The Commonwealth: Use Your Imagination

Deep in the afterglow of an incredible Olympic Games and a rekindled British spirit, there’s talk around the campfire that maybe the Commonwealth isn’t just a quaint affectation of a used-up Super Power.  In fact, no less an illustrian than ex-Canadian and convicted felon Conrad Black has run the idea of a resurrected Commonwealth up the international flagpole to see if anybody bothers to salute.  It’s a curious notion that isn’t going to get a lot of attention, but maybe it should.

In theory, The Commonwealth is the natural devolution of the British Empire – a collection of states bound together by (if nothing else) a common colonial experience.  These states share a tradition of British law, parliamentary democracy, education and language.  They are, in reality, and according to Commonwealth doctrine “not [entirely] foreign to each other.”  So much for theories.  In truth, the Commonwealth is an organization (and I know I’m going to get some emails about this) badly in need of a purpose.  What good it does do around the world goes largely unnoticed, and most people assume it’s just a holding tank for stodgy old colonials, with a few dusty monarchists congealing on the side.  Realistically, the Commonwealth simply does not swim where the big boys feed.  It has neither the infrastructure, the management nor the common direction to heft any weight internationally.  It’s only raison d’etre seems to be to voice a few high-minded principles and host the Commonwealth Games.

The weird thing is, however, an invigorated Commonwealth actually makes a lot of sense.  Look around.  Who takes the United Nations seriously anymore – aside from guys like Chavez and Mugabe?  Even Obama works around them when he feels the need.  OPEC is permanently attached to their petro-dollars, and the Arab League isn’t interested in anything beyond the Middle East and whatever anti-Israeli rhetoric is flavour-of-the-week.  Meanwhile, the European experiment is rapidly turning brown, and the Euro itself is on the verge of folding up like a cheap lawn chair.  If Merkel and Hollande can’t find some common ground soon, this time next year, this planet’s largest economic unit might be slowly sliding into the Mediterranean.

On the other economic hand, four of the sixteen largest GDPs in the world belong to Commonwealth nations.  In total, the Commonwealth has a combined Gross Domestic Product of over ten trillion dollars.  That’s second only to the EU and the USA.  It has a population of 2.1 billion — which makes it the largest single organization in history.  Folks, that’s enough purchasing power to get a discount outta WalMart!  Merely turning the Commonwealth into a Free Trade Zone without any other added economic attractions — would be like hitting the world economy with a double dose of adrenalin and a Red Bull™ chaser.  Whatever recession the IMF had in mind – forget about it.  It would be over instantaneously.  Individually, the Commonwealth states have enough natural and human resources to feed, clothe and power the world.  As a single economic unit with proper development and a little imagination, there is simply no limit to what it can accomplish.

Actually, the idea of a super-economy, built out of the British Empire, is an old one.  It’s a 19th century philosophy that found its voice in Joseph Chamberlain, a Victorian Era politician.  His idea was to form the Empire into a closed shop, eliminating trade barriers within the British Empire but erecting tariff walls around it.  Forged as a single economic unit, the Empire would generate immense internal wealth and secure Britain’s position as the world’s only superpower for another century.

Unfortunately, Chamberlain never convinced the British government to step away from its policy of free trade.  As early as 1910, the balance of British trade was beginning to tilt away from the Empire in favour of America (with a corresponding outflow of cash.)  Four decades of that — and a couple of expensive world wars — and Britain simply couldn’t afford its empire anymore.  A simplistic view I’ll grant you, but true all the same.

Very soon, empires will no longer be political; they’ll be economic.  The Commonwealth has the potential to be history’s greatest superpower, but don’t hold your breath.  There are too many national egos involved.  But mostly economists don’t make policy; politicians do.  Unfortunately, they have neither the imagination nor the political will to make something as radical as a non territorial political entity work.

India’s Economic Revolution

Last week, everyone was focused in on America’s Black Friday retail shenanigans – as well they should be.  There’s no doubt the world economy desperately needs some conspicuous consumption right now, and those half-crazed American shoppers didn’t disappoint us – although the pepper spray was a bit much.  However, on the other side of the world, getting largely ignored outside of India, there was some even better economic news.  This news was largely ignored outside of India because, beyond the outsourcing debate, India itself is largely ignored by the Western World.  While all economic eyes are hypnotized by the Great Chinese Dragon, the Indian Juggernaut (a Hindi word, by the way) is steadily gaining momentum.  Nobody is ever going to say that the Indian economy will save the world from international recession. (Dare I use the d-word?)  However, it’s certainly going to be a game changer.

Here’s what happened last week.  It’s all very complicated and you can read a slightly slanted version here, but in essence the Indian government opened up the country to foreign, hypermarket chain, investment.  What does this really mean?  In a word — Walmart.  The international retail bogeyman is coming to the sub-continent!  Just as an aside: in North America, we are blinded by Walmart.  However, around the world there are several other hypermarkets — including France’s Carrefour and the UK’s Tesco plc, ranked two and three by revenue — and they are major retail players internationally.  For example, Walmart has 189 outlets in China, but Carrefour has 184.  Walmart might be the biggest kid on the block, but — to mix a metaphor — it’s not the only game in town.  I’m not going to debate the various merits and demerits of Walmart here — that’s for another time – but Walmartophobia aside, this is excellent economic news.  Let me explain.

To most North Americans, India is a combination of Russell Peters, Slumdog Millionaire and Apu from The Simpsons.  In general, most of us don’t ever get past Bollywood or the local tandoori restaurant.  We are walking encyclopaedias of ignorance when it comes to what’s south of the Himalayas.  This isn’t because we’re stupid; it’s because, for the last decade, we’ve been looking at the Yangtze, not the Ganges.  However, times are changing.

I’m not going to bore you with statistics, but here are just a few incredible numbers.  There are over one billion people in India.  Although nearly half of them live below the poverty line, the Indian middle class is huge, and it’s expanding faster than any other place on the planet.  In real numbers that translates into 350 million people with disposable income.  In 199,1 the average per capita GDP in India was (U.S. dollars) $329.00. This year, it’s $1,265.00, and by 2016 it will almost double to $2,110.00.  Do the math!  The standard of living in India is growing at a phenomenal rate.   Those are all pretty spectacular numbers, but the one that tops them all is the median age in India is 25.  That means half a billion people between the Indian Ocean and the Bay of Bengal are under 25 years old.  This is primo, prime time purchasing power.  The market for Levis alone is breathtaking.

This brings us full circle back to India’s new government policy to allow what they call “multi-brand retail” outlets — superstores.  Last Thursday, the Indian government opened up a vast retail market.  It doesn’t take a genius to figure out that we’re not just talking about a couple of big box stores out in the suburbs.  The ripple effect of adding 350 million potential customers to the world economy is going to be huge – and it’s not only because of end-user retail goods, either.  For example, there are going to have to be warehouses, fleets of trucks, forklifts.  How many shopping carts do they need?  How many computers and cash registers?  How much cash register tape?  Coat hangers?  Staplers?  The little tags that show the price?  The list goes on and on, and this is just the beginning.  All this stuff has to be manufactured and purchased before the first family in Mumbai lays down a single rupee in retail sales.

The folks in Cincinnati are still part of the largest retail market in the world, but while they’re fighting over a big screen TV at Target, there’s been a seismic shift in Asia.  The potential is huge, and we’d better pay attention to it.