‘Zero-Sum World’

The financial crash has heralded a backlash against globalisation and liberal political ideas

Image of Gideon Rachman

Most of my career has been spent reporting on a world where things were steadily improving. I started work in London during the Thatcher boom of the mid-1980s. At the BBC World Service, we followed the spread of democracy around the world, from Latin America to south-east Asia.

I first visited Moscow during the Gorbachev years, as the long Soviet nightmare was coming to a close. I was in Madison Square Garden to see Bill Clinton accept the Democratic party nomination in 1992, while the crowd danced to “Don’t Stop Thinking About Tomorrow”. I spent the next five years reporting on Asia – witnessing how rapid economic growth was transforming people’s lives from Bangkok to Bangalore. Based in Brussels from 2001, I followed the reunification of Europe under the umbrella of the European Union, as countries such as Poland and the Czech Republic rejoined the ranks of free and prosperous nations. I was in London when Tony Blair won his first electoral victory in May 1997, swept along by a campaign anthem that seemed to capture the spirit of the age: “Things Can Only Get Better”.

It doesn’t feel that way now. The United States is stuck with near double-digit unemployment and huge budget deficits. Britain is entering a new age of austerity, with unprecedented cuts in public spending. Both countries are stuck in a bloody and prolonged war in Afghanistan. The European Union is indebted and squabbling about the future of its single currency, as voters increasingly turn to populist and anti-immigration parties.

There is still plenty of optimism in the booming economies of the emerging world, in particular China, Brazil and India. But combine the rise of Asia with troubled times in the west and you have a formula for growing international tension.

During the years between the collapse of the Soviet Union in 1991 and the collapse of Lehman Brothers in 2008, globalisation created common interests between all the world’s major powers. A world that had once been divided between capitalist and communist systems – and between a small group of rich countries and a much larger group of underdeveloped nations – was now united by a single economic system. For a tantalising 20 years, globalisation seemed to promise rising living standards for all nations, and a more peaceful world.

The economic crash of 2008, however, has changed the logic of international relations. In a new economic situation, the win-win logic that allowed the major powers to embrace globalisation is now being replaced by a zero-sum logic, in which one country’s gain looks like another’s loss. Both as individuals and as a nation, Americans have begun to question whether the “new world order” that emerged after the cold war still favours the US. The rise of Asia is increasingly associated with job losses for ordinary Americans and with a challenge to American power from an increasingly confident China. Chinese thinkers, for their part, are increasingly suspicious that a wounded America is intent on thwarting their nation’s rise.

Tensions between established and rising powers are the traditional stuff of international relations. But the financial and economic crisis has also disrupted the intellectual narrative that helped western leaders to make sense of the world, in the 20 years after the end of the cold war.

A western Age of Optimism between 1991 and 2008 was underpinned by a set of ideas, which might be called liberal internationalism. As a journalist at The Economist for most of the period, I was deeply familiar with these ideas, since we argued for many of them on a weekly basis.

In retrospect, I think there were five key elements to the ideology of the period before the financial crisis. The first was a faith in the onward march of democracy – expressed most famously by Francis Fukuyama’s essay on the “end of history”, which appeared in 1989, just as the Soviet empire was collapsing. The second, linked belief was a faith in the triumph of markets over the state. This was also the era of the rise of the personal computer and the internet, and so a third key belief was in the transforming power of technology, as a force driving forward prosperity, democracy and globalisation. The fourth idea, which knitted all these notions together, was the theory of the “democratic peace”: the belief that in a world in which democracy and capitalism were on the rise, the risk of conflict between nations inevitably diminished. The fifth and final idea – a sort of insurance policy – was the faith that in the last resort the US military could defeat any power on earth.

By the time Barack Obama took office, each of the five ideas that had underpinned American self-confidence during the Age of Optimism had taken a battering. The faith in the onward march of freedom had been shaken by the difficulties of exporting democracy to Iraq and Afghanistan, and by the rising confidence of authoritarian China. The belief in the power of free markets took a terrible blow with the economic and financial crisis of 2008. The technological revolution no longer seemed the magical cure-all that it had promised to be, as problems as diverse as climate change and the mechanics of military occupation proved impervious to a technological fix. The theory of the “democratic peace” looked less persuasive, as Russia flexed its military muscles, almost over-running democratic Georgia in August 2008 and China became more assertive in territorial disputes with Japan and India. Finally, the belief in the unstoppable nature of American power looked much shakier with US troops bogged down in Afghanistan and Iraq, and the American economy reeling.

