Atanu Dey On India's Development

The US Empire in Decline

| 3 Comments

R Vaidyanathan has an interesting piece in expressbuzz cryptically titled “The Lost Horizon of the Emperors.” He takes a very big picture view of what’s happening around the world. Big picture painted rather randomly. He starts off with USA’s decline and quickly moves to India and Pakistan. Regarding the decline of the US, he write, “US is going the banana republic way what with a national debt of more than $10 trillion, which is more than 80 per cent of its national income.”

It is interesting although an unfocused piece. In one paragraph he moves from the current US situation to Asia’s historical share of global gross product. Then after noting that China and India have 12 percent and 5 percent of current global gross product (respectively), he writes:

In the next 20 years, India should plan to have a share of at least 30 per cent of the global GDP. These imply that India should be racing ahead. If India grows at 8 to 9 per cent in the coming decade, then it can become the world’s third or fourth superpower.

I don’t see how he does that arithmetic. A trivial nitpick is that India cannot be 4th in a list with 30th percent share (the other three have to have more than 30 percent and that adds up to over 120 percent.) One can only be 1st, 2nd or 3rd with a 30 percent share. But can India have a 30 percent share of the world product in 20 years?

Let us say that India today has 5 percent of the global gross product. Rounding figures to trillions, India is around $1 trillion out of a $20 trillion global gross product. Assuming that the global gross product grows at an annual rate of 3 percent, in 20 years, that will be $36 trillion. If India is to have 30 percent of that in 20 years, it has to have around $10.8 trillion as its GDP.

At what rate of growth will India move from $1 trillion to $10.8 trillion in 20 years? Simple arithmetic reveals the answer to be 12.5 percent. Is that reasonable? No, it is not reasonable considering that for most of its history since 1947 it grew at around the 3 percent Nehru rate of growth. In the more recent past, the rate has doubled but it is still around 6 percent average. Doubling that to around 12 percent is a herculean task, and maintaining that rate for 20 years in an era of intense competition and natural limits to growth is next to impossible.

I think people should be required to do some arithmetic when making important pronouncements.

I agree with much of Vaidyanathan’s take on where the US is headed. The US is declining, just the same way that the British empire declined. And just like Britain did in its turn, the US is not willing to admit that it is a “declining Empire.” The US, he writes, “it wants to retain its sole power status when it realizes that its writ does not any more hold good. It tries to bully India.”

The US uses Pakistan as the instrument to keep India bleeding, as I have argued before. I agree with Vaidyanathan the Pakistan negotiate with a gun held to its own head threatening to blow its brains out.

That is, they always threaten others with catastrophe if money is not given to them. This is the most sophisticated begging anywhere you can see in international relations.

One cannot but feel sorry for Pakistan. It is reduced to “suicidal mega-begging” and “suicidal bombing.” What a sad end to the dream of being the “Land of the Pure”! Seems like the land of the impure is not doing as badly.

The piece concludes with the observation that the US will be more hard to deal with now that it is a declining, instead of a stable, empire. Quite so. Nobody goes quietly into the good night. Usually they rage and have to be dragged kicking and screaming into the darkness.

Postscript: In the context of the US and China, see the article by James Fallows (link is here), where he writes, “every person in the (rich) United States has over the past 10 years or so borrowed about $4,000 from someone in the (poor) People’s Republic of China.

  • viveksh

    Ah, the hypocrisy of such arguments. There is some element of kicking someone when one’s down here. The general theme is – oh look the US took on too much debt and screwed up. Meanwhile, look… our growth rates are still high, we still have jobs, etc.

    Why have the growth rates in India/China been high in the past decade? Globalization, outsourcing, exports driven by? Well, by these same OECD countries?

    As an emerging economy of this size, we can’t not have high growth rates while the developed US does not need to have high growth rates. Now that the OECD economies are declining we are going to be more and more on our own – lets see how we do in this situation.

    Yes, they have problems today and they are shrinking but we have many, many more problems than them. They took on huge amounts of debt while jump starting China’s/India’s economy along the way – bad for them, good for us. Lets give them time to work out their problems (and work it out they will – they have good quality human capital and geography advantages and those are powerful, powerful catalysts) while working on our problems ourselves.

    Now, ofcourse if only they did not have a powerful financial oligarchy which is bent on ruining the country and a powerful military complex. Well, maybe the downfall of the “empire” will address those areas and it will be a good thing for the world.

    And, as far as “hard to deal with” goes. Do we think that China (or replace new favorite empire here – unless you think that it will be India which is not happening in the next 50 years so lets leave that aside) will be easier to deal with instead of the US in the future? If the US has been hard to deal with isn’t it more because of our foreign policy failure over the decades? If anything, the US should be easier to deal with now than before.

  • pankaj

    The downfall of OECD nations as well as rise of new emerging powers is overstated,but of course china is no doubt a great power and will continue to take strides in becoming a world power in the near future . they have the will and the means,the oecd as rightly ponted by vivesh have quality human capital as well as resources.moreover they became rich when the natural resources were abundant and relatively low priced which is not the case now.moral oecd nations will call the shots before long , and will be as in the past the engine of growth of the world economy.well india being a world power is wishful thinking.

  • viveksh

    By the way, what I meant by favorable geography for the US was this:

    The geography of the recession