An Unstoppable Economic Rebalancing

At the recent Mines and Money conference in London, Professor Andrew MacLeod reminded delegates of China's historic importance, and drew attention to misconceptions about its Belt and Road initiative.

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White Anglo-Saxon domination of the global economy is a relatively recent phenomenon, and for most of the past 2,000 years it was Asia (specifically China and India) that dominated global output. Delegates were reminded of this by Professor Andrew MacLeod at the Mines and Money (M&M) conference in London at the end of November.

Professor MacLeod is a former senior official at the UN responsible for emergency aid coordination in conflict and natural disaster situations, and is currently a non-executive director at Cornerstone Capital and visiting professor at Kings College London.

Before the industrial revolution in Europe, Professor MacLeod explained, productivity was similar everywhere, so large populations produced large economies. When human productivity was skewed by machines it allowed Europe and North America to overtake the Asian economies.

The situation is now reverting as China, and to a much lesser extent India, are reasserting their historic economic position. This process started in the 1950s, when knowledge was shared (and ideas implemented globally). This rebalancing is "unstoppable", according to Professor MacLeod — although he is pessimistic about India's ability to expand its economy because of the huge levels of bureaucracy.

Mining Beacon (MB) caught up with Professor MacLeod after his presentation and asked him why more white, Anglo Saxons are not alert to this rebalancing?

Andrew MacLeod (AM): Humans generally are not good at accepting change, and often fail to recognise important transitions. For example, there is still a widespread view in North America and Europe that Africa is a risky place to do business — there is a gulf between real and perceived risk. This opinion is not shared by China, which is targeting the continent as part of its initiatives to grow the economy.

MB: In your presentation you noted the misconceptions about China's Belt and Road initiative, what is the most important of these?

AM: The Belt and Road initiative is not about providing links to Europe. The most important target for China is the burgeoning market in Africa, and infrastructure projects there are designed to ease access to African resources for China, and for Africans to access Chinese goods (including a railway to link the east and west coasts). Amongst all these initiatives, Europe is being side lined.

MB: You reminded delegates of the historic advantage of being on trade routes, and gave Uzbekistan as an example. Is this still an advantage in the modern world?

AM: Absolutely. Trade has the power to create opportunities, and those countries on China's Belt and Road routes will benefit significantly over the next few decades.

MB: Will this benefit African countries particularly?

AM: Yes, although Africa is already growing strongly ahead of this initiative. The continent has five of the seven largest-growing economies over the past 15 years.

MB: Which African country has been the most inspiring?

AM: Probably Rwanda. In the World Economic Forum's global risk analysis, Rwanda is ranked ninth safest country in the world, which puts it above the UK and US. This east African, landlocked nation has made a remarkable transformation since the 1994 genocide.

MB: You are an Australian living in the UK, but you are critical of Europe's record in Africa; is China's record better?

AM: It is different. It will take time to say whether it is 'better', however the signs are positive. Unlike the Europeans, which ravaged the continent, China is building infrastructure and seems to be adding value. There is, of course, a vested interest in this as a wealthier Africa will be a ready market for Chinese goods, and for Africa's resources to guarantee China's future supply chain, especially in rare earth minerals.

MB: So Asian dominance of the global economy is the norm, and we are just reverting to the status quo?

AM: Yes, the dominance of white Anglo Saxons since the mid-19th century was, in effect, just a spike.

MB: Are western companies ready for this transition?

AM: Generally, not. Directors need to ask if their companies understand Asian cultures and communities? These attributes are not factored into share prices currently, so those companies that are ready for the transition, are undervalued. At Cornerstone Capital we are taking advantage of these investment opportunities.

MB: Thank you.

Chris Hinde

Chief Commentator, Mining Beacon

Previously editorial director of Mining Journal, and more recently head of S&P Global Market Intelligence's metals and mining team, Chris is now Mining Beacon's editor-in-chief and lead commentator. He posts two blogs every week, one on Monday reviewing market conditions over the prior week, and a second on Thursday looking at issues on the global mining scene. There is also a quarterly blog on business opportunities in the sector.