Prelims

Half Title

Beyond Confrontation

Title Page

Beyond Confrontation: Globalists, Nationalists and Their Discontents

by

Phil Mullan

United Kingdom – North America – Japan – India – Malaysia – China

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Emerald Publishing Limited

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First edition 2020

© 2020 Phil Mullan. Published under exclusive licence by Emerald Publishing Limited.

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Contents

List of Figures and Box

List of Abbreviations

About the Author

Phil Mullan combines business management with research and writing, primarily on economic topics. He is the author of Creative Destruction: How to Start an Economic Renaissance (Policy Press, 2017) and The Imaginary Time Bomb: Why an Ageing Population Is Not a Social Problem (IB Tauris, 2000).

Having completed eight years in Senior Management roles with Easynet Global Services, an international communications services company, he is now a Business Consultant and a Charity Trustee. Previously, from 1996 until 2003, he was the Chief Executive of Cybercafé Ltd., running the Cyberia franchise, which had opened the world’s first internet café in London in 1994.

Preface

Introduction: Global Times

“Be convinced that to be happy means to be free and that to be free means to be brave. Therefore do not take lightly the perils of war.”

Thucydides, The History of the Peloponnesian War

Blueberry sales have recently surged across Europe. In Britain, they have even overtaken those of the raspberry, the favourite fruit grown domestically. Blueberries’ relatively long shelf life for a soft berry appeals both to retailers and shoppers since neither likes to be stuck with punnets of rotting fruit.

Only a tiny share of blueberries sold in Europe is harvested there. Most are imported from Argentina and Chile where the terrain is better suited to acid-loving plants. The durability of the fruit suits the three-week sea voyage to Europe without losing freshness. And with labour costs in South America about one-tenth of those in Western Europe, prices are competitive with fruits produced in Europe.

Blueberries are one of a thriving group of global commodities. And while shoppers in London or Berlin buy their fresh fruit from Argentina, many businesses produce across borders too. The Apple iPhone is sold around the world and also involves one of the most internationalised of production processes. Making the smartphone involves operations in many parts of the world.

Many of us will have seen the sign on the iPhone packaging that it is “designed in California”. Many are also aware that the phones are mostly final assembled by two Taiwanese companies, Foxconn and Pegatron, in their factories in China. Emphasising the global nature of production, Foxconn has already diversified some iPhone assembly into India, while Pegatron has plans to assemble in Indonesia.

Meanwhile, the individual iPhone parts are not just made in China, Taiwan and South Korea but are mostly imported from manufacturers around the world. Apple uses specialist manufacturers from a multitude of geographies to deliver individual items, including the battery, the lenses, the camera, the glass screen, the liquid crystal display, the various digital chips, the gyroscope, the compass and the phone shell. Factories producing these hundreds of individual components are located in more than 30 countries (Costello, 2019).

Apart from fruit sales and hardware production, other global linkages have proliferated. An email communication from Delhi will arrive in Paris instantaneously. The football FIFA World Cup final in 2014 between Germany and Argentina attracted over one billion viewers. A similar number watched the 2015 cricket World Cup match between India and Pakistan. Movies open on the same weekend in cinemas as far apart as New Zealand and the Netherlands. In so many ways, the world’s cultural and economic lives are more interconnected than ever before.

Interconnectedness: Deterrent or Stimulant of Conflict?

It is often assumed that this increasingly interconnected world is a less conflict-prone world. With greater economic interdependence, surely governments would be foolish to confront each other. Closer connectedness should herald an era of peace, at least between the prosperous advanced countries that have far too much to lose from war. But the history of the twentieth century is not so reassuring.

That same assumption at the start of that century saw many deny that anything like the First World War could happen. The rapid expansion of the world market from the late nineteenth century suggested the prospect of continued peace, progress and prosperity – at least within the most developed countries.

Norman Angell’s 1910 book The Great Illusion seemed to capture this mood.² The “illusion” he sought to dispel was that nations could gain by military confrontation. He argued that because of economic interdependence, war between the major nations would be futile and counterproductive. He also thought nationalist sentiment could no longer motivate the leaders of industry, because

the capitalist has no country, and he knows, if he be of the modern type, that arms and conquests and jugglery with frontiers serve no ends of his, and may very well defeat them. It seems the “global citizen” is an old idea.

