A User's Guide to the Century

A User's Guide to the Century

Mini Teaser: Jeffrey Sachs explains why the new world order of the twenty-first century is crisis-prone.

by Author(s): Jeffrey D. Sachs

THE "NEW world order" of the twenty-first century holds the promise of shared prosperity . . . and also the risk of global conflict. This is the paradox of our time. The scale of human society-in population, level of economic production and resource use, and global reach of production networks-gives rise to enormous hopes and equally momentous challenges. Old models of statecraft and economics won't suffice. Solutions to our generation's challenges will require an unprecedented degree of global cooperation, though the need for such cooperation is still poorly perceived and highly contested by political elites and intellectuals in the United States and elsewhere.

Our world is characterized by three dominant patterns: rapid technological diffusion, which creates strong tendencies toward technological and economic convergence among major regions of the world; extensive environmental threats resulting from the unprecedented scale of global economic activity and population; and vast current inequalities of income and power, both between and within countries, resulting from highly diverse patterns of demography, regional endowments of natural resources, and vulnerabilities to natural and societal disruptions. These characteristics hold the possibilities of rapid and equalizing economic growth, but also of regional and global instability and conflict.

 

THE ERA of modern economic growth is two centuries old. For the first one hundred years, this was a strong divergence in economic growth, meaning a widening gap in production and income between the richest regions and the rest of the world. The dramatic divergence of per capita output, industrial production and living standards during the nineteenth century between the North Atlantic (that is, Western Europe and the United States) and the rest of the world was accentuated by several factors. The combination of first-mover industrialization, access to extensive coal deposits, early development of market-based institutions, military dominance resulting from vast industrial power, and then colonial dominance over Africa and Asia all contributed to a century of economic divergence , in which the North Atlantic greatly expanded its technological lead (and also military advantage) vis-à-vis the rest of the world. The apogee of "Western" relative dominance was roughly the year 1910. Until the start of World War I, this economic and technological dominance was nearly overpowering.

The period 1910-1950 marked a transition from global economic divergence to economic convergence. Most importantly, of course, was Europe's self-inflicted disaster of two world wars and an intervening Great Depression, which dramatically weakened Europe and proved to be the downfall of the continent's vast overseas empires. Below the surface, longer-term forces of convergence were also stirring. These deeper forces included the global spread of literacy, Western science, the modern technologies of transport and communications, and the political ideas of self-determination and economic development as core national objectives.

Since 1950, we have entered into an era of global convergence, in which much of the non-Western world is gradually catching up, technologically, economically, geopolitically and militarily. The North Atlantic is losing its uniquely dominant position in the world economy. The technological and economic catching-up, most notable of course in Asia, is facilitated by several factors-the spread of national sovereignty following European colonialism; vastly improved transport and communications technologies; the spread of infectious-disease control, mass literacy and public education; the dissemination of global scientific and engineering knowledge; and the broad adoption of a valid "catch-up model" of economic development based on technology imports within a mixed public-private system. The system was modeled heavily on the state-led market development of Japan, the only non-Western country to succeed in achieving modern industrialization during the nineteenth century. Japan's economic development following the Meiji Restoration in 1868 can indeed be viewed as the invention of "catch-up growth."

The modern age of convergence, begun with Japan's rapid rebuilding after World War II, was extended in the 1950s and 1960s by the rise of Korea, Taiwan, Hong Kong and Singapore, all built on an export-led growth model using U.S. and Japanese technologies and institutions. Convergent economic growth then spread through Southeast Asia (notably Indonesia, Malaysia and Thailand) in the 1970s and 1980s, again supported by Japanese and U.S. technologies, and Japanese aid and development concepts. The convergence patterns were greatly expanded with the initiation of rapid market-based growth in China after 1978 (which imitated strategies in East and Southeast Asia) and then India in the 1980s (and especially after market-based reforms initiated in 1991). In the early twenty-first century, both Brazil and Mexico are similarly experiencing rapid technological catch-up.

In economic terms, the share of global income in the North Atlantic is now declining quickly as the emerging economies of Asia, the Middle East and Latin America grow rapidly. This is, of course, especially true when output and income are measured in purchasing-power-adjusted terms, thereby adding weight to the share of the emerging economies. By 2050, Asia will be home to more than half of global production, up from around 20 percent as of 1970. In geopolitical terms, the unipolar world of the North Atlantic is over. China, India, Brazil and other regional powers now fundamentally constrain the actions of the United States and Western Europe. This shift to multipolarity in geopolitics is bound to accelerate in the coming decades.

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