CIAO DATE: 07/2009
Volume: 88, Issue: 4
July/August 2009
Globalization in Retreat
Roger C. Altman
It is now clear that the global economic crisis will be deep and prolonged and that it will have far-reaching geopolitical consequences. The long movement toward market liberalization has stopped, and a new period of state intervention, reregulation, and creeping protectionism has begun.
Indeed, globalization itself is reversing. The long-standing wisdom that everyone wins in a single world market has been undermined. Global trade, capital flows, and immigration are declining. It also has not gone unnoticed that nations with insulated financial systems, such as China and India, have suffered the least economic damage.
Furthermore, there will be less global leadership and less coordination between nations. The G-7 (the group of highly industrialized states) and the G-20 (the group of finance ministers and central-bank governors from the world's largest economies) have been unable to respond effectively to this crisis, other than by expanding the International Monetary Fund (IMF). The United States is also less capable of making these institutions work and, over the medium term, will be less dominant.
This coincides with the movement away from a unipolar world, which the downturn has accelerated. The United States will now be focused inward and constrained by unemployment and fiscal pressures. Much of the world also blames U.S. financial excesses for the global recession. This has put the U.S. model of free-market capitalism out of favor. The deserved global goodwill toward President Barack Obama mitigates some of this, but not all of it.
In addition, the crisis has exposed weaknesses within the European Union. Economic divergence is rising, as the three strongest EU nations -- France, Germany, and the United Kingdom -- have disagreed on a response to the crisis and refused pleas for emergency assistance from eastern Europe. The absence of a true single currency has proved inhibiting. And the European Central Bank has emerged as more cautious and less powerful than many expected.
Such lack of strength and unity in the West is untimely, because the crash will increase geopolitical instability. Certain flashpoint countries that rose with the oil and commodity boom, such as Iran and Russia, will now come under great economic pressure. Other, already unstable nations, such as Pakistan, could disintegrate. And poverty will rise sharply in a number of African countries. All this implies a less coherent world.
Tamed Tigers, Distressed Dragon
Brian P. Klein, Kenneth Neil Cukier
For decades, Asian economies used exports to the West as a means of growth. Now, if they hope to weather the global recession, they will have to enact deep structural changes such as higher wages and increased domestic consumption.
Andrew F. Krepinevich Jr.
Summary -- The military foundations of U.S. dominance are eroding. In response, Washington should pursue new sources of military advantage and a more modest grand strategy.
Fotini Christia, Michael Semple
Summary -- The deployment of more U.S. troops to Afghanistan is necessary to tip the balance of power against the Taliban. But this military "surge" must be accompanied with a political one designed to persuade insurgents to give up their fight.
Mohsen M. Milani
Summary -- Iran's foreign policy is often portrayed in sensationalistic terms, but in reality it is a rational strategy meant to ensure the survival of the Islamic Republic against what Tehran thinks is an existential threat posed by the United States.
Shannon O'Neil
Summary -- Hysteria over bloodshed in Mexico clouds the real challenge: the rising violence is a product of democratization -- and the only real solution is to continue strengthening Mexican democracy.
The Russia File
Robert Legvold
Reversing the collapse of U.S.-Russian relations is one of the great tests facing the Obama administration. Among the major powers, Russia is the hard case. And the stakes involved in getting U.S.-Russian relations right are high -- much higher than the leadership of either country has acknowledged or perhaps even realized so far. If the Obama administration can guide the relationship onto a more productive path, as it is trying to do, it will not only open the way for progress on the day's critical issues -- from nuclear security and energy security to climate change and peaceful change in the post-Soviet area -- but also be taking on a truly historic task. One of the blessings of the post-Cold War era has been the absence of strategic rivalry among great powers, a core dynamic of the previous 300 years in the history of international relations. Should it return, some combination of tensions between the United States, Russia, and China would likely be at its core. Ensuring that this does not happen constitutes the less noticed but more fateful foreign policy challenge facing this U.S. president and the next.
THIS IS A PREMIUM ARTICLE
Max Boot
Summary -- To defeat piracy in centuries past, governments pursued a more active defense at sea and a political solution on land. The current piracy epidemic off the coast of East Africa requires many of the same tactics.
