The unravelling of the international order

Two things happened last week that showed us the deteriorating condition of international affairs. Most attention focused on the inconclusive trade talks between the US and China, and President Trump’s imposition of higher import tariffs. The global interest here is justified. For a few years in the early 1930s, escalating tariff protectionism illustrated the fraught state of relations between the world’s leading nations. Today, beneath the hardball tactics over a trade deal, the US is grappling with how to address its decline in global power relative to the rise of China’s.

Of similar, possibly greater, long-term significance for the international order was a less discussed event last week: the cancellation of a planned visit to Berlin by US secretary of state Mike Pompeo. Just like expanding tariffs on China, the US’s snub to Europe’s leading nation was a sign of something deeper – in this instance, the dire state of the US-German relationship, and more generally mounting frictions within the post-1945 transatlantic alliance. Germany is being castigated by the Americans for, among other things, its big trade surplus with the US, missing NATO defence spending targets, being too chummy with Russia – including expanding Europe’s dependence on Russian gas – and refusing US calls for it to ban the Chinese telecommunications provider, Huawei.

Together these US-China and intra-West disputes mark the arrival of another unstable era for the world order. The postwar geopolitical hierarchy was pretty much frozen during the Cold War, as the West united against the Soviet bloc. Since the Cold War ended, at the turn of the 1990s, international affairs have become more fluid again.

As the reality of the West’s economic atrophy has become harder to disguise, particularly in the aftermath of the 2007-2009 financial crisis, rivalries both within the West, and also between the West and the rest, have sharpened. The West is in material decline relative to the expanding parts of the world in Asia. And so it can no longer justify imposing its own geopolitical agenda on everyone else. The old order cannot continue forever, and recognition of this fact is growing.

For instance, every four years the US National Intelligence Council produces its ‘map of the future’, Global Trends, an unclassified strategic assessment of how the world might look in the coming period. Its latest January 2017 edition anticipated increasing tensions between countries and a heightening of the risk of interstate conflict over the next five years.

The report concluded with a picture of increased international friction: ‘The near-term likelihood of international competition leading to greater global disorder and uncertainty will remain elevated as long as a la carte internationalism persists. As dominant states limit cooperation to a subset of global issues while aggressively asserting their interests in regional matters, international norms and institutions are likely to erode and the international system to fragment toward contested regional spheres of influence.’

It was a blunt presentation of what could be in store.

It is telling that this official US assessment of the fragility of the world order was prepared before Trump entered the White House. It is therefore facile to pose Trump’s overseas policy initiatives as the source of international instability. Moreover, trade conflicts and diplomatic slights are always symptoms, not causes, of worsening inter-state relations. The real provenance of tension is the persistence and exacerbation of national unevenness in economic performance. If this trend continues, it is likely to have grave geopolitical consequences.

Depressed national economies compete more aggressively. The failure to overcome the West’s generalised economic slowdown increases competitive friction not only between individual businesses, but also between Western nations. There is a shared impetus to mitigate domestic economic decay through greater orientation to the world market, and this generates rivalries between the advanced industrial nations. Different nations increasingly find their firms going after the same export markets, the same sources of cheap inputs, and the same locations for profitable investments. Expanding state support to their respective businesses creates friction between nations.

These economic rivalries are compounded by a weakened capacity to manage international relationships. When political and social troubles spread at home, as is all too evident today, nations scapegoat others for their own problems. Take the US blaming China for its economic problems. The highlighting of issues of technology transfer and intellectual property ‘theft’ pertains to the way US businesses operating in China feel themselves to be badly treated by the Chinese authorities.

More than this, the White House is taking on China’s whole development strategy. It wants China to abandon its ‘Made in China 2025’ policy, designed to help China catch up with the best of the West across 10 technologies, and establish its domination in some technologies, particularly AI and electric cars. For China’s leaders, this is more than an economic matter. It is a measure of China’s emergence as a significant global power. This is why a US-China trade deal won’t resolve their international strains.

Trump’s critics from the European Union, Japan and leading US Democrats, as well as American business chiefs, are reluctant to endorse White House tariff tactics against China. But they share Trump’s anxieties over China, and the goal of Chinese containment. In March this year, the globalist European Commission officially described China as an ‘economic competitor in pursuit of technological leadership, and a systemic rival’. Western mercantilists and globalists are united in this perspective, even if their responses to the situation differ.

On the face of it, the conflict between China and the US, and between China and the West more broadly, looks like the most serious threat to peace. By one recognised measure – the purchasing power generated from domestic production – China’s economy is already larger than that of the US. But this doesn’t mean China will soon replace the US as the world’s top power. Recall that the American economy first exceeded that of Britain’s around the 1870s, but it took another 60 years, and a couple of barbaric world wars, before the US eventually took over as global hegemon. And despite much interwar anticipation that it would take a war between the US and Britain to bring about this transition, the postwar international order was crystallised with the old and new hegemons fighting alongside each other. How geopolitical instability unfolds is not economically determined.

Today, a successful, peaceful transition to an order reflecting the new balances between nations cannot be a matter of chance. We need thoughtful, reasoned actions to bring about progressive change. The goal should be domestic economic renewal in the mature parts of the world, accompanied by an expansion of worldwide collaboration between independent sovereign nations. The Western powers could be driving this transition. Instead, by trying to sustain the status quo, they are fomenting the potential for more serious conflict with China and the East, as well as between themselves.

While the US pursues provocative tactics, and the EU takes a more preservationist approach to the old rules-based trade system, their aim is the same: stopping China from achieving global dominance. But while the rise of China poses the most obvious challenge to the international order, dominated as it is by the advanced industrialised nations, dissension within the West, including over how to handle the rise of the East, could be a more immediate source of strife.

Phil Mullan’s latest book, Creative Destruction: How to Start an Economic Renaissance, is published by Policy Press.

Phil will be discussing ‘What is neoliberalism?’ at the Leeds Salon on 23 May. Book your tickets here.

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