Great Powers
Page 40
A final concept begging for consideration as strategic deterrence in the globalization age is simply the well-attuned public. When everybody in American society, for example, practices good security behavior, almost all of which corresponds to “neighborhood watch” best practices, you’ve just added an additional 300 million-plus sense-think-and-respond human sensors across your network, boosting your resilience infinitely. As the columnist Brad Todd noted, the 9/11 hijackers aboard United flight 93 had their months of planning foiled spontaneously by ordinary citizens who, through real-time networking, cracked their enemies’ code and mounted an effective response within minutes. In short, we have no shortage of “white hats” ready to man battle stations and fight back on a 24/7/365 basis. Today’s globalization, as über-blogger Glenn Reynolds argues, provides the network connections that allow any ordinary citizen the same breadth of knowledge and (virtual) experience as only elites once enjoyed in the past. Tapping into that broadband capability only makes sense in a world where every “swinging mouse” can make a difference.
Add all these ideas up and you quickly come to the conclusion that deterrence today is no longer about holding our enemies’ assets at risk. Globalization’s advance actively reformats our enemies’ most prized assets—their culture and community. You might think that reprehensible. I consider it God’s work in a world where we can’t all afford to go our own way any longer and still leave behind a planet our children will enjoy. If that means my culture’s got to change a lot to accommodate yours, then so be it, but the reverse will also be true. Let’s have no illusions here: Globalization is the ultimate remix, doing on a global scale what American culture has been doing here for over two centuries—blending the best and discarding the rest. What that inevitable outcome tells us is that real deterrence in this age must be based in transmitting that context and making clear its inevitability. The only way to combat exclusionary, collective identities is to offer globalization’s glorious hi-low mix of universal identity coupled with maximum individual freedom—the very essence of being American. And no, that’s not implying that everybody on the planet ends up looking and acting more like us than themselves. As Americans constitute a mere one-twentieth of the world’s population, that’s an unlikely outcome. I’m just pointing out that, as the population furthest along in this globalization experiment (have we not been accepting all comers to our completely synthetic culture for over two centuries?), we’ll just be among those most comfortable with the outcome.
Real deterrence in this day and age will remain focused on resilience, not the threat of disproportionate punishment. It will remain focused on this message: Anything you can do, I can counter faster; I can absorb anything better than you. America is often derided for its lack of cultural and historical awareness, its attention-deficit disorder. In truth, this is one of our greatest strengths—our sheer speed in adaptation. No power should ever want to engage America in a race to shift paradigms. We cannot be shell-shocked or demoralized by change. We simply live for it.
THE GLOBAL ACCELERANT: THE GREAT GLOBALIZATION BUILD-OUT
I can’t overemphasize what a world-turned-upside-down change has occurred in infrastructure development in emerging and developing economies thanks to globalization. Starting with the “big push” heyday of Western foreign aid in the 1950s, the vast majority of infrastructure building in the so-called Third World was directed by Western public entities using public funds. It was a supply-push function: Depending on how “rich” the West felt, that’s how much was available. Today the situation is overwhelmingly reversed, as the majority of infrastructure building in emerging and developing economies can be described as a demand-pull function: Asian companies—from west to east—creating the necessary physical connectivity to access developing economies’ raw materials and markets, while back home their governments and national flagship companies engage in massive build-outs of road, railroad, airport, educational, manufacturing, research and development, and power generation and distribution systems. After decades of hand-wringing by the West over “Who is going to save the world’s poor?” we find ourselves largely standing on the sidelines while Asians step up to save themselves and the rest of the Gap.
Will Asians do any better in connecting these Gap regions to globalization in a sustainable fashion? They have three things going for them right now. First, they’ve got the cash, thanks to trade imbalances with the West over goods or energy. We know that historically globalization tends to expand when the global economy is flush with money. Second, they’re demographically incentivized, whether we’re talking East Asians facing a growing population of elders or West Asians trying to accommodate youth bulges as they head into working age. Third, they’re doing it out of greed and ambition instead of empathy and guilt, and, no offense, but I’ll take Asian greed over Western guilt any day.
Some sense of the scope involved here:
Overall, emerging markets are expected to build over $20 trillion of infrastructure over the next decade, according to recent calculations by the Wall Street firm Morgan Stanley.
China is the clear global demand center when it comes to infrastructure-building, accounting for over 40 percent of that stunning total. Right now they’re deep into a road-building spree that recalls America’s construction of its interstate system starting in the 1950s. By 2020, China will have roughly the same amount of freeways—about 50,000 miles—and it will have pulled off this feat in roughly half the time it took America. In its efforts to construct the “new socialist countryside” (really, just a desperate attempt to keep the interior poor from falling too far behind the booming coast), Beijing plans to increase road networks there by almost 50 percent in the next few years alone. As China now crams 25 percent of the world’s rail traffic on just 6 percent of the world’s track length, it is looking to embark on the biggest railway expansion the world has seen since the nineteenth century, adding 60 percent more track in a dozen years. Air travel has skyrocketed since 1985, increasing more than twenty-five-fold, leading to plans for ninety-seven new major airports by 2020. Seaport capacity will likewise grow dramatically, almost doubling by 2020. You want to know why U.S. export of construction equipment is booming? This is why.
