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Every Nation for Itself: Winners and Losers in a G-Zero World
Fareed Zakaria- What is a G-Zero world, and how did we get here?
Ian Bremmer- The G-Zero is a world without effective, consistent leadership. It’s not the G7 world where Western industrialized powers set the agenda. It’s not a G20 world where developed and developing states find some way to work together on tough transnational problems. It’s a world where no can be counted either to pay the piper or call the tune.
I love the story in your book The Post American World about Colin Powell making peace between Spain and Morocco over a disputed island in time to go swimming with his grandkids. I included a story in Every Nation for Itself about how Lyndon Johnson diverted about 20 percent of America’s wheat crop in 1965 to help India feed its people during a drought. The leadership capacity that these two stories illustrate isn’t what it used to be, and Europe has too many serious problems of its own to try to take up the slack. At the same time, we can’t expect emerging powers like China, India, Brazil, Turkey, Russia, or the wealthy Gulf monarchies to fill this vacuum because their governments have neither the bandwidth nor the desire to accept the risks and burdens that come with much greater international leadership.
But Every Nation for Itself is not about the shifting balance of international power. In fact, we can’t know what the longer-term future holds for America, Europe, China or any of these other countries. There are good reasons to bet on US resilience, but that will depend on the quality of American leadership in years to come. The rest will continue to rise, but some of them will have more staying power than others.
We can forecast with great confidence, however, that the world has entered a period of transition, one in which global leadership will be in short supply. Every Nation for Itself is about that historic shift and the tremendous challenges and opportunities it will create—for the global economy, for relations between the world’s most powerful governments, and for the world’s ability to cope with a variety of what we might call “problems without borders.”
Zakaria- What do you mean by problems without borders?
Bremmer- First, there’s the traditional threat to regional peace and stability. US and European elected officials know that voters tend to support costly, extended military commitments only when they believe that vital national interests are at stake. That’s why, from Yugoslavia to Rwanda and from Sudan to Russia’s 2008 war with Georgia, they’ve remained on the sidelines as much as possible. Given the need for austerity on both sides of the Atlantic, we’re likely to see both a larger number of local conflicts around the world and an even deeper Western reluctance to engage.
But conventional conflict is not the only potential source of trouble. Given the market volatility of the past four years, governments of both established and leading emerging powers are more worried than ever about creating jobs and boosting growth, and the most important instruments of power and influence in coming years will be economic tools like market access, investment rules, and currency policies.
This will also be a world in which great power competition takes place in cyberspace as state-backed industrial espionage becomes an ever more widely used weapon in the battle for natural resources and market share. It’s a world in which some authoritarian emerging players will find new ways to reestablish state control over the flow of ideas, information, people, money, goods and services. Add climate change, the risk of food price shocks, threats to public health and other problems that flow easily across borders and the world will be without international leadership just at the moment when it needs it most.
Zakaria- Who are the biggest winners in this G-Zero world?
Bremmer-The first key to success in this period of transition is a recognition that changes to the global system will enable an unprecedented number of governments to play by their own rules. Those who still operate as if borders are opening, barriers are falling, and the world is becoming a single market will find themselves reacting to events they don’t understand. In a G-Zero world, the winners will be those players that can develop and maintain choices. The most important option a government can have is a choice among potential commercial and security partners.
Among the most fortunate are the “pivot states,” those that are able to build profitable relationships with multiple partners without becoming overly reliant on any one of them. Then there are “rogues with powerful friends,” states that openly flout international rules with cover from other governments. In a world where newly cost-conscious established powers will have to resort more often to political and economic (rather than military) pressure to get their way, these ties will be more important than ever.
Companies will have new opportunities too. Among multinationals, watch out for what I call the “adapters,” those that understand the changing competitive landscape and are agile enough to exploit the advantages it provides. Some companies can respond to a world with fewer enforceable rules by exploiting arbitrage opportunities to minimize tax and regulatory burdens. Others can transform a state-backed rival into a commercial partner by offering something that a government-controlled enterprise can’t get anywhere else, like access to battle-tested advanced technology or services that demand unique expertise.
Finally, because the G-Zero is a period of transition, significant changes in the international balance of power stoke both competition among would-be regional powers and anxiety among those who fear they aren’t yet ready to compete. That’s why a group of companies we might call “protectors” will also figure among the likeliest winners. Firms involved in defense against conventional military strikes, cyber-attack, terrorism or commercial piracy will prosper in a G-Zero world, particularly if they’re able to align themselves with deep-pocketed emerging market governments.
