“We live in a different world“, “the nations do not represent historic entities in the same sense the European nations did. Turkey of course does and Iran in a considerable extent does. But in the region in between, the boarders were drawn“, “were drawn by the victors of World War 1 on the basis largely of what would facilitate their influence“. “So therefore the identities of these countries and of their boarders can be challenged more easily“. “What we in America call terrorists are really groups of people that reject the international system. And they are trying to re-group it to a radical Islamic fundamentalist” (German Jew Henry Kissinger, 2007).
The Chance for a New World Order
by Henry A. Kissinger
[Slightly revised version of January 12, 2009 International Herald Tribune article]
As the new U.S. administration prepares to take office amidst grave financial and international crises, it may seem counterintuitive to argue that the very unsettled nature of the international system generates a unique opportunity for creative diplomacy.
That opportunity involves a seeming contradiction. On one level, the financial collapse represents a major blow to the standing of the United States. While American political judgments have often proved controversial, the American prescription for a world financial order has generally been unchallenged. Now disillusionment with the United States’ management of it is widespread.
At the same time, the magnitude of the debacle makes it impossible for the rest of the world to shelter any longer behind American predominance or American failings. Every country will have to reassess its own contribution to the prevailing crisis. Each will seek to make itself independent, to the greatest possible degree, of the conditions that produced the collapse; at the same time, each will be obliged to face the reality that its dilemmas can be mastered only by common action. Even the most affluent countries will confront shrinking resources. Each will have to redefine its national priorities. An international order will emerge if a system of compatible priorities comes into being. It will fragment disastrously if the various priorities cannot be reconciled.
Current international economic policy seems to be based on the illusion that once the current crisis subsides, the old globalized system can be restored. But a major cause of the crisis has been the gap between the economic and the political organization of the world. The economic world has been globalized. Its institutions have a global reach and have operated by maxims that assumed a self-regulating global market.
The financial collapse exposed the mirage. It made evident the absence of global institutions to cushion the shock and to reverse the trend. Inevitably, when the affected publics turned to their national political institutions, these were driven principally by domestic politics, not considerations of world order. Every major country has attempted to solve its immediate problems essentially on its own and to defer common action to a later, less crisis-driven point. So-called rescue packages have emerged on a piecemeal national basis, generally by substituting seemingly unlimited governmental credit for the domestic credit that produced the debacle in the first place, so far without achieving more than stemming incipient panic. International order will not come about either in the political or economic field until there emerge general rules toward which countries can orient themselves.
In the end, the political and economic systems can be harmonized in only one of two ways: by creating an international political regulatory system with the same reach as that of the economic world; or by shrinking the economic units to a size manageable by existing political structures, which is likely to lead to a new mercantilism, perhaps of regional units. A new Bretton Woods kind of global agreement is by far the preferable outcome.
The nadir of the existing international financial system coincides with simultaneous political crises around the globe. Never have so many transformations occurred at the same time in so many different parts of the world and been made globally accessible via instantaneous communication. The alternative to a new international order is chaos.
Not since the inauguration of President John F. Kennedy half a century ago has a new administration come into office with such a reservoir of expectations. It is unprecedented that all the principal actors on the world stage are avowing their desire to undertake the transformations imposed on them by the world crisis in collaboration with the United States.
The extraordinary impact of the president-elect on the imagination of humanity is an important element in shaping a new world order. But it defines an opportunity, not a policy. The new administration could make no worse mistake than to try to rest on its initial popularity.
An unprecedented agenda awaits the new administration. In Iraq, it will have to find a way to translate military progress into international recognition and stabilization. In Afghanistan, it needs to adjust its strategy to the historic reality of the failure of every previous attempt to control Afghanistan by establishing a central government with foreign backing. The neighboring countries, even Iran, have an interest in an outcome that constrains radical, Taliban-style Iraq. If Pakistan turns into a failed state with nuclear weapons, a vast challenge to international order will come about. India, threatened directly by jihadist terrorism, is only at the beginning of a process, which we should welcome, of involving itself in the political evolution of the region between Singapore and Aden. The Palestinian issue cries out for international involvement.
Varied as these issues appear, they can only be shaped by a grand strategy beyond the controversies of the recent past. Absent a common design, increased consultation will sooner or later produce deadlock. The charge of American unilateralism has some basis in fact; it also has become an alibi for a key European dilemma that Europe, suspended between abandoning its national framework and a yet-to-be-reached political substitute, finds it very hard to ask its people for sacrifices. Hence its concentration on soft power. Most Atlantic controversies have been substantive and only marginally procedural; there would have been conflict no matter how intense the consultation. The Atlantic partnership will need to work towards a common design if it is to survive.
