Global Shifts and Fault Lines: What is Happening to the Global System in the 21st Century - Research Paper Example

 Global Shifts and Fault Lines: What is Happening to the Global System in the 21st Century? One day in 1991, the United States and other liberal democracies the world over woke up to realise there was no longer an enemy at the gates. The Soviet Union had collapsed. The pivotal event bid farewell to the bipolar world they were accustomed to and heralded the era of U.S. supremacy. A scant handful of analysts had predicted such a development for the world’s geopolitical status quo, which prompted Eric Hobsbawm (1994) write: ‘The record of forecasters in the past thirty or forty years... has been so spectacularly bad that only governments and economic research institutes still have, or pretend to have, much confidence in it.’ (1994: p.3). Forecasters had been so used to live with the idea of a bipolar world that they failed to detect the signs of a shift that changed the entire geopolitical chess board, namely the dissolution of the USSR and the emergence of a unipolar world. Presently, analysts have another deployment to decode. Other power centres are emerging in Asia and in the East in general and their current and future impact on the chess board deployment needs a close and incisive look to adequately measure whether and how fast a multi-polar world will shape up. In 1991, the U.S. emerged as the monocratic global super power. While to the country this was a new role to adapt to, the phenomenon in itself was not without a precedent. Almost a century earlier, Great Britain found itself in a similar position. At the time, Mackinder (1902) warned there were ‘permanent facts in physical geography’ and that Britain was fraught with losing its power position due to ‘the presence of vast Powers, broad-based on the resources of half continent’ (1902: p. 25). The vast powers he envisaged were Russia and the United States at the eve of the Great War. Later, after their victory in World War II, these two states emerged as the world super powers around which new power axes were created – the Sino-Russian partnership in Asia and the opposing Atlantic Treaty Alliance plus Japan, in the West. When the last great power war was over, new institutions were established and a new bipolar order introduced. By the mid-60s the world slowly evolved into a closed system where every ‘single piece of territory in the world became part of a state’ (Schweller, 2010). The USSR and the U.S. themselves were powers strong enough to sustain the bipolar model, with Moscow pouring cheap energy into the economies of its East European satellites, while Washington practising the doctrine of containment and arms race, which finally fuelled the collapse of the Soviet Union. Many theorists accept the view that a power vacuum is unsustainable and there is a need ‘for one great power that can lead and dominate the system and it will provide order, sort of a public good’ (Schweller, 2010). Now Washington is playing this role but there are signs that new powers are emerging on the global scene amid a financial crisis and soaring prices of energy. Among the ones to have gained special prominence are Brazil, Russia, India and China, which have formed an alliance named after the initials of their countries, BRIC. Their combined efforts already threaten the present undisputable U.S. world domination. And, just like it happened many times before in history, the fight for shifts on the global chess board is closely related to resources, namely energy, as well financial and economic resources in general. Mackinder (1919), the father of the modern geopolitical theory, who was a good economist, too, described this process as: ’The great wars of history are the outcome, direct or indirect, of the unequal growth of nations, and that unequal growth… in large measure… is the result of the uneven distribution of fertility and strategical opportunity upon the face of the globe.’ (p. 6) The two pillars of the global American power are often described as, firstly, the dollar as the international reserve currency and medium of payment and, secondly, the US military might is right to lord it over the rest of the world (Frank, 2001). Bulent Gokay (2006) adds the superiority of American production methods and the relative strength of the U.S. economy as a third pillar. Hence, if one or more of these pillars of power is cut then the whole system of U.S. power means will be endangered and new players will have the chance to strengthen their positions in the global power game. However, the first pillar, the US dollar, is under constant attack in the past three years and Washington seems unable to stop its spiralling depreciation without risking high-fly inflation which will ruin domestic economy. Moreover, at risk is the status of the dollar as the only currency used to trade oil (Gokay, 2004) and its role as the leading reserve currency in the world. Recently Russia, Iran, Venezuela, and even Kuwait, a close ally of Washington, expressed views in favour of the euro over the dollar when it comes to oil trade (Cohen, 2008) and if, and when, this diversification becomes reality, the U.S. economic power will be weakened even further. Asian countries, led by China and India (both are members of BRIC, together with Russia), are raising voice against the dollar-denominated oil trade and the premium they have to pay over oil deliveries, too. Moreover, the new BRIC alliance could pave the way to form other alliances. ’India has suggested BRIC-based energy cooperation on the basis that Brazil is a major producer of bio-fuel, Russia one of the largest producers of hydro-carbons, and India and China are two of the world's major fuel importers.’ (Mills, 2010) and such a new alliance could totally reshape the world of the oil-driven global economy. At present, Washington controls directly or indirectly the vast majority of oil deliveries coming from the Arab countries – ’US policy, however, does not only want to control oil for its own consumption, but also to deny this control to other important industrial powers - European Union, China, Japan’ (Gokay, 2004). That was one of the primary reasons for the two consecutive Gulf wars, the battle against the regime of Saddam Hussein being only a pretext for invasion aimed at control over oil deliveries to the world, this powerful weapon and tool in the sphere of geopolitics. The control over the Arab peninsula is crucial for global dominance in an oil-driven world because here are concentrated ’states of very limited power [which] possess the capacity to cause nearly infinite international damage’ (Kissinger, 1997) Russia, for its part, has plenty of energy and mineral resources and has plenty of dollar reserves coming from the sale of oil, gas and other commodities. Energy-hungry China turns to its northern neighbour for a growing part of its oil and energy imports and two major pipelines from Russia to China are already under construction. This will allow Beijing to diversify its energy imports and achieve valuable energy independence amid a battle for world dominance in the coming decades. It is not unexpected that at their first formal meeting in the Russian town of Yekaterinburg in June 2009, the leaders of BRIC also tabled the issue of a common energy policy within the framework of BRIC. Moreover, the BRIC countries want to have a bigger say in international affairs and an increasing role within international organisations such as the World Trade Organisation, the International Monetary Fund and the World Bank in addition to a new global financial order based on a ’less dollar-dependent world economy’ (Xinhua, 2009a). At present, BRIC countries represent about 15 per cent of the world economy but they account for 50 per cent of the global economic growth in 2008. The second indicator is more important because it directly leads to the conclusion expressed in a recent report by investment bank Goldman Sachs that by 2030 the BRIC economies will outsize those of the G7 countries (Xinhua, 2009b). When this new reality becomes a fact, Brazil, Russia, India and China will have valid grounds for their wish to have a bigger say in world affairs. A step in this direction is a recent policy of the Chinese government to encourage China-facing financial transactions by foreign public and private institutions. It already explicitly approved plans of the government in Washington and the World Bank to issue the so-called panda bonds, denominated in Chinese currency, the yuan (Stroupe, 2009). The importance of such a step is not so visible at first glance but it does have a crucial role in a major reshape of the world’s financial markets and in further weakening the dollar’s position as a leading global reserve currency. In addition, China is investing heavily in energy and resource-related companies abroad and turns bigger parts of its dollar reserves into hard assets, Stroupe (2009) points in his article “BRIC group plans own revolution,” The dollar as a tool of American geopolitical hegemony would suffer further from a process of issuing SDR-denominated (SDR – Special Drawing Rights, is the IMF currency) bonds by the International Monetary Fund. China declared it will purchase $50 billion in SDR bonds, while Brazil and Russia will buy both $10 billion worth of SDR bonds. As a further step Russia, which has the third-largest foreign currency reserves, trailing only Japan and China, announced that it would diversify even more its $140 billion dollar holdings (Stroupe, 2009). These not much advertised but logical steps by BRIC countries will encourage international investors to diversify their dollar exposure and will enhance BRIC’s positions within the organisations known as lenders of last resort i.e. the World Bank and the IMF. ’The old status quo where the U.S. and Europe dominated the global order and its key institutions is rapidly changing as the emerging economies take up key positions in the global economy, international finance and trade,’ Stroupe (2009) writes, and many other experts