Mikhail Gorbachev set in motion Russia’s trajectory toward functioning status when he decided, as the last leader of the Soviet Union, to launch the political reform process known as glasnost, or “openness.” He also launched an economic reform process called perestroika, or “restructuring,” but this proved to have far less impact. In fact, his dream of saving the Soviet economy through perestroika was killed by glasnost, because the latter so undermined the Soviet political order that the country disbanded within half a decade. At that point, the economic reform of Russia began in earnest, but because the political “openness” preceded—and in some sense, precluded—the necessary reform of the legal system, the subsequent privatization of the vast Soviet-era economy unfolded under conditions of rule-set anarchy, where the powerful took what they wanted and the masses were effectively shut out. By the mid-1990s Russia was consistently described by Western observers as suffering from a “mafia-style” or “robber baron” capitalism, and capital flight out of the country proceeded apace. Then came President Vladimir Putin’s push to create a “dictatorship of the law,” and within a few years, Russia experienced its first net inflow of capital—in effect, Russian money coming home because it was now safe for it to do so.◈
Of course, that flow can and will reverse the minute investors lose confidence in the Kremlin’s commitment to rule of law, as they did immediately following the Russian government’s decision to investigate the giant oil firm Yukos and imprison its then-CEO, Mikhail Khodorkovsky, in 2003. Thus, the second-quarter capital inflow of almost $4 billion became a third-quarter outflow of almost $8 billion.◈ But the Khodorkovsky affair is—in and of itself—an amazing expression of just how far Russia has come in a single generation. History may well judge it to constitute the biggest political crisis of Putin’s presidency, and it has already turned “Russia’s richest man” into a political figure in his own right. But this controversy likewise presages the inevitable rise of political power based on private wealth, and that development alone speaks volumes about the new rule sets that have already transformed Russia.
Thus, within an amazingly short time span of less than two decades, Russia effectively synchronized the bulk of its internal rule sets with that of globalization’s emerging rule set. By doing so, Russia was transformed from America’s number-one threat to a country deemed worthy of limited membership in NATO. Think about that for a minute. If I had come to you in 1985, the year of Gorbachev’s ascendancy, and asked you what would have to happen for Russia to be able to join NATO twenty years hence, you probably would have replied, “World War III.” Yet it has happened, not because we started building Star Wars and not because Ronald Reagan demanded that Moscow “tear down that wall.” It happened because the Soviet Union’s first great technocratic generation of leaders, exemplified by Gorbachev, saw a system that was being left behind by history—not just by its archrival the United States but increasingly by a united Europe, Japan, and even its erstwhile comrade China.◈ Gorbachev began this process hoping to save the Soviet Union, only to bury it and the Cold War in the process. But what he gave the world was a Russia reborn. Russia, while embedded within the Soviet Union, was one of the most isolated, disconnected countries in the world. Not surprisingly, it was a huge source of danger and threat to the United States. When Russia ended its disconnectedness, it ceased being a military threat.
Russia decided to reconnect itself to the world first through political reform, then economic reform, and finally ongoing legal reform, but China has taken close to an opposite route. Under the reformist leadership of Deng Xiaoping in the early 1980s, China focused first on economic reform, especially in the agricultural sector. When that unleashed a decade of impressive growth, popular pressures for political reform naturally ensued, culminating in the Tiananmen Square protests of 1989. Following the bloody crackdown, China focused more on reforming its legal rule sets regarding business versus those involving political freedom. This choice set in motion a huge influx of foreign capital across the 1990s, transforming China from an emerging market to a global manufacturing superpower and a key pillar of globalization’s Functioning Core.
A Chinese friend of mine who had been active in the democracy movement explained how this rule-set shift changed his outlook: “Before Tiananmen, we believed that freedom is 90 percent political and 10 percent economic. A few years later, we came to realize that real freedom is 90 percent economic and 10 percent political.” You may find my friend’s change of heart troublesome, but think about your own daily life and then try to tell me that second formula isn’t a better description of how things really work for the vast majority of Americans. Anyway, my friend’s rebalanced equation makes perfect sense to me when I think about China’s sequencing of rule-set reform.
Is China a democracy yet? No. In terms of economic freedom, though, it has synchronized its internal rule sets with those of globalization to a great degree, and as we witness the birth of a litigious society there, I become increasingly confident that China will accomplish the same in terms of its legal rule sets.◈ Nowhere is this seen more clearly than in China’s joining the World Trade Organization, from which, in effect, Beijing’s leadership is importing legal and economic rule sets they could not otherwise generate effectively on their own—a sure sign of their weakening authoritarian grip over the political system as a whole. China will be a democratic society within a generation, because by synchronizing their internal economic and legal rule sets with those of globalization’s Functioning Core, China will end up accepting far more internal change than its Communist leadership ever bargained for.
