The Modern World: New Realities. Part 1.

Vyacheslav NIKONOV (Russia)

After World War II and up until the late 1980s, the world was bipolar, with two centers of power. One of them was the Soviet Union, which at its height controlled a significant part, although not the greater part, of humanity. The gross domestic product of the country at its peak amounted to 9 percent of the total world GDP. Almost 300 million people lived in the USSR. The Soviet Union was the world’s second largest economy, and it was capable of challenging the United States anywhere in the world.

1. After the collapse of the USSR the Russian Federation retained approximately half the population and four-fifths of the territory of the Soviet Union—the USSR was said to cover one-sixth of the planet; Russia covers one-eighth. The population of the Russian Federation totals 2.4 percent of the world population, while at the peak of our demographic power at the beginning of the 20th century almost every seventh inhabitant of the planet lived in the Russian Empire. On the eve of World War I Russia’s population came to almost 180 million people, and today it is 142 million.
Thus Russia has ceased to be the second center of power in the modern world, and at the beginning of the 21st century the world in fact became unipolar—so that, it was felt, the United States was independently capable of determining the course of world affairs. To quote two American colleagues who in 2002 wrote in the most influential foreign policy journal, “Foreign Affairs”: “The United States does not have even one rival in terms of any of the significant parameters of power. Never before has there existed a system of sovereign states in which one nation had such a degree of dominance.” The only disagreements at the beginning of the 21st century were about whether the United States was more powerful or less powerful relative to other states than the Roman Empire was at the time of Christ’s birth. The conclusion generally reached was that the United States was more powerful. The United States accounted for one-third of world GDP and half of the world’s entire military spending. The United States captured Kabul within a matter of days, and then carried out a military operation in Iraq that defeated Saddam Hussein’s army literally within weeks.
But just six years later another American, Chairman of the House Financial Services Committee Barney Frank, explained to journalists why the United States was not seeking aid from other countries during a painful time of economic crisis: “America is a big and strong daddy, but let’s be realists! We are no longer the dominant force in the world.”
Six years had passed, and the United States had suffered setbacks in Afghanistan, where in recent months more American soldiers died than in Iraq. And in Iraq itself the United States controls only those areas were American troops are located. In addition, the financial crisis, and for the United States it was a real economic crisis, clearly defined the limits of American power.
It is completely obvious that the United States remains the only superpower in the world, but, as it turns out, it is hardly the only power. The United States cannot cope with all challenges at once, and certainly not with challenges around the entire world. The United States was unable to pursue a policy of world domination because such a policy would require acting more as a global manager than as the world’s policeman who punishes everyone around.
American foreign policy—under President Bush, at least—absolutely did not include taking on the responsibility of running the world. Rather, it involved unilateralism and a desire to ensure a freedom of action to solve problems directly affecting the interests of the United States itself and the American voters.
The U.S. role of moral world leader, which was very evident even 15-20 years ago, is now at an extremely low ebb. This came about after about a million civilians were killed in Iraq as a result of the American invasion, and after a camp was established in Guantanamo for those suspected of belonging to the Taliban organization, where they have been held for many years without benefit of trial. And finally, after the establishment of CIA prisons around the world, and after the passage of the Patriot Act in the United States, which provided for the total surveillance of citizens without a court-approved warrant. Against this background, the argument that the United States is a moral authority in the modern world has become less convincing.
And in so doing, the United States demonstrated a very serious capability to harm literally all of humanity when it set off the global financial crisis. The well-known New York Times journalist Roger Cohen said: “Let’s be clear: This is an American mess forged by the American genius for newfangled financial instruments in an era where the mantra has been that government is dumb and the markets are smart and risk is nonexistent.”
Now, everyone in the world, America included, recognizes that the current crisis is a result of the American development model, which raises even greater questions. If the steps being taken by Washington to rescue the American financial system were implemented in our country, Medvedev and Putin would be accused of seeking to impose a total dictatorship. This is because not long ago it would have been impossible to imagine such confiscations and such emptying of the pockets of shareholders, retirees and other categories of Americans taking place.
In the early 1990s the well-known American philosopher and political analyst Francis Fukuyama proposed the idea of “the end of history,” according to which history would come to an end with the final triumph of liberal capitalism. That idea has now been proven to be absolutely invalid. There is quite a lot of talk about how the liberal model, on the contrary, is an exception.
It is completely obvious that the balance of power on the world stage is changing rapidly, and these changes have become very obvious literally during the recent years and months. Discussion is needed less about how America is growing weaker, although that is taking place, than about how other centers of power are developing and becoming more significant. First of all, the BRIC countries—Brazil, Russia, India and China—and the Persian Gull states now possess more substantial gold and foreign currency reserves than all the nations of the West combined. The gold and foreign exchange reserves of Brazil, Russia, India, China and South Korea now total more than $3 trillion, and the size of these reserves relative to their foreign debts also compares favorably with those of Western nations. For example, China’s reserves are four times larger than its foreign debt, and the UAR’s reserves are two and a half times larger. The reserves of Brazil, South Korea and Russia are one and a half times greater, including, in our case, corporate obligations. Our current account surplus in general is the envy of the West. China’s CA surplus is 8.5 percent of GDP; Russia’s is 6.2 percent.
