Another related possibility that may help smooth the passage through a crisis is that the Chinese authorities, having watched the political fallout from the global financial crisis and the eurozone crisis, would take great care that the costs of an economic downturn would be borne by the wealthy and that some form of emergency social welfare framework would be put in place for the duration of the downturn.
Eurasia
Though Europe may provide the lessons for what China should not do, it nonetheless has its own distinct way of doing things. Its brand of capitalism is less aggressive than the Anglo-Saxon model, and it is far more democratic a region than Asia. However, the European Union is a project that has run into the limits of its two-dimensional geometry. Since 1999, it has grown deeper (through the introduction of the euro, for example) and larger. It is now twenty-seven states, one fewer since Brexit but still far larger than it was in 2006. Its future now depends on being able to either intelligently track back on these two dimensions (institutional depth and enlargement) or find a new dimension on which to perch itself. Its next great challenge will be on immigration. The backlash against immigration across the EU countries, together with security risks, may entail a more fine-tuned interpretation of its freedom-of-movement principle, at least as far as immigration from outside the European Union is concerned. In the future, the relationship of the European Union with countries like Turkey and Nigeria will be tested by the question of immigration. These two increasingly populous countries (the World Bank expects that by 2045 Nigeria’s population will be greater than that of the United States) are beset with economic, political, and institutional frailties, and both are already established as very large sources of immigration into the European Union.31 Should this immigration pick up materially, it will in turn set the scene for a popular backlash against those countries and a deterioration in their relations with the European Union.
The question of immigration, like the bumblebee-construction of the euro (recall Draghi’s comment), betrays a sense that the principles, laws, and policies that govern the European Union are fine in theory but fall apart as soon as something goes wrong. There is a design problem in the European Union’s structure, and also one of vision: it often appears that the aims of the European Union are opaque, even to its leaders.
Indeed, my own experience is that Asians, Americans, and those living in the Middle East regard Europe with disturbed curiosity. From an investment point of view, Americans, or American-based investors at least, have regarded Europe not as an investable region in its own right but as a special situation, an asset one might at best trade but not own. The fact that Asians cannot understand why Europe has a leadership (the European Commission, which is the executive of the European Union) but its Parliament effectively plays second fiddle to some national parliaments should underline to Europeans the inelegant labyrinth of their democracy. It is worth saying that if Asia were to put together an “Asian Union,” its early years might well be as shaky as those of the eurozone (and the early years of the United States system, also). The eurozone crisis and its subsequent tremors have done much to harm the credibility of the European Union and lessen confidence in the way it is run, and to a large extent this has profoundly colored the opinion of non-Europeans regarding the European Union. To a large extent, the euro crisis and its episodes resembled the circles of hell in Dante’s Inferno.
As a result, it is now a ritual among commentators and economists to profess the view that “Europe will fail” and demand that it “reform.”32 This approach misses several points. The first is that economic prowess is, thankfully, not the overriding goal of Europe; it is conjoined with aims of stability and social development. The second is that Europe is held together by a very Catholic (in the sense of a deeply ingrained blind faith) form of political creed that in moments of crisis has acted as a sort of political energy to bind the European Union together. The third is that there is still much recognition by Europeans that in its current form the European Union is preferable to a very long history of conflict.
The European Union has four officially stated aims: to promote EU citizenship, to support economic and social progress, to underpin justice and security, and to define and defend Europe’s place in the world. The last of these aims is arguably the weakest, and the others could be summed up as promoting an enlightened form of social democracy (whose benefits I feel are wholly underappreciated and underestimated). The European Union is, however, silent on how it can better govern the relationships between its states, how it manages crises and responds to trend changes in areas such as migration and foreign policy, and how it positions itself relative to China and the United States. In reality, one could boil Europe’s aims down to two goals: The first is the more expedient option of staying together, in the sense of maintaining harmony between its member states and within its electorates. The other is the more distinct aim of fostering social democracy, which is faltering in the light of the rise of extreme political parties across Europe and of recalcitrant eastern European governments amid the pressures of immigration, terrorism, and fiscal constraints.