So if Russia’s path was political-to-economic-to-legal rule-set change, and China’s is economic-to-legal-to-political rule-set change, can a country begin with legal rule-set changes first? It can, and frankly most do, although most observers would be hard-pressed to describe the initial rule-set shift as constituting what we like to call rule of law. Basically, this third way is the single-party-rule method, in which the country is administered by a single dominant party that—in a fairly technocratic style—engineers a systematic, state-directed economic development strategy, typically described as export-driven growth. While this dominant leadership holds elections that are open to competing parties, the political system is so rigged that no serious challenges are allowed. Often, the dominant party is ruled over by a single long-term leader, such as Singapore’s Lee Kuan Yew, or Malaysia’s Mahathir Mohamad, but this is not always the case. Both Japan’s dominant Liberal Democratic Party and South Korea’s Democratic Liberal Party ruled their respective states for decades while rotating top leaders in an otherwise non-competitive political environment.
In this third model, then, strong legal rule sets form the first piece of the puzzle, followed by strong economic rule sets. Over time, as the country’s economy grows and a middle class appears, invariably we see popular demands for more political openness, as we have witnessed in recent years in South Korea, Mexico, and Japan.
As we go, it is important to keep the definition of functioning fairly loose, in large part because the global rule set itself is undergoing constant revision—especially in the realm of free trade. The so-called Washington Consensus of the mid-1990s, derided by critics as a sort of free-trade-at-all-costs philosophy, does not hold sway today. In the current round of negotiations within the World Trade Organization, known as the Doha Development Round, developing economies seek relief from the Old Core’s protectionism in agricultural trade. In return, advanced economies are pushing harder for more protection of technology patents and copyright of intellectual property. Simply put, the process of defining global rule sets is as important as the ultimate results, because it is through the adjustment of existing rule sets that the Functioning Core accommodates new and aspiring members.
This is why the mere act of gaining admittance to the World Trade Organization is a crucial step forward for emerging markets. Show me a country moving in this direction, like Russia, and I will show
you a member of the Functioning Core—or a country I do not worry about much as a potential security threat or danger. But show me a country not even considering such a step, like North Korea, and I know one of two things must be true: either that state is not providing for its people and thus failing them on multiple levels, or that state seeks to make its way in the world by working around existing global rule sets or ignoring them completely.
Of course, always trying to play by globalization’s evolving rule sets does not guarantee success, it just makes success more likely—on average. But when states do follow the rule sets adequately and their economies still end up being abused in the global marketplace, as in Argentina or Brazil in recent years, then it is incumbent upon those international organizations and the largest economic powers that dominate them to adjust the rule sets accordingly. That is simply the squeaky wheel asking for grease, and that has to be allowed. As Dani Rodrik points out, China managed to integrate with the global economy while breaking plenty of the rule sets along the way, remaining one of the world’s more protectionist economies until quite recently.◈ So clearly, how we define what’s good behavior will depend a lot on when we choose to judge. China’s path looks a lot more forgivable now than it did ten years ago.
So if these are my fundamental definitions of what constitutes functioning within globalization’s Core, which countries can be considered in? My list of the Functioning Core of globalization consists of North America, Europe both “old” and “new,” Russia, Japan, China (although the interior is less so), India (in a pockmarked sense), Australia and New Zealand, South Africa, and the ABCs of South America—Argentina, Brazil, and Chile. That is roughly four billion out of a global population of six-plus billion.
I am leaving some smaller states off the list for now, and I will explain why once we get to the issue of where U.S. military crisis-response activity occurred across the 1990s. But before I do that, I need to offer some explanation of how I define the opposite of functioning within globalization—or what I call disconnectedness.
While I will hold off throwing statistics at you for now, let me say that disconnectedness from the global economy can be described in a variety of ways. First, there is the problem of simply losing out on connectivity because you fail to attract the kind of foreign investment that fuels it. Maybe your country is simply so impoverished that foreign investors shy away from it out of habit. But frankly, since multinational corporations are always on the lookout for cheap labor, poverty alone is not a significant impediment. Usually, foreign investors simply do not see enough rule sets in place to give them a sense of confidence for placing long-term bets. Good evidence of a lack of sufficient rule sets would include regular financial crises or a recent state bankruptcy.◈
So what keeps these rule sets from appearing? Wars are one obvious problem. War zones typically signal the absolute absence of rule sets. Frequent leadership changes are another bad sign, since the routine rotation of leaders through something approaching a free election is a basic political rule set that most investors want to see. So if leaders are coming and going willy-nilly, that means extralegal means are probably being employed—coups d’état, political assassinations, and the like. Every time something like that happens, a country’s internal rule sets tend to flux, creating the sort of uncertainty that investors hate.
