Opinion

Compass

The big powers need to learn to share

Nader Mousavizadeh
Oct 31, 2011 14:58 UTC

For both leaders and citizens of the G20 countries, this week’s summit in Cannes is about as welcome as a visit to an undertaker. Euro-zoned out, as most of us are by now, seeing presidents and prime ministers assemble at a moment of global crisis to issue bland communiqués and even blander group photos will tempt many to reach for their “Occupy Wall Street” signs and pitch their tents in the nearest town square. This would, however, be a mistake. For all its unwieldiness and amorphous sense of purpose, the G20 represents the beginnings of an understanding – as necessary as it is reluctant – that a global economy with new growth sources must have a new structure of governance.

Founded in the late 1990s in the aftermath of the Asia crisis, the G20 found its purpose at the 2008 Washington Summit when its members had gone through the experience of the Lehman collapse, and feared for their economic lives. Their minds concentrated by the threat of a cascading systemic crisis throughout the global banking system, G20 political and economic leaders coordinated stimulus programs and ensured that central banks injected vast amounts of liquidity into the global economy. Rising out of the ashes of the much-derided G7 meetings, this was a grouping that accounted for more than 80% of global output and two-thirds of the world’s population – and was yet able to take effective economic action.

With the likes of Indonesia, Turkey, South Africa and Saudi Arabia finally joining with China, Brazil and India at the grown-up’s table set by the Americans and the Europeans, this forum for economic cooperation has the potential – uniquely among global gatherings – to harness the power and interests of rising and rich countries alike. What keeps its strength potential rather than actual, however, is a stark fact: in many Western capitals the G20 is still seen more as a symptom of disorder in the global system than a solution entirely fitting for a new world of fragmenting capital, power, and ideas.

Before the G20 can become the force for effective coordinated action to address challenges both economic and political, the old powers need to get over their outdated sense of privilege. Rather than appearing as reluctant joiners of a coalition of the un-willing, they must understand that the price of a new global growth era is one of shared power, and shared rule-setting, among developed and developing countries. Preaching must be replaced with genuine partnering; lecturing with hard-headed, realistic dialogue that recognizes the position earned by those countries whose successful management of their economies earned them a position of virtual lender and investor of last resort to embattled Western countries.

And yet, we’re far from this realization at present. You’d have thought that the U.S. debt-ceiling debacle and the Eurozone’s endless cycle of half-measures declared and quarter-measures taken would have impressed upon Western leaders the urgency of finding new solutions to their economic difficulties, and the modesty to recognize the need for help in implementing them. You’d be wrong. Instead, they responded to a recent proposal from a number of emerging market countries to increase the firepower of IMF with a mixture of fear and arrogance. Seeing the power of their global foreign exchange reserves and sovereign wealth funds to serve as a definitive boost to Europe’s failed attempts to regain the confidence of markets, the rising powers had suggested allowing surplus countries to make ad hoc bilateral loans to the IMF, or contribute to a special purpose vehicle designed to support sovereign bond purchases.

Who fills the global power vacuum?

Nader Mousavizadeh
Sep 26, 2011 20:43 UTC

By Nader Mousavizadeh
The opinions expressed are his own.

The question of who will fill the global power vacuum has never before been felt as acutely as it is today – or in as many different arenas of politics and economics simultaneously. Last week, at the annual conference convened by the global advisory firm Oxford Analytica (where I serve as CEO), Robert Rubin joined Martin Wolf in a conversation about the perilous state of the global economy. Listening to the two wise men of global finance set out the steps necessary for Europe and the U.S. to escape the sovereign debt trap, there was a palpable sense of nostalgia for a time when concerted, timely, effective global leadership – in any sphere, by any one country or group of countries – was imaginable. There was also little doubt that the U.S. would not be returning to its pre-eminent leadership position any time soon – or that many countries would even welcome it.

Today, after a week’s geopolitical drama driven by the Palestinian bid for statehood at the UN, it is evident that the global power vacuum is not limited to economics and the Eurozone alone.  Rather, the world is facing a vacuum of leadership in each of the economic, diplomatic and strategic arenas – and what’s filling this vacuum is a mixture of the good, the bad, and the highly unpredictable.  Years from now, this may yet be seen as a period of global creative destruction – a transition away from a false and iniquitous stability towards a more sustainable, diversely founded equilibrium of global interests.  In the meantime, the process of filling the vacuum is likely to be volatile, dangerous, and deeply disorienting.

