Archive for May 27th, 2012

Over the next two decades, the relative power of major international actors will shift markedly.  Around 2030,  after nearly a century as the preeminent global economic power, the United States will be surpassed by China as the world’s largest economy. With its trade in goods expected to nearly double that of the U.S. and Europe, China’s international economic clout will reach new heights.  By 2030, India will become the world’s most populous country and third-largest economy, while Brazil’s economy will rank fourth in size.  India and Brazil will join China at the high table of 21st century international politics alongside the United States, even as the relative weight of Russia and Japan diminishes.  The European economy will remain in the top tier, but it is not clear whether Europe will be able to act with common purpose to leverage this source of strength.

 

With its enhanced economic base, Beijing could rival Washington in overall military spending, even as a slowing Chinese economy and internal political conflict complicate China’s ability to lead internationally.  The United States will remain primus inter pares in light of its continued advantages across the full spectrum of national power and the legacy benefits of its leadership.  It will, however, be operating in a post-Western world in which the bulk of global economic power is held by countries whose per capita incomes are far below those of the traditional great powers.  This reality will leave China, India, Brazil, and other players focused on internal development and domestic challenges, torn between their desire to be global powers and their interest in free-riding on Western management of the interna­tional system.

 

How will the rise of the rest impact the international system?  The National Intelligence Council’s draftGlobal Trends 2030: Alternative Worlds maps out three broad scenarios:

 

Reverse Engines. Under this scenario, the international system would consist of several powerful countries — but no single state or bloc of states would have the political or economic leverage to drive the international community toward collective action. Such a world, characterized by a global vacuum of power, assumes that the United States will no longer be willing or capable of sustaining the predominant leadership role it has assumed since 1945.   With no other country able to step in to replace the U.S. as a global leader, the resulting diver­gence of interests would lead to fragmentation and the inability of great powers to work cooperatively to solve global issues.  Mercantilism and protectionism could lead economic globalization to go into reverse, constraining technological breakthroughs required to manage scarce global resources.  Conflict and disorder would follow.

 

Great Power Convergence.  An alternative scenario is what the NIC calls a “fusion” world, in which major powers work together to adopt and enforce a set of globally accepted rules and norms. As U.S. predominance over the international system recedes, other emerging powers would step in to assume greater responsibility for the management of international affairs commensurate with their swelling economic might.  Emerging powers emerge as full stakeholders in a global order that is transformed by power shifts but remains liberal and pluralistic.  Great power concert (perhaps enabled by democratization in China) to meet global challenges increases the stability of the international system even as power is diffused within it.  U.S. resilience enables it to create enduring partnerships with rising powers to sustain the basis of liberal order.   Technological advances create new possibilities for joint management of key global challenges, rewarding positive-sum behavior by the great powers.

 

Multipolar Divergence—U.S. Primacy.  A third scenario, one the NIC calls “fragmentation,” involves a multipolar system characterized by a divergence of views among great powers that challenges global governance.  The United States would continue to maintain disproportionate global influence and leverage that influence to address global challenges by working through coalitions of like-minded states.  A multispeed global economy accelerates the diffusion of power but an alternative coalition to the West does not form, with developing giants consumed by their domestic challenges – even as the global middle class explodes in ways that transform politics within the rising powers.  With inclusive global institutions effectively stalemated, the United States instead turns to its old and new allies in Europe and Asia, who would continue to see Washington as their partner of choice in advancing the norms and rules of a liberal order.  The risk of conflict increases with the continued rise of new powers like China and the rapid pace of technological change.

 

One key conclusion of the NIC study is that the future role of the United States in the international system is a decisive variable in determining what kind of “alternative world” will exist in 2030.  The choices U.S. leaders make – about how to marshal (and preserve) domestic resources, how vigorously to assert U.S. military and economic leadership overseas, and how much to invest in alliances old and new – will be central to determining which of the above pathways the international system will follow over the coming 20 years.  To a certain extent, the answer to the question of how the “rise of the rest” impacts the U.S.-led international system is that it is not up to them… so much as it is up to us.

