Speculating on South America’s Extraordinary Future
By: George Friedman
This is not a forecast.
A forecast is a prediction, the validity of which my ego and I are professionally responsible for.
What I offer here is speculation – something that is likely enough to write about but not so likely that my ego hangs in the balance.
It's also something that, if true, would prove important in a geopolitical and geoeconomic sense.
For almost a century, the global economy was the heir and executor of the Industrial Revolution.
During this time, a cycle came into focus.
The health of the global economy depended to a great extent on a major emerging industrial power, which would serve the economy for 50 or so years.
The cost of production for emerging industrial powers was significantly lower than it was for more mature economies, so they kept things affordable and relieved pressure on more established economies and their consumers.
Three nations were crucial in this regard.
The first was the United States.
Its industrial economy began to surge in the 1880s.
In about 1890, it became a major exporter of industrial products to Europe, which at the time was the most established industrial power in the world.
To a great extent, the U.S. based its economic development on these exports, cheaper as they were than European products and in some cases more innovative.
The U.S. economy surged until 1929 at the onset of the Great Depression.
World War I had severely limited Europe’s economies, which could no longer afford to buy U.S. goods.
This was at least partly responsible for the depression.
The second country was Japan.
It had been a significant industrial power before World War II, but the conflict shattered its industrial capacity, forcing it to operate more as an emerging economy.
Exports, particularly to the U.S., fueled its postwar economic boom.
It did so well that in the 1970s, it began to undermine American auto manufacturers and other industries, offering cheaper automobiles and superior products.
1990 ushered in an economic crisis called the Lost Decade, and only after it was overcome did Japan become a more mature industrial economy.
The third country was China.
Its economy grew rapidly around 1980 and surged in the 1990s, replacing Japan as the world’s low-cost, high-value industrial exporter.
Growth has now slowed, and given the precedent of the U.S., it ought to reach maturity in the 2030s.
(Admittedly, a comparison of the two is hardly the most reliable metric.)
China remains the world’s largest exporter, but as with the U.S. and Japan, it will reach a point where its economic growth cannot be based on exports, a sign of a still emerging and not yet mature economy.
These three nations had things in common.
The first was that no one in their right mind would have imagined them becoming global economic powers.
The U.S. was primarily an agrarian nation that had emerged from a devastating civil war 25 years before to begin its period of breakneck growth.
In 1945, no one would have thought that five years after World War II, Japan’s economy would recover, let alone become a powerhouse.
Similarly in China, it was unthinkable that just four years after Mao’s death, the country would be on the path toward economic superpower.
They had other things in common, of course.
They had relatively large populations with strong agrarian bases.
They had demographics of people educated in technologies that would prove critical.
In addition, and more subtly, they had developed cultural and personal ambitions for social and economic development.
They all had a cultural tradition of entrepreneurialism disrupted by war but resurrected by the end or decline of ideologies that had made economic adventures difficult, if not impossible.
They all came into being at a time when mature economies in the world needed low-cost, fair-quality imports.
Finally and most importantly, they all emerged from their dizzying, export-based growth during times of relative health and peace.
Interestingly, each nation was the center of gravity of exporting powers, while other, smaller economies in their respective regions emerged as exporters alongside them in the decades following the major nations’ emergence.
China is nearing the end of this cycle, shifting to a large but mature economic model, with domestic consumption increasing and prices rising.
As it matures, the most pressing economic question in the world is: Who will take China’s place?
There are two possibilities, both of which are difficult to imagine: Africa and the Middle East.
The problem is that these are regions, not nations, so their economic processes might diverge.
More, they are constantly burdened by ongoing conflicts.
Whoever replaces China will be a nation that would not appear in any way likely to emerge, with a large population, a strong agricultural base and a layer of existing entrepreneurial culture, along with a layer, however thin, of sophisticated technologists.
As regions, Africa and the Middle East don’t quite fit the bill.
This leaves Latin America, particularly Brazil, which has the seventh largest population in the world, a strong agrarian base, a significant entrepreneurial culture and a needed cohort of technological minds.
The region it belongs to is largely past its period of instability and conflict.
Brazil is surrounded by other nations that are smaller in population but have the same characteristics.
Where the U.S. had Canada and Mexico, and Japan and China had the rest of Asia, Brazil has the southern cone of Latin America, which includes Argentina, Chile and Paraguay.
Brazil (and the broader Brazilian area) has already entered the process of economic development with a lower-wage workforce that allows it to become a lower-cost producer vital to more mature economies.
Perhaps most importantly, the extent to which Brazil and the rest of South America are emerging is still underestimated, even as foreign investment in the region increases.
Thus, in this speculative dimension, assuming that the global economic pattern that began with the emergence of the U.S. in the 19th century will continue as China matures, Brazil and South America may well be the most likely to emerge, just as the U.S., China and Japan did, stabilizing the global economy and developing over the decades into a major mature economy.
If this happens, and I stand by my speculation on this, the process has already started.
0 comments:
Publicar un comentario