Although Angell himself was anxious that disastrous wars could still happen, many who subscribed to his thesis saw it as an argument that war was now impossible. Of course, they were soon disabused. An uncontrolled escalation of rivalries culminated in not just one but two world wars, interspersed by periods of instability, depression, protectionism, militarism and barbarism.

But despite the bloody realities of the First and then the Second World Wars, the notion that interconnectedness guarantees peace persisted. After the second of these wars, a new world order emerged under US hegemony, regulated by a network of institutions and a legal framework conditioned by the experiences of previous decades. This settlement was powerfully legitimised by two phenomena: the outbreak of the Cold War that pitted a free, liberal West against an authoritarian repressive Soviet bloc, and also by the post-war economic boom in the industrialised capitalist nations.

Carl von Clausewitz famously said that war is a continuation of politics by other means. We can go further by adding that politics is often influenced by economic developments. However, politics, and the possibility of war, is never determined solely by economic considerations. In consequence, economic interconnectedness is not a deterrent to conflict. On the contrary, it can become a tense source of friction. Economic troubles and joblessness at home often get blamed on trade and capital flows across borders.

Thus, it is more than coincidental that signs of the crumbling of the post-war world order first become evident from the 1970s alongside the arrival of the West’s long economic depression. Slowing productivity, the monstrous expansions in debt and a series of recessions culminating in the 2008 Western financial crash have aroused more aggressive competition between advanced capitalist countries.

Against this rivalrous background, the shift in the balance of economic power from West to East and especially the rise of China has deeply unsettled the old order. In response, the declining powers have clung, pragmatically, to the existing structures and rules that they established and still oversee, though often clashing with each other in the process. Meanwhile, the rising powers, generally excluded from positions of authority in those institutions, have been, selectively, challenging the old framework. This has included setting up international organisations side by side with the existing ones.

As a consequence, conflict between countries is being channelled through interdependence, rather than being contained. Closer links provide a means of furthering national interests at the expense of others. For instance, the tool of sanctions uses economic dependence to pressurise targeted nations.

The closer countries become connected, the more weapons are available, ranging today from disrupting global supply chains to controlling international payments systems. Political scientist Abraham Newman has explained that the very networks of globalisation that were supposed to “liberate business and bring peace” have become “a yoke on business and a source of coercion” (Farrell & Newman, 2019).

For instance, alongside the high-profile trade wars launched by the United States against China, in 2019, Japan and South Korea began their own economic war. Japan restricted key chemicals needed by the South Korean information technology industry in retaliation for South Korea’s continued demands for Second World War reparations.

Thus, while economics matters a lot to politics, economic integration doesn’t make international relations more amicable. Geopolitical confrontation operates alongside and sometimes through, denser economic entanglements. Nevertheless, the old notion that international connectedness is a stabilising influence lives on in today’s globalisation thesis. This gives backing to the enormous faith that the globalist leaders who run most Western nations place on the “rules-based international order” as the preserver of peace and prosperity.

Recalling Angell’s contention, this book demonstrates that this belief is one of today’s “great illusions”. We examine how the approaches adopted by Western leaders in pursuit of international stability are ironically an accelerant for instability. Clinging to an anachronism can be dangerous. We propose an alternative not just to the dominant outlook and practices of globalism but also to its supposed antithesis, mercantilism – the idea that trade generates wealth and that government protectionism contributes to the accumulation of lucrative trade balances.

Globalist politicians both stress the importance of established institutions and “weaponise” the existing rules and regulations. Their mercantilist opponents, personified by President Donald Trump, openly resort to trade protectionism. In both cases, defensive measures become aggressive by inflaming hostilities between nations and between regional blocs. The democratic alternative we propose here instead incorporates the possibility of enlightening change, as guided by human agency through the institution of the nation state. In particular, we explain how domestic economic transformations initiated by bottom-up democratic forums are vital to reducing the tendencies towards international conflict.

The Theory of Globalisation

The global developments that impinge on all our lives have fed both the popular and the scholarly belief in globalisation. The latter first gained some credibility as a description of the more integrated world economy, boosted by technological developments, mass consumption, financialisation and the apparent primacy of market forces. The concept of globalisation expressed the belief that the world – economically, politically, culturally and ecologically – is shrinking fast in its social and physical dimensions (Camilleri & Falk, 1992, p. 1).

