The World in 2030: Are We on the Path to Convergence or Divergence?

May 29, 2012

For much of the last fifty years, the international system – its structure, operations and goals of its key institutions – remained remarkably stable.  Now that is all changing.  The international system -- as we know it today and as represented by such organizations as the IMF, World Bank, WTO, WHO, OECD, United Nations and NATO -- has to reform or the institutions at the core of the system will become marginalized or even obsolete.  Moreover, we should expect new institutions to develop that will contribute to a reshaping of the global landscape with profound implications for America and the Western world in geopolitical, security and economic terms.

 The reasons why are obvious.  With the economic rise of China, India, Brazil, Russia, Turkey and other emerging economies, these countries rightly are exerting more influence in world affairs and changing the way business is conducted in the international system.  Witness the growing role of China and other leading economies in the global response to the financial crisis of 2007.  Already the G-20 group of developed and developing countries has assumed a more prominent role than the G8 forum, comprising only developed economies, in mitigating the risks associated with the financial crisis and in setting forth a global response. 

Building a consensus in any of these institutions for global action in areas as diverse as security and trade is now increasingly difficult, with the addition of more players in decision-making and due to the fact that emerging economies often have very different immediate goals and agendas.  It was never easy to negotiate a multilateral trade round when Europe and the United States largely drove the agenda.  Yet, now we struggle to even get to first base with India, China and other emerging economies in setting forth a serious effort on market access, let alone addressing new impediments to trade and investment stemming from regulatory divergence and state-owned enterprises (SOEs).   When China and India dug in and resisted our charm offensive for more market access and improved disciplines on subsidy practices, it was hardly a surprise that the Doha Round went into deep freeze.

Change will be more evolutionary than revolutionary, but it will be significant. For instance, Europe and the United States may have retained their leadership roles in the IMF and World Bank institutions for now, but these institutions have already had to reform in subtle and not so subtle ways to reflect the growing might of the emerging economies.   No doubt the shape and size of the table (i.e., international system) is evolving today, and will do so even more significantly in the years to come, to reflect the growing weight of China, India, Brazil and other rising economies.

One thing is for sure: in assessing the impact of these rising economic powers, we should be careful about how we group them.   Jim O’Neill of Goldman Sachs gets credit for coming up with the BRIC concept (i.e., Brazil, Russia, India, and China) years ago.  There now are other countries that have become developing economies of significance -- like Mexico, Indonesia and Vietnam.   This is a diverse group with differing interests and challenges; it’s hard to say that they are united in policy or actions.   If you look ahead to 2030, the lines thought leaders often draw between developing and developed countries may in fact further blur; scenarios we forecast today might alter significantly as countries like China, in particular, behave vastly differently than some of the other countries with which they are often grouped.

As this evolution occurs, I see five key questions we will confront:

First, will the emerging economies -- led by China, India, Russia and Turkey -- take on greater global responsibilities or will they remain preoccupied with internal challenges for much of the next decade and beyond?  Many of these so-called rising players are consumed by internal challenges.  Russia may have re-elected a strong leader, but the country itself faces enormous obstacles in creating legal reforms and modernizing its economy away from dependency on oil.    Similarly, India needs to reform its economy but faces political constraints with no obvious solutions in the short or even medium term.  While China has had (in contrast to India and Russia) tremendous economic success including lifting 500 million people out of poverty in less than 20 years, political reform has been slow in coming; leaders there increasingly are aware of the developing strains on their society resulting from the resentment building up from those left behind and from perceptions about a developing privileged class in that country. 

There should be hope that the United States and the West, more generally, can find common ground with China, India, Brazil and other emerging economies to pursue pragmatic approaches to some of the most challenging issues in the world today.  In the past few decades, one billion people have been lifted out of poverty.   With another billion and more people making this social and economic migration between now and 2030, we can and should be optimistic about our collective future.  Can we move quickly enough with the developing world to pursue “win-win scenarios” that advance the welfare of these societies?   Will these countries work with us in tangible ways in supporting innovation, promoting environmental collaboration and fostering stronger health care?   To date, the picture has been mixed, but the hope is that these governments will be more open to partnership in each of these areas.

