The Incredible Shrinking Davos Man

Last week’s annual Davos meeting of the World Economic Forum was conspicuous by how little it seemed to matter to anyone — the event passed with hardly a nod from the mainstream media, which had more important things to worry about. But as I wrote on, it wasn’t simply that Davos was eclipsed in the news cycle by global stock market wobbles and by Hamas in Gaza wiping the floor with its dunderheaded adversaries (dutifully gathered at Davos, in the persons of Condi Rice, Tony Blair, the Israeli government and the leaders of Fatah). On fronts as different as financial markets and the geopolitics of the Middle East, it has become plain that the political and economic elites of the West have seen a sharp decline in their ability to dictate events.

The decline of Davos Man is not simply related to a credit crunch or a U.S. election year. Even if America elects a new Administration dedicated to reversing the mistakes of the Bush team, it is unlikely to restore U.S. and Western primacy such as it existed in the golden years of Davos. The policy failures of the Bush years may have accelerated the decline of U.S. influence, but they are not its sole cause. In the years during which the U.S. became distracted by the “global war on terror,” China’s economy has grown to twice the size it was when President Bush first took office. It is to China — guarantor, by virtue of the trillion dollars and growing line of credit it makes available to the American consumer, of the American way of life — that U.S. investment banks turn for help when confronted by their losses in the subprime loan crisis. The very success of capitalism in developing and former socialist countries has inevitably weakened the grip of the West on the global political economy.

Today, market analysts contemplate whether the best hope for the global economy avoiding being dragged into the vortex of recession by the U.S . slowdown may be the “decoupling” from the U.S. economy that some believe could allow economies such as China and India to continue growing by virtue of momentum in their own economies. It’s a theory, untested in crisis — and clearly the wobbles hitting India’s stock market this week suggest its own investors are not convinced. Still, China has already become the key trading and investment partner in both Africa and in some key Latin American countries, offering a model of development quite different from the “Washington consensus” on issues of governance and economic management that might, as easily, have been dubbed the “Davos consensus.” China is certainly not going to take direction from its debtors, and global energy prices have transformed Russia from obedient supplicant to swaggering challenger to the West.

The U.S. and its allies remain immensely powerful, but the limits of their ability to influence events have been laid bare in Iraq. Today, long-term traditional U.S. allies in Asia, Africa, Latin America, the Middle East and Europe can no longer be counted on to follow Washington’s lead. At the same time, the Davos crowd has lost its near-monopoly on global political and economic power, which is increasingly being diffused across a variety of different power centers with shifting alliances. French foreign policy intellectuals of the 1990s, fearful of what they called the American “hyperpower,” fantasized about a “multipolar world” where power was balanced across a variety of different power centers and interests. While economic “decoupling” remains an untested hypothesis, geopolitical “multipolarity” is today increasingly plain to see.

But a far more extensive and interesting development of this argument can be found in Parag Khanna‘s must-read New York Times magazine piece, Waving Goodbye to Hegemony. Khanna begins with the present distribution of power, noting that the presidential candidate in the U.S. sound almost quaint as they discuss their plans for managing the world. “At best, America’s unipolar moment lasted through the 1990s, but that was also a decade adrift,” he writes. “The post-cold-war ‘peace dividend’ was never converted into a global liberal order under American leadership. So now, rather than bestriding the globe, we are competing — and losing — in a geopolitical marketplace alongside the world’s other superpowers: the European Union and China. This is geopolitics in the 21st century: the new Big Three. Not Russia, an increasingly depopulated expanse run by; not an incoherent Islam embroiled in internal wars; and not India, lagging decades behind China in both development and strategic appetite. The Big Three make the rules — their own rules — without any one of them dominating. And the others are left to choose their suitors in this post-American world.”

He has interesting thoughts on why Russia won’t make it as a major power in its own right, and will be forced to align either with Europe or with China. (It’s population continues to rapidly diminish.) He makes the case that the geopolitics of the next century will be contested by three main hemispheric power blocs led by the U.S., Europe and China, and that the outcome of their battles will be determined largely by the choices of what he calls “second world swing states” — countries with substantial economic or political weight, such as Turkey, Iran and Brazil, with no fixed allegiance to any of the Big Three.