Globalisation is a relatively recent term. It was only in 1983 that Theodore Levitt, a prominent marketing professor and émigré from 1930s Germany, popularised this previously little used word. His Harvard Business Review article “The Globalization of Markets” triggered a whole new intellectual discourse. Levitt (1983) thought that the latest technologies had brought about a distinct commercial reality: “the emergence of global markets for standardized consumer products on a previously unimagined scale of magnitude”. Today, just about everything is viewed through the prism of globalisation (Held & McGrew, 2003).

Despite its ubiquity, perhaps because of it, the word globalisation is without an agreed definition. According to the prize-winning scholar Or Rosenboim (2017b), the “multifaceted, flexible character of the idea of the global enhanced its appeal but also highlighted its weakness” (p. 6). For most of its users, globalisation refers to some aspect of the enhanced integration of international markets and higher levels of trade and capital flows. However, this is just the start of its perceived overarching significance.

Others draw attention to the increasing flow across borders of ideas, information and people and often mark out three main types of globalisation: economic, political and cultural (Hoffman, 2003). It appears that no area of life is now unaffected by it. We also have the globalisation of disease, of ethics, of technology, of wealth, of geography, of ecology, of gender equality, of terrorism and of religion (Conner, 2004, pp. 2–5).

By the end of the last century, David Held, an influential writer on international relations, warned that the term is “in danger of becoming, if it has not already become, the cliché of our times”. He and his colleagues then proceeded to provide a definition, which has become the standard one cited in academia:

Globalization can usefully be conceived as a process (or set of processes) which embodies a transformation in the spatial organization of social relations and transactions, generating transcontinental or interregional flows and networks of activity, interaction and power … (and) can be thought of as the widening, intensifying, speeding up, and growing impact of world-wide interconnectedness. (Held, McGrew, Goldblatt, & Perraton, 1999)

A bit of a mouthful. Helpfully, the authors clarified the historical context:

(C)ontemporary patterns of globalization mark a new epoch in human affairs. Just as the industrial revolution and the expansion of the West in the nineteenth century defined a new age in world history so today the microchip and the satellite are icons of a new historical conjuncture. By comparison with previous periods, globalization today combines a remarkable confluence of dense patterns of global interconnectedness, alongside their unprecedented institutionalisation through new global and regional infrastructures of control and communication, from the WTO [World Trade Organization] to APEC [Asia-Pacific Economic Cooperation]. Driven by interrelated political, economic and technological changes, globalization is transforming societies and world order. (Held et al., 1999)

In short, technological and related development has driven the world’s evolution into a distinctive and fast-changing era. The particular emphasis on the institutionalised expressions of globalisation points to the political importance of the thesis as prescriptive for how our lives should be conducted. Although “globalisation” is sometimes loosely equated to “internationalisation”, this association downplays the crucial political significance of globalisation as an edict of governance.

Far from globalisation being a quantitative, or qualitative, extension of economic internationalisation, politically it is its opposite. While internationalisation relates to links between nations, the dominant theories of globalisation transcend the framework of nations and nation states. Rosenboim pointed out that the word “international” attributes importance to the nation, or the state, as a “defining, order-creating unit, and explores the relations between nations as sovereign entities”. While the “international” assumes mediation through states, “globalisation” in contrast assumes the diminution of the state and privileges the political role of the globe as a whole (Rosenboim, 2017b, pp. 3–4).

In political praxis, the globalisation thesis favours technocracy over democracy and the ascendancy of supranational institutions over nation states. This follows from the blame it heaps on nationalism and democracy for the barbaric catastrophes of the first half of the twentieth century. It is this prescriptive, rather than the descriptive, element of globalisation that unsurprisingly has come to the fore as the post-war order has experienced increasing strain.

A Less Controllable World?

While increasing interconnectedness is real, it doesn’t substantiate the core premise of most globalisation literature: the idea that impersonal, autonomous global forces dominate humanity. The thesis presents the world as more complex, uncertain and out of control. Political scientists Robert Keohane and Joseph Nye (1977) describe this as “complex interdependence”.