The Rise of the Rest; Decline of the West?

By Jeffrey Gedmin

The finest minds of our times have been engaged for some time now in a deep and ongoing debate over the so-called rise of the Rest (particularly India and China) and what this means for the liberal international order. What we know is clear. Nearly a quarter of a century ago, the end of the Cold War signaled an end of bipolarity and a new fluid moment in international relations. We also know that as other nations come on line — by virtue of things like size of population, economic growth, national self-confidence and strategic ambition — relative shifts in global power are likely to ensue (indeed they have already begun).

I suspect we actually spend far too much time, though, speculating about what something like the rise of China means for the new world order. In truth, we can’t possibly know. To those who see a menace, there’s the rebuttal that China’s rising middle class is likely to seek greater political participation in the years ahead; that as a result, Chinese politics may well became more consensual and democratic, with emerging checks and balances that will mute the more malign aspects of nationalism and diminish the appetite for foreign adventurism. To those who see China’s future as a peaceful one, a rising power wrapped (and restrained) in a global web of economic  interdependence, there is the fact that we’ve fallen prey to analogous wishful thinking  before. A century ago, two popular forecasts stood out: one that the advent of international trade would soon make war obsolete; the other, that the one nation poised to play a leading role for peace in the world was Germany.

Of course, let’s keep forecasting, and thinking about economic trends, defense spending, demographics and social stability in a place like China. Let’s think about policy and incentives to shape a new world order that we view as conducive to our interests, supportive of our values and likely to advance world prosperity, peace and security. Let’s also be humble, though. In this respect, it’s quite possible that the keys to the future lie chiefly with us, “not them” — and, like Dorothy’s ruby slippers in the Wizard of Oz, we ought to look right beneath our very nose if we’re concerned about getting home to a future we want and can believe in.

The Great Recession of 2008, America’s crippling debt problems (and our inability to get entitlement spending under control), and the EU’s single currency are serious self-inflicted wounds which, if not properly tended to, may undermine the very foundations of the West and severely curtail our ability to grow, prosper and project power in the decades ahead. What may have started as a crisis in the financial system has become a crisis of values. In fact, the two were always inextricably linked.

In the United States, what made America of the past great — things such as risk, thrift, self-reliance, humility, and deferred gratification — have slowly been fading as central tenets of American life and key ingredients of the American dream. In foreign policy, we’ve always been at our best when we balance interests and values, and fuse American values to universal values, so that we can work closely with and appeal to the enlightened interests of other nations. As humility has declined at home, it’s no surprise that hubris has increased in our dealing with affairs abroad.

In the European Union there is a similar crisis of values. The EU’s crisis is compounded by the grave strategic error of having forced the introduction of a common currency in the last decade. A number of nations did not want this. Others were simply incapable of sensibly adopting the euro. What drove this? It was principally false lessons from history mixed with the vanity and ambition of elites. The result is becoming clear. A project aimed at bringing Europe together has manifestly had the opposite effect.

There are lessons. To build a strong, liberal international order, it’s indeed important that we soundly reject isolationism and the folly of those who call for us to retreat into our shell. America and its allies must remain engaged and seek to shape the new emerging world order. But let’s show a little modesty. Let’s understand those spheres where we have more control, and those where we have less. Centrally, let’s assume responsibility for the health and vitality of the West and see the current crisis for what it is: an immense challenge, but also an opportunity. It’s time for self-critique, self-examination and self-control. It’s time to adapt, and grow again. If the West cannot solve its problems and set a convincing agenda for its own future, how can we pretend to influence and manage the peaceful rise of the Rest? 

Jeffrey Gedmin is President and CEO of the London-based Legatum Institute.

By Myron Brilliant

For much of the last fifty years, the international system – its structure, operations and goals of its key institutions – remained remarkably stable.  Now that is all changing.  The international system — as we know it today and as represented by such organizations as the IMF, World Bank, WTO, WHO, OECD, United Nations and NATO — has to reform or the institutions at the core of the system will become marginalized or even obsolete.  Moreover, we should expect new institutions to develop that will contribute to a reshaping of the global landscape with profound implications for America and the Western world in geopolitical, security and economic terms.