Zakaria- Say more about this idea of pivot states?
Bremmer- Over the past 30 years, the big winners were states that adapted to and profited from the processes of Western-led globalization. But in a world that is more likely to have several regional centers of gravity, one in which no single country can afford to play the global leader, governments will have to create more of their own opportunities. The ability to pivot will be a critical advantage.
For example, Brazil has built strong political ties and promising commercial relations with the United States, China and a growing number of other emerging market countries. As a result, its economy continues to enjoy access to American consumers, but its ties with China, now Brazil’s largest trade partner, ensure that it isn’t overly dependent on US purchasing power for growth. A serious downturn in the US will still take a heavy toll on Mexico. That’s much less true for Brazil.
The book profiles several pivot states, from Turkey and Vietnam to Canada and Kazakhstan.
Zakaria- What does the G-Zero mean for the United States?
Bremmer- It means that America will have to learn to do something it doesn’t do very well these days: Invest in the future. In a country where political leaders focus so much of their energies on winning the next news cycle, and business leaders try to maximize quarterly profits at the expense of long-term reinvestment, Americans need to look beyond the horizon described in this book.
Anyone who believes that American decline is inevitable has chosen to ignore the entire history of the United States and its people. For the moment, America can’t lead in quite the same way it did during the second half of the 20th century, because the world and its balance of power have changed profoundly. But the G-Zero will provoke a tremendous amount of trouble for a wide variety of people. It can’t last, because tomorrow’s most important powers, whoever those powers happen to be, can’t afford for it to continue. That’s why, if Americans can rebuild for the future, the country’s underlying strengths—its hard power capacities and its democratic, entrepreneurial values—will ensure that US leadership can again prove indispensable for international security and prosperity. I argue in the book’s final chapter that leadership of a post-G-Zero world should be the goal that guides American foreign and domestic policies in years to come.
Zakaria- Why do you believe, as you say in the book, that “China is the major power least likely to develop along a predictable path?”
Bremmer- China’s leaders have acknowledged that the country’s growth model is “unstable, unbalanced, uncoordinated and unsustainable,” and they know that their ability to guide China through the next stage of its development is far from certain. India, Brazil, and Turkey can continue to grow for the next ten years with the same basic formula that triggered growth over the past ten. The United States, Europe, and Japan will reinvest in economic systems that have a long history of success. But China has to undertake enormously complex and ambitious reforms to continue its drive to become a modern, middle-class power.
At the same time, the international environment is becoming less friendly to China’s expansion. Higher prices for the oil, gas, metals and minerals that China needs to power its economy will weigh on growth. The rise of many other emerging powers will add to the upward pressure on food and other commodity prices, undermining public confidence in government, the most important source of China’s social stability. As state-backed Chinese companies draw their government into the political and economic lives of so many other countries, particularly in the developing world, they risk the same backlash from local companies and workers that plagues so many other foreign firms doing business far from home. And because the Chinese government has such a direct stake in the success of these companies, Beijing will be drawn into conflicts it has never coped with before.
Zakaria- I’m interested to see that your book is quite bullish on Africa’s political and economic future? Why is the G-Zero world good for Africa?
Bremmer- Africa has become the world’s most underrated growth story, in part because it has become a kind of “pivot continent.” For many years, cash-strapped African states had to turn almost exclusively to the IMF, World Bank and Western governments for the aid and investment they needed to bankroll development, and the money often came with strings attached—like demands for democratic reforms and greater openness to Western investment. Over the past decade, however, just as we’ve seen in Brazil and other parts of the emerging market world, China has sharply increased its investment in the region. But this is not a story about US-Chinese competition. The winner here is Africa, which can now expect multinational and state-owned companies from the established and emerging market worlds—from America, Europe, Japan, China, India and elsewhere—to compete for access to African consumers and favorable investment terms. The world’s largest emerging markets get this. That’s one big reason why the BRIC countries (Brazil, Russia, India and China) invited South Africa to join their club in December 2010.
The Post-American World: Release 2.0
Ian Bremmer- You made clear from the opening sentence of The Post-American World that you do not believe that America faces some kind of inevitable, irreversible decline. But how can US policymakers ensure that the rise of the rest actually strengthens the United States?