This notion of global complexity underpins the most critical and far-reaching of the globalist tenets: that national political activity has become much less effective and often detrimental. In her seminal book The Retreat of the State, the scholar Susan Strange (1996) explained how global economic and financial developments had rendered the nation state obsolete. Nation states have supposedly become “disempowered co-players” embedded in “irreversibly globalized markets” (Habermas, 2015, pp. 87–90; Hardt & Negri, 2000). This idea – that the nation state has become irrelevant as the prime political mover – is erroneous in fact, self-serving in theory and dangerous in practice.

Globalist thinking assumes that national political activity and national sovereignty are supplanted because they are no longer able to meet today’s global challenges. The existence of our global problems is thought to require “global”, not national solutions (Mounk, 2018, p. 60). Thus, globalisation theory is much more than a description of internationalised production and trade; it embodies the ascendancy of complexity over mastery, of the global over the national and of supranational institutions over nation states.

The most developed representation of supranational organisation is the European Union (EU). Its genesis was in the European Coal and Steel Community (ECSC) established in 1951. Motivated by the French foreign minister Robert Schuman as a way to prevent another war between France and Germany, the aim of strengthening European economic integration was to make war not only “unthinkable but materially impossible”. However, the inter-country clashes within its EU successor over, among other matters, the crisis within its common currency zone, migration flows and interpretations of the rule of law, bring to mind the follies of that pre-1914 complacency about the impossibility of conflict.

The fundamental danger of globalist thinking is that the very discounting of national politics does make the world more out of control and less certain. Belief in the undermining of national authority and power by globalisation reinforces the fatalist component within present-day thought. This is counterproductive to solving the world’s real problems.

More than ever, we need collective human capabilities to overcome our biggest challenges. We already have the means: the same technological, economic and social developments that inform the globalisation thesis actually provide us with greater capacity to influence and mould our world. Not least a more extensive international division of labour expands humanity’s productive capabilities and resources.

Yet regarding the nation state as impotent abandons the only effective, and potentially legitimate, vehicle so far developed for executing human agency. By rejecting the institution of the nation state, globalist politicians give up on the main instrument through which people could take some control of their lives. Collaborative international problem solving is best achieved through nations acting together, not by demeaning proven national apparatuses in favour of undemocratic supranational bodies.

National Sovereignty Curbed

The defining political habit of the past three decades is of Western politicians giving away their powers to a multitude of appointed technocratic bodies, both transnational and national ones. National political enfeeblement has thereby become institutionalised. When national politicians outsource their responsibilities to globalist bodies and mechanisms, they make themselves doubly ineffectual. They delegate their authority in the first place and then become subordinate to the new globalist arrangements. The rules and boundaries imposed by the international bodies render national governments even less capable of autonomous action.

For instance, at the turn of the millennium, a dozen EU governments accepted the use of the euro in place of their national currencies. They hoped this could bring about improved currency stability, since the new supranational currency would be further removed from the pressures of national economic conditions and policies. Wim Duisenberg, the founding president of the European Central Bank (ECB), stressed this feature by presenting the euro as the first currency to have severed its link not only to antiquated gold but also “its link to the nation state”. This was a prototype globalist currency.

Within a decade, the eurozone crisis shattered the illusions of being able to eclipse the national. In reality, national economic problems and differences still mattered a lot. But by then, national governments, not least in Greece, saw themselves helpless in the face of economic chaos. Because of the euro framework, governments couldn’t resort to currency devaluation or decide how much to borrow to dig themselves out of the mess. The distress of nation state impotence was the self-produced outcome of globalist initiatives.

Democracy Degraded

Giving up on national sovereignty eviscerates democracy. In place of the national arena comes the formal suggestion that democracy needs to be reinterpreted for the new global times. This proposition is usually expressed as a combination of local, community-based voices alongside supranational mechanisms. But in most matters, local democracy has too little weight to make a real difference to folks’ lives, while supranational authority has failed to attain democratic legitimacy.

The same suggested impotence of national politicians is offered as justification for abandoning political accountability. It is “difficult” to see, argued the political scientist Yascha Mounk, what the realistic alternative is to relying to a greater extent on the technical expertise of unaccountable international organisations. We must choose, he argued, between achieving international cooperation on key issues such as climate change and the spread of nuclear weapons “by a troublingly undemocratic path” and “not achieving it at all” (Mounk, 2018, p. 96).

