THE SHIELD OF ACHILLES

by Bobbitt, Philip

  These regional arrangements were a force for stability, but they were not without shortcomings. First, they tended to be relatively passive because, even following Security Council reform, it was still easy to block any U.N. endorsement of action. Various horrors in South Asia, South Africa, and Guyana had failed to prompt armed intervention. Second, key states with respect to a particular regional group—like Russia and the Caspian Sea Security Arrangement, or China and the South Pacific Treaty Association—were disinclined to participate, fearing their pockets would be picked by the other members who would rely on them for funding. Third, the true security interests of market-states were not especially regional, being connected instead through an abstract archipelago of shared economic and cultural interests.

  All of these factors were in play when China seized Taiwan in a series of shrewdly planned, if brutal moves. China's navy and air forces were large, but consisted mainly of small coastal craft, antiquated Soviet submarines, and obsolete fighter aircraft. There was little fear that China could conduct a successful amphibious assault against the island. Moreover, China's nuclear weapons were scarcely suited to reuniting a related but recalcitrant province. It was rather China's acquisition of neutron bomb technology (aided perhaps by espionage) that proved the key to the takeover. In an assault that was murderous but highly confined, China attacked military targets with ballistic weapons that were conventionally armed and, hours later, irradiated the largely Formosan city of Tainan, one of the centers of the independence movement. It is estimated a quarter of a million persons died in the brief, two-week campaign. The United States no longer perceived itself as a protector of Taiwan. The regional group did not want to get involved. Action by the U.N. was stopped by the Chinese who treated the entire affair as an internal matter.

  This event again focused attention on the U.N. and its provisions for regional security organizations. Security Council reform had already changed the membership of that body: the European members (France and the United Kingdom) had been replaced by a single E.U. representative. Representatives of India, the Southern Cone Common Market (Mercosur), and the Association of Southeast Asian Nations (ASEAN) also sat as permanent members of the Council. Moreover, the veto power vested in permanent members was modified to prevent a veto that would trump action recommended by a unanimous regional group, which is simply to say that nonregional permanent members could not stop action outside their own immediate regions. By 2020, however, regional forces had completely replaced any “blue-hatted” U.N. peacekeepers just as NGOs had replaced the U.N. humanitarian arm, though it must be conceded that these regional forces were used chiefly to suppress separatist movements at the behest of various states. This paved the way for a universal consensus around a concept of sovereignty that would have been familiar to international lawyers of the second half of the twentieth century. One might call it “sovereignty with exceptions,” meaning that the classic view of impermeable sovereignty was qualified only to the extent that the U.N. Charter was held to endorse such limitations. This satisfied both large states—that wished to avoid being drawn into local conflicts—and small states that feared intervention. The state leaders of The Park considered themselves worldly wise: they did not chase after humanitarian crises; they were willing to accommodate the facts of life; above all, they sought reassurance in alliances with those to whom they were historically bound. This set the stage for great power confrontation among the three great blocs—Asian, American, and European.

  CULTURE

  In the uncertain economic environment following the American recession, a new destabilizing element appeared: the shift in the ratio between young and old. In 2003, Italy's population of persons sixty-five years of age and over passed 20 percent of the total; Japan followed in 2005 and Germany in 2006. France and Britain arrived at this figure in 2015. At the same time, global life expectancy was rapidly growing. As life spans increased, fertility rates in the developed world plummeted. As recently as the 1960s, the worldwide fertility rate (the average number of lifetime births per woman) was at 5.0. By 2000 it stood at 2.7—a figure fast approaching the replacement rate of 2.1. In the developed world, the average fertility rate declined to 1.6. By 2000, Japan was projecting a population decline of 20 percent in the ensuing two and a half decades. In Germany, where the rate had fallen to 1.3 by 2000, fewer babies had been born each year in the 1990s than in Nepal. In the United States this development had been masked by large numbers of immigrants, who included families with higher fertility rates than those of native-born Americans. The looming demographic crisis pitted young unemployed persons against taxpaying workers against pensioners. As a result of this tricornered struggle, by 2010 the politics of social security reform became effectively paralyzed. Governments were forced to make severe cuts in defense spending, infrastructure maintenance, and finally in health benefits.

  These developments—unemployment, social tensions among groups, and a recession that followed government cutbacks—brought to power a number of reform-minded governments determined to protect the youth who had elected them. To invigorate their economies—and mindful that falling population rates could not be made up by productivity gains—states in the developed world followed the U.S. example and began loosening their immigration rules. These immigrants brought with them higher fertility rates and lower labor costs, forcing a revision of state-regulated employment practices that had stifled growth. In Germany, foreign workers rose to 40 percent of the workforce by 2025 and dominated cities like Munich and Frankfurt. At the same time, governments began encouraging higher fertility rates and investing more in the education and the productivity of future workers. In the high-tax states that followed the managerial market-state model tax credits were offered for taking intergenerational responsibility within families, including home day care for the young and residence care for the elderly. Because these popular measures directly attacked the existing social contract and affronted entrenched ideologies and interests, they opened up the politics of these states to reform; and because such policies brought youth into the reform camp, the parties of the past with their addiction to state ownership withered away.