The idea that falling oil prices will deal a blow to the economies of the new centers of power is also unthinkable, because while the current situation is bad for Russia and the Persian Gulf states it is also bad for all other countries. The same is true for China and India, which are net consumers of energy—oil, gas and electricity. Although these countries are showing high rates of economic growth and consumption despite the crisis, they cannot yet be considered dominant in the world. And in addition, they are very dependent on Western markets.
Typically, even in the current economic crisis when the American economy is truly in dire straits, people withdrawing money from rapidly depreciating assets did not run to the yuan or the ruble, and not even to the euro—they ran to the dollar. There is still a high degree of confidence in the American economy despite its obvious fundamental weaknesses, and this points to the fact that the United States is a very, very strong economic force, which incidentally relies on developing nations.
China today is supporting the American economy to the tune of about a half trillion dollars. This is the value of the American government bonds that China acquired in previous years, and which it is in no hurry to liquidate, although it is not eager to acquire new ones, either. Russia, which holds approximately $65 billion in U.S. government bonds, is likewise in no hurry to liquidate them, because it understands the interdependence between the American economy and world’s economies.
But the Western nations now underpin the U.S. economy to a lesser degree and have ceased supporting developing countries to the extent they previously did. Rather, some developing countries support other developing countries. Not long ago China extended credits to Nigeria in excess of $50 billion, and that is greater than all the aid provided by Western nations to all the developing economies in the world. Therefore, a new geopolitical reality is taking shape in front of us.
From the first millennium of the Current Era until recently, world politics have evolved to be West-centric. But West-centrism, it appears, is coming to an end. According to all estimates, by 2020 three out of four of the world’s largest economies will be Asian. China’s gross output will overtake that of the United States; India and Japan will come in just behind the United States. An active struggle for fifth place will break out between two other countries that do not belong to the West—Russia and Brazil.
And the West-centric view of the world that has prevailed in intellectual discourse for centuries, I believe, will disappear much sooner than 2020. In contrast to the era of the 1990s, none of the rising centers of power are still talking about copying the Western model, but rather about following their own course. We were the brunt of much laughter when we said that a Russian path of development was possible. In the past two years, the Brazilian and Indian paths of development and Kazakhstan’s development model have been extensively discussed, and no one has laughed at them because they are fully viable models, although they are not copying Western patterns.
Previously, developing countries were usually part of the Non-Aligned Movement and did not form any factions or alliances. Now, a large number of international organizations are being formed by countries that fall into the category of developing nations. And these organizations do not invite the United States to join. One example is the Shanghai Cooperation Organization, which includes Russia, China and the Central Asian states, and on which the United States does not even have the status of observer, in contrast to India, Pakistan, Afghanistan and Mongolia. The SCO is the kind of organization that the United States would in fact like to join, but to which it has not been invited. The BRIC format countries—Brazil, Russia, India and China—are in the process of becoming an organization. BRIC meetings at the foreign minister level are already being held, and “second track” structures involving experts, politicians and journalists are being formed in support of these quadripartite relations. Then there is the Commonwealth of Independent States; the Eurasian Economic Community, which includes the CIS core countries; and ASEAN and the various ASEAN formats, which likewise have not invited the United States. That is, the developing nations are forming their own alliances and their own centers of influence.
Among other things, the situation is characterized by a growing crisis in the institutions of global governance and management of the international system, which for the most part were established in a different era, just after World War II. The UN mechanisms that remain the most relevant have not made the world perfectly safe, particularly at a time when some key players, the United States, for example, have a very ironic attitude toward the role of the UN in the modern world. Until now, management of the world’s economy has been the function of the so-called Bretton Woods institutions—the International Monetary Fund, the World Bank, and the Organization for Economic Co-operation and Development, which was formed in 1961 as a kind of expert club for rich countries. In addition, there is the World Trade Organization. They hold conferences and symposia, issue declarations and special mandates, implement anti-dumping procedures and control their own budgets.
But as it turns out, the role of these institutions is rapidly diminishing amid the global crisis. Not one of them has done anything to help the American economy, or any other Western economy for that matter. The IMF and World Bank, which were established to be a source of bailout funds for slumping economies, now hold much less free currency than any of the developing countries. And therefore, IMF and World Bank funds may be sufficient to rescue the economy of Hungary, say, or even Ukraine, but nothing more.
And this means that there simply are no actual financial tools capable of saving the world economy. When the financial crisis began, the G7 met in Washington to save the world’s finances, but it turned out that the Group of Seven no longer occupies the commanding heights in world finance. So it is no accident that it was decided to hold a summit of the “Big Twenty” to discuss problems associated with the world’s finances, since it is now pointless to discuss global financial problems without China, Russia, India, Brazil, Mexico, South Africa and Saudi Arabia.

To be continued…

Vyacheslav Nikonov is the Executive Director of the ‘Russky Mir’ [Russian World] Foundation, Head of the Working Group for International Affairs of the Public Chamber of the Russian Federation, Chief Editor of the journal “Strategiia Rossii” [Russia’s Strategy],and Doctor of Historical Sciences.

The English translation published by the ‘New Eastern Outlook‘.