Nouriel Roubini offers a compelling analysis of the Decline of the American Empire. There were several different strands in this piece, including traditional themes of resource competition, military power and spheres of influence, combined with a novel economic analysis of global financial asset ownership and patterns of liabilities. The politics are indeed reminiscent of the jockeying of empires that occurred through the 19th century, culminating in World War I. With that historical analogy in mind, one might view “a more unstable world characterized by conflicts,” as more likely than the alternative of multilateral cooperation. The likelihood of the pessimistic scenario is enhanced by the threat posed by terrorist groups, failed states and heterogeneous “non-traditional global players.”
What might be different in the present and future, versus the past that led to two horrific conflicts? One thought I have is that the nature of world trade is quite different than in the past. It is not just that the United States, with its massive trade deficit, is “too big to fail.” The economies of the industrialized west and emerging markets are intertwined in a manner that has not been the case before: there are global networks of production that provide incentives for cooperation that did not exist in the past. This was, of course, the concept underlying the post-World War II European project, that economic integration would make political harmony more likely by increasing the costs of conflict. The Marshall Plan, Europe’s own institutional fabric, and its institutional innovations all contributed to the success of the vision.
In some ways, China’s economic integration with the rest of the world, particularly Asia, has had some of the same benefits, though not through any joint vision or explicit institution-building. Thus, I would argue that China is in a very different category than Russia, even though both are focused on controlling natural resources. In this context, it is clear that the BRIC appellation is worse than useless – it is downright misleading. Each of the four countries in the acronym has a very different combination of economic and political conditions. The danger from Russia, from the Middle Eastern oil states, and from some of the non-governmental actors, comes from the fact that they do not see any advantage from playing the post-World War II economic game: it has done nothing for them. This may change for some of the Middle East – this time round, they are investing their excess returns somewhat better than in the 1970s. In particular, places like Dubai are becoming part of the global economic fabric, and investment in Egypt is making a difference. Russia, on the other hand, has not been integrated into the economic system in a significant way: it remains a commodity producer with oligarchic and authoritarian politics. China has some commonality in its politics, but the nature of its domestic economy and international economic engagement is completely different.
India and Brazil are different yet again. Neither is a significant military power. But each is democratic in its own way. India, in particular, represents a remarkable achievement, preserving democracy, pluralism and even some egalitarianism at very low levels of income. Its political example had little influence while its economy remained stagnant. Now, I would argue, India can do more for the world by demonstrating that democratic politics and sustained, inclusive growth at high rates are possible in a diverse (non-white, non-Christian majority) society, than by increasing its strategic clout and international prestige. How is that? Recall that the U.S. is cozying up to India largely because of its post 9-11 global strategy. The U.S. Middle East strategy relies on military strength, political manipulation and, now, in Iraq, a haphazard grafting of institutions on to an unstable society and weak economy. U.S. policy has never focused on dealing with the underlying problems of governance and economic development that have made the Middle East what it is today.
India, as a country with historic ties to the Islamic world, a sizable Muslim population, and many of the economic challenges faced by Middle Eastern countries – especially the need to generate employment for their youthful populations – has the potential to show the way to its Islamic neighbors, and countries beyond South Asia. To my mind, the problem of terrorism cannot be solved for the long run by surveillance and suppression. The swathe of nations stretching from Morocco to Pakistan to Indonesia needs more nuanced attention. India has a global role to play as a model of what can be achieved: high, inclusive growth while preserving democracy and diversity, in a non-European setting.