The reasons why are obvious.  With the economic rise of China, India, Brazil, Russia, Turkey and other emerging economies, these countries rightly are exerting more influence in world affairs and changing the way business is conducted in the international system.  Witness the growing role of China and other leading economies in the global response to the financial crisis of 2007.  Already the G-20 group of developed and developing countries has assumed a more prominent role than the G8 forum, comprising only developed economies, in mitigating the risks associated with the financial crisis and in setting forth a global response.

Building a consensus in any of these institutions for global action in areas as diverse as security and trade is now increasingly difficult, with the addition of more players in decision-making and due to the fact that emerging economies often have very different immediate goals and agendas.  It was never easy to negotiate a multilateral trade round when Europe and the United States largely drove the agenda.  Yet, now we struggle to even get to first base with India, China and other emerging economies in setting forth a serious effort on market access, let alone addressing new impediments to trade and investment stemming from regulatory divergence and state-owned enterprises (SOEs).   When China and India dug in and resisted our charm offensive for more market access and improved disciplines on subsidy practices, it was hardly a surprise that the Doha Round went into deep freeze.

Change will be more evolutionary than revolutionary, but it will be significant. For instance, Europe and the United States may have retained their leadership roles in the IMF and World Bank institutions for now, but these institutions have already had to reform in subtle and not so subtle ways to reflect the growing might of the emerging economies.   No doubt the shape and size of the table (i.e., international system) is evolving today, and will do so even more significantly in the years to come, to reflect the growing weight of China, India, Brazil and other rising economies.

One thing is for sure: in assessing the impact of these rising economic powers, we should be careful about how we group them.   Jim O’Neill of Goldman Sachs gets credit for coming up with the BRIC concept (i.e., Brazil, Russia, India, and China) years ago.  There now are other countries that have become developing economies of significance — like Mexico, Indonesia and Vietnam.   This is a diverse group with differing interests and challenges; it’s hard to say that they are united in policy or actions.   If you look ahead to 2030, the lines thought leaders often draw between developing and developed countries may in fact further blur; scenarios we forecast today might alter significantly as countries like China, in particular, behave vastly differently than some of the other countries with which they are often grouped.

As this evolution occurs, I see five key questions we will confront:

First, will the emerging economies — led by China, India, Russia and Turkey — take on greater global responsibilities or will they remain preoccupied with internal challenges for much of the next decade and beyond?  Many of these so-called rising players are consumed by internal challenges.  Russia may have re-elected a strong leader, but the country itself faces enormous obstacles in creating legal reforms and modernizing its economy away from dependency on oil.    Similarly, India needs to reform its economy but faces political constraints with no obvious solutions in the short or even medium term.  While China has had (in contrast to India and Russia) tremendous economic success including lifting 500 million people out of poverty in less than 20 years, political reform has been slow in coming; leaders there increasingly are aware of the developing strains on their society resulting from the resentment building up from those left behind and from perceptions about a developing privileged class in that country.

There should be hope that the United States and the West, more generally, can find common ground with China, India, Brazil and other emerging economies to pursue pragmatic approaches to some of the most challenging issues in the world today.  In the past few decades, one billion people have been lifted out of poverty.   With another billion and more people making this social and economic migration between now and 2030, we can and should be optimistic about our collective future.  Can we move quickly enough with the developing world to pursue “win-win scenarios” that advance the welfare of these societies?   Will these countries work with us in tangible ways in supporting innovation, promoting environmental collaboration and fostering stronger health care?   To date, the picture has been mixed, but the hope is that these governments will be more open to partnership in each of these areas.