The Battle for Thailand
Bertil Lintner
Over the past three years, Thailand has lived through a military coup, six prime ministers, and widespread civil unrest. The ongoing crisis grabbed headlines last year when protesters occupied two international airports, and it culminated this April in violent clashes in Bangkok. Observers have wondered how what was once such a promising democracy could devolve so quickly.
Today, a semblance of normality has returned to Thailand. But the battle for the country is far from over, and its future remains uncertain. The fractures that led to the confrontation in the first place have yet to be mended. Thai society has become deeply polarized, with different elites jockeying for power and the urban population pitted against the rural population, the north and the northeast against Bangkok and the south, and the poor against the rich. With Thailand's economy now contracting, these divisions might become even more salient. To make matters worse, speculation abounds about the health of the country's 81-year-old monarch, Bhumibol Adulyadej, who has traditionally stood for stability and continuity.
Whatever the outcome of the present crisis, the future of Thai democracy does not look good. Thailand's democratic institutions remain weak and vulnerable to interference by unelected institutions, such as the military and the judiciary. Unless Thailand develops solid, independent state entities that can bridge the gap between various interest groups, the situation will only deteriorate.
THAKSIN'S TENURE
It all began with the meteoric rise of Thaksin Shinawatra, an immensely wealthy telecommunications tycoon who became prime minister in 2001 after his party -- the Thai Rak Thai (Thais Love Thais), or TRT -- won the general election by a landslide. (Thaksin's 2005 electoral victory would be even more spectacular.) He ran on a platform of reform, but once in power he flouted democratic rules.
THIS IS A PREMIUM ARTICLE
Africa's Capitalist Revolution
Ethan B. Kapstein
In one of the great ironies of history, Africa may well emerge from the current global recession as the only region in the world that remains committed to global capitalism. While the tired industrialized nations of the West are nationalizing their banks and engaging in various forms of protectionism, Africa remains open for business -- promoting trade, foreign direct investment, and domestic entrepreneurship. Analysts in the industrialized countries are concerned that foreign aid flows to Africa might drop because of the recession, but Africans themselves are much more worried about rising barriers to their exports and diminishing private investment from abroad, which could impede the continuation of the impressive economic progress the continent has made over the past decade.
It is still a well-kept secret that the African continent has been in the midst of a profound economic transformation. Since 2004, economic growth has boomed at an average level of six percent annually, on par with Latin America. This rate will undoubtedly decline as a result of the global financial crisis, but the International Monetary Fund still projects growth of around 1.5 percent for this year and four percent for 2010 throughout Africa -- a relatively healthy figure by today's depressing standards. International trade now accounts for nearly 60 percent of Africa's GDP (far above the level for Latin America), and foreign direct investment in Africa has more than doubled since 1998, to over $15 billion per year. Overall, private-sector investment constitutes more than 20 percent of GDP. Furthermore, since 1990, the number of countries with stock markets in sub-Saharan Africa has tripled and the capitalization of those exchanges has risen from virtually nothing to $245 billion (that is, outside of South Africa, which has long had an active stock exchange). These "frontier" markets have, until recently, given investors huge returns compared to those found in other emerging economies.
THIS IS A PREMIUM ARTICLE
Steven Simon
Two new books offer insightful analyses of how to succeed in Afghanistan. But the sheer difficulty of the task points to the need for an alternative strategy -- one that defends U.S. interests without trying to rebuild a shattered country.
Walter Russell Mead
George Herring's well-written and lively book may turn out to be one of the last attempts by a leading scholar to compress a comprehensive and comprehensible account of the United States' foreign relations into a single volume.
Edward Luce
Nandan Nilekani has produced one of the best and most thought-provoking books on India in years.
Which Way Is History Marching?
G. John Ikenberry, Daniel Deudney, Ronald Inglehart, zar Gat, Christian Welzel
Joseph S. Nye Jr.
Summary -- Leslie Gelb's skepticism of "smart power" is misguided; it is only by combining the strategies of both hard and soft power that the United States can achieve its ends.
Thomas Culora, Andrew Erickson
Robert B. Oakley, Edward Marks
Ronald D. Asmus, Jeremy D. Rosner
Richard N. Haass
Russell Seitz