All these urgent issues are taking place against a background of a historic shift of the center of gravity of world affairs from the Atlantic to the Pacific and Indian Oceans. But there are much fewer trans-Pacific institutional ties with America than exist in the Atlantic. This raises the danger that, over time, the regions will confront each other as strategic and economic adversaries. The emergence of a new regional mercantilism and strategic confrontation by groups possessing large numbers of weapons of mass destruction needs to be resisted.
This is why the U.S. relationship with China is so central. A relationship that started on both sides as essentially a strategic design to constrain a common adversary has evolved over the decades into a pillar of the international system. China made possible the American consumption splurge by buying American debt; America helped the modernization and reform of the Chinese economy by opening its markets to Chinese goods.
Both sides overestimated the durability of this arrangement. But while it lasted, it sustained unprecedented global growth. It mitigated as well the concerns over China’s role once China emerged in full force as a fellow superpower.
Each side of the Pacific needs the cooperation of the other in addressing the consequences of the financial crisis. Now that the global financial collapse has devastated Chinese export markets, China is emphasizing infrastructure development and domestic consumption. It will not be easy to shift gears rapidly, and the Chinese growth rate may fall temporarily below the level that Chinese experts have defined as the line that challenges political stability. America needs Chinese cooperation to address its current account imbalance and to prevent its exploding deficits from sparking a devastating inflation.
What kind of global economic order arises will depend importantly on how China and America deal with each other over the next few years. A frustrated China may take another look at an exclusive regional Asian structure, for which the nucleus already exists in the ASEAN-plus-three concept. At the same time, if protectionism grows in America or if China comes to be seen as a long-term adversary, a self-fulfilling prophecy may blight the prospects of global order. Such a return to mercantilism and 19th-century diplomacy would divide the world into competing regional units with dangerous long-term consequences.
The Sino-American relationship needs to be taken to a new level. Such issues as proliferation of weapons of mass destruction, energy and the environment demand strengthened cooperation between China and the United States. Such a vision must embrace as well such countries as Japan, Korea, India, Indonesia, Australia and New Zealand, whether as part of trans-Pacific structures or, in regional arrangements, dealing with special subjects as proliferation, energy and the environment.
In short, this generation of leaders has the opportunity to shape trans-Pacific relations into a design for a common destiny, much as was done with trans-Atlantic relations in the immediate postwar period — except that the challenges now are more political and economic than military.
America’s contribution to these tasks will be great in proportion to the modesty in our conduct. The collapse of the Soviet Union and the subsequent period of nearly uninterrupted global growth induced too many to equate world order with the acceptance of American designs, including our domestic preferences. The result was either unilateralism or else an insistent kind of consultation by which nations were invited to prove their fitness to enter the international system by conforming to American prescriptions.
The complexity of the emerging world requires America to operate within the attainable and to be prepared to pursue ultimate ends by the accumulation of nuance. An international order can be permanent only if its participants have a share not only in building but also in securing it. In this manner, America and its potential partners can transform a moment of crisis into a vision of hope.
Henry A. Kissinger served as national security adviser and as secretary of state in the administrations of Presidents Richard Nixon and Gerald Ford.
Distributed by Tribune Media Services.
Globalization and Its Discontents
by Henry A. Kissinger
International Herald Tribune – May 29, 2008
For the first time in history, a genuinely global economic system has come into being with prospects of heretofore unimagined well-being. At the same time – paradoxically – the process of globalization tempts a nationalism that threatens its fulfillment.
The basic premise of globalization is that competition will sort out the most efficient, a process that, by definition, involves winners and losers. If there are perennial losers, they will turn to their familiar political institutions for relief. They will not be mollified by the valid proposition that the benefits of global growth far outstrip its costs.
Moreover, to remain competitive, many countries are obliged to abridge their social legislation – a task bound to generate domestic protests. In periods of economic distress, these trends are magnified. The debate over trade policy in the U.S. presidential campaign is a case in point.
In industrialized countries, globalization impacts domestic politics in two ways: Improved productivity generates the paradox of enhanced well-being, accompanied by higher unemployment. At the same time, there occurs a migration away from menial jobs, which are then filled by workers from abroad. A clash of cultures and a nationalism advocating exclusion develop. Variations of protectionism thereby acquire a domestic base.
That trend takes place even within the productive sector of the industrialized world. Connected by the Internet to similar industrial and financial institutions around the world, transnational enterprises operate in the global marketplace served by staffs that often have longer tenure than those of governments and fewer restrictions on their analyses.
