CAIRO: Professor Norbert Walter, chief economist of Deutsche Bank Group, presented “Dawn in the East, Dusk in the West: The End of the End of History for the American Chamber of Commerce (AmCham). Minister of Investment Mahmoud Mohieldin responded with his own insights and perspective, critiquing Walter’s conclusion that the western economies are in their final decline while the East, namely China, will dominate the world within the next 10 years.
Walter cited declining European populations, increasing regulations and heavy deficits as contributing to the West’s inevitable fall. Mohieldin acknowledged China’s record-breaking ascendency, but asserted that success came with the adoption of western values of technological progress, pragmatism and meritocracy.
Mohieldin’s applause for China’s success carried a thinly veiled criticism of Egyptian policies that he referred to as “stupid and populist.
“Bad ideas are controlling our minds and constraining our capacity to get things developed. Good ideas are there. [the difficulty] is abandoning stupid populist ideas. There were 22 bad ideas recently adopted by policy makers just so they can feel relaxed. These are getting passed on to next generation, Mohieldin admonished the audience. He was effectively preaching to the choir, as AmCham would be only too willing to support reform in Egypt’s economic and social assistance policies.
Face up to reality
Walter began by explaining his title, based on the famous essay published by Professor Fukayama in 1989, which declared the “end of history ; that the fall of the Berlin Wall signaled the monopolization of global ideology and policy by liberal democracy and western capitalism.
Thus, “The End of the End of History represents the rejection of this framework based on the dominance of non-democratic China. Walter laughed that his Chinese counterparts have assured him that “Western capitalism is dead, the future is in the East. Although Walter knew his friends had “gone overboard when they called Wall Street bankers the worst in the world and Chinese bankers the best, he did not appear to doubt the veracity that the practices with which banking and business are conducted will be increasingly set by an Eastern standard.
Walter urged the AmCham audience to “face up to this reality.
“The last 15 months saw the most dramatic downturn in the past 17 years. After the most drastic fiscal stimulation the world has ever seen – including figures such as 15 percent of GDP in the Arab world and China, where prior stimulus plans never exceeded 5 percent – returning to ‘business as usual’ is impossible, he stated.
Overspending in the private sector in the US, and the public sector in Europe and Japan leaves a burden that future generations may be incapable of bearing. In countries like Germany, Italy and Japan, an aging population bequeaths a burdensome inheritance of debt for their increasingly dwindling numbers of youth.
“In my country of Germany, the number of children per woman has fallen to 1.3. Thus, in one generation the active population and labor force has shrunk by one third, Walter said, before adding that hope for Europe might come in the form of immigration from countries “south and east of the Mediterranean with a different demographic fate.
Walter went so far as to criticize single child households as deficient in “natural competition and socialization, allowing offspring “to get fat and lazy. To counteract the effect of this on national productivity, he suggested increased emphasis on education in countries like Egypt, which are rich in children but poor in opportunities.
He moved on to fiscal policy, predicting the end of low interest rate policies by the end of next year and that by 2011, the world will no longer be on “stimulus drugs and will have to bear the burden without government assistance.
“Either endogenous growth or no growth, he declared, predicting that the US can expect to grow at 2 percent, Europe at 1 to 2 percent, while China will maintain double digit GDP growth.
The end of whose history?
Mohieldin responded with Kishore Mahbubani’s article published by The New York Times upon Obama’s arrival in China, “The End of Whose History? , implying that it is China’s turn to write the history books. He asked what relevance a shifting power structure has for Egypt, particularly when China simply represents the new defender of the free market system, having adopted “seven key Western values, including modernization, technological and scientific advancement, meritocracy, pragmatism, education and a culture of peace.
Only liberty and democracy have not penetrated China’s strategy- a fact that has made their stimulus measures more effective than the slower process with which Keynesian policies have taken effect in the US and Europe.
Mohieldin charted China’s meteoric rise: in 1985, the Chinese economy represented 7 percent of the US economy. By 1995, it was still only 10 percent. By next year, it will comprise 38 percent and is expected to be the largest economy in the world by 2020.
He then turned to Egypt’s forecast. “The forthcoming three years will be tough for some, but not so tough for us. Let’s Egyptianize the story: a huge budget deficit, dangerous protectionism, and resistance to capital flows [hinder Egypt]. There is a great deal of confusion . the eastern countries are marching ahead; they’re not confused. 12 years ago, 90 percent of our trade came from the EU and US. Now 35 percent comes from the eastern hemisphere, he stated.
Asked to comment on the default of Dubai World, Walter presented a grimmer picture than Mohieldin.
“Dubai is no longer the master of the universe, or even the master of itself. It now has to rely on its neighbors for support, said Walter.
Mohieldin stated that although the company will suffer, the incident is “not difficult for the UAE to handle. especially with expected rise in oil prices.
Mohieldin expressed his optimism that Egypt’s economy is “on the right track in the face of a shifting world order. With FDI reaching $10 million for the year, and unemployment expected to remain in the single digits, he believes Egypt can expect a place, even after the “end of western history.