First, the vacuum in global economic leadership. The absence of concerted action is most acutely displayed in the Eurozone’s response to an economic crisis that as of the past few weeks is beginning to threaten a global contagion, with serious implications for emerging markets too. With each passing day, and every claim that Greece is not insolvent and that it – and the Eurozone – would not be better off long-term with a Greek default and exit, policymakers are running down their credibility on the far more consequential matter of whether they’ve properly understood the risks to the Italian and Spanish financial systems.  This is how contagion happens.

A smaller America could be a stronger America

Nader Mousavizadeh
Aug 25, 2011 12:46 UTC

By Nader Mousavizadeh
The opinions expressed are his own.

Last week, China quietly launched the aircraft carrier Varyag from the port of Dalian. The ship is expected to be deployed to Hainan province in close proximity to the strategic regions of Taiwan and the South China Sea. Amidst an atmosphere of existential gloom triggered by the debt-ceiling debacle and the deeper economic crisis, the reaction in the United States was dominated by the fear of a rising, militarist China challenging America’s global superiority. What few in the United States bothered to mention, however, is that the new Chinese carrier was built from an unfinished Ukrainian hull purchased in 1998 – and is the first and only aircraft carrier China has ever had. The United States, meanwhile, has eleven.

The real problem with the U.S. response was not, however, that it exaggerated the Chinese threat. It is that it greatly overestimates the benefits, to America, of the country’s continuing quest for global supremacy – politically, economically and militarily. To lament America’s decline from a dominant position of unaffordable and unsustainable strategic burdens is, in fact, to mistake an opportunity for a threat. For all of the past decade’s concerns around the world about the reach and military assertiveness of U.S. unilateralism, it seems increasingly clear that its principal casualty has been the U.S. itself. America is choking on the edifice of empire and the sooner it’s dismantled, the easier will be America’s return to a leading – not the leading – position as a dynamic, innovative economy.

Consider briefly what the past decade’s economic policies, military interventions and strategic priorities have brought the country: a Great Recession, debts that are fundamentally irrecoverable, a credit crisis, a housing collapse, and two wars with immense costs in lives and treasure. A country that employs more than one million people within its intelligence community, and still is surprised by the Arab Spring, is not being efficient with its resources. Waste and corruption are endemic to any enterprise of this size – and the U.S. military-industrial complex has been no exception.

How we got to the archipelago world

Nader Mousavizadeh
Jul 25, 2011 11:29 UTC

By Nader Mousavizadeh
The opinions expressed are his own.

Ten years after the attacks of September 11th, the brief moment of global solidarity that followed when we were “all Americans,” in the words of Le Monde, seems as improbable as it is distant. Barring a global catastrophe, the world is unlikely to unite again as it did on that day – and not just because of the conduct and course of the wars of 9/11 in Afghanistan and Iraq. A deeper – and more radical – shift is at work in the politics of the global economy. A fragmentation of power, capital and ideas is creating a new map of the world – with lasting implications for investors and policymakers alike.

The evidence is everywhere. Europe beginning to roll back key aspects of the free market even as it manages yet another bail-out of Greece; the failure of the Copenhagen climate change negotiations; a Doha trade round dead in all but name; the emergence of new global governance structures, such as G-20; the flows of macro-finance investments between emerging markets combining state and business interests; China’s “going out” strategy upending traditional vectors of global capital and influence; an Arab Awakening as much defined by its diversity as its aspiration for accountability and legitimate government; the resurgence of nationalist, populist movements across rich and poor parts of the world; a proliferation of hybrid economic and political systems defying old categories of left and right, liberal and authoritarian.

Conventional thinking holds that all this is a threat to an otherwise well-ordered global order – or that it reflects a zero-sum shift from West to East, U.S. to China, democracies to dictatorships.  For large parts of the world, of course, the existing global order seemed less well-ordered than designed to perpetuate – by any means necessary – dated power structures of the mid-20th century.  Equally, to see this merely as reflecting an all-embracing power shift to the East (as observers both Eastern and Western do) ignores the fact that pivotal powers such as Turkey, Brazil, Indonesia and Nigeria are charting distinct paths aimed above all at economic independence and national power – beyond ideological labels.

  •