2006.
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References 3
•
“The Economic Foundations of National Power: From Multi polar to
Tri-Polar World?” in V. R. Raghavan (Editor), Economic Growth &
National Security, Centre for Security Analysis, Chennai, 2008.
•
“Future Economic Contours of the Asia-Pacific and South Asian
Region and Thier Impact on Global Security Architecture,” USI
National Security Lecture, 2006, in National Security, Global
Strategic Architecture and Information Security, National Security
Series, 2006, KW Publishers Pvt Ltd, New Delhi, 2007.
•
Evolution of World economy and Global Power: From Unipolar to
Tripolar World in Economic Diplomacy, Editor I. P. Khosla,
Konarak Publishers, 2006.
•
“Globalisation, Economic Growth and National Security”
chapter in, Comprehensive Security for an Emerging
India, Editor AVM Kapil Kak, CAPS 2010
•
The Sudoku of India’s Growth, BS Books, New Delhi,
2009.
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