A bimonthly magazine on international affairs, edited in Germany's capital

Tipping the Scale


For more than 500 years the fate of countries and peoples in Asia was shaped by developments and decisions made in the West. Now the two are beginning to change roles.

© REUTERS/Tyrone Siu

Even for the rapid pace of our age, the shift of power and wealth to Asia has happened with remarkable speed. As Indian prime minister Narendra Modi recently reminded the World Economic Forum, his country’s economy is now six times as large as it was in 1997—the last time an Indian prime minister had spoken in Davos. The growth of the Chinese economy has been even more momentous. In 2014, according to the IMF, China became the world’s largest economy, ranked by purchasing power. The United States now is number two, relinquishing the top spot that it had held since the late 19th century. The IMF figures also showed that three of the world’s four largest economies are now in Asia, with Japan at number three and India at number four. In 2009, China also became the world’s largest merchandise exporter—a position that the US had held since the World War II. China is also now a vast market. Daimler Benz sells more cars in China than in any other foreign country. Indeed in 2016, China became Germany’s largest trading partner.

The economic transformation of Asia first became evident in Japan in the 1960s and then in South Korea, Taiwan, and parts of Southeast Asia in the 1970s. The expansion and evident wealth of the Japanese economy, in particular, was so dramatic that by the late 1980s, many Americans began to fear that the US might be eclipsed by its old second world war adversary. Yet the population of Japan, at just over 120 million in 1990, was too small to shift the global balance of economic power on its own. The rise of China and India, two countries with populations of over 1 billion people, is a different matter. From 1980 onward, the Chinese economy began to grow at the double-digit rates pioneered by Japan in the 1960s. India also grew strongly, albeit not quite as fast after economic reforms in the early 1990s.

The fundamental reason for the shift in economic power to Asia is simple—weight of numbers. By 2025 two-thirds of the world’s population will live in Asia. By contrast the United States will account for about 5 percent of the world’s population and the European Union around 7 percent. Hans Rosling of Sweden’s Karolinska Institute put it nicely when he described the world’s pin-code as 1114: of the planet’s 7 billion people, roughly 1 billion live in Europe, 1 billion live in the Americas, 1 billion in Africa and 4 billion in Asia. By 2050, the world’s population is likely to be 9 billion, and the pin-code will have changed to 1125, with both Africa and Asia having added a billion people.
For centuries, the wealth and technology gap between West and East was so enormous that western nations dominated international affairs and business, no matter the difference in population. But rapid economic development in Asia over the past two generations means that this wealth gap has narrowed sufficiently, and Asia is beginning to tilt the balance-of-power in the world.

Easternization Full Speed Ahead

Western skeptics tend to highlight any signs of political or economic turmoil in China in particular—and there is no shortage of those. In 2015 alone, China experienced a sharp slowdown in growth, a spectacular plunge in the stock-market, an increasingly harsh political crackdown on domestic dissent, and the arrest or interrogation of high-profile political, media, and business figures as part of an effort to stamp out graft. It may well be that China’s economy will slow sharply in the coming years and will fall well short of the 7 percent growth a year that President Xi has targeted.

But a slowdown in Chinese or Asian growth would no longer be transformative. The economic development that allows China and India to push for great power status has already happened. The most senior analysts in western governments are already operating on the assumption that the shift in economic power from West to East will continue and that economic change will translate into political power. America’s National Intelligence Council recently predicted: “By 2030 Asia will have surpassed North America and Europe combined in terms of global power, based upon GDP and population.”

China’s communist system is clearly vulnerable to political and economic shocks, and India is notoriously hard to govern. But the idea that the fragility of the Chinese or Indian systems means that the trend of “Easternization” will soon end ignores the extent to which the West’s own rise was punctuated by episodes of extreme instability. The US, after all, fought a civil war in the middle of the 19th century, but that did not halt its rise to global pre-eminence. The rise of Asia has already been punctuated by occasional crises. China was on the brink of revolution in 1989, just a decade after the economic reforms promoted by Deng Xiaoping had begun. South Korea, Thailand, and Indonesia all suffered huge economic damage during the Asian financial crisis of 1997. Yet the rise of Asia has marched ahead.

Predicting how this shift in economic power will change international politics, however, is an uncertain business because the relationship between economic and political power is not straightforward. When China became the world’s largest economy it did not also automatically become the world’s most powerful country; similarly, while the IMF may have ranked India as the world’s third largest economy, even India’s leaders acknowledge that their country is still no more than a mid-ranking power in international politics.

