As a result of globalization, there has been a much better distribution of the world’s economic output, led by what were once regarded as overpopulated third-world countries such as India and China. Globalization is now coming to an end, to be a replaced by a multipolar world, a critical strain upon which is the tension between Leveller and Leviathan approaches to social governance. However, the policy consensus remains wedded to globalization, and there are few signs that thinkers in the foreign-policy space are ready to break with established models of looking at the world.35 We are now on the verge of another fissure and a paradigm shift in international affairs, and there is therefore a need to find ways of illustrating what the new world order might look like.
NINE
A NEW WORLD ORDER
Levellers or Leviathans?
GEOPOLITICS, INCREASINGLY DRIVEN BY THE LEVELLING OUT OF ECONOMIC and geopolitical power and wealth among nations, is central to our story. Two trends will drive the evolution of geopolitics over the next twenty years, as the levelling takes hold. The first is that three Orwellian regions will come to dominate the multipolar landscape: Oceania (the United States and possibly the United Kingdom), Eurasia (the European Union plus Turkey, eastern Europe, and Israel), and Eastasia (Chinacentric Asia). The second is that these poles will increasingly differ ideologically, not to the extent of being communist or capitalist but on where they stand as Leveller or Leviathan nations politically.
These trends will trigger a number of new departures in international affairs, some of which I will sketch here and then elaborate in the rest of the chapter. Middle-sized nations will struggle to find their place in the world; Brexit and its aftermath will be a widely watched experiment; small, advanced nations will club together; and the international institutions of the twentieth century will wither and will be replaced by new institutions.
The trade dispute in 2018 between the United States and China is an apt illustration of the last—with the WTO standing idly by in the background, whereas in the 1990s it was much more prominent. The institutions designed for the twentieth century will increasingly run into the limits of their own relevance. Many of the problems they were designed to solve, from acute underdevelopment across the emerging world to the funding of countries, have largely been resolved, and in many cases, new, more complex problems have grown up to replace them.
The emergence of a large-pole-driven world will also be to the detriment of medium-sized nations. Thus, another issue is what medium-sized nations do about their status as satellite, orphan, or vassal states (to use a favorite term of Brexiteers). Britain, Russia, and maybe India are examples here. Britain, denuded by Brexit, might fall back on its roots as the linchpin of the rule of law to become a global center for law, commerce, and corporate governance. It could become the location of choice for multinationals, legal-dispute resolution, and global standardization in payments and digital currencies, for example (Switzerland has stolen a march here). Similarly, Russia could be more influential if it had a more solid economy and was trusted with the investment capital of other nations.
Unlike Britain and Russia, India’s economic potential is growing. It now faces the dilemma of matching its economic potential with hard power as it spends more aggressively on defense. A very interesting development here is that, together with the United States, Australia, and Japan, India is a member of the Quadrilateral Security Dialogue alliance (the Quad) of Western-oriented Asian nations. It is based on “shared values and principles” and has the aim of securing a free and open Indo-Pacific region. It was initiated a decade ago but was parked owing to objections by China. China’s rise has now caused a revival of the Quad. Commercial and military ties among the Quad countries are growing. India, an increasingly aggressive military spender, is one of the most significant markets for American defense equipment, and it is employing Japanese financing and technology in the construction of high-speed-train networks. Set against the Quad (and NATO) is the Shanghai Cooperation Organization (SCO), founded in 2001, whose principal members are Russia and China (Pakistan is also an active member, and India is also a member but is understandably less active). The Quad and the SCO are significant to the levelling in that they are the two rival teams on the geopolitical fault line, located between the two large poles of the Americas and Asia. Each team (or perhaps gang) will increasingly carry out joint military exercises and will purchase their military equipment largely from their allies.
From the Quad to the Hanseatic League 2.0 to the SCO
At the same time, this changing world has the potential to liberate other countries. One such group consists of small, advanced countries (i.e., Austria, Belgium, Singapore, Sweden, Switzerland, Ireland, Hong Kong, Norway, Denmark, Finland, New Zealand, Israel, and the Netherlands) with a number of distinctive features. Small, advanced economies also have very open economies and are effectively the canaries in the coal mine of the world economy in the sense that they pick up new developments, such as fluctuations in world trade, before these issues are experienced in larger economies. They also all tend to suffer the same problems. For example, in the wake of the quantitative easing programs of the Bank of Japan and the European Central Bank, the currencies of countries like Norway and New Zealand became more volatile. Geopolitically, this group of countries has a growing incentive to come together as a group (there is already a budding Hanseatic League 2.0 of small northern European countries, made up of the Nordic and Baltic states together with Ireland and the Netherlands, whose initial activities have focused on a more stringent approach to EU fiscal policy) and may soon be regarded as the moral authority in world affairs.1
So the SCO, the Quad, and the Hanseatic League 2.0 may well grow to be some of the important reference points in twenty-first-century geopolitics, and in my view they will help form the skeleton of the new world order.
