Tuesday, 21 April 2009

The shift of global power

John Mangun
Business Mirror

On May 28, 1588, the Spanish Armada sailed from Lisbon with the intent of invading and conquering the British Isles. The Spanish had the decided advantage with over 200 ships to the 130 ships of the English, and in armament as well; its available firepower was 50 percent more than that of the English.

Three physical qualities and two psychological factors determined the outcome some three months later and forever changed the course of the world, as global economic power shifted from the Spanish to the British.

The British ships were smaller and more maneuverable, able to change course more quickly. British guns, although less powerful, were able to fire a longer distance, allowing British ships to attack outside of the range of the Spanish guns. The firepower of the British was more balanced. Much is made of the bad weather and strong winds that forced the Spanish Armada out of battle position. Yet the British ships also faced this severe weather. The difference was that the Spanish ships were designed and fitted to sail before the wind, not against the wind as the British vessels could do.

England possessed two particular strengths lacking in the globally dominant Spanish. The British were much more patriotic, united, and nationalistic. Further, their seamen and sailors had endured decades, if not centuries, of hardship and suffering, navigating the harsh and unforgiving northern oceans.

A similar shift of global power may be taking place 420 years later, and the outcome may be determined by similar differences between the “powerful” and the “second line” countries.

There are three power blocs in the world; the G-7 (the United States, the UK, Germany, Canada, Italy, France, Japan), the BRIC (Brazil, India, Russia and China), and everyone else. Forget the G-20. The G-20 is a joke and a fabrication of the G-7 to make the “G-13” feel important and think they have a voice and power on the world economic stage.

For the last 35 years, the G-7 has dominated the global economy and, in effect, the rest of the world. The G-7 dog wagged the global tail. It was not long ago that we, particularly in the Philippines, accepted as truth, “When the United States sneezes, the world catches cold.”

Like the Spanish of four centuries ago, the G-7 would not accept and did everything to destroy any challenge to its economic power. Agricultural nations were never able to compete against Western government farm subsidies. Countries like Japan would impose unrealistic trade measures and standards to ensure that products from countries like the Philippines would never reach their markets. High Western tariffs stopped “Third World” countries from ever developing their manufacturing capability. The rise in the last 10 years of the BRIC countries was unplanned and a result of their geographic size, dominant geographic position in their region, and population size.

The economic power of the G-7 bloc led it to believe that it could also sway the politics of the rest of the world. The purpose of the Spanish invasion by its Armada was to overthrow Queen Elizabeth I in favor of a government more willing to allow Spanish global domination.

Like the Spanish, over the last decades the G-7 became fat and lazy, too used to the good times and its positions of power and dominance. Now its power is eroding due to its own policies and the resulting events of those policies. Had the Spanish not tried to invade England, British global power might have never been developed.

Similar to the British of 1588, nations like the Philippines have economies more nimble, more balanced, and more adaptable to changing global economic conditions. For all of the domestic in-fighting, countries like the Philippines have recognized for years that the G-7 nations are ultimately economic adversaries, if not outright economic enemies, who are interested in only their own interests.

And there is no comparison between the ability and strength of nations and people like the Philippines to endure and prosper through hardship.

But colonial mentality is a vice and a bad habit that is hard to break. Every stock-market comment that says our market must wait for the United States to go up is an example of an awful mentality. In 2009, the emerging markets are the dog wagging the Western stock-market tails.

As of last Friday, the US market was down 5 percent in 2009. The Philippine Stock Exchange is up more than 10 percent and we are lagging behind some of our peers. Look at other Philippine-like markets: Peru—up 45 percent, Argentina—up 14 percent, Sri Lanka—up 12 percent, Chile—up 12 percent, Ukraine—up 10 percent, and Greece—up 11 percent.

This year will mark the beginning of the end of G-7 global dominance and the shift of power to nations like the Philippines. No, it will not come at once any more than the defeat of the Armada marked an immediate change of global power. It was, though, the beginning of the end.

This realignment of economic strength is not without risk. Nations like the Philippines will be under immense pressure to stay within the fences established by the G-7. And the only way for the Philippines to be successful in establishing its global economic identity is to keep its money at home, its eyes on the world, and its heart and mind focused on this nation.

PSE stock-market information and technical-analysis tools were provided by CitisecOnline.com Inc. E-mail comments to mangun@email.com.

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