The key second-world countries in Eastern Europe, Central Asia, South America, the Middle East and Southeast Asia are more than just “emerging markets.” If you include China, they hold a majority of the world’s foreign-exchange reserves and savings, and their spending power is making them the global economy’s most important new consumer markets and thus engines of global growth — not replacing the United States but not dependent on it either. I.P.O.’s from the so-called BRIC countries (Brazil, Russia, India, China) alone accounted for 39 percent of the volume raised globally in 2007, just one indicator of second-world countries’ rising importance in corporate finance — even after you subtract China. When Tata of India is vying to buy Jaguar, you know the landscape of power has changed. Second-world countries are also fast becoming hubs for oil and timber, manufacturing and services, airlines and infrastructure — all this in a geopolitical marketplace that puts their loyalty up for grabs to any of the Big Three, and increasingly to all of them at the same time. Second-world states won’t be subdued: in the age of network power, they won’t settle for being mere export markets. Rather, they are the places where the Big Three must invest heavily and to which they must relocate productive assets to maintain influence….

Second-world countries are distinguished from the third world by their potential: the likelihood that they will capitalize on a valuable commodity, a charismatic leader or a generous patron. Each and every second-world country matters in its own right, for its economic, strategic or diplomatic weight, and its decision to tilt toward the United States, the E.U. or China has a strong influence on what others in its region decide to do. Will an American nuclear deal with India push Pakistan even deeper into military dependence on China? Will the next set of Arab monarchs lean East or West? The second world will shape the world’s balance of power as much as the superpowers themselves will.

The starting point of a new American leadership looking to remain competitive in the new geopolitics (the idea of restoring American primacy is already an anachronism, he argues), will be to pursue what President Bush promised during his first presidential campaign — a humble foreign policy. One based on a consultative and cooperative relationship with new and emerging power centers of a sort quite unimaginable to those currently in charge. It may be a sign of Davos’s own decline as a showcase of global influence that the conference was opened by Condi Rice and chaired in many key sessions by Tony Blair. Why would you want to listen to the unrepentant cranks who screwed things up over the past decade when trying to figure out how to manage the next one?

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22 Responses to The Incredible Shrinking Davos Man

  1. billy says:

    Did Davos ever really have any “golden years”? I mean sure, it’s very exciting to see so many important people in a glamourous spot, and for thousands of star-struck journalists it certainly added up to a golden opportunity to network on a massive scale and get a good holiday to boot. Maybe a few major ideas were discussed along the way, even. But fundamentally it’s just a talk-shop like any other, but one without any decision-making capacity. It is a commercial venture, not an official government one, and the conference organisers must consider themselves thice blessed that the media have anointed it the must-be-seen-at event of the year.

  2. David Seaton says:

    This is a very good piece and and so is Parag Khanna’s in the Times, but I think I like Tony’s darker tone better.

    Khanna sees all sorts of ways of “managing” the situation, but what I believe really defines it is that it is no longer manageable. It’s manageability is its defining characteristic.

    I also think that Khanna is wrong about Russia’s situation. We are going to be looking at a world of much conflict actual and threatened and the Russian’s have very good weapons for sale. In fact they are the only ones that provide antiaircraft systems of a quality that can neutralize the US air force’s superiority. Thus anyone who would like to be independent of US intimidation only has Russia as an alternative.Iran is an obvious case in point.

    I would imagine that Russia’s population will increase as the oil and gas money continues to filter through their society. They also have a fair base in pure science as I recall and that is a real ace in the coming world, where science will have to solve so many hair raising problems. Anyway it is silly to write off any people that produced Leo Tolstoy and who drowned Adolph Hitler in their blood.

    Really, what I worry most about is the effect this stomach floating drop in power, influence and ultimately standard of living, will have on the Americans themselves. There are certainly plenty of right wing demagogues around in the USA and I am worried by the idea of a “Wiemar – America”, with an apple pie version of “ve vass stabbed in der back”. There may be American leaders waiting around the corner that could make Bush look good.

  3. Bernard Chazelle says:

    Yes, Khanna’s piece is a fascinating read. I am actually surprised that the NYT would publish it (though I am tempted to attribute its uncharacteristically weak “prescriptive” conclusions to the demands of his editor to dechomskify his piece a little).
    What has the Peace Corps got to do with any of that? Or the “diplomatic-industrial” complex? (Whatever that is.)

    Anyway, finally someone who brings up the issue of America’s geographical isolation! One big reason the US needs such a huge military is that it is stuck in the wrong part of the world.
    Eurasia is still the only continent that matters and Russia is stuck in the middle of it. Kagan got his metaphor wrong. The US is not from Mars. It is on Mars.
    And Europe and Russia live in the center of planet earth.
    Which is why I agree with David that Russia will always be a key player.

    The EU is the most unexpected triumph of the 20th century. Nothing else compares. (The only other major happy events were the ends of catastrophes, which is not the same thing as triumphs).

    Except for Argentina, every country in the top 10 was already there a hundred years ago. Plus ca change…
    Ah, except for the EU. No one could have predicted that nations would accept such gigantic loss of sovereignty for a greater good.