In this respect, the great experiment of this emerging order is what happens to Britain in the post-Brexit era. British politicians have coined the phrase “Global Britain” to represent their vision of Britain in the future, but very few of them have added color to what remains a blank canvas. The evolution of Global Britain is worth watching beyond Britain’s shores, especially in the United States, for a number of reasons. First, Brexit is the first major event of the levelling. Second, together with the United States, Global Britain is central to the narrative of the levelling. Not only are those two nations the focus of many of the trends described in this book, but, in the eyes of many, they are also countries coming to terms with decline from greatness and confronted with the challenge of renewing themselves. The current predicament of the United Kingdom should act as a warning for the United States, because the United Kingdom is treading a path that the United States and other nations (such as Italy) may follow. We need to carefully watch whether and how the United Kingdom reinvents itself. Global Britain will be a marker of how well countries can reinvent themselves in a changed geopolitical setting and of how well they can reinvigorate their economies. Not only is Britain a close ally of the United States, but it also shares many of the same socioeconomic issues and political fault lines. If, say, the Tory Party splits, I feel that that makes it easier to envisage the same happening to the Republican Party.
Hotspur
The previous chapter relied on George Orwell’s 1984 to explain the three large poles that may dominate a multipolar world. Another Orwell text is also useful in explaining recent events in the United Kingdom. In an essay entitled “Boy’s Weeklies,” Orwell encapsulates the stereotypes of foreigners prevalent in comic books like Magnet and Hotspur, surmising the French and Italians as “excitable,” Scandinavians as “kind-hearted,” and most other nationalities as “treacherous.”2 The picture he paints in 1940 is of an Anglocentric world where upstanding English men need to be on their guard once they pass beyond the shores of the United Kingdom and into the distasteful, inferior world outside Britain. Reading it, I was reminded of an apocryphal British newspaper headline that read, “
Fog in the Channel, Continent Cut Off.”
This view of the world beyond the channel is outdated, but it does chime with the schoolboy tone of much of the debate on Brexit and underlines a sense of British exceptionalism that many other Europeans, Asians, and even Americans might feel has not dissipated. Indeed, much of the discussion of Brexit has set the tone for political events internationally; it has seemed stereotyped, with scaremongering and bullying as the main channels of communication. Both sides in the Brexit debate made the mistake of treating the public to a low form of badgering. Politics has been diminished, but there is yet little apparent response to the desire of voters for new, coherent, and arguably constructive political solutions. The sense of Orwell’s essay is still pertinent today and suggests that the British never considered themselves to be European, which is perhaps why they felt it relatively easy to consider leaving the European Union.
In the scheme of things, Brexit was a significant breakpoint in history for a number of reasons. It represents a rupture, an unexpected backlash by a people, and the first major event that crystallizes the feeling that something is changing. It is also the first break that a country has made with the established order and the first clear signal of dissonance between the people and the Grandees.
Brexit serves as an important indicator of the way relationships among power, wealth, and democracy are being subjected to a stress test. Brexit, by threatening to rupture the relationships among England, Scotland, Northern Ireland, and Ireland, takes us back in history, all the way back toward the Levellers to 1706 and 1707 and the Acts of Union between Scotland and England. At the same time, the debate that was led by the Levellers was very different from that which has taken place over Brexit. The discourse of the Levellers was, as far as we know, hopeful, constructive, and detailed in its prescriptions, whereas Brexit has been nasty, negative, and chaotic.
The pungently negative Brexit debate also has a revealing and very worrying element. It has opened up a crater-sized policy vacuum within the great apparatus of the British state, whose leaders were neither able nor, apparently, willing to fashion a credible Brexit negotiating plan and are struggling ever harder to produce a meaningful and credible vision of Britain’s place in the world after Brexit. To paraphrase Churchill’s quotation on Bolshevism: “Brexit is not a policy; it is a disease. It is not a creed; it is a pestilence.”3
Decline and Fall
Brexit will delight the “decline and fall” crowd. Brexit gives the professional declinist a live experiment of a nation going it alone, going against the multipolar current, and, arguably, going against the gravity of productivity, demographics, and indebtedness. In chapter 7, I noted that long-term moves in the price of currencies reflect the rise and fall of countries. And the currency market has already delivered a verdict on Brexit.
When the dollar made its debut as the currency of the United States in 1794, it cost $4.75 to buy £1. This ratio stayed generally stable for the next one hundred years (though it dipped down toward $3 for £1 during the Napoleonic Wars and then rose as high as $10 for £1 during the American Civil War). Yet the relationship changed materially after the Second World War; by the 1950s, it only took about $2.50 to buy £1. Post the Brexit referendum, the dollar-to-pound exchange rate dropped to a low of $1.18 for £1.4
Making a success of Brexit would be much easier if globalization as we have known it for the last thirty years were to persist and if the global economy were to continue to strengthen in the near future. However, because globalization is over and a multipolar system, of which Britain is not a major player, is now evolving, Britain will find that, after Brexit, it will enter a more complex world-trade environment and will be under pressure to surrender its privileged place in many world institutions (in the UN Security Council, for instance). Nor is it likely that the global economic recovery will continue for much longer; the world will probably be in recession by the time Britain finally sails away from Europe.
