a tri-polar world: usa, china and india arvind virmani (views are personal)

A Tri-Polar World:A Tri-Polar World:USA, China And IndiaUSA, China And India

Arvind VirmaniArvind Virmani(views are personal)(views are personal)

9th February 2011 CarnegieEIP:av

IntroductionIntroduction

• 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

Nations PowerNations 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/Tech9th February 2011 CarnegieEIP:av

Economic Foundations of PowerEconomic 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


26/10/0711 April, 2007

11 April, 2007 AV

Global Growth ExperienceGlobal 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 1960s 1970s 1980's 1990s

1950s 1.0 0.26 0.07 0.02 -0.041960s 1.0 0.34 0.12 0.061970s 1.0 0.15 0.211980's 1.0 0.181990s 1.0Countries 66 89 127 129 182Note: No of countries varies because of data availabilityData: Penn World Tables, ver 6.2; Chain index, const price

Indices of Power: VIPIndices of Power: VIP22, VIP, 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



Uni- Polar to Bi PolarUni- 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


Bi Polar to Tri PolarBi 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)


US NIC: November 2008US 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


New Developments: 2008-10New 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


Fiscal ImpactFiscal 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


Impact on ExportsImpact 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

1a Economic Size (GdpPpp)1a Economic Size (GdpPpp)


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Rleative Size of Economy: GDP PPPUSA China India

Japan Germany Russia

Brazil


Difference: 2010 from 2004-5Difference: 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.

1b Economic Size (GdpPpp)1b Economic Size (GdpPpp)


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Rleative Size of Economy: GDP PPPUSA China India

Japan Germany Russia

Brazil UK



• 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



• Power Potential (VIP2)

• China VIP2 =USA 2027

• India: VIP2 80% of USA in 2040– 10 yrs earlier than in first prediction

Long Term Evolution: Power Potential VIPLong Term Evolution: Power Potential VIP22


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Power Potential: VIPPUSA China Japan

Germany UK France

India Russia


Global System: Long TermGlobal 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

Long Term Evolution:Long Term Evolution:Power Potential VIPPower Potential VIP22


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USA China India Japan Germany


Quadri-Polar: UnlikelyQuadri-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


Multi-Polar TransitionMulti-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


Overall PowerOverall 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?

Transition: Power Potential Transition: Power Potential VIPVIP22


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Power Potential: VIPPUSA China Japan

Germany UK France

India Russia


Net Assessment: PreliminaryNet 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


Velvet Glove Scenario: Velvet Glove Scenario: US-India PartnershipUS-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)


Initiatives: EconomicInitiatives: 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)


Initiatives: International SecurityInitiatives: 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


Initiatives: International SecurityInitiatives: 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


Medium Term: Geo-Political RulesMedium 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)


References 1References 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&SubSubCatId=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&SubSubCatId=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().


References 2References 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.


References 3References 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.

a tri-polar world: usa, china and india arvind virmani (views are personal)

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