    The US is culturally ill-equipped to understand the notion of trading sovereignty for security. The US is still, essentially, a 19th century nation-state, and that cultural gap is its most serious handicap today.

  4. David Seaton says:

    “The US is culturally ill-equipped to understand the notion of trading sovereignty for security. The US is still, essentially, a 19th century nation-state, and that cultural gap is its most serious handicap today.”

    You could say the same thing about China, and I’m not so sure it is a handicap in their case. The problem for the USA is that at the same time it is a classic nation state, it want to be “all things to all men”.

    As to the EU (where I live) I’m reminded of an old joke (brought up to date) by a wonderful 50s comedian, George Gobel, “I make all the important decisions in my house and my wife makes the unimportant decisions. She decides where we live, what we eat, what clothes we wear and where the kids go to school and I make the important decisions, like should we attack Iran.

  5. sal says:

    demography and destiny aside russia is in decline anyway, and i can understand the europeans arrogance in being able to ‘anexe russia’ if they so wished, but IMO thats hubris before they have the ability to suffer from it.

    watching from Britain i cant see europe as a unified player in geo political strategy. i dont see germany’s oil deal with russia and france persuing its own thing with a new air base in the UAE and Britain [more like Englands] out-right hostility to anything from brussels, as an arbiter of future bon amis-ness.

    i was watching hardtalk on BBC news with zainab badawi talking to pierre moscovichi, and he was talking quite openly about “not being a vassel to the us” and this was the distinction he made between frances outlook and britains. if thats the conflicted environment europe is in, i dont see how the EU is going to be a fully independent agenda.

    one last word on russia, it’ll be foolish to write it off but the way i see it they’re like the trade unions were here, in that they only have one weapon [striking and oil respectively] and theyre limited in how they can use it.

    your thoughts please gentlemen

  6. Bernard Chazelle says:

    David: Good joke! (I heard something like that in an Italian movie – can’t remember which one).

    You’re absolutely right about China — when it comes to land, language, etc. But China has been in catchup mode for so long now that it’s acquired remarkable trading skills in areas touching on sovereignty. For example, what it had to swallow to accede to the WTO is orders of magnitude above what the US would ever accept. There’s no Chinese John Bolton.
    (Plus, since the Forbidden City *is* the center of the universe, pursuing hegemony is a silly distraction for the Chinese 🙂

    sal: It is true that the demographics in Russia is simply beyond catastrophic and if it can’t reverse then trend then who knows?

    Annexing Russia? This must be a joke. Europeans are torn about annexing Serbia…

  7. I too devoured the article by Parag Khanna. (Heard about it via Juan Cole’s ‘Informed Comment’). I’m about in full agreement with its assumptions, and find it interesting some of the above can’t grasp Khanna’s feelings about Russia. I had trouble in the beginning also, but I’m starting to side with his opinion. He’s got a point about shrinking population (hick!) and huge piece of land tied together with miserable roads going to forgotten towns.
    In the meantime, what are we going to do with Yo! Blair? (It no longer deserves quotes; it’s a fact of reality.) Now he’s shrinking I agree, but I’d also like to bankrupt this war criminal, and am looking for advise as I’m computer dumb. I’d like to start a letter to JP Mogan/Chase saying I, (and whoever else is willing to sign) will boycott them in toto, credit cards, stocks, bonds, savings, you name it – until they rip up that 2mil $ yearly contract for his “advise” – thus far in Phylis Diller slang “couldn’t have been wronger”.in the Middle East. That’s alot of money to throw away on a failure, and Rami Khouri’s (grandmother?) once told him for a healthy life “brush your teeth well twice a day, and never trust the British”. With what both Karon and Khanna are saying, we must put pressure on American firms to stay away from trouble. They’ve already gotten us into enough…

  8. sal says:

    im worried it may not be a joke. from my understanding [limited as it is] berezovsky seems to be setting the agenda or capitalising on it in european circles. paranoid as it sounds, the taylor of panama plays itself in my mind whenever i think of him having meetings with eurobureucrats.

  9. David Seaton says:

    Anyone interested in annexing Russia should remember what happened to the last guy who tried it… and that was before they had thousands of atomic bombs. Having a huge population is no great advantage, but having a good educational system is. Are the Russians still producing those scientists? That for me is key question.

  10. sal says:

    hi david:
    when i mentioned anexing russia, im not talking about any sort of military endeavour. i was refering to khanna’s piece where he says privately some europeans have implied that they could control it, ‘anexing’ its just the type language he used. thats all. and when talking about russias decline in general, i thinks its worth remembering that decline is measured against the soviet unions relative power. i think they’ll always have the kind of power a Turpitz-like doctrine requires to be ‘enough’. theres plenty of room for them to cause mischief in khanna’s ‘big three’, more so than the others.

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