In the emerging great powers of the New Core—Russia, China, India, and Brazil—there is also a new assertiveness on the part of their multinational corporations. It is not just the buying up of ailing Western companies that attracts attention, but also the desire to go “downstream” in ways that outsiders just didn’t do in the past. I mean, it’s one thing for the UK’s National Grid to buy up electrical grids on America’s northeast coast, but quite another for Russia’s Gazprom to move aggressively into retail natural-gas markets in Europe on top of its already extensive network of pipelines. Historically, it has always been a matter of Western energy companies going over there, getting the stuff, and marketing it back here. Now we’re seeing national energy companies from over there bringing their own stuff over here and marketing it directly. To some, that is awfully scary, highlighting the West’s dependency on foreign energy sources, but to me, it’s a natural and welcome business instinct on the part of these outside firms, indicating they seek the same sort of vertical integration in their industries that Western firms have long achieved. If you want stakeholders, you’ve got to give them legitimate stakes.
What’s fascinating this time around with the oil boom is that the Middle East is not sending all its money west and asking us what they should invest in. This time around, the Middle East is either investing its profits locally or sending them east to both tap into and encourage the sort of infrastructure build-out that will further cement (no pun intended) energy ties east-east—as in, the Middle East to East Asia. This is yet another reason why it is unsustainable for America to have a grand strategy in which we play sole Leviathan to the Persian Gulf: It is just not our oil and they—meaning both “Easts”—simply won’t pay for it. The Gulf Cooperation Council countries, including Saudi Ara
bia, are expected to pocket as much as $3 trillion between 2005 and 2020. About half of that money is expected to stay at home for infrastructural development of all sorts aimed at providing jobs to young people (true draining-the-swamp work), about a quarter ($750 billion) is expected to be invested in the larger Middle East/North Africa (MENA) region, and the remainder will probably go into sovereign wealth funds of the sort that buy equity in Wall Street firms—at bargain-basement prices—during periods of turbulence while simultaneously availing themselves of good investment opportunities in the East. The good news for the West is simply the overwhelming scope of the profits: A good portion inevitably comes our way simply because we’ve got the biggest and best financial markets to handle that sort of flow (for now, at least).
Here’s how I wrap this all up in terms of Western companies thinking ahead to growth opportunities.
First, you’ve got to get in on this huge infrastructural build-out going on in Asia. There’s just too much money to be made in all this construction and the associated business.
Second, it you’re not there, you can’t participate in the roll-up season that must inevitably occur. By “roll-up season,” I mean a long period of intensive mergers and acquisitions (M&A) to create the infrastructure behemoths that will make all this expansion happen. Simply put, the world doesn’t currently have corporations big enough to handle all this work efficiently, but inevitably those behemoths will arise through M&A, creating global “trusts” that dominate markets in the same way that such giants once ruled in late-nineteenth-century America. No, they won’t be as easy to whittle down to more acceptable size on the basis of national legislation, because many of these firms will arrive on the scene with the firm backing of their national governments. But I would expect them to submit to a progressively “downward” evolution in the direction of Palmisano’s “globally integrated enterprise,” or a firm that sources, develops, manufactures, and markets locally. In other words, I’d expect these behemoths to shed their nationalistic flavor over time and become truly global brands largely detached from cultural moorings—like a Toyota.
Remember, good globalizers, whether they’re companies or religions, must leave behind their original cultural context. For example, Hollywood markets increasingly internationalized films, because roughly half its box office registers overseas. Commensurately, when a Bollywood (Indian) entertainment giant steps up to finance American film director Steven Spielberg’s future creative freedom, it’s also looking to create a marketing beachhead for its major stars. So again, count on greed to make the necessary changes to firms, such that we’re not looking at a future where great powers clash through their corporate giants. Where protectionism is likely to rear its ugly head, though, will be when Eastern firms start gobbling up Western ones, a process we’ve already witnessed in several industries. But we’d simply better get used to the idea that most mergers will feature an Asian name, either fore or aft. So if you think DaimlerChrysler was shocking, better fasten your seat belt.
Third, Western companies want to be there simply to partake in the stunning amount of new R&D that will necessarily accompany all this infrastructural development. Since we’re often talking harsher environments with more fragile ecosystems, plus a lot of regions that will be harder hit by global warming, the ingenuity required to pull this off will be immense—and highly profitable for multiple sales elsewhere.