side his stance. These developments led to a situation when within a decade BRIC ’has been transformed from a marketing term to an investment craze to a political bloc’ (Hough, 2010). Many experts believe that this bloc will outpace the U.S. and the European Union as global leaders in the 21st century; however, Hough (2010) warns, these countries carry significant risks. And this risk is not so much related to political uncertainties in these countries but to their economies. Despite all warnings and demands by Western politicians and economists, Beijing refuses to adopt a policy of free yuan exchange rate and keeps the yuan at artificially low levels. In the case of China, this poses a threat of growing inflationary pressures, although many reports point at China as the future leader of global demand and a key player in drawing the ongoing financial crisis to an end. As for Russia, it is heavily dependent on its energy and mineral exports and recent efforts of the government in Moscow to introduce technology based economy as a future for development of domestic economy are more wishes than a real action plan. Recent energy price developments hit hard even Gazprom, the Russian state owned gas monopoly, which is viewed as Kremlin’s tool for political pressure on its neighbours and the EU (Caryl, 2009). It is worth noting that Gazprom accounts for the bulk of Europe’s gas imports. Moreover, it is in possession of practically all major pipelines that pump gas to Europe. ’When Gazprom turns off the spigot, entire countries go dark,’ Caryl (2009) notes in his article “Paper Tiger” in Foreign Policy magazine. Yet he also mentions that while in 2008 the company was the world’s third-largest with market capitalisation of $300 billion, later developments on the energy markets both abroad and in Russia, shrinking demand due to the financial crisis and repeatedly postponed deregulation of local gas prices pushed the company’s market capitalisation down to just $90 billion and now Gazprom is in the bottom 30 of the world’s biggest companies. Hence, Russia could muscle its way to dominance with oil and gas deliveries but it is so dependent on energy exports for much needed cash that its entire economy is very vulnerable to energy price fluctuations. India, being the largest democracy in the world, is surrounded by hostile neighbours, which is a huge problem to deal with, while internal ethnic problems and raising pressures for local self governance undermine its efforts to play a significant global role. Moreover, India and China are described by most experts as “natural rivals” whose strategic competition will lead in long-run to a conflict between these two countries with huge population (Mills, 2009). Both countries constantly try to outpace each other in most significant spheres and are fierce competitors when it comes to energy resources and investment in energy projects abroad. It remains to be seen how these two giant neighbours are to co-exist within BRIC but their geographic positioning puts them in the situation of inevitable rivals. Brazil’s problem is its soaring currency, which threatens its exports, Hough (2010) writes, but fails to note that China already replaced the U.S. as Brazil’s largest trade partner. Thus, the two countries are bound together as not only political but also economic allies, while Brazil wants to play a growing role in Latin – or South – America as opposed to North America, dominated by the U.S. The second pillar of America’s supremacy, its mighty war machine, appears not to live up to its expectations. It is also challenged by new players and new circumstances in a fast changing world. Part of the problem lies in the policymaking of former American administrations, namely those of the two Bush presidents and their confrontational approach toward world affairs. ’A confrontational American policy that is perceived as unprovoked will drive the countries of Asia away from the United States and toward both nationalism and neutralism’, Henry Kissinger (1997) writes in his Newsweek article called “A world we have not known”. Kissinger (1997) remarks that an economic colossus like China, with its growing military power, will inevitably emerge as a global super power. China’s military technology is narrowing the gap to America’s and coupled with China’s status of the world’s largest manufacturer of energy equipment it will be a major challenge to the U.S. role as a global leader. After the collapse of the bipolar model other power centres emerged in Asia - India, Vietnam, China, South Korea (Kissinger, 1997) and these centres will strive not only to survive but also to gain growing, including military, power. This could lead to the rise of nationalism in Japan, a big economy with a proven military record, which will follow a more nationalistic political course and stop orbiting around Washington’s foreign policy, Kissinger (1997) warns. America is re-focusing its military attention and presence from Europe to the Pacific and Asia. However, many experts doubt the