Why China’s rise really is bad for America -- and other dark forces at work.
BY GIDEON RACHMAN | JANUARY 24, 2012
In my book Zero-Sum Future, written in 2009, I attempted to predict how the global economic crisis would change international politics. As the rather bleak title implied, I argued that relations between the major powers were likely to become increasingly tense and conflict-ridden. In a worsening economic climate, it would be harder for the big economies to see their relationships as mutually beneficial -- as a win-win. Instead, they would increasingly judge their relationships in zero-sum terms. What was good for China would be seen as bad for America. What was good for Germany would be bad for Italy, Spain, and Greece.
Now, as the paperback edition of my book comes out, the prediction is being borne out -- which is gratifying as an author, although slightly worrying as a member of the human race. The rise of zero-sum logic is the common thread, tying together seemingly disparate strands in international politics: the crisis inside the European Union, deteriorating U.S.-Chinese relations, and the deadlock in global governance.
This new, more troubled mood is reflected at this year's World Economic Forum. In the 20 years before the financial crisis, Davos was almost a festival of globalization -- as political leaders from all over the world bought into the same ideas about the mutual benefits of trade and investment and wooed the same investment bankers and multinational executives. At Davos, this year, the mood is more questioning -- with numerous sessions on rethinking capitalism and on the crisis in the eurozone. The European Union is an organization built around a win-win economic logic. Europe's founding fathers believed that the nations of Europe could put centuries of conflict behind them by concentrating on mutually beneficial economic cooperation. By building a common market and tearing down barriers to trade and investment, they would all become richer -- and, eventually, would get used to working together. Good economics would make good politics. The nations of Europe would grow together.
For decades, this logic worked beautifully. But, faced with a grave economic crisis, this positive win-win logic has gone into reverse. Rather than building each other up, European nations fear that they are dragging each other down. The countries of southern Europe -- Greece, Portugal, Italy, and Spain -- increasingly feel that they are locked into a currency union with Germany that has made their economies disastrously uncompetitive. For them, European unity is no longer associated with rising prosperity. Instead, it has become a route to crippling debt and mass unemployment. As for the countries of northern Europe -- Germany, Finland, and the Netherlands -- they are increasingly resentful of having to lend billions of euros to bail out their struggling southern neighbors. They fear that they will never get the money back, and their own prosperous economies will be dragged down. Now that France has lost its AAA credit-rating, Germany is left as the only large AAA-rated country in the eurozone. Many Germans feel that they have worked hard and played by the rules -- and are now being asked to save countries where people routinely cheat on their taxes and retire in their fifties.
From the beginning of the crisis, Europe's politicians have argued that the solution to a severe crisis within the EU was "more Europe" -- deeper integration. Unfortunately, their interpretation of what this means is rather different and dictated by the singular nature of their national debates. For the southern Europeans, "more Europe" means Eurobonds -- common debt issuance by the whole European Union that would lower their interest rates and make it easier to fund their governments.. But the Germans regard this as a dangerous pledge simply to underwrite their neighbors' debts, long into the future. For them, "more Europe" means stricter enforcement of budgetary austerity from the center -- German rules for everybody.
Over the next year, this inherent contradiction is likely to cause increasing discord and rivalry within the EU as the political argument plays out against a deteriorating economic climate. Britain's refusal to go along with a new European treaty at the December 2011 Brussels summit led to screaming headlines about a continental divorce. But it is likely to be just a foretaste of things to come. The development to watch for in European politics will be the rise of political parties that are more nationalist in tone and that take a much more skeptical attitude to the European Union -- not to mention the single currency. Marine Le Pen and the National Front will do well in the upcoming French presidential election. Other rising Euroskeptic parties include the Freedom Parties in the Netherlands and Austria, the Northern League in Italy, the True Finns in Finland, and a motley collection of far-right and far-left parties in Greece.
Ironically, this intensifying crisis in Europe comes just at the time that the United States has decided to readjust its foreign policy to concentrate much more on Asia and Pacific. Although the "pivot to Asia" is being presented as a far-sighted reaction to long-term economic trends, it also represents an adjustment to a shift in the global balance-of-power in the aftermath of the global economic crisis.
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