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Tectonic Shift: The Geoeconomic Realignment of Globalizing Markets.

Tectonic Shift: The Geoeconomic Realignment of Globalizing Markets, Jagdish N. Sheth and Rajendra S. Sisodia, Response Books, A division of Sage Publications India Pvt Ltd, New Delhi/Thousand Oaks/London, 2006, ISBN 0-7619-3490-1

In the Preface, authors Sheth and Sisodia clearly lay out the promise of this book. "Tectonic Shift represents a continuation of the journey started by Commanding Heights, Daniel Yergin and Joseph Stanislaw's masterful recounting of the economic history of the 20th century. We offer a plausible (emphasis added) scenario for how the global economy is likely to evolve in the first few decades of the 21"t century." (p. xv)

This plausible scenario visualizes an evolution of world economy from the numerous current trade blocs into three large, regional trade-blocs involving" ... several non-intuitive developments ... what we call the 'regionalization with a twist' ..." (p. xv). The FTAA (Free Trade Agreement of Americas) will include North, Central and South Americas, the Caribbean countries--even a post-Castro Cuba, and India. The European Union will be joined by all of Eastern Europe and Russia, North African and Middle Eastern countries. The third bloc will consist of all Eastern and South-East Asian countries such as China, Japan, Korea, ASEAN countries, along with Australia and New Zealand.

Hypothesizing about such macro phenomena is not without its challenges. The authors must develop an argument as to why the many blocs should merge into three, why unattached countries are likely to move towards certain blocs, and what other events must happen for the prediction to become reality.

In the first five chapters, Sheth and Sisodia set the stage for their thesis by recounting political and economic events of the 20th century and displaying a pattern that led to the formation, development and current status of various trade blocs. In chapter six, they examine countries that are not part of any trade blocs and predict the movement of these countries towards the three trade blocs. In support of their predictions, the authors cite evidence of increasing economic activity between these countries and the trade blocs towards which they are hypothesized to move. The authors recognize that some non-intuitive events must occur for their predictions to come true. For example, the United States will need to give up economic domination and learn to live as equal with countries such as India; Japan and China will need to overcome historical antipathy towards each other so that both countries could become part of the expanded ASEAN trade bloc.

The second half of the book is prescriptive. Chapter 7 addresses issues of policies and actions for trade blocs and member country governments in restructuring four areas for competitiveness of their trade bloc in the tri-bloc world economy. These four areas are (1) Realignment of Industrial Policy, (2) Renewal of Bloc Infrastructure, (3) Bloc centric Trade & Investment, and (4) Rationalization of Domestic Industry. In chapter 8, the authors cite Ireland as a success story of realignment of industrial policy. They acknowledge and emphasize governments' role in setting policy to facilitate economic growth and to target industries where countries can enjoy strong competitive advantage. Specifically, the authors would like to see every country adopt or realign its industrial policy that is free of ideology, and emphasizes (a) privatizing public enterprises, (b) providing incentives for quality, innovation, and productivity, (c) stimulating economic growth, and (d) requiring environmental compliance.

Chapter 9 deals with renewal of bloc infrastructure. The authors cite Singapore as an example of a country engaged in renewal of education, transportation, and information infrastructure. Their summary assessment that Asia still shows a major weakness in terms of infrastructure is not very surprising. Many Asian nations were colonies of Europe during the first half of twentieth century. Chapter 10 begins with an examination of growing trade between some of the countries within the three hypothesized blocs. The authors cite evidence of increasing trade between Japan and China, and between Russia, Germany and France. These examples lead into the authors' prescriptions for country and trade bloc policies that encourage more intra-bloc trade and investment. Chapter 11 follows with policy prescriptions for countries to facilitate rationalization of domestic industry through sector specialization, removal of government subsidies, removal of barriers to industry consolidation, encouragement of bloc-centric markets, and promotion of bloc standards and intra-bloc resource mobility.

In the last chapter, the authors recognize three likely obstacles to the realignment of markets. First is the domestic private sector that refuses to exit product-markets where other countries in the bloc may have greater advantage. Second is the possibility of political gridlock among bloc countries, and the third is the fact that progress is always slower than what people expect, thus causing them to blame the trade agreements themselves for lack of progress. The authors also suggest solutions to these problems. These solutions seem somewhat superficial due to their brevity. In defense of the authors, fully developed solutions may be beyond the scope of this book.

The main criticism of this work would be from the point of view of political and socio-cultural history of countries involved. Will the Chinese forget Japanese atrocities during World War II, and will they move towards greater cooperation? Will dominant economies of today be able to give up their domination and move towards partnering with developing economies as the authors suggest? The answers may lie in the non-intuitive movements that are already taking place. Given the history of Europe, it is non-intuitive to see any alignment and increased cooperation between countries that were historically enemies. Yet evidence in the book shows increasing trade between such historical enemies such as France, Germany and Russia. Such evidence should put to rest much of the criticism.

The book has done an excellent job Of describing patterns of macro movements in the world economy during the twentieth century. Free market policies resembling those mentioned in Chapter 8 led to domestic economic growth for countries. Alignments between trade bloc countries were influenced by politics of the times, but the alignments were reflected in increased levels of trade and other flows between these countries. It is not unimaginable that extrapolation of trends in recent trade activity between countries signify realignment of economies into the three large blocs that the authors envisage. Political leaders and company strategists should benefit from a reading of this book for developing long term strategies. As far as relying on the book's predictions, only the coming decades will tell us whether Tectonic Shift is simply a collection of arguments and prescriptions to support wishful thinking, or a work of prophetic predictions by two respected scholars.

Rajendra Khandekar

Professor, Department of Management

Metropolitan State College of Denver

Denver, Colorado
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Author:Khandekar, Rajendra
Publication:Indian Journal of Economics and Business
Article Type:Book review
Date:Jun 1, 2009
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