It's becoming unavoidably obvious that the current global order is unraveling. Add investor fears that we've ignored warning signs of slower growth, particularly in Europe, and that the easy-money days of quantitative easing may finally be coming to an end, and it didn't take much to send equity markets plunging last month. ... A distracted, war-weary America is no longer willing and able to provide global leadership, and no other country is stepping up to take its place. The U.S.'s international disengagement and seemingly improvised foreign policy are leaving allies, distracted by their own problems, looking to hedge their bets. Meanwhile, developing countries have become powerful enough to block U.S.-led plans but are not yet coordinated, motivated or influential enough to offer alternatives. Fast-changing China, revisionist Russia and a host of emerging markets with competing priorities and different political and economic systems leave us with too many major powers with too many divergent interests. The result is a global power vacuum - and markets are afraid of what might come next. ... We've now reached a crossroads where the outcomes of four combustible geopolitical crises could begin to reshape the global economy. Two of these crises are already reaching a critical point. The conflict between Russia and the west will rage in and around Ukraine, on Russia's borders with other neighbors, in energy markets, in financial markets, in the defense budgets of countries on both sides, in cyberspace - and anywhere else Moscow may try to undermine what remains of American global leadership. ... In the Middle East the battle with ISIS has just begun. ... Two other crises, not yet dominating headlines, are very much in play. Chinese leader Xi Jinping has his hands full with transformational economic reforms that will reshape the Chinese market and his country's global standing. But as its economic agenda comes under pressure, Beijing will look to deflect frustration and attention onto foreign companies, neighborhood adversaries or Washington. ... Second, new fissures in the U.S.-Europe alliance are taking shape. Divisions among European countries as well as global challenges that disproportionately threaten Europe are widening a structural divide between Europe and America.
Asian business is reforming. Its emerging multinationals will change the way we all live ... BUSINESS power follows economic power. In the 1920s British firms owned 40% of the global stock of foreign direct investment. By 1967 America was top dog, with a 50% share. Behind those figures lie cultural revolutions. The British spread the telegraph and trains in Latin America. American firms sold a vision of the good life, honed by Hollywood and advertising. Kellogg’s changed what the rich world ate for breakfast, and Kodak how it remembered holidays. The next corporate revolution, as we describe in our special report this week, is happening in Asia. This too will change how the world lives. ... rules that have governed Asian capitalism for the past two decades are changing. Asian firms are having to become brainier, more nimble and more global. ... The immediate motivation is underperformance: growth has slowed, and Asian shares have lagged American ones by 40% in the past three years. Three deeper trends are also at work. First, labour costs are rising, not least in China, and East Asia’s workforce is ageing. Second, Asia’s middle class is becoming more demanding. They are no longer satisfied with fake Louis Vuitton handbags; they want clean air, safe food and more leisure, and are madly in love with the internet. Third, competition has intensified from Western multinationals, which have invested $2 trillion in Asia. They also now use the same cheapish labour, and they generally have much more sophisticated supply chains, brands and R&D.
- Also: The Economist - Business in Asia: How to keep roaring < 5min
- Also: The Economist - Megatrends: Q & Asia < 5min
- Also: The Economist - Governance: Avoiding the dinosaur trap < 5min
- Also: The Economist - China Mobile: Get up and dance < 5min
- Also: The Economist - Hutchison Whampoa: Now for the fat-cow years < 5min
- Also: The Economist - Globalisation: The fear factor < 5min
- Also: The Economist - Convergence: One world < 5min
The epic begins 10,000 years ago in an Asian jungle and ends today in kitchens all over the world ... The chickens that saved Western civilization were discovered, according to legend, by the side of a road in Greece in the first decade of the fifth century B.C. The Athenian general Themistocles, on his way to confront the invading Persian forces, stopped to watch two cocks fighting and summoned his troops, saying: “Behold, these do not fight for their household gods, for the monuments of their ancestors, for glory, for liberty or the safety of their children, but only because one will not give way to the other.” The tale does not describe what happened to the loser, nor explain why the soldiers found this display of instinctive aggression inspirational rather than pointless and depressing. But history records that the Greeks, thus heartened, went on to repel the invaders, preserving the civilization that today honors those same creatures by breading, frying and dipping them into one’s choice of sauce. The descendants of those roosters might well think—if they were capable of such profound thought—that their ancient forebears have a lot to answer for.
The demographic and macroeconomic backdrop in sub-Saharan Africa resembles that of East Asia in the early 1980s, says Arnold Dubin-Green. How many astute investors among us would love to say they invested in Asia when the Tigers were cubs? … “The hopeless continent.” This was the Economist’s front-page reference to Africa in May 2000. Hopeless Africa; asphyxiated by civil war, corruption and political instability. … Investors ran a mile at the mere mention of Ghana, Kenya or Rwanda. Today, returns in more expensive developed markets threaten to be low for years to come. Slow global growth and low yields are the norm. Jumping off the US fiscal cliff and euro crisis, these headlines motivate investors to seek markets with higher yields and stronger fundamentals. … Fundamentals are better placed than in many developed markets. Africa is now the continent on their lips; a market that is a significant and growing part of the global economy with plenty of room for productivity gains, favourable demographics, commodity richness and recent history of fiscal and monetary reforms.