Second, will these rising economic countries believe they need to develop their own strong separate institutional frameworks — or will they increasingly share the burden of global leadership with the U.S. and EU within the existing albeit reformed international system?  It is easy to say that the burden is on these countries to demonstrate that they want to be “responsible stakeholders” within international institutions, to borrow Bob Zoellick’s phrase, but we also have the burden to encourage their active and appropriate participation.  The key is for government leaders in the developing and developed world to understand this shared burden.

While it is true that leaders from Brazil, Russia, China and India now meet to discuss regional and global issues, this is at this time largely a talk-shop;  nothing profound has come out of these discussions.  Certainly, it is hard to see these countries agreeing to map out a radical departure from the existing international system through alternative institutions.   However, these countries will begin to demand changes to the existing system or they won’t play ball with the mandates issued by these governance organizations.

It is worth noting that most of these countries see directional alignment with the United States as essential for global stability — even if they at times have different views on critical geopolitical issues (e.g., five plus one on Iran or six-party talks with North Korea).  Certainly, China sees itself as more of a partner of the United States on economic and security matters than it would India or Russia, where the dependency and trust factor is even lower.  And Brazilian President Dilma made it quite explicit when she articulated in Washington, D.C. during her winter visit that her country’s aspiration is to have a strategic relationship with the United States; in contrast, she said Brazil only wanted a commercial relationship with China.

Going forward, we should ask more of China, Brazil and other rising economies with increasing resources and capacities to take on greater responsibility, and to work more closely with us in solving some of the world’s greatest challenges.

Third, as they emerge on the world stage, will these countries increasing flex their new powers in ways that promote strategic cooperation, or undermine it in favor of more nationalistic objectives?  We have seen China increasingly expand its core interests to include vast claims in the South China Sea; can regional cooperation withstand a redefinition that limits the sovereignty of a half-dozen or more neighboring nations?  Can India work with us and others to combat terrorism in South Asia in ways that invite more collaboration among the key actors in that region, with the close cooperation between the security and intelligence communities that requires?   Trust will be a key factor here.

Fourth, will these countries adopt a market-based approach to their economies, or will they implement approaches that undermine the principles of national treatment, level playing field and open markets?  The economic and financial crisis of 2007 has fed oxygen to the argument that “managed capitalism,” or a hybrid state-backed mercantilism, is a sturdier economic model for development.  This argument will play itself out in the 2030 scenario much as those capitalist-socialist models contended in the second half of the 20th century.  Moreover, the period in which the U.S. and Europe account for 50% of world trade is passing.  A new and far more multipolar world of trade powers and regional hubs is emerging.  Managing this concert of commercial powers will be every bit as challenging as balancing military and security relationships in the 19th century.  We can hope to work with China, India and Brazil to combat protectionism.  Yet recent trends are discouraging, as these countries do not yet see as a core strategic interest the promotion of national treatment, competition and open markets in a meaningful way.

Fifth, will the growth of these economies put an inevitable strain on global resources and increase competition for water, oil and other commodities, culminating in a zero-sum race for resources — or is a collaborative approach possible?  In India and China natural energy and water resources are scarce.  Food wastage is a growing problem and developing a farm-to-market supply chain is evolving.   Pressure is rising as we see increasing competition for resources (e.g., China’s appetite for securing resources in Africa).  Global challenges require global solutions.   We need to find ways to address these issues now before they become even more significant.

We know that the world is changing in profound ways.  How we respond to the increasing influence of China, India, Brazil and other emerging economies reflects as much on our own leadership as it does on these countries.   We cannot advance the twin concepts of “strategic trust” and “cooperation” if we are not willing to adapt ourselves and acknowledge that the size and shape of the table has to change to reflect the needs, values and interests of these countries.   We should have a desire to share the burden of global governance and prosperity with these states — and in return have every expectation that they will increasingly act as responsible stakeholders.

This will not happen overnight, this will not happen without challenges, and it will not happen if America is not strong.   But we can advance a “win-win” agenda where our interests and those of China, India, Brazil and others coexist — if we are proactive, frank, open and transparent in our convictions and engagements.

Myron Brilliant is senior vice president for international affairs at the U.S. Chamber of Commerce.