The late German sociologist Ulrich Beck came to the same conclusion. He suggested that the recent scale of social and economic transformation has been so extreme that it amounts to a “metamorphosis of the world”. He deduced that if “one acts nationally … one is left behind”. Additionally, Beck thought a continued attachment to the nation gets in the way of finding solutions. He drew on what he described as the “common sense” insight that no nation state can cope alone with the global risks of climate change and extrapolated that the principle of national sovereignty is “an obstacle to survival of humankind” (Beck, 2016, pp. 4–5, 9–10,17–18, 35).

But why do states have to act “alone”? Why is inter-nation cooperation not possible anymore to address international challenges? The answers suggested by globalists tend to be vague but imply a loss of faith in ordinary men and women acting with such “common sense”.

The globalist disparaging of national politics takes advantage of popular political disconnection. The failure of the old political parties, particularly since the 1980s, to offer compelling visions to the electorate has led to disillusionment. This loss of legitimacy reinforced declines in traditional party membership levels and falling electoral turnouts. When the political class also belittles national policies on the basis that the global arena is now the relevant one, then domestic politics appears even less consequential. Politics seems instead to revolve around careerists and self-important personalities.

Ordinary citizens living far beyond elite circles became even further disengaged, adding to scepticism about what is politically possible. In an inversion of reality, frustrated individuals are seen as the source of the democratic crisis. Mainstream commentators blame them for being apathetic, when it is the failures and excuses of national and globalist politicians that have discredited modern politics.

The anti-democratic propensity within the globalist perspective has recently become much more evident. Since 2016, globalists have rubbished the actions of the populace who voted in large numbers for Brexit, or for Trump as US president, or for “populists” across Europe. The previous aloofness of politicians became contempt for ordinary people who failed to vote as advised. The electorate was patronised as having been duped or, at best, badly informed. Some were described as “deplorable” and imagined to be motivated by racist, xenophobic thinking.³ In fact, survey evidence confirmed that most of the contrary voters simply wanted things to change for the better (Economist Intelligence Unit, 2018, p. 4).

There is much that is new about internationalisation today that we need to understand. None of it, though, renders the nation state, sovereignty and collective human action as obsolete. Greater global interconnectedness has no determinate consequence for the potential potency of a nation state’s policies. Moreover, none of what is novel vindicates putting up with the old status quo. And none of it excuses the top-down globalist and mercantilist approaches that are exacerbating inter-nation tensions.

Global Frameworks Under Strain

We have entered another unstable era for the world order. Every four years, the US National Intelligence Council produces its Global Trends “map of the future”: a strategic assessment of how the world might look over the next 20 years. Its January 2017 report anticipated increasing tensions between countries and heightening of the risk of interstate conflict during the ensuing five years. It concluded with a picture of increased international tension:

The near-term likelihood of international competition leading to greater global disorder and uncertainty will remain elevated as long as a la carte internationalism persists. As dominant states limit cooperation to a subset of global issues while aggressively asserting their interests in regional matters, international norms and institutions are likely to erode and the international system to fragment toward contested regional spheres of influence. (National Intelligence Council, 2017, p. 44)

This is an accurate description of the state of the world: international fragmentation around fluid regional groupings. It is telling that this official American assessment of global fragility was prepared before Trump entered the White House. It is, therefore, unhelpful to concentrate, as so many commentators do, on Trump’s impromptu and arbitrary overseas policy initiatives as being the source of international conflict. His mercantilist actions don’t help, but they are not the underlying cause of confrontation.

Instead, today’s impending geopolitical rupture derives from the unusual collision between two epochal developments. This is the distinctive feature of modern international relations. First, the centre of global wealth creation has shifted from West to East, specifically from the United States to China, while the distribution of power within international institutions still reflects the very different economic world of 1945. This incongruity is bound to foment tension.

Some anticipate a Thucydides moment. In his history of the Peloponnesian War 2,500 years ago Thucydides wrote that “What made war inevitable was the growth of Athenian power and the fear which this caused in Sparta”. Today, we appear to be on the same path as old and new powers clash.

Just as Sparta could not expect always to be on top, so America, and the West in general, should not expect always to be the dominant powers. The problem is that a rising China is bringing out the anxieties within declining America and Europe. West-East animosities are heating up over trade, technology, investment and geopolitical influence around the world. The EU and the United States agree in officially describing China as not only an economic competitor but also as a systemic threat.

