Interview: Parag Khanna

Global strategy advisor and best selling author Parag Khanna carved out time from his schedule to share with Global Citizenship Review his expert insight into the growing influence and dominance of Asia.

Global Citizenship Review (GCR): Parag, it’s great to chat to you! Your latest book, The Future Is Asian: Commerce, Conflict, and Culture in the 21st Century was recently published. What has been Asia’s status until now, and how is it evolving?
Parag Khanna (PK): For decades, even centuries, Asia’s full geographic extent has been neglected. Five hundred years of colonial division and a half-century of Cold War rivalries have, until now, made Asia less than the sum of its parts. The past quarter century since the Cold War has kicked off a genuine process of Asian reintegration that harkens back to the pre-colonial world of the 15th century and earlier. West Asia, or what we have grown accustomed to calling the Middle East, now trades far more with the rest of Asia than with Europe or the USA. All the sub-regions of Asia — such as South Asia, Southeast Asia, Central Asia, East Asia — have rapidly growing trade and investment ties with one another. They are confidently rekindling and establishing economic complementarities. All of this was well underway before China’s recent launch of the Belt and Road Initiative (BRI), the largest coordinated infrastructure investment plan in human history, which will serve primarily to tie Asia’s sub-regions even closer together.

GCR: If the future really is Asian, what are some of the key factors driving the growth of Asia’s influenceglobally?
PK: The Asianization of the world is of course multidimensional. Demographics and economics are key: Asia is home to more than half of the world’s population and all of the world’s fastest growing economies. They are of necessity reaching out worldwide to acquire resources and access markets for their booming exports. Asians have also built up the largest currency reserves, which have been crucial for global financial stability, for example by holding down USA’s interest rates and purchasing eurobonds. Indeed, Asia’s market appeal is so strong that Europe has diverged strongly from the USA in how to handle Asia’s rise: while the USA is launching trade wars to reduce Asian surpluses, Europe is exporting its surpluses to Asia. Furthermore, first Japan and now China have enormous foreign direct investment (FDI) stocks and continue to acquire assets worldwide far beyond Asia. Asians are also the largest source of global migrants: the Chinese and Indian diasporas are growing on all continents, even South America. Indeed Indians have the highest incomes of any ethnic group in America.

GCR: You talk about China having “taken a lead in building the new Silk Roads across Asia but it will not lead alone”. Which countries do you expect will lead alongside China in this new world order, if you were to describe it as such?
PK: The most significant error in contemporary strategic thinking that I seek to correct with this book is the notion that China’s rise, and its BRI, paints a linear path to Chinese hegemony in Asia and even global supremacy. This is false. The world is irrevocably multi-polar, with North America, Europe, and Asia all important at the same time. Asia itself has throughout its history been multi-polar, not unipolar. Only the Mongols were able to assert themselves across the swath of Asia stretching through the Arab world to Europe. But today all of Asia’s civilizations — Chinese, Japanese, Indian, Persian, Turkic, and Russian — are strong and confident. None want to be a Chinese vassal. China’s infrastructure investments are actually accelerating the process of modernizing states such as Pakistan and Uzbekistan. Rather than China dominate them, it is actually giving them the tools and capacity to govern themselves more effectively and dilute Chinese encroachment. This is completely consistent with imperial history: empires actually sponsor the very forces that resist them. The British learned this all too well in India!

GCR: To what extent are urban and digital growth the cornerstones of Asia’s future success?
PK: Urbanization and digitization have achieved growth on an unprecedented scale in Asia. Asia’s mega-city clusters with populations nearing 100 million are four or five times larger than their counterparts in the West such as Los Angeles and London. Urban services economies are the reason Asians are leapfrogging the traditional manufacturing path of development and instead creating jobs in construction, logistics, hospitality, and other areas. Mobile internet and finance have propelled the peer-topeer economy and unleashed Asia’s high savings into financial products in credit and insurance. China has been a leader in mobile payments, and ecosystems such as WeChat have been replicated across the region. Asia has thus rapidly become home to billions of connected urban consumers, and Asian governments are spending up to 30% of their budgets (as India is) on infrastructure, especially for cities.

