Great Powers

by Thomas P. M. Barnett

  Finally, and most important to the long-term health of the planet, which is the ultimate target of our grand strategy of shrinking the Gap, Prahalad shows us that relearning how to sell to the bottom of the pyramid is an innovation booster that can shape more environmentally sustainable development. Why? The bottom of the pyramid is highly resource-conserving in outlook, given the limits of its purchasing power, so we’re talking small-units packaging with limited materials employed in both manufacturing and packaging. The bottom of the pyramid needs things that are incredibly robust and durable, given that most live in a “hostile-infrastructure” environment—the essence of the economic frontier setting. Items also need to be highly affordable, accessible for purchase, and available for on-the-spot buying in small numbers. Ask yourself, Where can an American buy a single beer or a single cigarette? Typically, the only places are bodegas or convenience stores that service low-income neighborhoods. Well, most of the Gap’s bottom-of-the-pyramid market lives on such “single-serve sachets”—for example, that’s how most shampoo is sold in India. It’s a low-margin, high-volume, and high-return-on-capital business environment. To master it, you’ll be forced into innovation. One example Prahalad cites in his book: In Latin America, most mothers don’t want to use more than two diapers a day for babies, meaning manufacturers that want to succeed in that market need to create cheap but highly absorbent diapers. Can that innovation be put to good use not just across the Gap but the world over? Absolutely. As Prahalad sums up:

  Innovation in bottom of the pyramid markets can reverse the flow of concepts, ideas and methods. Therefore, for a multinational corporation that aims to stay ahead of the curve, experimenting in bottom of the pyramid markets is increasingly critical.

  Some Core marketers retain the vestiges of this logic: McDonald’s, Wal-Mart, and Home Depot all specialize in selling to the bottom of our pyramid, or people willing to bus their own restaurant tables, find rock-bottom prices, or repair their own homes. When such corporations enter bottom-of-the-pyramid environments inside the Gap, they initially adjust themselves to local tastes and customs in order to gain access, but then start forcing the locals to adapt themselves to the firm’s core operating principles, thus increasing local competition and, yes, wiping out local businesses that could only remain competitive if the environment remained closed. But the reason such firms can succeed in the Gap the same way they succeed in the Core is that they offer real value to people on tighter budgets, their underlying bottom-of-the-pyramid logic being “I’d rather make a little money on lots of sales than more money on far fewer sales, because if I can’t, this huge potential market remains closed to me.”

  Again, in terms of shrinking the Gap, this logic is monumentally empowering to the billions of people trapped in informal economic settings where contracts are never signed, land is never titled, and dreams are rarely fulfilled. By creating such economic connectivity and thus opportunity, identity is generated on a demand basis: “This is who I am and this is what I want.” If you want globalization to empower and provide identity and not just challenge its traditional definitions, there’s no better way than to put hard-earned money in people’s hands and give them the economic freedom to choose how they spend it. That’s why income growth is so crucial, because it’s the wellspring for all market opportunity.

  Moreover, the historical opportunity here is immense. We will add about one billion people to the planet’s population in the next dozen years, but the ranks of the middle class will grow at nearly twice that rate, or between 1.5 to 2 billion people, roughly doubling the middle class’s percentage share of the world population. Shaping that middle-class identity and associated ideology, much as the American System managed to accomplish during our own frontier-integrating age, is how we trigger both the progressivism and the environmental awareness that marked Theodore Roosevelt’s age in the United States. That’s our grand strategic target for the planet: making people rich enough to care.

  The good news is that Asia’s emerging pillars, especially China and India, are already moving in the direction of viewing the Gap, and particularly Africa, as targets for their market replication and extension. According to a new World Bank study titled Africa’s Silk Road, here’s how it works in a nutshell: Globalization integrates trade among countries by disintegrating production chains and dispersing them across economies. As such, multinational corporations account for roughly two-thirds of global trade, and half of that share is actually intra-industry or intra-corporate transactions. Such traffic is called “network trade.” As rising Asia increasingly looks to Africa for resources, there’s also a natural tendency to want to shift production facilities there for three potential outcomes: producing and selling to local markets, home markets, and advanced third-party markets, i.e., the West.

  Right now, most of what chain connectivity is brewing inside Africa is of the buyer-chain variety, with Wal-Mart as a logical template. Buyer chains feature a focus on consumer products with retailers, branded marketers, and branded manufacturers playing the central role. These “buyer-driven networks” tap into Africa’s cheap labor pool by concentrated purchasing of labor-intensive, low-end goods. The bigger opportunity here is to migrate African economies into producer-driven networks, where a major manufacturer like Toyota is more the model. Producer chains feature multinational corporations with strong vertical integration in capital- and technology-intensive industries looking for cheaper inputs and further opportunity to disperse production in the most cost-efficient and resilient fashion. The fact that Indian and Chinese companies are already looking at Africa along these lines is hugely positive.

