One is tempted always to analyze the use of power in the context of acknowledged super-powers- the USA and Russia. This is based mainly on their possession of arms and digital technology. In this cyber space plays an important role. When it comes to trade and the ability to influence the paradigm of commerce, energy or communications- reference is made not only to the USA but also to China, Japan, Canada and certain countries of the European Union.
In fact, in Europe, the UK, Germany, France and Russia are considered as major powers, while Spain, Italy and Poland are considered as regional powers. In Eastern Asia, in addition to major powers Russia, Japan and China, there are two regional powers- North and South Korea. Within South Asia, India and Pakistan occupy this platform because of their nuclear capabilities and the availability of advanced weapons. The regional powers in the Middle East include Turkey, Iran, Israel, Egypt and Saudi Arabia. In Eastern Europe, the regional powers are Poland and Ukraine. In South America, there are two regional powers- Brazil and Argentina.
In the arena of economic power, factors like- ability to produce diversified products on a mass scale at a comparatively cheap price, availability of necessary technical logistics and required skilled manpower make all the difference. This is taken forward with the factor of presence of energy. These elements help to create the necessary conditions required for sustainable economic growth.
The export-led growth model, according to economists is also seen as a positive function of aggregate output. It needs to be remembered here that higher output, through its effect on the scale of production, lowers costs and increases productivity. Strategists now also agree that labor, capital and technical progress have now become the basic factors of production. Land, in most cases has ceased to be an important determinant of economic growth- that it was fifty years ago.
This element has acquired special importance because technical progress allows for accelerating expansion in output by raising the productivity of the economy. China has been the best example of that.
Consequently, economic power could be defined as the inclusion of all varieties of the means of production (capital stock), size of the labor force, education and health of labor, management and organizational skills, technical capability, financial wealth and non-reproducible natural resources. This equation is also supported by the presence of international foreign exchange assets including reserve assets.
This climbing of the economic ladder by a country towards being recognized as a major economic power is greatly facilitated through investments and the health and education of the population. Investments also add to available capital.
It also needs to be remembered here that exports include both goods and services. Singapore, Thailand and India have become good examples of this. It needs to be understood that the services sector also includes medical services and tourism. This element has now led China to also join the bandwagon.
In this context it would be appropriate to refer to the two-way financial inter-action that has marked the changing inter- relation between the USA and China. The USA has benefited from relatively lower interest rates due to the Chinese purchase of US Government Securities and US consumers have benefited from low-priced Chinese made goods. China on the other hand has also benefited from ready access to large US consumer markets that permits Chinese exports to expand rapidly. More importantly, China has also benefited from the availability of know-how and advanced technology of US firms producing and operating in China.
It has to be understood at this point why in the modern world so much emphasis is given to investment as being critical for acquiring greater economic power. Investment adds to the capital stock of a country or a sub-region and also promotes sub-regional connective economic growth.
We have to understand that capital stock consists of infrastructure, machinery, roads, airports, harbors, factories, buildings, hospitals and other medical facilities, energy production facilities and other means of production that raise the productivity of the nation. Investment directly and indirectly increases aggregate output and this, in turn, satisfies the consumption of goods and services. This, in turn, has a cyclical effect on savings and then investment.
Identifying areas and sectors for investment, is normally done on the basis of future profitability expectations among the entrepreneurs. Such potential, in turn, is agreed to on the basis of probable political stability in the short, medium and long-term expectations. Another aspect also needs to be recognized. Larger production and diversity in products leads to a further rise in productivity. It also lowers production costs and results in greater exports and output.
In the present international scenario, technical progress enhances the economic power of a nation by raising the productivity of its labor force. Economists in this regard always point to changes that are being brought about through the introduction of advanced robots, digital tools and other high-tech means of production. When a nation is found to be sincerely involved in such an exercise, it encourages institutions to come forward with investment. This indirectly promotes economic power.
There is also general consensus among socio-economists about another important factor. It is agreed that the geographic location of a State, its approximate access to large markets and oceans (that provide relatively cheaper transportation of goods) are natural determinants of its potential economic power. For example, Mexican exports benefit from their convenient access to large US markets.
We have identified the various dimensions of economic power but this matrix also has to carefully consider the dynamics of security within the fluid international order. Anarchy within this paradigm and competition for greater security based on national interest often leads to conflicts. This situation then leads to the need for countries to maximize their military power. That, in its own way, affects stability and retards economic progress.
We have the United Nations, established after the Second World War. It was created to promote peace and stability. Unfortunately, the principle of veto and the selective use of this authority by the five Permanent Members of the UN Security Council- Russia, China, the USA, Britain and France- have reduced its effectiveness. Instead of security, international order and the creation of consensus through inter-dependence among States, what we have today is a political arena where a country involved in ethnic cleansing and genocide is able to avoid the culpability arising out of transgression of international law. To say the least, that is most unfortunate.
We need to understand that national security is not just improving the environment, economic welfare and the health of citizens or establishing and maintaining democracy in a State. These are all desirable objectives but there are also other attractive goals- and the highest among them is security of a nation. If a State cannot protect its citizens and its sovereignty from its enemies, that State will have difficulty in surviving within this anarchic world order.
Believing in connectivity and sub-regional and regional cooperation are important elements but this dynamics can be taken forward only when other countries recognize the latent power of another State and do not take that State for granted.
The writer, a former ambassador, is an analyst specialized in foreign affairs, right to information and
good governance. Email:[email protected]