GCR: In what way is the region’s ethnic, cultural, and linguistic diversity a benefit to its economic and political ambitions?
PK: This is a wonderful question! The Western experience teaches us that diversity breeds difference but Asia’s deep diversity of large, rooted civilizations separated by mountains and water, and representing mutually unintelligible languages, tells a different story: no Asian culture could ever successfully conquer the others as Europeans have tried to do to each other. Asians are simply too detached from each other and self-absorbed. They intuitively realize that they must live and let live. This means there are inherent limitations to the actual influence China can have over its neighbors, as was the case with Japan in the mid-20th century. All Asian powers are pursuing their ambitions, and while their interests do overlap and sometimes conflict, they will skirmish more at the margins than at their cores. They are skirmishing over the South China Sea waters between them, not to conquer entire sub-regions such as Southeast Asia. Outside Asia there is something of a division of labor emerging that has gone largely unnoticed. Japan and China have opened many doors with their infrastructure investments and resource deals, but India has come in behind them capturing deals in training workers and implementing software platforms. Their ambitions inadvertently reinforce one another.

GCR: The Future Is Asian: Commerce, Conflict, and Culture in the 21st Century is described as offering “a global strategic roadmap for decades to come”. How exactly should businesses position themselves to benefit from the shifting geo-economic dynamic we are witnessing?
PK: Global businesses or multi-nationals need to wake up quickly to Asia’s third major growth wave that is mounting. After Japan and the Asian Tigers (South Korea, Taiwan, Hong Kong, and Singapore) during the 1960s to 1980s, China then rose to become the ‘factory of the world’ and the largest economy. Asia’s next growth wave is being propelled by the 2.5 billion people of South and Southeast Asia — from Pakistan through to the Philippines. These nations already represent about USD 6 trillion in GDP and are growing fast. India today is the fastest growing country in the world. Southeast Asia (the 10 member states of ASEAN) has half the population of China and India (only 700 million people) but already has a larger GDP than India (more than USD 2.5 trillion) and receives more FDI each year than China does. Furthermore, these countries represent far more open political economies than China’s economy, hence the opportunities for businesses to penetrate their markets are enormous compared to China’s. Because the Western tech sector has never had full access to the Chinese market, it is ahead of the curve in focusing on South and Southeast Asia. Other sectors should follow its lead.

GCR: How do you expect the global system will respond to the rise of Asia and the resultant Asianization of economies and societies?
PK: The notion of Asia rising goes back decades to the ‘rising sun’ of Japan, which captured Western attention with its aggressive business expansion. More recently, China’s rise has polarized the world, with the USA viewing it as a threat, while most of the rest of the world, including Europe, sees China as an opportunity. As Asia comes together, its powers are finding ways to accommodate one another and agree to common rules of engagement. Currently, 23 of the 25 trade liberalization agreements under negotiation are in Asia. New multi-lateral bodies such as the Asian Infrastructure Investment Bank have mostly Asian membership and demonstrate Asians’ ability to solve Asian problems. We are not yet at the stage where the global system appreciates Asia as a whole and comprehends its collective impact on the world. That is why I wrote this book!

GCR: Is the concept of ‘Asia First’ a direct retaliation against the protectionist ideals of ‘America First’, or is it rather a more strategic and productive approach?
PK: It would be too generous to call ‘America First’ a strategy, unless the purpose of strategy is to harm one’s own interests. Industrial policy such as what Asian nations aggressively practice works for developing countries, but the USA needs immigrants in many sectors and is scaring them away. Its global companies depend on foreign revenues, yet the USA is walking away from trade agreements. It is cutting itself off from important sources of growth — particularly Asia — at a time when Asia is learning to meet its own needs with less dependence on the USA. When America does come back to the table, it might be too late. In that sense, ‘Asia First’ has been underway for some time, forging ahead under the surface since the 1990s. That is the point of departure of The Future Is Asian and in the period since then Asia has flourished far more rapidly than anyone could have imagined.

GCR: How did your interest in the region develop?
PK: Well, for one thing: I am Asian! I was born in India and have roots from Central Asia to the Mediterranean. I spent my childhood in Abu Dhabi and Dubai, the Gulf region, which my diplomat grandfather always insisted should be called “West Asia” as Indians have always termed it. At university I developed a theoretical interest in regional systems, which is the approach I take to Asia in this book. At the same time, I immersed myself in Central Asian history and began traveling regularly to the former Soviet republics. In researching my first book, The Second World, I spent a great deal of time in that region, as well as driving across western China and after that across Russia. Subsequently I served as an advisor to USA Special Operations Forces in Iraq and Afghanistan. Through all these travels, I came to experience firsthand the opening of Asian borders and the steady resurrection of the ancient Silk Roads. I believe this is truly the most significant geopolitical and geo-economic trend of the 21st century.

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