  Yes, in the grand scheme of things, these Asian investment flows are currently small, but they’re rising dramatically and they’re quickly becoming “about far more than resources,” as the report notes. China and India have become global leaders in forging “bilateral investment treaties” with other developing economies, and wherever their investments go, there follow three important and positive trends: (1) more trade with Asia; (2) more internal competition within the target economy; and (3) more trade connectivity between the targeted economy and the rest of the global economy. The big holdup is, in many ways, the poor and complex regulation of the investment climate in Africa. Simply put, there’s a “spaghetti bowl” of overlapping free-trade areas. American efforts in the region should logically pursue simplification of this investment landscape wherever possible, facilitating India’s and China’s deeper penetration, along with any American companies prepared to play this game. This is a complete win-win in grand strategic terms. Instead of pretending that weak African economies can scale the development mountain on their own, we hitch their future to rising India and China, who in turn link African workers to their firms, then to our firms, and finally to everybody’s markets.

  You want to “drain the swamp” preemptively and foreclose opportunities for terrorists in the backwaters of the earth? This is how it’s done, this is where it will be done, and this is whom we need to help. The average Muslim living inside the Gap earns about one-half the average global income. That simply does not spell victory. In a world where network connectivity determines wealth, America’s grand strategy seems abundantly clear, especially when military interventions are involved: Whatever we do and wherever we do it, leave the place more connected than we found it, because jobs are the only exit strategy. World trade has more than tripled since the mid-1980s and FDI flows have increased more than tenfold, but America continues to act, in grand strategic terms, as though terrorism is a supply-side problem best addressed by capturing and/or disrupting terrorist networks, when in reality it’s a demand function linked to globalization’s rapid advance around the planet. America’s problems with Native American “insurgents” in its West were not a function of their supply but our national demand for frontier integration. The same is true with violent extremists today. The answer isn’t simply to hunt them down and kill them, although we’ll do plenty of that and
should. The answer is to align ourselves with this tsunami of demand for frontier integration and ride it on through its inevitable conclusion.

  If you really want to win this long war, then do whatever it takes to make globalization go faster.

  Five

  THE DIPLOMATIC REALIGNMENT

  Rebranding the Team of Rivals

  Every functioning state pursues some form of grand strategy, either purposeful or accidental. Sometimes a leader will seek to sell a national strategy to the public, hoping to garner popular support. Other times he will keep it secret, because he can or because he must. In ages past, one leader might encompass this whole process. In today’s modern government, the norm is for hundreds and even thousands of key people to be involved, for change to be incremental and spread over years, and for significant disjuncture to occur only with shifts in top political leadership. The modern grand strategist therefore aims to forge a lasting chain from analysis synthesized to vision spread to values embedded to leadership executed. A grand strategy is not an “elevator speech.” It cannot be slipped in like a password. Its why must be inculcated in younger minds so that when they become older hands, these leaders know which levers of power to pull—and when.

  So when I speak in this book of affecting significant and lasting change in America’s grand strategy, or its diplomatic approach to shaping this age of globalization, understand that I target not merely one administration or one party or one generation of leaders, but this nation’s sense of historical purpose—its political soul. America’s grand strategy must reflect our complex internal makeup as a people, but likewise our magnificent impact upon the world since our beginning as a nation. It must at once incorporate our imagined identity (we are the most synthetic of political creatures) and the world’s emerging ambitions, which we have enabled through our stewardship of global affairs. This challenge properly met, we bequeath unto our children a most wonderful world; the challenge abandoned, we condemn them to a fate of dead-ended dreams and openended conflicts.

  Grand strategy is like imagining the chess game from start to finish, except that, in today’s world of rapidly spreading globalization, it’s never quite clear how many players are involved at any one moment or which pieces they actually control. It may seem as though there are no rules, but that means it’s important to make explicit our definition of the rules and realize that playing consists largely of making our rule set seem attractive to others, regardless of how the game unfolds. This game-within-the-game resembles the highly iterative process of generating our own grand strategy. As Parag Khanna argues in The Second World, the line distinguishing geopolitics (the relationship between power and space) and globalization (the global economy’s expanding connectivity) has been effectively erased. Therefore, my nation’s grand strategy—and therefore its diplomacy—is mostly about trying to shape every other state’s grand strategy more than they shape mine. What was once highly hierarchical is now far more peer-to-peer in dynamics, thanks to globalization’s stunning advance. In a frontier-integrating age, you’re either the integrator or the integrated.

  That’s not to suggest that any American citizen should simply wait for Washington to get this right. Frankly, everyone and anyone who wants to make a difference should just go ahead and get his or her own foreign policy and stop waiting on change from above. It’s a perfectly American thing to do.

  THE UNDENIABLE TRAJECTORY: THE “GLOBAL WAR ON TERROR”

  America’s current definition of grand strategy seems to be working the shoulders of globalization’s bell curve: obsessing over terrorists on one end and democracy on the other. In combination, these two foci amount to American myopia on the Middle East, where democracy is unlikely to be forthcoming anytime soon and where terrorism, the tactic of the weak, is likely to continue for quite some time, given the durability of authoritarian rule there and the global economy’s continued dependence on the region’s energy flows. As such, it is a grand strategy destined to be a long and frustrating slog, generating magnificent friction and pushing America into morally questionable situations.