Over the long run, however, there clearly is a strong relationship between economic might and international political power. The British Empire became unsustainable when Britain’s economy was no longer strong enough to support its global commitments. The Soviet Union lost the cold war largely because its economy was too weak to keep up with the United States. By contrast, America’s rise in the 20th century would have been impossible without the might of the American economy. In time, the growing wealth of Asian nations will also translate into political power that will be felt all over the world.

Asia’s New Order

The erosion of America’s strategic and economic dominance formed the backdrop to the election of Donald Trump. In pledging to “Make America Great Again,” Trump implicitly promised to reverse the shift of power to Asia, restoring America to its unrivalled position.

Some of Trump’s most important advisers made a direct link between globalization, the rise of Asia, and the decline in American wealth and influence. Steve Bannon, who was appointed as chief strategist in the Trump White House, argued: “The globalists gutted the American working class and created a middle class in Asia.” Bannon and Trump have fallen out, but the protectionist instincts of the Trump administration endure. Trump’s first months in office began with a more conciliatory stance over trade. When Chinese President Xi Jinping visited Trump at his Florida estate in April 2017, Xi did a masterful job of charming his American counterpart. Months later, Trump was still waxing lyrical about their relationship, telling an interviewer: “We got along great. I like him a lot. I think he likes me a lot.” Early threats of tariffs against China were played down, only to be revived a few months later—a useful reminder of the volatility of policymaking in the Trump White House.

Trump’s unpredictability is a profound worry for Japan and South Korea, America’s closest allies in East Asia. Both countries know that they would be in the front line if a war were ever to break out on the Korean peninsula or in the South China Sea. Efforts by South Korean President Moon Jae-in to launch a rapprochement with the North Korea underlines the extent to which US and South Korean interests are beginning to diverge. For the Moon administration, the biggest short term security threat is that the US, in pursuit of its own security interests, will attack North Korea and provoke a devastating war on the Korean peninsula.

The Japanese government, meanwhile, like the Obama administration, understands that the likeliest route to a China-dominated Asia is through commerce rather than conflict. Twenty years ago America was the most significant market for all the major Asian economies, and Japanese multinationals were the largest foreign investors across Southeast Asia. But those days are gone. Now China is the most important trading partner for South Korea, Japan, Australia, and most of the nations of South East Asia, and this carries geopolitical significance: Asian countries will be much less willing to confront China—or side with the US or Japan in a territorial dispute—if their economic futures depend on goodwill from Beijing.

For the Abe administration, the Trans-Pacific Partnership (TPP) —a giant new trade deal linking 12 countries including the US and Japan that had been painstakingly negotiated by Obama and Abe—represented a last effort to push back against a China-dominated co-prosperity sphere in East Asia. Trump’s repudiation of the deal was thus a grievous blow to Japan’s survival strategy for the 21st century. Eventually, Japan decided to press ahead with the TPP without American participation, but the alliance is clearly weaker.

Europe’s Waning Power

Outside the US, Trump’s treat from the TPP was widely interpreted as a symbol of an American retreat from global leadership. A couple of days after the decision was announced, a senior EU official in Brussels remarked to me: “It’s interesting, when the Brits were the world’s dominant economy, they were also the main promoters of free trade. And then when America became the world’s dominant economy, they became the main promoters of free trade. And now America is losing its faith in globalization and China is becoming the main advocate of free trade. You can feel the wheels of history turning.”

Go to most of the capital cities of the European Union and you will be visiting the capital of a former empire, from the ruins of the Acropolis in Athens to the Coliseum and the Pantheon in Rome and the Arc de Triomphe in Paris. By 2009, when an economic crisis erupted in Europe, the age of European imperialism in Asia and elsewhere had already been over for roughly half a century. But most Europeans are still not prepared for the idea that their slide in global power might have further down to go. It is not simply that Europe’s voice counts less in the world. The real risk is that Europe’s desire to exist as an island of prosperity and political decency in a turbulent world is being put at risk because of a loss of political power.

The process of Easternization means Europe is increasingly vulnerable to political, social, and economic trends in the rest of the world that it cannot control – but which pose direct and indirect threats to European stability, prosperity, and even peace.

The traditional “West” as a political concept has always had two pillars—North America and Europe. But if the US and the EU end up at loggerheads during the Trump years, the “Western alliance” will be in profound trouble. Trump, as an advocate of “America First,” may not worry about antagonizing Europe. But the weakening of the Western alliance would actually gravely undermine Trump’s plans to restore American greatness because it would decrease the power of the US to shape world affairs; it would also hasten the shift of wealth and power to Asia that so troubles Trump and his supporters.

The rise of new Asian powers and the fracturing of the West strengthens the case for European unification, so that EU countries can defend their collective interests. But there is little reason to believe that the EU will move quickly enough to respond to a process of Easternization that is unfolding at remarkable speed.