Dear ATCA Colleagues; dear IntentBloggers

[Please note that the views presented by individual contributors are not necessarily representative of the views of ATCA, which is neutral. ATCA conducts collective Socratic dialogue on global opportunities and threats.]

Re: Beyond Davos: Demise of the Hub-and-Spokes World Economy: The 21st Century Great Global Economy Paradigm Shift

The annual mela in Davos, Switzerland, begins today and is being held under the theme "The Shifting Power Equation." However, as Prof Jean-Pierre Lehmann from IMD Lausanne points out, this in fact is the "Demise of the Hub-and-Spokes World Economy" via "The 21st Century Great Global Economy Paradigm Shift." With multiple sessions on climate chaos -- which some in the gathered crowd are cynically branding as climate collapse -- this may be one of the "greenest" gatherings of the throng ever. "Better late than never!" as one social entrepreneur put it. Prof Lehmann writes:

Dear DK and Colleagues

Emirates Airlines runs daily non-stop flights from Shanghai and Beijing to Dubai. Soon it will be inaugurating a non-stop flight between Dubai and Sao Paulo. It will then be possible for Brazilian and Chinese business executives (and others including government officials, students, tourists and honeymooners) to fly between their two countries without the hitherto obligatory stop-over in either Frankfurt (Europe) or Los Angeles (US). Regular direct flights from Dhaka, Karachi, Mumbai and Colombo to Dubai also secure the dynamic and ever stronger link between the economies of the Gulf and the economies of the Indian Sub-Continent. Arab businessmen will be flying to all these destinations as an ever increasing flow of goods, capital and ideas link the four regions: Greater China, South Asia, South America and the Middle East.

The economic ties and business networks across Asia are being developed and discussed in the recently inaugurated Indian-Arab and Chinese-Arab CEO annual summits convened by the UAE based forum Moutamarat. This reflects, among other things, the fact that China, India and the states of the Gulf Cooperation Council are the three fastest growing world economies. The recent increasingly growing business ties between and across the three Asian regions (West, South and East) have been described as the New Silk Road.

While the trans-Asian connection - which increasingly also encompasses Central Asia within its expanding orbit - is the most important economic story of the first decade of the 21st century, it is by no means the only one. In October 2006, as ATCA observed, Beijing hosted the first China-Africa Summit, a very grand affair that brought to the Chinese capital over 50 African heads of state. China is by far Africa's fastest growing trade and investment partner; with India also increasingly active, this trend has been described in a publication by Harry Broadman of the World Bank as "Africa's Silk Road: China and India's New Economic Frontier." At a policy level, the new relationship between the three continents of the "developing world", Africa, Asia and Latin America, was reflected in the establishment of the G-20 during the Cancún WTO ministerial meeting in September 2003; led by Brazil, India, China and South Africa, the G-20 is the first developing world trade alliance to counter the hitherto overbearing authority of the "Quad" (US, EU, Japan and Canada).

All these trends are indicative of the terminal demise of the 20th century global hub-and-spokes business paradigm, whereby the OECD (Organisation for Economic Cooperation and Development) countries represented the hub and the different parts of the developing world the spokes. The new paradigm, though not yet entirely clear, is one of growing axes of trade, investment, networks and knowledge across the erstwhile spokes. Economic ties are also spawning more political and cultural connections.
By no means should one infer that the old industrialised nations are "finished". The US, EU, Japan, Australia, Switzerland and Norway remain extremely rich in both material and cultural wealth. But, in the words of Bob Dylan, "The times they are a-changin", and both the demise of the hub-and-spoke and the rise of the new global axes of business development are inexorable.

The influential and highly respected economics editor of the Financial Times Martin Wolf, also an ATCA member, wrote in a 2005 article: "The economic rise of Asia's giants is the most important story of our age. It heralds the end, in the not too distant future, of as much as five centuries of domination by the Europeans and their colonial offshoots." [Asia's Giants on the Move, 23 February 2005] The rise of the European seaborne empires in the late 15th century spelt the end of the old Silk Road, as its merchants and rulers stayed confined in their resolute ways and mindsets, thereby failing to respond to the new competition and technologies, and to adapt to the changing times. The shoe is now on the Western foot.