Second, will these rising economic countries believe they need to develop their own strong separate institutional frameworks -- or will they increasingly share the burden of global leadership with the U.S. and EU within the existing albeit reformed international system?  It is easy to say that the burden is on these countries to demonstrate that they want to be “responsible stakeholders” within international institutions, to borrow Bob Zoellick’s phrase, but we also have the burden to encourage their active and appropriate participation.  The key is for government leaders in the developing and developed world to understand this shared burden.  

While it is true that leaders from Brazil, Russia, China and India now meet to discuss regional and global issues, this is at this time largely a talk-shop;  nothing profound has come out of these discussions.  Certainly, it is hard to see these countries agreeing to map out a radical departure from the existing international system through alternative institutions.   However, these countries will begin to demand changes to the existing system or they won’t play ball with the mandates issued by these governance organizations. 

It is worth noting that most of these countries see directional alignment with the United States as essential for global stability -- even if they at times have different views on critical geopolitical issues (e.g., five plus one on Iran or six-party talks with North Korea).  Certainly, China sees itself as more of a partner of the United States on economic and security matters than it would India or Russia, where the dependency and trust factor is even lower.  And Brazilian President Dilma made it quite explicit when she articulated in Washington, D.C. during her winter visit that her country’s aspiration is to have a strategic relationship with the United States; in contrast, she said Brazil only wanted a commercial relationship with China. 

Going forward, we should ask more of China, Brazil and other rising economies with increasing resources and capacities to take on greater responsibility, and to work more closely with us in solving some of the world’s greatest challenges. 

Third, as they emerge on the world stage, will these countries increasing flex their new powers in ways that promote strategic cooperation, or undermine it in favor of more nationalistic objectives?  We have seen China increasingly expand its core interests to include vast claims in the South China Sea; can regional cooperation withstand a redefinition that limits the sovereignty of a half-dozen or more neighboring nations?  Can India work with us and others to combat terrorism in South Asia in ways that invite more collaboration among the key actors in that region, with the close cooperation between the security and intelligence communities that requires?   Trust will be a key factor here. 

Fourth, will these countries adopt a market-based approach to their economies, or will they implement approaches that undermine the principles of national treatment, level playing field and open markets?  The economic and financial crisis of 2007 has fed oxygen to the argument that “managed capitalism,” or a hybrid state-backed mercantilism, is a sturdier economic model for development.  This argument will play itself out in the 2030 scenario much as those capitalist-socialist models contended in the second half of the 20th century.  Moreover, the period in which the U.S. and Europe account for 50% of world trade is passing.  A new and far more multipolar world of trade powers and regional hubs is emerging.  Managing this concert of commercial powers will be every bit as challenging as balancing military and security relationships in the 19th century.  We can hope to work with China, India and Brazil to combat protectionism.  Yet recent trends are discouraging, as these countries do not yet see as a core strategic interest the promotion of national treatment, competition and open markets in a meaningful way.

Fifth, will the growth of these economies put an inevitable strain on global resources and increase competition for water, oil and other commodities, culminating in a zero-sum race for resources -- or is a collaborative approach possible?  In India and China natural energy and water resources are scarce.  Food wastage is a growing problem and developing a farm-to-market supply chain is evolving.   Pressure is rising as we see increasing competition for resources (e.g., China’s appetite for securing resources in Africa).  Global challenges require global solutions.   We need to find ways to address these issues now before they become even more significant.      

We know that the world is changing in profound ways.  How we respond to the increasing influence of China, India, Brazil and other emerging economies reflects as much on our own leadership as it does on these countries.   We cannot advance the twin concepts of “strategic trust” and “cooperation” if we are not willing to adapt ourselves and acknowledge that the size and shape of the table has to change to reflect the needs, values and interests of these countries.   We should have a desire to share the burden of global governance and prosperity with these states -- and in return have every expectation that they will increasingly act as responsible stakeholders. 

This will not happen overnight, this will not happen without challenges, and it will not happen if America is not strong.   But we can advance a “win-win” agenda where our interests and those of China, India, Brazil and others coexist -- if we are proactive, frank, open and transparent in our convictions and engagements.   

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