Fareed Zakaria - If more countries thrive in the existing global system, it means a larger world economy – more consumers and producers, investors and inventors. That’s great for America. As Europe boomed after World War II, America boomed with it. The rise of Japan and Korea and Taiwan has not meant the decline of America. But the key has been that we have to be able to adjust and adapt. The US economy was enormously productive in the 1950s and 1960s – leading the world in almost every way, from technology to infrastructure to mass education. Our problem is that we no longer lead the world on many of these dimensions – think of infrastructure or K-12 education – and the rest of the world has been hard at work catching up. So, the fault lies not in our competitors but in ourselves. The good news is, if we can rectify these mistakes, we should still do well in the emerging world.
Bremmer- Given everything that has happened since 2008—the financial market meltdown, the Eurozone crisis, the Arab Spring—have you become more confident or less that the United States can successfully transition from its previous role as global hegemon to a new role as the most powerful among other powerful countries?
Zakaria- There are two distinct (though related) challenges for Washington in a Post-American World. The first is economic, which I outline above. The second is political. Here the structural challenge might seem daunting. Political power is not like economic power. In economics, others can grow and that can be good for you – win, win. In politics, power is relative. As China and India and Brazil and Turkey all prosper and gain strength and confidence, whose dominant influence are they cutting into? The US. But even here, the picture is actually quite hopeful for America. The truth is, only America has power along all dimensions – economic, military, political, cultural. And that gives it great strength, particularly as an agenda-setter. Also, the rise of these other countries creates uncertainty and anxiety in the international system. If the United States plays its cards well, it can be the crucial stabilizing force in the system. You can see that dynamic at work in Asia where China’s rise has unsettled many Asian countries and they look to America to play a stabilizing role. It’s a new diplomatic challenge for America, to be more of a catalyst and broker than hegemon and arbiter. It emphasizes brains more than brawn. Let’s hope we’re up to it.
Bremmer- How can policymakers overcome the polarization of American politics to get this right?
Zakaria- That’s the Trillion dollar question. America’s economy and society remain dynamic. It’s political system is broken. First, recognize the problem. Stop mouthing slogans about how we have the world’s greatest democracy. Our system is now highly dysfunctional and corrupt. We need to fix it.
Bremmer- Among rising states, which do you think have the most staying power and why? Will some of the rest be left behind?
Zakaria- China is in a league apart from every other rising power. It has the scale – in terms of sheer numbers—to have a huge global impact. It is also run by a competent elite, technocrats who plan for the long term and are moving China up the value chain. They are making huge investments in education and infrastructure, which will pay off over the long run. I agree with you that China continues to have a long-term political challenge, how to combine a vigorous and open economy with a closed and bureaucratic political system. But so far they have managed to balance it – I think they will need to make much larger political changes in the next decade than they have in the last decade.
Bremmer-How well do you think America is responding to China’s continued rise?
Zakaria- American business has been responding well to China’s rise, helping it but also benefitting from it. American society is more closed and parochial than American business and so there has been little contact, which is a pity because we can always learn from others. Washington, at a foreign policy level, has actually done quite well in its handling of China. It has encouraged the integration of China into the global economy, it has tried to get China to be more rule-based and more committed to producing (rather than consuming) global public goods. And it has carefully and systematically shored up its alliances with key Asian countries, from India to Japan to South Korea to Australia, which is an important hedge against Chinese expansion. All in all, a solid performance.
Bremmer- You devote a chapter to India’s growing prominence. Are you optimistic that India’s government will help spur the country toward the next stage of its economic development? Or is this still a country where progress will come mainly in spite of government?
Zakaria- China grows because of its government, and India grows in spite of its government. I don’t expect much improvement in India’s public policy. The infrastructure will continue to lag, the education system will be poor, the government will keep doling out subsidies, and tax and regulatory policy will be uncompetitive. But Indian businesses are world class. They manage under very difficult conditions to perform amazingly well. They manage capital efficiently, understand global markets and brands, and have high quality management. India has good demographics, with lots of young consumers. India’s story is a bottom-up story, rather than China’s top-down story. But don’t kid yourself. Ultimately, you need good government policy to go to the next stage. Unless there is massive and intelligent investment in human and physical capital, India will lag behind China substantially. Whether in India or America, bad government will be a huge limiting factor on a country’s success, no matter how dynamic the society and the economy.