Why isn't the rest of Asia afraid of China? … Are tensions high in Asia? It certainly appears so. Over the last few months, North Korea has tested missiles and threatened the United States with nuclear war. China spars regularly with Japan over ownership of a group of disputed islands, and with several Southeast Asian countries over other sparsely inhabited rocks in the South China Sea. Meanwhile, the United States is in the midst of a well-publicized "pivot" to East Asia, and continues to beef up its military deployments to the region. … Yet as of 2012, military expenditures in East and Southeast Asia are at the lowest they've been in 25 years -- and very likely the lowest they've been in 50 years (although data before 1988 is questionable). While it's too early to factor in recent tensions, as China's rise has reshaped the region over the past two decades, East and Southeast Asian states don't seem to have reacted by building up their own militaries. If there's an arms race in the region, it's a contest with just one participant: China.
In just 20 years, Cambodia has transformed from a post-conflict, aid-dependent, least-developed country to a dynamic economy with the fastest pace of GDP growth in East Asia. ... According to a report from the Cambodian Development Resource Institute, between 1995 and 2012 economic growth averaged 7.9% and per capita income increased from $248 to $878. GDP growth for this year — on the back of strong performance in garment manufacturing, tourism, construction and agriculture — is expected to reach 7.3%. This puts Cambodia ahead of its neighbors in Southeast Asia. The latest ANZ Asia Pacific Economics report describes Cambodia as “the only country that has been able to grow its exports at a faster pace in the post-crisis period [2007-2008].” ... Economic prosperity is showing up in socio-economic indicators such as the poverty rate, which has been halved, improvements in primary school enrollment, and reduced infant mortality. Corruption, clientelism, social inequality and poor infrastructure remain, but the overall picture is brighter than it has been for four decades. ... To appreciate the magnitude of Cambodia’s turn-around, it’s important to go back to “year zero,” to 1975, when Cambodia was ruled by Maoist fanatics known as the Khmer Rouge. By the time the Vietnamese army overthrew the Khmer Rouge in January 1979, between 1.5 and two million people — a quarter of the population at the time — had perished.
Because rubber is so common, so unobtrusive, so dull, it may not seem worth a second glance. This would be a mistake. Rubber has played a largely hidden role in global political and environmental history for more than 150 years. You say you want an industrial revolution? If so, you need three raw materials: iron, to make steel for machinery; fossil fuels, to power that machinery; and rubber, to connect and protect all the moving parts. Try running an automobile without a fan belt or a radiator hose; very bad things will happen within a minute. Want to send coolant around an engine using a rigid metal tube instead of a flexible rubber hose? Good luck keeping it from vibrating to pieces. Having enough steel and coal to make and drive industrial machinery means nothing if the engines fry because you can’t cool them. ... To the extent that most people think about rubber at all, they likely picture a product made from synthetic chemicals. In fact, more than 40 percent of the world’s rubber comes from trees, almost all of them H. brasiliensis. Compared with natural rubber, synthetic rubber is usually cheaper to produce but is weaker, less flexible, and less able to withstand vibration. For things that absolutely cannot fail, from condoms to surgeon’s gloves to airplane tires, natural rubber has long been the top choice. ... Iron can be found around the globe; so can fossil fuels. But rubber today is grown almost exclusively in Southeast Asia, because the region has a unique combination of suitable climate and infrastructure. Despite all the ups and downs in the global economy, the demand for tires continues to grow, which has created something akin to a gold rush in Southeast Asia. For millions of people in this poor part of the world, the rubber boom has helped bring prosperity
In December 2014, Presnell became the first person in North Carolina to be convicted of felony ginseng larceny on private property. He joined other thieves across Appalachia — the mountainous strip of territory extending from southern New York through the Carolinas down into Mississippi — who’ve been arrested, fined, even imprisoned for various ginseng-related crimes, including poaching, illegal possession, and unlawful trade across state lines. ... Cornett went into business for the same reason poachers are keen to rob him. The global market for ginseng root, popularly used as an herbal supplement, is estimated at more than $2 billion. Long a staple of traditional Chinese medicine, ginseng products are also ubiquitous in Korea and increasingly popular in Singapore, Malaysia, and other countries with large ethnic Chinese populations. These days, most ginseng is mass-produced on large, pesticide-sprayed farms under the artificial shade of wood and fabric canopies. Wild ginseng, which tends to grow in temperate forests, is considered more potent and fetches a higher price. Plants like Cornett’s, cultivated in the woods, are closer to wild than to conventionally farmed ginseng. ... Dwindling supply and robust demand have inflated wild American ginseng’s value. In 2014, according to public and academic data, the 81,500 pounds that were legally exported commanded an average wholesale price of $800 per dried pound. That was almost 15 times more than the going rate for farmed roots. Nearly all exports go to China, where a burgeoning middle class is willing to pay marked-up retail prices — sometimes even thousands of dollars per pound. ... Scientists believe ginseng is native to both East Asia and North America because some 70 million years ago, the two land masses were part of a single megacontinent known as Laurasia