But a second phenomenon exacerbates this flux. Escalating strains within the old Western world add to the disruptive mix. International rivalries reminiscent of a century earlier are sharpening, aggravated by these advanced industrial countries’ collective failure to recover after the crash and recessions of 2008 and 2009. In particular, transatlantic ructions between the United States and EU countries have turned bitter.

Thus, mounting West–East tension is interacting with chronic intra-West tensions. While all the major nations will seek to avoid a frontal military confrontation between each other, this is not the way a world war is likely to begin. An escalation in one, or several, of many hotspots around the globe – including the Middle East, the South China Sea, the Balkans or Sub-Saharan Africa – could see the big powers finding themselves on opposite sides. Actual fighting could break out. If this happens, it might appear the outbreak of global conflict is “accidental”, but the roots will be these two big international trends.

Either one of the two could on their own precipitate confrontation. Their fusion brings even greater danger because each makes it harder to deal with the other. The West’s economic decline relative to the East reinforces frictions between the leading industrial economies as each vigorously seeks to reap advantage from world markets. When one Western power sanctions China, this creates competitive opportunities for others (Rosenberg & Saravalle, 2018). For instance, the US threat in 2019 to extend financial sanctions against Chinese companies encouraged Britain’s authorities to double down on promoting their service offerings to these same firms (UK Government, 2019).

Meanwhile, the malaise and disunity within exhausted and fearful Western countries makes it more difficult for them to negotiate together a new international set-up with the world’s rising nations. Also by providing a convenient foreign scapegoat for the West’s economic troubles the rise of China helps Westerners evade that the real roots of economic decay are at home. These problems should be addressed domestically rather than dodged by assigning false blame on other countries.

The combination of these two trends also means the West can no longer confidently impose its geopolitical agenda on the rest of the world. The current international regime as inherited almost unchanged from the end of the Second World War no longer corresponds to the economic realities. The rise of Asia has decisively flipped the location of production and new wealth generation.

At the end of the Second World War, the United States and Western Europe accounted for the lion’s share of global production. America was by far the supreme nation. Not only had it led the Allied victories over Germany and Japan, it produced about two-fifths of the world’s output.⁴ The rest of the advanced Western nations produced another third.

The global economic hierarchy is very different today. For the first time since the industrial revolution, a greater part of world production happens outside the advanced industrial economies than inside. Fig. 0.1 shows that the US national share of world output fell below a quarter by 1970 and has been below a fifth, and falling, since the 2008 crash.⁵ Western Europe taken collectively was the biggest region between the mid-nineteenth century and the Second World War. It fell just behind the United States after the war and has since tracked America’s steady decline.

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Fig. 0.1.

Changing Shares of World Output, 1500–2018 (Years 1500–1990: Maddison, 2003; Years 2010 and 2018: World Bank World Development Indicators, 2020: GDP, PPP (Current International US$)).⁶

On the ascending side, China has now overtaken the United States and Western Europe to become the world’s largest economy.6 India is in third position as a nation. On present trends, until at least the late 2020s, more than two-thirds of global economic growth is expected to come from the non-advanced countries.

These economic shifts should not be surprising to any Western government since balanced development across all countries would be exceptional. Nevertheless, tension derives from the mismatch between where economic power now lies and which national authorities politically dominate international institutions.

Even when international regimes are promoted in the language of universal equality, as was the case after 1945, the reality is an uneven world with inequalities of national power. The more powerful countries imposed their wills on the less powerful. Hence, the international arrangements agreed at the end of the Second World War expressed the balance of forces in the world then. Now, the material basis of that order has irretrievably gone.

Those on top will always try to extend their dominion. The Western powers today though seem unusually reluctant to let go. This doggedness to perpetuate the past is significantly reinforced by internal unease within Western elites.

The Enlightenment belief that a better system is worth striving for has lost its appeal. Aspiration to lead change is enfeebled. The idea of progress itself has become tainted through the cumulative impact of the daunting experiences endured since the First World War (Furedi, 2014). This informs today’s peculiarly pervasive sense of uncertainty, inducing an impulsive attachment to the status quo.