The European Union may find that, in an emerging multipolar world, having a clear identity ought to become more pressing. If the United States were to leave Europe to fend for itself and if China were to become a more challenging trade partner, then that would create the pressures, or impetus, for the European Union to better define itself. Thanks to the more isolationist stance of the Trump White House, there are already plenty of signs that the European Union is becoming more singular. There are now regular calls for the European Union to become self-sufficient in terms of developing its own battery technology, artificial intelligence, and military capabilities (i.e., an EU Army). Some European politicians also demand that the European Union create its own payments system, to break free from the US-based Society for Worldwide Interbank Financial Telecommunication (SWIFT) system.33
The road to a more defined and independently powerful European Union will need to overcome several obstacles. One major issue is optimizing foreign policy in a realistic institutional form. Europe’s foreign minister has more often than not been a relatively powerless, second-rate politician, a role embodied in its worst form by Catherine Ashton (a minor, low-key British politician whose tenure as European foreign affairs representative was widely criticized). The power dynamics of the European Union mean that in foreign-policy commissioners, for instance, are chosen less for their ability and stature and more for their inability to counter the interests of the larger states. What, for example, would the French foreign ministry do in the face of an EU-level Madeleine Albright or Henry Kissinger? Or what might the German finance ministry think of a powerful EU treasury secretary?
A coherent and meaningful EU foreign ministry, together with colleagues in areas such as trade (which is one area where the European Union has focus and power), would intermediate the European Union’s relations with large poles such as China and the United States and might also serve as a fulcrum for EU policy on common defense and cybersecurity. The installation of a more powerful foreign minister would be an important step toward deepening the ability of the European Union to act on the international stage. This more meaningful role might also take on some of the lessons on crisis management learned by the economics and finance side of the European Commission. It would be a shame if other parts of the European Commission did not learn from the economic management process of the eurozone.
The deepening of some parts of the European Commission should not at the same time be an excuse for making it bigger. Politically, election results and opinion polls consistently point to EU citizens’ desire not to take on more members. In this respect, the impetus for further enlargement comes, it seems, solely from Brussels. The European Union is now at a critical size where the introduction of new members (e.g., the Balkan states) may encourage others to leave, or at least to begin to make their own policy breakaway groups. If it is not careful, the European Union may gai
n Serbia but lose Sweden in the process, which in my view is not a good bargain. Europe will also face the long-term consequences of waves of immigration, principally from the African continent as its population grows. In addition, the leverage that Turkey has over Germany (owing to the very large Turkish immigrant population in Germany) will play a role in the European Union’s immigration policy and will probably exacerbate tensions between EU nations such as Austria and Germany.
I suggest that, in the aftermath of Brexit, the European Union should institute a formal process whereby the aims and tenets of the European Union are reexamined in the light of Brexit and growing political volatility across the European Union. This may provoke some change to EU principles and policies and may even drive existing countries to adopt more stringent criteria for countries to get into and stay in both the European Union and the eurozone. It may come to pass that member states of both the European Union and the eurozone can be expelled from those unions for grave breaches of political and economic values. Such mechanisms are a necessary part of the governance of the eurozone and would make very clear to new EU members that accession comes with responsibilities.
Now the Trilemma
One of the problems the European Union has is that it is trying to be many things at the same time: a democracy, a functioning group of nation-states, and an economically powerful coalition (via the euro). In a multipolar world, other large regions may face the same difficulty. Indeed, the breakdown of globalization and the emergence of a multipolar world may be the logical consequence of what Dani Rodrik calls “the trilemma of globalization.”34 Rodrik is a professor of international economy at Harvard and one of the academic experts on globalization. His trilemma underscores the near impossibility of individual states’ managing to achieve deep economic integration with the world and regional economies while preserving national sovereignty and also managing to uphold a democratic form of politics.
This balancing act is central to the theme of the levelling, where we find regions and some nations becoming less integrated with each other economically as some of their leaders emphasize sovereignty over democracy and liberty. Some of the remedies put forward in this book so far—such as reducing imbalances (stopping QE and holding a debt conference) and recognizing country strength—are intended to ease if not resolve this trilemma.
Specifically, Rodrik’s trilemma has been proven correct in the sense that Brexit, the election of Donald Trump, and political agitation in parts of Europe represent, through democratic political processes, the preference for national sovereignty over economic integration. Multipolarity is a response in that at the regional level, poles begin to craft their own distinctive forms of sovereignty, economic integration, and democracy, as opposed to continuing to shoehorn themselves into a one-size-fits-all global version.
The path toward multipolarity will not be smooth. One tension is that since the Industrial Revolution the world has had an anchor point in terms of the locus and spread of globalization (Britain in the nineteenth century and the United States in the twentieth century). The fact that there are now at least three points of reference introduces a new and possibly uncertain dynamic to world affairs.
The potential is high for friction, misunderstanding, and conflict among the increasingly different ways of doing things across the major poles. Essentially, multipolarity means that instead of speaking a common language, the major poles speak different policy languages. Trade-based tension is an obvious possibility here. Another form of tension is the crisis of identity created for countries that are not wholly within one of the poles—again, Japan, Australia, and the United Kingdom are the prime examples—and the crisis of ambition for countries, such as Russia, that want to be poles but lack the wherewithal to do so convincingly.