Enterprises that remain dependent on the national economy generally do not have the same opportunities. On the whole, they employ the labor force with the lowest wages and bleakest prospects. They tend to rely on more limited markets and on national political processes. The transnational companies advocate free trade and free movement of capital; the national companies (and trade unions) often push for protectionism.
Economic crises obviously magnify these tendencies. And the globalized financial system has produced periodic crises almost as predictably as its sustained growth: in Latin America in the 1980s, in Mexico in 1994, in Asia in 1997, in Russia in 1998, in the United States in 2001 and then again starting in 2007.
While each crisis had a different trigger, their common features have been profligate speculation and systemic under-appreciation of risk.
With each decade, the role of speculative capital has magnified. For speculative capital, nimbleness is the essential attribute. Rushing in when it sees an opportunity and heading for the exit at the first sign of trouble, speculative capital has too often turned upswings into bubbles and downward cycles into crises.
The strategic impact of globalization raises perhaps the most important issues on two levels: Are there industries indispensable for national security in which foreign investment should be limited or even precluded? Second, what industries must be kept from collapsing to maintain America’s defense capability? The answers to these questions clearly lend themselves to abuse. But this is not an excuse for avoiding what the national interest dictates must be faced.
The international system thus faces a paradox. Its prosperity is dependent on the success of globalization, but that process produces a dialectic that can work counter to its aspiration. The managers of globalization have few occasions to manage its political processes. The managers of the political process have incentives not necessarily congruent with the economic managers. This gap must be eliminated or at least narrowed.
As a start, I offer the following prescriptives:
The first imperative is to recognize that these problems are the blemishes of great success. Debate about shortcomings of the process should not degenerate into attacks on its basic conceptual framework, as has happened too frequently in the U.S. presidential campaign. Political leaders must avoid – not encourage – the protectionism that led to disaster in the 1930s.
The parameters of the national security limits to globalization should be established on a national basis rather than left to pressure groups, lobbyists and electoral politics. In the United States, the next administration should establish a bipartisan commission at the highest level to study what constitutes an indispensable strategic U.S. industrial and technological base and the measures to preserve it. High among its priorities must be a hard look at an educational system that creates too few engineers and technologists in comparison with our competitors. The criterion should be what is essential for national security, not to shield enterprises from the competition essential for global growth. That line will not be easy to draw, and the effort risks political manipulation. But the problem will not go away and at some point will become unmanageable.
International economic institutions need to be made relevant to current challenges. The annual Group of Eight summit originated in 1975 as a meeting of six industrial democracies to chart their economic and social futures during the first energy crisis. (Canada was added in 1976; Russia in 1998.)
At the first meeting in Rambouillet, France, each country was allowed only three participants, including the president, to facilitate frank discussion. Since then, the meetings have degenerated into large assemblies serving essentially political functions.
They should be restored to their original purpose, devoted primarily to issues affecting the long-term health of the global economy, including giving opportunities to societies that have been left behind to participate in global growth. In that process, India, China and potentially Brazil should be included.
The original Group of Seven industrial democracies should continue to meet at the level of finance ministers during the G-8 meetings. This G-7 should be charged, above all, with addressing the domestic and social distortions caused by globalization.
The International Monetary Fund as presently constituted is an anachronism. It has been a bystander in the financial crises of the 21st century, which have been produced by practices within the private sectors. The IMF has sought to adapt, but too slowly; it needs to be reformed.
The lending practices that produced the U.S. economic crisis require urgent attention and greater international cooperation. Profligate and obscurantist practices were evident long before the crisis struck. They were made possible by the invention of financial instruments that encouraged speculation while obscuring the nature of obligations. In the subprime mortgage debacle, lenders lost the ability to estimate the extent of their obligations and the indebted to understand the implications of their commitments.
Moral hazard needs to be faced. There is an inherent contradiction when financial entities are permitted to reap extraordinary profits and manage vast assets and then, when conditions change, are declared too large to be permitted to fail, requiring taxpayer bailouts. Financial institutions, whether investment banks or hedge funds, need oversight in a way that protects the taxpayer’s interest.
In sum, if the gap between the economic and political orders is not substantially narrowed, the two structures will wind up weakening each other.
Henry A. Kissinger heads the consulting firm Kissinger & Associates.
Distributed by Tribune Media Services.
“Established in the spring of 1997, the Project for the New American Century is a non-profit, educational organization whose goal is to promote American global leadership. The Project is an initiative of the New Citizenship Project (501c3); the New Citizenship Project’s chairman is William Kristol and its president is Gary Schmitt” (PNAC, 2015).
“We aim to make the case and rally support for American global leadership” (PNAC, 2015)
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