  And this seems to be the main problem in current American grand strategy—its unreasonable expectations for immediate success (democracy) and its tendency to treat terrorism as a supply-side problem. If we admit that we cannot kill them faster than our enemies can recruit them, and that there is growing demand, as Ian Bremmer argues, for terrorism in too many parts of the Islamic world, where these angry young men “have little hope of lawfully altering their fates,” then we’re forced to move beyond the knee-jerk kinetics to address seriously the underlying demand for personal liberty. America can, by its own lack of historical awareness, pretend the political freedom as exemplified in a mature democracy is the first best answer, but in today’s world we’re largely alone in that assumption. If we weren’t, China’s development model wouldn’t be so attractive and Vladimir Putin wouldn’t be so popular. Plus, if we weren’t so forgetful of our own national history, we would better recognize how many decades it took us to achieve the sort of inclusive, multiparty democracy we now enjoy, which, even by the kindest reading of American politics, did not appear until half a century after our own revolution, and even then purposefully excluded women and sanctioned slavery.

  Yes, we can most definitely say we know better now, but it gets awfully hard to expect others to make that journey overnight, especially when we ask them to adjust their culture and even their observance of religious faith to accommodate diversity forced upon them by globalization’s creeping embrace. If, in our patience, we are able to place more faith in economic liberty through marketization and admit (as it has been proven throughout our own history) that political liberalization never occurs in a sustainable fashion absent rising incomes, and that increasing income in this world is virtually impossible without connecting to the global economy, then we will finally begin to recognize our liberal international trade order for what it truly represents—a global revolution in the most fundamental sense.

  But more important, we will begin to realize that our myopic fixation on terrorism and democracy risks short-circuiting those carefully laid plans, as well as possibly negating the decades of effort—in both blood and treasure—that the United States has expended to bring our American System-cum-globalization to these world-spanning heights. And we risk it all just because we can’t have it all right now.

  Today, America sees a very different world from that seen by the rest of the planet: We want it instantly tidied up with no terrorists and no autocrats and no environmental damage—a grand strategy predicated on some notion of perfection. Meanwhile, that young, ambitious non-Western chunk of humanity focuses on an entirely different agenda—a grand strategy that entails getting ahead at all costs. As a result, when our leaders speak to the world, they are not heard. That’s a big problem, not so much because America is the only nation capable of leading as because the world is a more uncertain and less secure place when we are perceived as having lost our way. Our “go-go” economic philosophy has long been countered, as well it should have been, by Europe’s “go-slow” focus on successfully integrating its poorer neighbors. The world is a better place for having that debate as long as both sides admit there’s something to learn from the other. But today, too much of the world seems to view our “go-go” as having gotten up and gone off the deep end in the service of extreme, self-serving goals, and unsustainable consumption.

  That’s not to condemn emerging markets for wanting all the same things we enjoy. Heck, we talked them into going down this path in the first place! Rather, it’s just pointing out how much all that non-Western economic activity is reshaping our world, because that’s where we find the truly inescapable challenges—and opportunities—of our age. But instead of looking those challenges—especially the cumulative environmental ones—straight in the face, we obsess over (1) global terror, the vast majority of which never comes close to touching American lives; (2) democracy in the shallowest form of free elec
tions and little else; and (3) worst of all, nuclear weapons—a bogeyman without parallel in our minds.

  In the summer of 2007, on a remote Australian island near the Great Barrier Reef, I had the privilege of spending time “on the beach”—so to speak—with Nobel economics laureate Thomas Schelling, whose thinking on nuclear deterrence shaped the international security environment we enjoy today. Expecting to find the wizened strategist downcast on the subject of nuclear proliferation (has it not always been increasing?), I instead found an outlook as optimistic as my own. Speaking to a World Economic Forum retreat, Schelling admonished everyone to remember just how effectively nuclear deterrence has worked over the past six decades. No state, he noted, that has developed nuclear weapons has ever been attacked by another state. Moreover, no state armed with nuclear weapons has ever attacked another state similarly armed.

  Think about that for a minute.

  America, the first state with nuclear weapons, is the only one ever to use them: twice on Japan to end World War II. Justified? As the child of a World War II Navy veteran who would have participated in America’s inevitable invasion of the Japanese mainland, I’ll pass on that one.

  But what has the world witnessed since that initial demonstration effect? America, as Schelling noted, could have employed nuclear weapons in its subsequent wars but did not. Nor did the Soviets. Because of the equalizing threat of mutually assured destruction, these devices cannot win wars but only prevent them. The same logic has held all these decades for powers as diverse as the United Kingdom, France, China, India, Pakistan, and Israel, with North Korea stepping up to the plate and Iran on deck. Somehow, despite all the irrationalities ascribed to each new member, the logic of nuclear deterrence holds fast.