Emerging Challenges What's In Store for the New Global Powers
China, India and Brazil are taking the global economy by storm, becoming more politically confident on their way. But even as they form a front against the West, they will have to tackle slower growth and major domestic problems that their newly prosperous citizens are no longer willing to tolerate.
What will be the world's most important cities in the future? To answer this question, the US-based journal Foreign Policy and the McKinsey Global Institute examined criteria such as economic growth and receptiveness to technology. The result? Shanghai edged out Beijing and Tianjin, followed by the first non-Chinese mega-city, São Paulo in Brazil. No Western European city ranks among the top ten "most dynamic cities." Berlin, Frankfurt and Munich don't even appear among the top 50, but other cities in China, India and Brazil do. If we are to believe the study's conclusions, humankind will be speaking Mandarin, Hindi and Portuguese in its urban centers in 2025. "We are witnessing the biggest economic transformation the world has ever seen," the experts say.
And what are currently the most competitive countries in terms of industrial production, and what will they be in the future? The management consulting firm Deloitte Touche Tohmatsu has established that China is now ahead of Germany, the United States and India. But according to the projection, for which 550 top executives of leading companies were surveyed, the hierarchy will already have shifted by 2017. Germany and the United States will drop out of the top ranks, and "old" powers will no longer lead the pack, having been replaced by China, followed by India and Brazil.
What's more, according to the 2013 United Nations Human Development Report, "the rise of the South is unprecedented in its speed and scale." For the first time in 150 years, the combined output of the developing world's three leading economies -- Brazil, China and India -- is about equal to the combined GDP of the longstanding industrial powers of the North -- Canada, France, Germany, Italy, United Kingdom and the United States. In addition, this year Beijing will, for the first time, import more oil from the OPEC countries than the United States.
Getting in on Western Commerce
It isn't just the sheer land mass and huge numbers of consumers in these three countries, which make up close to 40 percent of the world's population. China, India and Brazil are also stunning the world with their impressive performance in many areas, including research and technology. The owner of the world's biggest beer brewery is Brazilian billionaire Jorge Paulo Lemann, who acquired US-based Anheuser-Busch. The South American country is also considered an international leader in food research. São Paulo, together with the surrounding area, is the world's top location for German business, with about 800 branches of German companies headquartered in the area. Brazil has literally taken off, providing a home to Embraer, the world's third-largest aircraft manufacturer after Boeing and Airbus. And Rio de Janiero is an undisputed party capital, especially now that the city has been selected to host the 2014 World Cup and the 2016 Summer Olympics.
The most expensive private residence in the world, owned by entrepreneur Mukesh Ambani, is in the Indian city of Mumbai. Anyone who drives a Jaguar or a Land Rover is driving a car made by an Indian company, now that Tata Motors has bought the traditional British automaker. India is the world's largest producer of polyester and a leading force in renewable energy. Pune in western India is home to wind turbine maker Suzlon, which acquired Hamburg-based REpower. New Delhi is one of the world's leading producers of computer software and space technology. Though, on a less positive note, India spends more on arms imports than any other country.
Volkswagen has been selling more cars in China than in Germany for a long time, and the company plans to open five new plants there in this year alone. Conversely, the Chinese are also investing in Germany, where they already own automotive supply companies and have purchased some of the pearls of Germany's mid-sized companies, known as the Mittelstand. Changsha-based Sany, for example, has acquired Putzmeister, a concrete pump manufacturer based in southwestern Germany's Swabia region. The people who assemble London taxis, which are about as quintessentially British as Bobbies or plum pudding, report to Chinese bosses, as do many workers at the port of Piraeus in Greece. It seems that nothing works anymore without the wealthy Chinese, who have accumulated the world's largest foreign currency reserves. Beijing is also home to the world's fastest computer.
Forming a Front
Politically speaking, the new major powers are also becoming increasingly self-confident -- and sometimes form a united front against the West. In the United Nations Security Council, China blocks every Middle East resolution it doesn't like, while the Chinese navy flexes its muscles in the waters of the Far East. India is bucking the international trend by beefing up instead of reducing its arsenal of nuclear weapons. Brazilian President Dilma Rousseff demonstratively cancelled a trip to the United States and a meeting with US President Barack Obama to protest the NSA's surveillance practices. It's difficult to imagine German Chancellor Angela Merkel taking such decisive steps to represent Germany, which has seen similar treatment by the NSA.
A few years ago, the three emerging economies joined forces with Russia and South Africa to form the BRICS group. In March, the BRICS leaders decided to launch their own development bank, with a starting capital of $100 billion. It is apparently intended as an alternative to the US-dominated World Bank. Together, these countries are also trying to thwart the imposition of stricter environmental protection rules on their industries and gain influence in the traditional international centers of power. With Beijing's and New Delhi's votes -- and against the wishes of the United States -- Brazilian Roberto Azevêdo was chosen as the new head of the World Trade Organization (WTO) in May, and is now in a position to help shape the flow of goods around the world.
Forty years ago, Brazil was still a bankrupt military dictatorship, India was a backward agricultural country and China was groaning under the harsh dictates of the Cultural Revolution, with no private automobiles in the streets. But today we are on the edge of a new historical turning point.
Confronting Domestic Turmoil
But that's only one side of the success story that is constantly and proudly repeated in Beijing, New Delhi and Brasilia, not to mention by international institutions. There is another truth that isn't as pleasant: China, India and Brazil are currently being shaken by inner turmoil. In all three countries, people are taking to the streets to protest corruption, nepotism and inefficient government. At the same time, the economic recovery is flagging.
Ironically, the emerging nations have begun to see a considerable weakening of their economies in recent months, just as they pull ahead of the West. Growth rates in 2013 are expected to be about half of what they were in the boom year of 2007, declining in China from 14 to about 7.5 percent, from about 10 to 5 percent in India and from 6 to an estimated 2.5 percent in Brazil. These are still better figures than in the United States and the European Union, but they are not good enough to satisfy the rising powers' expectations. And now that the glitter is fading, differences are also coming to light once again. The three new powers may be in agreement most of the time when it comes to opposing Western dominance and a possible dictate on CO2 emissions, but their political differences are substantial.
They couldn't be more different when it comes to their own development models. China is a centralist, one-party dictatorship with clear elements of brute capitalism. India is a federal, chaotic democracy that is often its own worst enemy. And Brazil has a presidential governing system with a calcified party landscape. Shockingly, little has changed for hundreds of millions in the rural areas, where farmers have generally not benefited from the booming economy. But a new urban middle class has also taken shape. And, while earlier it seemed to be politically sedated by the steady rise in standard of living, priorities are shifting now that their basic economic needs have been met and the economic upturn has slowed down, at least temporarily. People are increasingly noticing societal injustice, the nepotism that enriches officials and the sharp divide between rich and poor.
- Part 1: What's In Store for the New Global Powers
- Part 2: The People Demand Justice