On the other side of that ledger are the leaders who simply stay too long. Almost any leader is reasonably good for the first four to six years, which is why many countries limit leadership terms. The problem is when the “great leader” decides he needs to stay longer than the prescribed limit—“for the sake of the people.” As soon as a leader declares himself “president for life,” disconnectedness becomes a near certainty. That is because as soon as a leader makes his rule absolute, he starts treating the national economy as his household economy. In Africa, this is known as the Big Man problem, Liberia’s Charles Taylor being just the latest in a very long line.◈ If all economic activity with the outside world has to go through the Big Man’s pockets (Taylor, for example, looted the government for $100 million), then the country’s connectivity will be minimized over time because only those foreign firms willing to put up with such corruption will pay that price. Then there is simply the logjam of having every economic deal go through a single door. Imagine how little trade the United States would enjoy if the President himself had to sign off on every single deal—after exacting a substantial bribe, of course.
One of the worst problems with Big Men, of course, is that they tend to beget Little Big Men, or their sons as successors. Typically, this leads to even greater disconnectedness, because the Little Big Man, having grown up as the anointed prince, tends to treat the nation less as his money box and even more as his plaything. North Korea’s Kim Jong Il is the prototype of this category, although we are beginning to see a new variant in Central Asia, where it looks like both Kazakhstan and Azerbaijan are heading down the path toward hereditary succession.◈
Countries ruled by royal families (here I am referring to nonconstitutional monarchies) would also fall into this general category, because all the problems that cause connectivity to be limited in the case of the Big Man are found here as well—simply multiplied. Typically, the Big Family holds hereditary right to the natural resources within the country—otherwise what would be the point of being king?
A country blessed with raw materials is likewise susceptible to disconnectedness, especially if those raw materials are its primary export. Historically speaking, countries whose economic well-being relies extensively on the exportation of raw materials are some of the least connected states in the world.◈ One reason that is true is that typically some Big Man will rise up, grab political power by force, and then quite naturally put himself in complete charge of overseeing the exploitation of those natural resources “on behalf of the people.” A worse variant is when the country is routinely racked by internal conflict among those groups competing for control over the raw materials. In several sub-Saharan African nations in recent years, precious-metals mines and oil fields have become the primary prizes for long-running battles between various rebel factions.◈
Theocracies also have a dampening effect on connectivity with the outside world, because—of course—the whole point of having religious leaders in power is to ensure the purity of the faith within one’s borders. Achieving that typically requires strict control over what content enters the country, and what kind of linkages exist between the faithful and the unbelievers outside.
Sometimes disconnectedness is simply beyond a nation’s choice. For example, lacking good transportation connectivity with the outside world is sometimes enough to retard integration into the global economy.◈ In general, some of the most disconnected states in the global economy lack access to ports and are located deep within vast continents. Paraguay is a good example of such a state. One of the ways Paraguay overcomes this deficit is to specialize in cross-border trafficking of illegal goods, like contraband cigarettes. It is estimated that as much as one-fifth of Paraguay’s GDP is derived by smuggling goods across its porous borders with Argentina, Brazil, and Bolivia.◈
Disconnectedness is often self-imposed by the pursuit of illicit gain. Criminals, for example, must maintain as much practical disconnectedness from normal life as possible, in order to stay “off the net” and avoid prosecution. States that garner a significant portion of their GDP through illegal activities are naturally some of the least-connected states, because—in effect—a low profile is good for business. Bolivia, a landlocked South American nation, is home to one of the world’s largest commercial fleets. Under normal circumstances, you might expect Bolivia to be a highly connected player in the global economy, except that all those vessels fly under a “flag of convenience,” meaning they are ships of foreign origin taking advantage of Bolivia’s exceedingly loose rule set regarding shipping registries.◈ As such, Bolivia is not really connected to the global economy; it is more like a back door u
sed by smugglers. States that engage in smuggling of any sort typically fall into this category, which is why most of the so-called rogues are routinely accused of engaging in drug-smuggling activities. North Korea, for example, conducts extensive heroin smuggling around Asia, in addition to selling counterfeit currencies.◈
Another example of why disconnectedness occurs can be found in how a society treats its women. States that tend to view women primarily as birthing machines are invariably more disconnected than those that let women enter the workplace, in large part because the economy is denied access to more than half its labor pool, thus limiting its ability for exports of either goods or services. In general, any society that keeps its women isolated from everyday life tends to be more disconnected. Examples of this isolation include the practice of female circumcision, “honor killings” of women who engage in out-of-wedlock sex, and restricted access to education or everyday privileges like driving a car. Some academics have gone so far as to argue that the real fault line between civilizations lies not in how they view politics differently but in how they view gender equality differently. A recent World Values Survey by the University of Michigan found that Muslim and Western populations differ very little in their approval of democratic ideals, but that a large gulf exists between the two over such gender-driven issues as sexual equality, divorce, abortion, and homosexuality.◈ What most states try to isolate their populations from is not the West’s political values but its social values, because the latter content flow is far more challenging to traditional societies.
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