May 22, 2012
For five centuries, the West dominated Eastern economies. But, beginning with the fall of the Berlin Wall in 1989, the East has now caught up, according to Niall Ferguson. It did so by downloading six “killer apps” from the West.
Those killer apps are institutional ideas that the West cultivated and embraced to promote wealth, stability and innovation: political and economic competition, the scientific revolution, the rule of law, modern medicine, education and the work ethic.
But now those apps are no longer monopolized by the West, Ferguson said. That is why the average American is now only five-times richer than the average Chinese. (The gap was 23-times in 1979.) And it is why the IMF projects that China’s GDP will exceed that of the US sometime in the next four decades.
Ferguson welcomes the change. What worries him is that, while the East has been downloading those apps, the West has been deleting them, with a lack of leadership largely to blame.
Ferguson is a professor of history at Harvard and the author, most recently, of Civilization: The West and the Rest. He spoke on May 3 at the Strategic Investment Conference in San Diego, hosted by John Mauldin and Altegris Investments.
Six questions will determine the future balance of power between the West and the East, according to Ferguson. But before we get to those, let’s first see what evidence Ferguson marshaled to show that the “download” he talked about has already taken place.
The six killer apps
Evidence that the West’s edge in fostering political and economic competition (the first “app”) has eroded comes from surveys taken at the World Economic Forum, which is held in Davos, Switzerland each January. Those surveys produce a competitive index for each country, in what Ferguson called “a very sophisticated exercise.”
Since 2004, the US’s competitiveness score has declined 7%, while China’s has increased 14%.
The Scientific Revolution was a uniquely Western phenomenon, Ferguson claimed. Now, however, innovations that we think of as uniquely American actually owe much of their success to Asian economies. The iPhone, for example, was designed in California but assembled in China – and that will be the model for technology breakthroughs in the future, Ferguson said.
Moreover, Japan leads all countries in the number of patents issued, and Korea has overtaken Germany for second place. China is not far behind.
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