Standing on the Sun. Christopher Meyer
attention to one dynamic that can be blamed for capitalism's worst excesses: the runaway effect.
CHAPTER ONE
Capitalism's New Center of Gravity
The shifting environment of the global economy
In the 21st century, history will unfold in the exact opposite direction of what Western intellectuals anticipated in 1991. Then they all assumed that the end of history is the triumph of the West. Instead, we will now see that the return of history is the retreat of the West.
—Kishore Mahubani, author of The New Asian Hemisphere: The Irresistible Shift of Global Power to the East, April 2009
It was 1997, and Chris was visiting Beijing for the first time. He was lucky to have a guide, the son of a Chinese colleague, who was both bilingual and bicultural; the twenty-something entrepreneur had spent his teenage years in California. On the tortuous drive to the Great Wall the two of them passed a curious neighborhood—a cul-de-sac of supersized faux-Tudor homes, the kind of ersatz splendor usually encountered in wealthy American suburbs. Surprised to see such conspicuous construction in a land still firmly ruled by the Party, Chris asked how people felt about it. Wasn't it decried as the ultimate in capitalist folly? The young man grinned as he offered an explanation: “In China, we're very pragmatic: if it works, we call it Communism and move on.”
The ensuing years have underscored the power of Chinese pragmatism. But in retrospect, why should we have expected otherwise? No law of nature dictates what communism must be. Karl Marx might have thought he was being definitive when he wrote, “The theory of the Communists may be summed up in the single sentence: Abolition of private property,” but like all isms communism remains socially constructed: only what its adherents make it. Over time, if their attitudes and behaviors change, they can make it over.
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The same goes for capitalism: it's only what capitalists believe and do. And it changes when the bulk of capitalists start doing something different.
Or when different people start doing the bulk of capitalism.
That is what this book is about: the fact that capitalism is now being practiced by a new set of people—in terms of geography, demography, and ethnography—and that as a result, capitalism itself is changing. Just like the young man Chris met in China, today's capitalists can expect to see changes in our own system that violate the prior orthodoxy. And if we are pragmatic—and we're accustomed to thinking that there's nobody more pragmatic than capitalists—we will move on.
In slightly more detail, here's the thesis we advance in this book. First, capitalism is an adaptive system, which is to say that it evolves when its environment changes. Second, we are now in a period of dramatic change in the environment in which capitalism is situated. Businesses follow the money, and we're in the midst of a dramatic shift of the economic center of gravity to different regions of the globe. It's not only that the growth of demand is coming from new markets; it's also that the societies hosting this economic efflorescence are markedly different from those that capitalists focused on in the second half of the twentieth century.
In this chapter, we talk about change along five dimensions: geography, demographics, technology, the nature of goods being traded, and the global span of activities. We hope it will become clear that the trends in any one of these areas are powerful enough to force changes in prevailing economic rules. Before we proceed to examine them separately, however, we should point out the important interaction among them. The emerging economies, characterized by low income per capita, are experiencing rapid growth; the level of capitalist activity in them will continue to rise rapidly. At the same time, the populations of emerging-economy nations, in stark contrast to the West, skew toward the young. This means that just as the geographical shift is happening, the reins of capitalism's course are also being placed in the hands of the first digital-native generation. The first populations that are majority-born into a world of powerful and inexpensive information and communications technologies, and most comfortable applying them to new areas, will be those of emerging economies, just as the United States gave rise to the first generation dominantly raised with industrial mass production, even though its enabling technologies originated in the then more developed United Kingdom.
As the demographic shift lends power to the geographic shift, change may come fast. Capitalists schooled in the old environment will have to find ways of working suited to a landscape they've never seen before. Businesses following the money will find themselves in unfamiliar territory, and will adapt, individually. The approaches they take will collectively shift the practices we think of as capitalism.
As we talk about the importance of the first digital-native generation, we also stress that the technologies its members are comfortable with are, in themselves, a huge changer of capitalism's environment. This is not another book telling you about the transformational potential of information technology (IT) at every scale, from a village in Africa to continental electrical grids to global disease detection and containment. Nor is it another book discussing the way people will work in networks. Both are rich and important topics about which we know less today than we think we do, because these forces are nowhere near mature. What's important for our purposes is that the emerging economies get to build their infrastructures with spanking new technologies. Remember Y2K? It was a yawn in India, China, and Brazil. The surplus from these economies' rapid growth pours into the seemingly instant creation of infrastructure that has more intelligence, higher efficiency, and more ubiquitous connectivity than what came before.
Economies built on this infrastructure will be taking on board some new economic realities with it: that many forms of value can be shared without limit; that tools and processes can spread almost instantly, at minimal marginal cost; that physical capital may be more anchor than asset; that human and capital resources can be accessed around the world. These are not merely complicating developments to integrate into today's capitalism like epicycles being added to a geocentric model of the universe. These are fundamentally different assumptions. They subvert many of the basic tenets of economics like scarcity, competitive advantage, the power of wealth, and the importance of location. Net: we can expect two decades in which the shape of capitalism will be in the most rapid flux in history.
Set in New Lands
At any given time, there is a dominant form of capitalism that feels more or less definitional. Capitalism does have a center of gravity, and it's determined in a very simple way. It's wherever the most wealth creation is taking place. Spain and its conquistadores, Britain with its East India Company, the United States with, at one time, Detroit, then Hollywood, then Silicon Valley. The players in the economies marked by the most valuable entrepreneurial activity lay claim to the concept. They call the most shots and set the overall tone. Other forms of capitalism are talked about with reference to the version practiced at the epicenter. And the epicenter for a long time has been the United States.
The United States has been the colossus of capitalism for more than a century—ever since the term gained currency, really. (The word didn't even exist in English, claims the Oxford English Dictionary, until William Makepeace Thackeray used it in his 1854 novel The Newcomes.) But the center of the action is gradually drifting to what are called the emerging economies: Brazil, India, and China in particular. (Russia? Intentionally left blank. More later.) Goldman Sachs also likes to talk about the “next eleven” countries with the greatest economic potential in the twenty-first century: Mexico, Nigeria, Egypt, Turkey, Iran, Pakistan, Bangladesh, Indonesia, Vietnam, South Korea, and the Philippines. When we speak of the emerging economies, we most often refer to these fourteen nations.
You'd have to have been living in Outer Mongolia to be unaware that the emerging economies are rapidly gaining in almost every measurement of economic importance. (Oh, wait—our point is that if you were living in Outer Mongolia, you probably would know.) A few facts help underscore both the magnitude and the immediacy of the phenomenon:
In 2000, 77