Compared to the three large poles, Britain is now dropping into the second division, a geopolitical reality that has been publicly underlined by the likes of Sir John Sawers, who, as the former head of the Britain’s Secret Intelligence Services, knows a thing or two about what is happening behind the scenes in world affairs.5 He has warned that Britain’s role in international diplomacy will be severely diminished in the post-Brexit era. There is a very large gap between expectations and reality here. Many British politicians still talk as if we are back in the 1940s (some even hark back to empire) rather than heading to the 2020s. This gap will bear heavily on UK politics. It will become the basis for a new divide in British politics between those people whose vision of Britain is sentimental and those people—arguably younger members of Parliament—who have a sense for the role Britain can play in a modern, multipolar world.
Their task ahead will be tough and reminds me of a story from an earlier period in British politics. In 1964 Jim Callaghan took over as UK chancellor of the exchequer from Reginald Maudling, who had left the nation’s finances in a precarious state. Upon arriving at his desk, Callaghan found a note from Maudling that read, “Good luck old cock. Sorry to leave it in such a mess.” With Brexit now underway, perhaps Downing Street should now write such a note to the next generation of Britons and especially to Ireland and Scotland given the economic and political uncertainty that Brexit may visit upon them.
The crafting of what Global Britain looks like will be the next great political challenge. It will take time for Britain to carve out a new, distinct role. The chief way for it to make a success of Brexit is to engage in arbitrage among the large poles in a multipolar world. What this means in practice is that Britain should establish itself as a trading center and standard leader for goods and services that the three regions share (corporate governance, for example, is one such area). Equally, it can establish itself as a supplier, independent from the major poles, of goods and services (e.g., internet security, artificial intelligence applications, media technology, and content-generation ability) that are too costly for less-well-resourced nations to develop on their own.
In this way, Britain can establish itself as a jurisdiction where individuals and corporations can avail themselves of independent, high-quality services across the industries of accounting, law, banking, and, to an extent, education. Individuals and corporations in countries across the world would go to the United Kingdom to settle accounts, disputes, and their bills in a way that would adhere to a global standard. This is a very optimistic account of one aspect of the United Kingdom’s place in the world economy. The journey to such a place will be strewn with obstacles. Consider the disruptive effects of Brexit on Scotland, Ireland, and Northern Ireland; the incentives of the European Union and its member states to pursue a difficult and testing Brexit process into the transition period; the risk that Britain will lose its place at the top table of international institutions (e.g., the UN Security Council); the leakage of financial capital away from London to other European capitals; and the difficulty of striking bilateral trade deals with the likes of India and China.
On the positive side, the United Kingdom has its role as a significant security power to use as a bargaining chip, and it is possible that any future political economy crisis in Europe or the eurozone will end up making Brexit look like a move of strategic genius. On the same side, it may now be pushed to take an approach straight out of the small-country manual. To some extent, the United Kingdom may end up looking to position itself as a more pugnacious version of Switzerland, or to take a position in Europe analogous to Japan’s in Asia: geographically in Europe but standing off politically and culturally.
To focus the post-Brexit response on what the UK government terms “Global Britain” may, however, miss the lessons of Brexit, which speak of hostility to immigration, a loss of identity, and a sense that the UK regions are underdeveloped both economically and in terms of social and intangible infrastructure when compared to London.6 Rather, much of the hard policy work wi
ll need to be done domestically in the post-Brexit period, and attention will need to be focused on the necessity for the British state to craft new economic and industrial structures.
The long-term lesson here is that the UK economy needs to be better balanced and more robust in a world where globalization is slowing. Intangible infrastructure is the key. In hard terms, this will require considerable innovation: a sophisticated regional approach to corporate taxation, tax credits, and company financing. In addition, there will need to be a wholesale renewal of physical infrastructure in the regions beyond London on a scale that would be on a par with the work of Isambard Brunel, the great engineer whose creations—railways, steamships (SS Great Britain), viaducts, bridges, and tunnels—changed the landscape of nineteenth-century Britain.
Similarly, there would probably have to be a rethinking of the UK school system so that funding and expertise are made available to foster the growth of more and better schools in the regions of the United Kingdom outside London. A UK-regions-based tax system—a tax system in which rates would be different in different regions—might be one way to achieve this, with large companies in particular being enticed by lower corporate taxes (or lower social changes and more attractive investment write-offs) in less-well-developed regions of the United Kingdom. This will partially help make the capital a relatively less attractive place to live. The post-Brexit period will be more fruitful if the government focuses on public goods in the United Kingdom and on sectors of the economy where the United Kingdom is distinctive and fashions a less aggressive foreign policy.
The Levelling Page 27