  The economic turmoil leading up to this revision and the demographic crisis that brought it to a head were certainly critical factors; so also was the growth in knowledge about how other people live and how other social systems function, which fueled immigration. The core E.U. was now powered by two late twentieth century developments that had appeared to be a drain on the E.U.: the takeover of East Germany, bringing a well-educated workforce into the capital system, and the proximity of Poland, Hungary, the Czech Republic, Slovenia, the Baltic states, and Ukraine, which enlarged the E.U. and provided cheaper labor and a vast new market for consumer goods once they were assured that their national cultures would be respected. Indeed it was the ability of the managerial market-states to recognize the rights of cultural minorities—including the United States with its decentralized constitutional system of federalism—that ultimately provided a key to success.

  One important constitutional tool in the institutionalization of this respect for minorities was the relative ease with which devolved partial states were created. Regions in Italy (the northern industrialized region centering on Milan and Lombardy), Spain (Catalonia and the Basque region), Canada (Quebec and the city-state of Vancouver), and the United Kingdom (Wales and Scotland) all “devolved” into new states with varying defense and trade relations to their parent states or, like the two partial states that emerged from the breakup of Belgium, sheltered within the economic and defense community of the E. U. The results were generally positive: the new states retained the role of reinforcing the historic culture of their peoples (something the market-state had been in danger of losing as it became more meritocratic, more multicultural, and more secular). As one observer noted:

  In social policy terms, regional organizations allowed different ethnic groups to choose their own cultural policy. In Europe, for example, dema
nds for Basque language schools subsided as it became apparent that, while the Basques were not happy to be schooled in Spanish, they were perfectly happy to be schooled in English with Basque as their second language. By 2025 all of Europe and much of Asia had accepted the policy of “English plus two,” meaning that primary and secondary school students were taught in English and two other languages, usually their native language and one foreign language.13

  In the United States, cultural groups were allowed, by constitutional amendments that altered the application of the 14th Amendment, to transform states to their own liking. This led to considerable migration within the United States as its citizens sought congenial states that catered to religious, ethnic, and political preferences. All these new “states” retained an open trade relation with the rest of the United States much like the one that prevailed in Europe within the E. U., and all adhered to a common defense policy with the rest of the United States under a much-shrunken defense establishment. Only their state constitutions were radically different: some permitted a union of church and state; some allowed the prosecution of “hate speech” and forbade books and movies that reinforced racial or gender stereotypes; some reintroduced corporal punishment, while others forbade capital punishment. There were feminist states where women were given certain affirmative benefits, including requirements that a certain number of officeholders and corporate board members be women; there were religious fundamentalist states that forbade commercial transactions on the Sabbath, required prayer in schools, and outlawed the sale of alcohol; there were ethnic states where English was a second language; and so on. In short, the new states permitted a closer match between the values of a certain polity and its legal rules—a reaction, it may be said, to the market-state's indifference to cultural values.

  This ability to decentralize not only liberated the political evolution of the highly developed states; it also led to a recognition of the economic, social, and environmental interdependence of states. Green tariffs—which penalized imports from states that did not obey Kyoto standards for environmental protection—date from this period. States in The Park were well-positioned to create the World Environmental Organization in 2008 as a follow-up to the Rio de Janeiro initiatives of the late 1990s. States were able to agree, as they were not at Rio, on principles of allocating environmental property rights. The WEO administered these rights, sometimes arbitrating, sometimes auctioning off rights. The largest step forward occurred in 2012 when the WEO won agreement on rules for tradable licenses to water, fishing, and emissions rights. The introduction of fungible carbon dioxide emission rights had come somewhat earlier. Thus different regions were able to achieve environmental targets in differ-ent ways, while bartering development and pollution rights globally.

  The creation of other multinational institutions followed: the World Commission on Biotechnology in 2010 and the World Commission on Internet Privacy in 2013. In some quarters, these commissions were viewed as high-handed and stifling of innovation, but the general view was that the society of states was better able to manage a new generation of multinational institutions in The Park than under other global approaches.

  Finally, though total wages grew more slowly than in The Meadow, wage disparities within the states of The Park were far less. Indeed, the relatively high wages in the developed world tended to encourage growth in the developing world. The Asian Industrial Prosperity Conference and the North American Free Trade Association were able to raise wages to such a degree that multinational corporations looked to Africa to reduce their labor costs. This resulted in a slowing of migration to African cities as factory complexes were sited beyond the supercities. This allowed Africa to avoid the flight to the coastal cities that plagued The Meadow, with the consequence that hygiene and sanitation were sufficient to mitigate the health threats that had haunted Africa.

  ECONOMICS

  The Park was characterized by three great blocs of states whose leading members had chosen some form of the Soziale Marktwirtschaft. The decisive step had been taken in 2005 by the United States when it rejected a British proposal for a “virtual” regional free trade alliance that would have included Japan, and decided instead to pursue a larger NAFTA. The result was a hardening of regional lines and a surge of regional protectionism.