That gets me to the final reason. By jumping in, not only will you get smarter, you’ll learn how to sell to that fabled “bottom of the pyramid” of the global working class that will present the opportunity for highest corporate returns in coming decades. You’ll learn how to sell to people who don’t have a lot of money but do have a lot of value expectations, or basically the market Wal-Mart has mastered back here in the States and aims to conquer globally. I know, I know. It’s fantastic to think our global economy’s future growth is dependent on a lot of poor people becoming both innovative and greedy at the same time, but hey! That’s how these United States were built. So sit on the sidelines at your own risk.
Some caveats before I move on:
First, there are clearly new opportunities in this environment for international financial institutions such as the International Monetary Fund and the World Bank. Both have suffered an existential crisis recently—namely, they’re just not sure what their role is anymore in this transforming global economy. Here’s my two cents: Having watched the U.S. Federal Reserve basically redefine its role—thanks to the subprime crisis—from mere protector of American banks to rescuer of America’s financial markets, I suspect the IMF will continue its 1990s evolution in that direction, but with a greater focus on threshold economies, or those near-emerging markets where a financial panic can overnight kill a healthy progression from Gap to Core status. I think the global economy has evolved to the point of interdependency where the Functioning Core’s economies can look out for one another, leaving the IMF to move “down” the development chain. As for the World Bank, I foresee a greater focus on financing postconflict and postdisaster recoveries in fragile states than on classic Western foreign aid. The World Bank is simply losing its relevance in peacetime development inside the Gap, and therefore should likewise move into more needier areas. In sum, I’d like to see the IMF focus on preventive interventions in New Core and Gap countries on the economic upswing and the World Bank focus on postincident interventions in Gap countries on the downswing. In both instances, we’re talking about institutions “playing down” from their original purposes, but as globalization expands and matures, that’s how I’d update Bretton Woods.
Second, as globalization’s great infrastructural build-out unfolds, shifting over time from the New Core East to the Gap as a whole, we’re clearly going to see a major increase in the role of nuclear power. Africa, home to about one-fifth of the world’s uranium, wants to move aggressively in this direction. The West and Russia, fearful of proliferation of nuclear weapons-grade uranium, push to create a Core-dominated consortium that will oversee the entire fuel-enrichment cycle for any country willing to outsource that process, in effect asking Gap countries to assume an energy-dependency relationship. Several proposals are on the table, and while there is a chance of competing rule sets fighting it out over time (e.g., competing U.S. and Russian systems), the odds are that the Core will come to some agreement that Gap countries find acceptable. But the clear upshot of all this will be that far more nuclear material will move along globalization’s networks, only emphasizing the worldwide need for better real-time, pervasive monitoring systems. So again, a shift from Cold War deterrence to globalization-era transparency seems inevitable.
Finally, it is ironic that much of the antiglobalization sentiment is centered in the Functioning Core’s most advanced economies, especially America and Europe. In effect, we’re the rich in the global economy who essentially look for protection from its poor and their “unfair cheap labor.” This unfortunate sentiment creates strange bedfellows, for as economist Paul Collier notes, “Rich-country protectionism masquerades in alliance with antiglobalization romantics and third world crooks.” Since I count al Qaeda and most other radical extremists in that mix of “antiglobalization romantics and third world crooks” (i.e., they promise retreats into the past and avail themselves of black globalization to finance their activities), this kind of thinking works decidedly against serious grand strategy designed to make sure America prevails in a long-war context, primarily because it is defeatist: When the global economy that America put in place gets too competitive for our comfort, we threaten withdrawal and/or demand self-serving renegotiation of the rules. My point is this: With globalization’s great infrastructural build-out well under way, the West has essentially lost control of the global dialogue over rules. From here on out, there’s no dictating, just negotiations.
Like the other caveats named above, this too is a price of our success in replicating the American System on a global scale. If we want to regain some measure of
national control over globalization’s rapid expansion, then we’ll have to get far better at working its seams and frontiers. We’ll have to get better at reconnecting postconflict and postdisaster states to the global economy, catching them at the moment of network connection that we purposefully engineer in a manner consistent with our preferred rules. For if we don’t, I guarantee you, others will. That’s why the cry of “no more Iraqs!” is so on-target: America either gets better at playing the “second half” or we’ll find ourselves shut out from the ground zero of new rule-making in the system—the generation of new markets in previously off-grid locations (remember, that’s how we once began). While America’s economic interests in these locations may seem marginal at first glance, our political-military interests are anything but. Because if we don’t push for good connectivity of the sort that extends the Core’s transparency inside the Gap instead of simply exposing the Core to the Gap’s worst “exports” (i.e., disease, terror, drugs, crime), the frontier-taming activities of many New Core countries like China may well end up creating more system instability than system integration.