Mohan Guruswamy | As world is transforming, Europe getting irrelevant

Within two decades, global GDP and power rankings will see substantial changes

The predicament of Volodymr Zelenskyy makes an apt metaphor for Europe. As he ran himself into a sword, the “Europe” of which he wants to be a part of egged him on and watched. By deliberately keeping Russia out of Europe, it has given itself a siege mentality. But what is this Europe? Dr Henry Kissinger once famously quipped: “If I want to talk to Europe, who do I call?” With individual nations conducting their own diplomacy, the EU is run by a bureaucracy of discarded politicians.

Time is also against Europe. It is rapidly ageing, and has entered the stage of very slow demographic growth and will be confronted with significant population decline in the first half of this century. Its 0-15 population is shrinking and it has a declining working-age population. In the near future, most EU countries will experience an excess of deaths over births. By 2050, its median age will rise to 48. That year, the number of Europeans over 60 will have doubled to 40 per cent of the total population or 60 per cent of the working-age segment. A century ago, Europe had a quarter of the world’s population. It will have only seven per cent by 2050.

The shortage of working-age people and its unwillingness to alter its immigration policies to attract a more skilled workforce and to draw highly educated technology professionals due to age-old prejudices will cost Europe dearly.

Paradoxically, the recent Ukrainian exodus has given fast-aging Europe a lifeline of working-age white refugees.

What can India expect from a loosely governed, economically slowing down, demographically ageing and contracting, and professionally unattractive Europe? Given its hostility to immigration, Europe has also largely showed itself incapable of reinventing itself as the United States has done to modify itself into a politically correct, more egalitarian union, where people are “judged not by the colour of their skin but by the content of their character”.

Low GDP growth rates lead to slower growth in tax revenues and, along with higher social security and welfare spending, leads to increasing deficits and debt levels, causing a poisonous cocktail to induce economic stupor. American journalist Fareed Zakaria best described the crisis in the Eurozone: “Europe’s core problem is a lack of growth. Italy’s economy has not grown for an entire decade. No debt restructuring will work if it stays stagnant for another decade.

The fact is that Western economies -- with high wages, generous middle-class subsidies and complex regulations and taxes -- have become sclerotic. Now they face pressures from three fronts: demography (an ageing population), technology (that allows companies to do much more with fewer people) and globalisation (which allowed manufacturing and services to locate across the world).”

In the years ahead, the issue of reforming the world governance system will come to the fore, as newly emerging countries in Asia, Latin America and Africa rise economically and militarily. It’s only natural for them to seek more political power. At present there are three global high tables -- the permanent members of the UN Security Council (P-5), G-7 and Nato. All three are Eurocentric. Nations like India, Brazil, South Africa and even Germany and Japan have been impatient over such a restricted system. Within two decades, global GDP and power rankings will see substantial changes.

Five European countries -- Germany, UK, Russia, France and Italy – are in the top 10 of the world’s largest economies in GDP. In 2050, only Germany and Britain will remain among the top 10 economies, ranking ninth and tenth. Quite clearly, restructuring of the world order cannot be avoided much longer. How can countries like the UK and France, with GDPs a third or less than India’s, or half of Japan’s, be in the UNSC as permanent members and India and Japan be left out?

Of late we have seen some discussion on expanding the UNSC and G-7. Nato, by its very acronym, defies expansion. While expansion will make these restricted forums more representative, it might detract from their effectiveness.

Right now, India, Brazil, Germany and Japan are knocking on the UNSC’s doors for co-option as permanent members. Even if they get in, the internal dynamics will remain tilted in favour of Europe and North America. As it is, the P-5, with each member armed with a veto, often finds itself unable to act decisively. An expansion with all members armed with a veto will only complicate matters. Clearly, the UNSC’s effectiveness depends on its compactness. Mere expansion recalls Groucho Marx’s comment; “I don’t care to belong to any club that will have me as a member”.

It is very clear that while the United States will be the engine of world growth for the foreseeable future, mostly possible by its sheer scientific superiority and climate conducive to innovation, it will be closely followed or even overtaken by an entirely new cast of countries. In less than a hundred years after the end of the First World War, among the victors, only the US will remain in the top 10 countries.

The US too is changing within. It has had its first black President. It now has an Afro-Indian woman waiting in the wings as vice-president. Its national political leadership is now increasingly a kaleidoscope of nationalities that gives countries of their origin a new reason to feel oneness with the US. Americans of Indian origin have entered several gubernatorial mansions and many more are in the executive branches of governments. Others occupy high positions in academia and industry, particularly in the new sunrise sector. Changing demographics also leads to changing attitudes, which reflect itself in a rearrangement of national goals and policies.

It should now be evident that the new rising countries will supplant Europe in the new global pecking order. This does not bode well for political relationships of any lasting nature in the future. The US has made clear that it wants greater engagement across the Pacific. Asia’s combined GDP, despite the slowdown in Japan, is still the highest in the world. By 2040, over 60 per cent of world GDP will be credited to it.

As their role in the world economy enlarges and becomes dominant, both China and India will demand changes to accommodate their aspirations and interests. While China’s relationship with the United States will stay adversarial, it will increasingly seek to balance the US with the EU. India, whose relationship with China is not likely to move even midway of the full spectrum from adversary to friend, might be drawn more and more closer to the United States.

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