  Within three blocs—led by Germany, Japan, and the United States respectively—trade flourished. By the year 2025, market-states within these groupings were exporting 50 percent of their production, even though most of this product was, at some point, made in other states. By adding value at the high end, and by erecting a forbidding tariff wall around the trading bloc, individual member states were able to maintain a large share of global profits through repatriation. At the same time, the protectionism of the regional blocs tended to retard the advance and diffusion of technology, and to reduce economies of scale. Conflicts over market openings for high technology became endemic, with charges of pirating and predatory pricing being frequently and acrimoniously exchanged.

  Unemployment was relatively high within these blocs, usually above 10 percent in the years between 2000 and 2025 in the Americas, almost 20 percent in Europe—but a jobless worker with a family could draw benefits equal to almost 70 percent of his former net earnings (somewhat less in the Asian countries). There were generous child allowances, substantially larger for poorer families, to the age of seventeen—or twenty-one if the child elected to go to college or state-sponsored vocational training. Parents drew child-rearing benefits for up to two years if they chose to take work leaves in order to stay home with children; job rights for those taking parental leaves were protected for three years.14 Periodic efforts to change provisions like these in order to curtail government expenditure collided with the fundamental sense of fairness that pervaded states in The Park. True, innovations like domestic robots were more expensive than they might otherwise have been and the most efficient hybrid fuel vehicles were beyond the reach of most—a painful fact as governments began to enforce more and more stringent air-quality controls—but the price of these items eventually came down. Innovation occurred, but at a far slower pace and with more expensive development costs than would otherwise have been the case.

  The principal external effect of the dominance of these three great groups of states was to restrict growth in the Third World by shifting the terms of trade sharply against raw-materials producers, though wages did rise in the developing world as corporations fled the high-wage blocs. Within the blocs, the main result was to delay innovation and increase costs to the consumer. Both internally and externally, the Park encouraged state fragmentation within the umbrellas of its larger groups and beneath the sheltering international institutions that it excelled at creating and maintaining.

  While many persons feared a Y2K crisis over New Year's Day 2000, this never materialized. What came later, however, was an infrastructure overload that cascaded through interconnected systems, apparently coincidentally, on New Year's Day 2005. Many analysts now believe this event triggered the stock market crash in 2005. The flight to the euro resulted in a 40 percent appreciation against the dollar, effectively destroying European exports. When the world recession struck in 2006, growth in The Park, which had been sluggish, turned sharply negative.

  The Park was hampered in its recovery by a problem that, though hardly unique to this particular society of states, was characteristic of it. This was the phenomenon of “moral hazard”—overaggressive risk taking pursued in the confidence that market-state governments would not permit truly large enterprises—or interest groups—to fail. It was evident, for example, that the Federal Deposit Insurance Corporation provisions in the United States induced many savers to make deposits in bankrupt banks and savings institutions because these desperate enterprises were offering the highest rates on short-term deposits. American savers correctly calculated that the government would bail them out when the crash came. Similarly, the difficulty for states in The Park was that, by removing risk from some
investments, these states crippled the ability of the market to discipline investment and brought about costly misallocations. Although the hardest hit economies in The Park were India, Nigeria, and Brazil, all economies suffered from this phenomenon because the social safety nets of The Park created perverse incentives by distorting true market risks. Furthermore, the high trading walls of the three great blocs prevented the development of a truly global system of reinsurance that would have cushioned the setbacks of this decade.

  Instead, states of The Park turned to the creation of new international financial institutions. In 2006, a conference in Paris resulted in the transfer of the functions of the IMF to new institutions, more market-state than nation-state in their orientation (and located outside of Washington). First, the Commission on Monetary Stability was given authority to combat speculation not by trying to outbid speculators, but by negotiating complicated baskets that bundled various currencies together and stabilized Third World monies by tying them to the dollar, the yen, or the euro. This commission was sometimes referred to as a New Bretton Woods, but its methods were decidedly those of the market-state. Second, the International Banking Board was created in order to oversee the capital adequacy of banks and their provisions for bad loans—not by mandating certain ratios but by publicizing the prevailing ratios and permitting shareholders to do the enforcing—and to prevent money laundering by much the same methods of transparency and public revelation. Third, the Agency on International Transactions attempted to prevent e-commerce from evading national value-added and sales taxes by licensing only certain firms on the Internet. It also aimed to create exceptions to sovereignty in order to prevent tax havens in the Caribbean, the Pacific, and elsewhere and to employ electronic monitoring to track liquid capital. It must be said that these efforts were not entirely successful, owing in part to corruption within some of the agencies created. Finally, the mission of the World Bank was changed from a lender-for-development to the Third World to a lender-of-last-resort for countries who could persuade the bank that avoiding default was to the economic benefit of the entire society of states, and not simply for the sake of the potentially defaulting state.