This will have immense implications across virtually every dimension one can think of. Western policy makers and business leaders will need to adjust. The "typical" Western multinational enterprise that runs its business empire from a Western central hub with the developing world compartmentalised into regional spokes - Africa, Middle East, Latin America, South Asia, Asia Pacific, etc - is unlikely to capture the ethos of the new age and therefore ultimately will lose out on the business being created. The Western multinational corporation of the 21st century in order to survive, let alone thrive, will need to reflect these new realities, in terms of organisation, management, culture and manpower.

Western policy makers must also fully absorb the implications of the changing paradigm. The 21st century marks the end of the Western imperial age - what the Indian historian BN Pandey called "The Vasco da Gama era of history", stretching from the rise of the Iberian seaborne empires in the late 15th century to the resurgence of the great Asian nations in the late 20th/early 21st centuries. This new multipolar world will require, more than ever, the strengthening of multilateral institutions, and especially in such a way that they truly reflect the changes. Western political and business leaders must abandon their badgering colonial attitudes in favour of a truly global collaborative mindset.

It cannot be over-emphasised that carrying out these changes, especially the change in mindsets, is going to be extremely difficult. But there is no real choice, apart from decline and extinction.

Western business leaders and policy makers might be inspired by what Bob Dylan had to say:

Admit that the waters
Around you have grown
And accept it that soon
You'll be drenched to the bone
Then you better start swimmin'
Or you'll sink like a stone
For the times they are a-changin'

Very warm regards

Jean-Pierre Lehmann

Jean-Pierre Lehmann is Professor of International Political Economy at IMD International -- Institute for Management Development -- in Lausanne, Switzerland, since January 1997. His main areas of expertise are the socio-economic and business dynamics of East Asia, the impact of globalisation on developing countries and the government -- business interface, especially in respect to the global trade and investment policy process. In 1994 he launched the Evian Group, which consists of high ranking officials, business executives, independent experts and opinion leaders from Europe, Asia and the Americas. The Evian Group's focus is on the international economic order in the global era, specifically the reciprocal impact and influence of international business and the WTO agenda. Jean-Pierre Lehmann acts in various leading capacities in several public policy institutes and organisations. He obtained his undergraduate degree from Georgetown University, Washington DC, and his doctorate from St Antony's College, Oxford University. He is the author of several books and numerous articles and papers primarily dealing with modern East Asian history and East Asia and the international political economy.

Prior to joining IMD, Jean-Pierre Lehmann has had both an academic and a business career which over the years has encompassed activities in virtually all East Asian and Western European countries, as well as North America. He was (from 1992) the founding director of the European Institute of Japanese Studies (EIJS) at the Stockholm School of Economics and Professor of East Asian Political Economy and Business. From 1986 to 1992 he established and directed the East Asian operations of InterMatrix, a London based business strategy research and consulting organisation. During that time he was operating primarily from Tokyo, with offices in Seoul, Taipei, Bangkok and Jakarta and was concurrently Affiliated Professor of International Business at the London Business School. Other previous positions include: Associate Professor of International Business at INSEAD (European Institute of Business Administration) in Fontainebleau, France; Visiting Professor at the Bologna Center (Italy) of the Johns Hopkins University School of Advanced International Studies; twice in the 70s Visiting Professor and Japan Foundation Fellow at the University of Tohoku, Sendai (Japan); and Founding Director of the Center for Japanese Studies at the University of Stirling (Scotland), where he also taught East Asian history in the University's History Department. From 1981 to 1986 he directed the EC-ASEAN 'Transfer of Technology and Socio-Economic Development Programmes' held in Singapore, Bangkok, Jakarta, Kuala-Lumpur and Manila.

[ENDS]