political elite in Washington is ready and capable of dealing with the emerging new world model and circumstances. ’Heretofore we engaged ourselves internationally by dealing with problems that were seen as having a terminal date,’ Kissinger (1997) explains and warns that the next biggest challenge for the U.S. as a sole global super power will be the construction of ’a system in which the rewards and penalties are conducive to a broader sense of global well-being’ (Kissinger, 1997). Nonetheless, such a system requires states and peoples to believe in it and this is where Washington is losing the battle. In many parts of the world, the Muslim countries in particular, the American-led system of rewards and penalties is seen as unjust and based on virtues and values which are forced to recipient countries by a sword. The U.S. is facing a growing lack of international support for its “peace forcing” operations around the globe and lacks even formal sanction from organisations like the United Nations for its last war in Iraq. Thus, America lacks the mighty tool of the “soft power,” a trend which Obama’s administration is trying to overcome. Moreover, the proliferation of weapons and war technologies and the rise of the cyber warfare constrain America’s military options in addition to partisan war tactics it faces in countries like Afghanistan. As Napoleon witnessed in Russia, and the U.S. in Vietnam it is almost impossible to win a partisan war without a clear frontline and enemies hiding everywhere. Last century was a century of industrialised wars which took the lives of tens of millions, but ’wars of choice, not wars of last resort, justified under the rubric of 'preventive war' further destabilised international order in the first decade of the new century’ (O’Brien, 2009). All these wars, in the 20th and 21st centuries, were driven by economic reasons with Germany starting two world wars lacking natural resources and “living space” to fulfil its imperial ambitions. In both cases, America entered the war at a later stage and appeared as a saviour for Europe’s nations. However, nowadays such a large-scale unjust conflict is not very likely so the U.S. lacks the moral grounds for its confrontational politics on the global chess board. This leads to growing support from numerous less developed nations of policies presented by China, for instance, within global organisations like the UN. China’s foreign policy and diplomacy are far better than those of the Soviet Union (Kissinger, 1997) and China is attracting more support for its approach to global affairs. Thus, the U.S. experience growing lack of moral support for its actions as a sole world super power and faces difficulties to finance its own economy; hence, to finance its wars for global dominance, let alone the practical impossibility to dismantle ’a deficient multilateral system, and start afresh by inventing completely new institutional machinery for 21st century’ (O’Brien, 2009). It is not possible to outline all scenarios for a future geopolitical world development but the major two scenarios accepted by experts are for a world where the U.S. stature will fade and it will experience serious troubles in adjusting to a new and more hybrid international order. The second scenario envisages a situation where America is still a dominant world power with no other state challenging its position, despite its economic troubles. On the other hand, this new hybrid order is already on its way and it will be more diverse and will require more thorough understanding of Islam and other forces which are emerging as powerful factors in the geopolitical game. ’To be modern and successful in such a world, a country will not necessarily have to be 'Western',’ O’Brien (2009) concludes. Azar Gat (2010) speaks of a similar phenomenon: ’Since 1945, nondemocratic capitalist great powers have been absent from the international system, but the recent meteoric rise of China has broken that pattern’ in an article in Foreign Affairs. A report of the US National Intelligence Council (2008),named “Global Trends in 2025: A Transformed World” sees the most possible scenario for the next two decades in the following way: ’While the United States will remain the world's single most powerful country in 2025, it will be less dominant and more constrained in its freedom of action -- even in the military sphere - than it is now’ (Lobe, 2008). The report looks at the BRIC countries as a major threat to America’s world hegemony. It professes the establishment of a multipolar world, provided that none of the BRIC countries follow the example of Germany and Japan in the last two centuries in terms of trying to challenge the status quo to an extent that will lead to a global war conflict (Lobe, 2008). One of the major observations, made by the experts who prepared the report, is that there is a continuing process of transferring global wealth and economic power from West to East, a process which will determine the outcome of many future global battles, both political