The Pacific Century is getting underway

Map of the Asia Pacific Region

The US and the Pacific

Rarely has Rarotonga, the main city of the Cook Islands, seen so many important world leaders at its annual summit of the Pacific Islands Forum as at this year's event with the US Secretary of State in attendance. But this is indicative of the wider US' policy of the re-balancing of the US' strategic posture away from Europe and the Atlantic towards the Pacific. 

The competition for influence in the Pacific Islands recalls the days when they were more significant, both economically and strategically in the 19th Century when boats sailed readily from European countries in search of trading opportunities. In contrast, the 20th Century was very much an Atlantic Century dominated by the US and Europe.

Russia's Pacific Side

Russia has just inaugurated the longest cable bridge in the world, measuring 3,100 metres between Russky Island and Vladivostok. The bridge is quite spectacular, it is as tall as the Eiffel Tower and was built for the APEC Heads of State meeting. As such, the bridge is a symbol of Russia's plans to develop its Pacific side and strengthen its ties with its Pacific side, which in the words of Putin is "the most important geopolitical task" for the 21st century. 

Russia's new Vladivostok Bridge on its Pacific Coast

Europe is set to become the biggest loser

So far the impact of the shift in power from Europe to the Asia Pacific has been greatly underestimated by Europe. Interestingly, Asia has developed so fast that its population has not adjusted to their growth in prosperity by taking its foot off the throttle the way people have in Europe — opting for more leisure and higher levels of public spending. In Asia, people continue to work as hard as they did when they were much poorer.

For example, the average UK citizen works 1625 hours a year — a 35-hour week with four weeks’ holiday plus bank holidays. This compares with 2307 hours in Singapore and 2287 in Hong Kong. In economic terms, this means the Singaporean is working the equivalent of four months a year more than Europeans do. 

Add to that the top rate of income tax in Singapore is 20pc and in Hong Kong 15pc, and the net effect is that per capita GDP in Singapore is 30pc higher than in the UK, and in Hong Kong it is 50pc higher. The gap is widening as people in Asia show little sign of slackening off. Furthermore, life expectancy rates are also on the rise. 

Therefore, changes in Europe to compete with this blast of competition from Asia Pacific will have to be more fundamental and far-reaching than anything European politicians have yet dared suggest. The West has allowed its cost base to become bloated. Unless this is tackled, the future looks bleak, with many other countries going the way of Greece through stagnation to economic near-collapse with all the accompanying political implications that will test democracy.

Conclusion

The Geo-Trade Blog predicts that the next decade is going to see closer regional cooperation around the world – in América Latina, and in Asia too and maybe even in Africa. Basically if your neighbour’s house is on fire, then your house is on fire too, it makes sense to work together to prevent fires in the first place although the Geo-Trade Blog expects this to be a long and tortuous process.

Furthermore, the last few years have seen economics and politics pulling in opposite directions. The economics calls for more labour mobility; the politics argues for closed borders, particularly in Europe and the US. The economics calls for investment in the productive potential of the economy for 21st Century but  the politics is dominated by older voters in Europe and the US for whom the prime issue is the debt that society owes them for a lifetime of work. These two positions look very challenging to reconcile.