I got an early hint of how the psychology of international relations was shifting when I visited the campus of Beijing University, just two weeks after the fall of Lehman Brothers, and met Pan Wei, director of the Center for Chinese and Global Affairs. “My belief,” he said, “is that in 20 years we will look the Americans straight in the eye as equals. But maybe it will come sooner than that. Their system is in chaos and they need our money to rescue them.”

Rising confidence in Beijing was more than matched by growing pessimism in the US. At the Davos meeting of the World Economic Forum in January 2010, Larry Summers, President Obama’s chief economic adviser, told the assembled plutocrats that one in five American male workers aged between 25 and 55 was now unemployed. In the 1960s, 95 per cent of the same group had been in work.

Summers strongly implied that Chinese trade policies were partly to blame – and he was not alone in his diagnosis. Over the following year, moves to impose sanctions on China, in retaliation for its alleged “currency manipulation”, gained momentum in the US Congress.

Economic tensions are now spilling over into other arenas. China and America have clashed at the world climate change talks. The two countries’ military establishments are also increasingly open in their suspicion of each other.

The rise in tensions between China and the United States is the most obvious example of the growth of zero-sum logic in international affairs. But there are others.

Zero-sum logic is also threatening the future of the European Union. The whole construction of the EU was based on an effort to replace the ruinous and bloody rivalries of European history, with a win-win logic based around mutual economic interests. But in the aftermath of the crash of 2008, rising public debts in countries like Greece, Ireland and Spain have increased tensions between EU members and cast doubt on the future of one of united Europe’s proudest achievements – the single European currency. Greek leaders, under pressure from Germany to cut spending, made dark references to the Nazis’ occupation of Greece during the second world war – precisely the sort of terrible memories that European unity was meant to banish. The risks of new international tensions and conflict are heightened by the emergence of a set of dangerous global political and economic problems that, if they remain unsolved, could provoke wars, environmental disaster and debilitating new economic shocks.

What are these dangers? President Obama gave a succinct summary in his first major address to the United Nations in September 2009: “Extremists sowing terror in pockets of the world. Prolonged conflicts that drag on and on. Genocide and mass atrocities. More and more nations with nuclear weapons. Melting ice caps and ravaged populations. Persistent poverty and pandemic disease.” President Obama’s list was alarming – but by no means comprehensive. To his agenda can be added the threat of new trade wars, failing states, rising food and oil prices, cross-border flows of refugees and illegal immigrants and the growing power of international organised crime from Mexico to the Balkans.

Even if tensions between a wounded west and a rising Asia can be contained, the relative weakening of the US makes it significantly less likely that the world will be able to find solutions to these international problems, increasing the risk of the wars and economic and environmental shocks warned of by President Obama.

Without a dominant power, multi-polar, multinational forums for negotiation are liable to get bogged down and to fail – as the international climate-change talks have amply demonstrated.

So how should we react to the rise of a zero-sum world? The crash of 2008 has been a disorientating experience for people who have spent the past 30 years arguing for free-market economics, globalisation and western democratic values. I count myself among them. Throughout the period, both of the publications I’ve worked for – The Economist and the Financial Times – were energetic chroniclers and promoters of globalisation and the spread of liberal economic and political ideas.

The economic crisis has led to a backlash against some of these ideas. But the economic and political gains made between 1978 and 2008 were not a mirage. Hundreds of millions of people are richer and freer because of the spread of democratic and capitalist ideas. Violent conflict around the world has fallen sharply since the end of the cold war. All of these gains were real.

And while some of the ideas that underpinned the Age of Optimism have taken a severe pounding, the alternatives are not particularly attractive. A backlash against free trade, globalisation and democracy promotion is likely to worsen international conflict and to lead to a less prosperous, less free world.

Over the next decade, such a backlash is entirely possible – maybe even likely. It no longer seems that “things can only get better”. But the gloom of today should be tempered by the memory of previous crises. The generation that lived through the 1930s had far more reason to turn their backs on liberal political and economic ideas. Many clever people in the west did just that – and embraced communism or fascism. Events proved them wrong.

So I am inclined to fall back on a British slogan from the second world war (and popular on tea-mugs here at the FT), and to “Keep calm and carry on.” The world does look unusually bleak in the aftermath of the global economic crisis. But the past century has proved the resilience and creativity of liberal democracy and free-market economics. I suspect the next century will do the same.

Gideon Rachman is the FT’s chief foreign affairs columnist. This is an edited extract from his book ‘Zero-Sum World’ (Atlantic Books, £20), published in Britain on November 1

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