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Shankar Acharya: The top dozen of the last 50

The most important global economic and political trends and events since 1965

Shankar Acharya 

Shankar Acharya

The depressing logjam in Parliament induces me to step back from the numbing turmoil of current events and headlines to take a wider, retrospective view. Specifically, this column attempts answers to the following question: what have been the dozen most important and political trends and events over the last 50 years since 1965? Everyone will have their own list. Here's mine, listed roughly chronologically.

(1) The freeing up of international trade through the many Rounds of multilateral trade negotiations (under auspices) up through to the Uruguay Round, the numerous, less inclusive regional trade agreements and many national, unilateral trade liberalisation initiatives have, together, ensured that the expansion of international trade has been one of the most potent propellants of growth in the last half century. In any five-year period, up until the global financial crisis of 2008, world trade has grown significantly faster than world output. The United States has been the most powerful and consistent driver of this largely benign process.

(2) Vietnam War. Originally a conflict between North and South Vietnam, by 1964, president Lyndon Johnson had committed the US to a long, deadly and futile war against North Vietnam and the Viet Cong, which killed more than two million Vietnamese and over 50,000 American soldiers before ending in 1975, with North Vietnamese tanks rolling into the presidential palace in Saigon and American personnel being evacuated by helicopters from the US embassy. Aside from the devastation wrought in Vietnam, the war had lasting political and policy consequences in the US. Arguably, it may have stemmed the fall of other South East Asian "dominoes" into the communist bloc.

(3) East Asian "Miracle". Among developing countries, many East Asian nations sought and reaped the greatest gains from the cumulative liberalisation of global trade and investment flows. After Japan in the 1950s, it was Korea, Taiwan, Hong Kong and Singapore in the 1960s, then Thailand and Malaysia in the 1970s, and finally China from the 1980s. All these countries aggressively adopted outward-looking policies towards external trade and investment, while following generally responsible fiscal and monetary policies domestically. Most reaped three decades or more of seven per cent plus economic growth, which propelled Korea, Singapore and Hong Kong into industrial economies, China into an economic superpower and the others into the upper middle income category of developing nations.

(4) 1971 saw the creation of Bangladesh as a new nation, the world's eighth most populous, after a tumultuous year. Despite the sweeping victory won by the Awami League in Pakistan's December 1970 national election, the West Pakistan-based military government refused to accept the verdict and, in March 1971, launched a genocidal military crackdown on the East Pakistani population leading to over a million deaths, the flight of 10 million refugees to India, the rise of the Mukti Bahini and the Indo-Pak conflict of December 1971, resulting in the birth of Bangladesh. This happened despite immense anti-India pressure and intimidation from the Nixon-Kissinger American administration, which was using the Pakistani military regime to secure its secret opening to Mao's China.

(5) Oil price hikes of the 1970s. Against the background of the Yom Kippur war in 1973, quadrupled the price of oil ("the first oil shock"), with far-reaching and political consequences. Net oil-exporters benefited greatly, while oil-importing nations suffered a major terms of trade shock. There was a second major price hike in 1979. A significant portion of the massive surpluses reaped by the lightly populated sheikdoms of the Arabian peninsula went for funding a global resurgence of hardline, Wahhabi Islam, including, eventually, its jihadi manifestations such as the Taliban, Al Qaeda and Islamic State. Subsequent consequences included the "9/11" attack on New York's World Trade Centre towers in 2001 and all that followed.

(6) Parallel to the wider global process of liberalisation of trade and investment, was the project of European economic and political integration. The 1957 Treaty of Rome had birthed the European Economic Community (EEC) or Common Market of six countries, consisting of France, Germany, Italy and the smaller BeNeLux nations. UK, Ireland and Denmark joined in 1973, followed within a decade by Spain, Portugal and Greece and then a host of East European nations after the fall of the Berlin Wall in 1989. In 1993 the European Union (EU) was established (including free flow of capital and labour among constituent nations) and in 1999 a subset of nations signed on to the euro zone. The result of this integration process was significantly increased prosperity and the elimination of prospects of any major European war.

(7) Building on the solid base of basic education and health built during Mao's rule, his successor Deng Xiaoping launched the "four modernisations" (agriculture, industry, national defence and science/technology) and an aggressive opening up to global markets from 1978 onwards. The result was an astonishing trajectory of sustained, double-digit economic growth, which took China's GDP from about $220 billion in 1978 to over $10 trillion in 2014, lifting hundreds of millions out of poverty and making China the second largest economy in the world, after US, at official exchange rates, and roughly equal in purchasing power parity terms.

(8) Slow rise of India. In the comparable 35 years, India's GDP grew at a more modest 6 per cent a year from about $130 billion in 1978 to over $2 trillion in 2014, taking India from a very poor, populous country to a low middle income nation with a sizeable middle class. The major reforms of the 1990s helped accelerate economic development.

(9) Collapse of the Soviet Union. This watershed event of 1990 resulted from accumulating internal contradictions and relentless American strategic and economic pressure. It transformed global international relations and ushered in the unipolar world of the last quarter century.

(10) Technological advances during the second world war had spawned the post-war rise of the computer, which became personal and ubiquitous in the 1980s. Wedded to the parallel development of the internet, email and the world-wide-web became commonplace in the 1990s. By the turn of the new century the mobile phone revolution was underway, with smart phones, apps and so much else transforming daily human life.

(11) Breakdown of state systems in Mid-East and West Asia. The defeat of the Taliban in Afghanistan by the post-9/11, American-led alliance and the US "war of choice" in Iraq destroyed state systems in these nations. The aborted Arab "spring" of 2011 added Libya, Syria and Yemen to the list. The absence of basic governance fuelled the rise of Islamic jihad across a wide arc of Africa-Asia, with enormous malign potential for militant terrorism, and worsened the growing problem of millions of refugees from affected areas.

(12) The inconvenient truth of global warming is here and growing. Thanks to the past history of industrialisation and weak mitigation among the big CO2 emitters (notably America and China) the target of limiting average global surface rise in temperature to two degrees Celsius (over pre-industrial levels) looks increasingly unattainable. And recent science warns that even two degrees may entail catastrophic consequences. Next generations (especially the poor among them) may just have to suffer the consequences, possibly horrendous, of richer nations' 20th century follies.

The writer is honorary professor, ICRIER and former chief economic advisor to the Government of India. Views are personal.