and economic. The other side of the coin is the ongoing competition, which will become even fiercer in the decades to come, for energy, food and water, while the world’s population is growing, particularly in the East. Many analysts failed in their predictions in the last decades, as Hobsbawm (1994) mentioned, but one is obvious: the world will witness a new hybrid and heterogeneous global system and order, with more power centres emerging and more power transferred to non-governmental structures like corporations, tribes and religious organisations. Most probably the U.S. will retain its role of the most powerful state on the globe but in the years to come it will have to realise that the global game will be played together with a number of new players, the EU and BRIC being among the most important ones. Empires rise and fall, just like particular states do, and no one can enjoy a reserved place as a global predominant power for ages. The 19th century belonged to Great Britain, the 20th to the United States, the 21st century will see a mix of power centres and a shift from West to East. Works Cited Caryl, C. (2009) Paper Tiger, Foreign Policy, 15 December 2009, [Online] Available from www.foreignpolicy.com/articles/2009/12/15/paper_tiger [Accessed 27 March 2010] Cohen, A. (2008) The Real World: Oil & Shifting Geopolitics Middle East Times, 31 May, [Online] Available from http://www.heritage.org/Research/Commentary/2008/05/The-Real-World-Oil-shifting-geopolitics, [Accessed 25 March 2010] Frank, A. G. (2001) U.S. Economic Overstretch and Military/Political Imperial Blowback? Personal Web Page, [Online] Available from http://www.rrojasdatabank.info/agfrank/overstretch.html [Accessed 25 March 2010] Gat, A., Deudney D., Ikenberry G. J., Inglehart R., Welzel C. (2009) Which Way Is History Marching? Debating the Authoritarian Revival, Foreign Affairs, July/August 2009, [Online] Available from http://www.foreignaffairs.com/articles/65162/azar-gat-daniel-deudney-and-g-john-ikenberry-and-ronald-inglehar/which-way-is-history-marching?page=show, [Accessed 25 March 2010] Gokay, B. (2004) War in Iraq, 'petro-dollar' and the challenge by euro. Middle East Information Center, 30 April, [Online] Available from http://middleeastinfo.org/article4398.html, [Accessed 25 March 2010] Gokay, B. (2006) Iran, Iraq and the End of Petrodolllar, 15 May 2006, [Online] Available from http://english.pravda.ru/opinion/feedback/80289, [Accessed 25 March 2010] Hobsbawm, E. J. (1994) The Age of Extremes: A History of the World, 1914-1991, New York: Vintage Press Hough, J. (2010) Watch Out for Falling BRICs, Wall Street Journal, 10 January 2010, [Online] Available from http://online.wsj.com/article/SB126308160940223407.html?mod=WSJ_PersonalFinance_PF4, [Accessed 27 March 2010] Kissinger, H. A. (1997) A world we have not known. (21st century global relations), Newsweek, Newsweek, Inc. 1997, 27 January, [Online] Available from www.highbeam.com/doc/1G1-19048226.html, [Accessed 25 March 2010] Lobe, J. (2008) U.S.: Intelligence Analysts See Multipolar, Risky World by 2025, Interpress Service, 21 November 2008, [Online] Available from http://www.highbeam.com/doc/1G1-189668348.html, [Accessed 27 March 2010] Mackinder, H. J. (1902) Britain and the British Seas. London Heinemann: [Online] Available from http://www.archive.org/details/britainbritishse00mackuoft, [Accessed 25 March 2010] Mackinder, H. J. (1942) Democratic Ideals and Reality, Washington D.C.: NDU Press [Online] Available from http://onlinebooks.library.upenn.edu/webbin/book/search?tmode=start&title=Democratic%20Ideals%20and%20Reality, [Accessed 25 March 2010] Mills, E. (2009) Keep Friends Close But enemies Closer, Changing Energy Relations Between China and India, Harvard International Review, June 2009, [Online] Available from http://hir.harvard.edu/index.php?page=article&id=1888, [Accessed 25 March 2010] News Analysis: BRIC makes formal debut with first summit meeting (2009), Xinhua News Agency, 14 June, [Online] Available from http://www.highbeam.com/doc/1P2-20413947.html, [Accessed 25 March 2010] News Analysis: World community jointly tackles global financial crisis, (2009) Xinhua News Agency, 16 September, [Online] Available from http://www.highbeam.com/doc/1P2-20775750.html, [Accessed 25 March 2010] O'Brien, T. (2009) The future shape of international relations: Terence O'Brien reflects on the shape of 21st century world affairs.(Essay). New Zealand International Review. New Zealand Institute of International Affairs, July, [Online] Available from http://www.highbeam.com/doc/1G1-204318177.html, [Accessed 25 March 2010] Schweller, R. (15 February 2010) Entropy and Geopolitics, Counterpoint, ABC Australia, 15 February 2010 [Online] Available from: http://www.abc.net.au/rn/counterpoint/stories/2010/2819698.htm [Accessed 23 March 2010] Stroupe, J. W. (2009) BRIC Group Plans Own Revolution, Global Events Magazine, Asia Times Online, 17 June 2009 [Online] Available from http://www.atimes.com/atimes/Global_Economy/KF17Dj04.html, [Accessed 27 March 2010] Read More