At a more grassroots level, the implications of the end of globalization as we know it and the path to multipolarity will become a greater part of the political debate. At the margin, the flow of people, ideas, and capital may be less global and more regional and in time could be reinforced by a growing sense of regionalization across the main poles. In a negative way, a more multipolar world may be the watershed that signals the peak of democracy and potentially the beginning of contests within regions for competing views of democracy, institutional strength, statecraft, and control.
Levelling versus Leviathan
The beginning of the transition to a multipolar world is germane to the levelling and will play out in at least two respects. First, the levelling out of many political and economic variables (from voter participation to indebtedness to low real-wage growth) marks a watershed in the end of globalization and the onset of a new world order. Second, power among nations and regions is being levelled out and the multipolar world into which we are moving is characterized by regions doing things in their own distinctive ways.
The most distinctive approach to nations’ doing things their own way will be their approach to what the Levellers might call the “rights of freeborn men,” or the idea of the open society mentioned in chapter 3. The code of the Levellers presents a very clear political formula that Europeans and Americans will recognize for its values, though decreasingly in its practice. The challenge to this code will come from the rising acceptance of less democratic ways of ordering society in both developed and emerging countries. A related clash will be the desire of a growing proportion of electorates to have a more open society as economies also open up.
It is possible that as the world evolves along the lines of Leveller-type and Leviathan-type societies, in some countries, such as Russia, a Leviathan-like approach of order in exchange for reduced democracy and rights will be the accepted way of life. In other countries, most interestingly China as its economy loses momentum and then evolves, there may be a growing tension between groups holding the Leviathan view, supported inevitably by Grandees, and opposing Leveller-like groups who favor equality of opportunity and a multiparty system. The role and views of women, especially in China, and of minority groups like the gay community will be pivotal here.
The emergence of a new world order, based on large regions and colored by Leveller and Leviathan modes of governance, echoes several periods in history. Again, the time of the Levellers (and Hobbes’s Leviathan) is apt and worth revisiting, though beyond the shores of Britain this time. Though the Putney Debates and the role the Levellers played in them are very important events in the history of democracy, they were tame compared to the wars that raged in Europe at the time. Notably, as the Levellers’ second agreement was struck, the Thirty Years’ War was drawing to a close. The Thirty Years’ War was fought across Germany among Denmark, Spain, France, and Holland, to name but a few of the antagonists. These wars devastated parts of Europe; for instance, in Germany, violence and disease wiped out a third of the urban population and nearly two-thirds of the rural population. The Thirty Years’ War was perhaps the most damaging conflict Europe has endured outside the world wars. In 1648, however, the Thirty Years’ War and the Eighty Years’ War were brought to an end by a series of treaties collectively referred to as the Peace of Westphalia.
The Peace of Westphalia, masterminded by the French cardinal Jules Mazarin, constituted a vast logistical exercise, with nearly two hundred states and statelets attending. The treaties that make up the Peace still mark the landscape of international relations and are seen as setting down the principles for the recognition of the nation-state as we understand it. The Peace recognized the right of the leader (prince) of each state and statelet to anoint an official religion and the right of those whose (Christian) religion did not conform to the official state religion to enjoy the right to practice their religion. Importantly, another provision was that the sovereignty of each state(let) was to be recognized. The implication was that future conflicts would be fought much less on the basis of religion and that individual states and statelets would act in a more strategic way, forming alliances, seeking overseas trade, and innovating in the areas of transport and military
technology.
There’s not a lot of evidence to suggest that the Peace of Westphalia resonated with the Levellers or the Putney Debates regarding the 1649 Agreement of the People, though the world that the Peace created would soon shape the destiny of England. However, I feel that there is a rhyme with today’s world, where political change (led by “Levellers”) is taking place at a time when the world of international relations (as at the gathering in Westphalia) is also changing.
Westphalia cut free forces and structures that would dominate the balance of power in world affairs for nearly three hundred years. It is also worth noting that at around the time of Westphalia, the dominant world power, the Ming dynasty in China, was fading. Weak trade, climate change, disease, and inequality were some of the factors to upend it. The next major structural change in international affairs came in the aftermath of the Second World War with the emergence of two superpowers and the creation of such international bodies as the United Nations (1945).
Following the fall of communism, globalization began and changed international affairs in several ways. First, globalization aided the spread of democracy; second, it has bound countries together through trade and through economic and financial links; and third, it has created a common culture of consumerism across nations and regions. Globalization has acted like glue across countries and institutions in its impact on international relations, and to a large extent this glue has been “made in America.”
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