For the past three decades, “TINA” has increasingly dominated the Western outlook. “There is no alternative” to how things are has become the stock leadership response to the fear of change. It is as if they all want to freeze the world as it was, with them in charge. So, the mercantilist Trump argues for technology wars to preserve America leadership. Meanwhile, the globalist school holds that there is no alternative for maintaining stability to retaining the liberal international order and the pre-eminence of Western values.

The Battle Over Rules and Institutions

It is true that universally agreed multilateral rules and institutions are helpful in some circumstances. They can smooth international working arrangements. For example, when foreign investment regulations provide a common framework it facilitates new cross-border ventures.

However, such benefits are secondary to the question of the legitimacy of the overarching arrangements. For many years, consent to the post-1945 order has been withering, especially among developing countries inspired by a more dynamic China. The tarnishing of Western authority was further reinforced by the 2008 financial crash, specifically the damage done to the reputation of the US economic model from being at the epicentre of the crisis.

The next geopolitical transition will adjust how world order is maintained. When any international hierarchy is no longer materially justified, the process of change is usually protracted and disruptive. But changing a rules-based institutionalised system creates particular challenges because it has embedded the authority of the dominant powers at the time of its establishment. This mode of order provides political leverage to the incumbent countries.

Authority that is derived from a depoliticised rules-based order arises precisely because it is not subject to the whims of political contestation. To retain dominion the rules don’t even need to be enforced that often, nor does everyone have to fully grasp their specifics. The fact of established rules, especially judicially overseen ones, gives the system an objective validity that discretionary balance-of-power arrangements couldn’t possibly match. Appealing to the authority of this type of order is often sufficient for the national governments presiding over its institutions to get their way.

The predicament today is that this formal authority continues even when the original leaders no longer warrant being leaders on the basis of economic strength. The legitimacy of the rules and the institutional structure gives the old order an aspect of permanence that benefits the founding states. The difficulties Britain had in leaving the institutionalised order of the EU illustrates this wider problem. The inertia built into formalised regimes makes them less adaptable, including being unfitted to incorporate rising nations on equal terms.

Nations inheriting authority from earlier times use that very authority to sustain a status quo even when it no longer corresponds to the reality of the world. They are able to use their presiding rank to resist any change that they perceive would disadvantage them.

For instance, although they can’t justify it on the basis of economics or international fairness, the United States and Europe have continued to run the two most important international economic agencies. They have been insistent in perpetuating the archaic custom that the United States appoints the head of the World Bank, while Europe, now in the form of the EU, selects the head of the International Monetary Fund (IMF). Similarly, Britain and France jealously protect their permanent positions on the United Nations (UN) Security Council (alongside the United States, the Soviet Union (subsequently Russia) and China), when other countries – from both north and south – exert bigger influences in the world.

As a consequence, the international system itself becomes a source of dissension and rivalry. Rising nations question why shouldn’t an Asian or an African lead the IMF or the World Bank? Why does India or Brazil – or Germany or Japan – not qualify to be a permanent member of the Security Council? National differences are expressed and sometimes inflamed through opposing or supporting the existing format of institutions and rules. The rules-based order and its institutions become weapons, used especially by the leadership of those countries who want to hang onto the way things were.

Most countries, ascending or descending, are unlikely to reject the rules-based order wholesale. Few rising nations will want to abandon a system under which they have been able to develop. It is clear that China and other emerging powers have become much stronger economically within the “liberal order” (Stuenkel, 2016, p. 184). Hence, the peculiarity of China criticising the American government for “undermining the rules-based order” that the United States was instrumental in establishing in the first place (Zhong, 2019).

Instead, differences between countries are manifest over the interpretation of rules and over how institutions apply them. For instance, what is meant by the “rule of law” has become an area of national difference, as seen currently with Germany and France clashing with Poland and Hungary over what it means in practice.

The EU spelt out the significance of interpretation when in 2019 it first described China as a “systemic rival”. It pointed out that “China’s engagement in favour of multilateralism is sometimes selective and based on a different understanding of the rules-based international order”. Future cooperation with China would be on the EU’s terms (European Commission, 2019, p. 2).

Conflicting interpretations of rules are also manifest on the other side of the Atlantic. With bipartisan support, the Trump White House has been highly critical both of China and of the WTO for the way trade, investment and state aid rules are being implemented. China is attacked for supposedly “cheating” the WTO system, especially the rules that favour developing over developed countries. The United States says China is now a “rich” country and shouldn’t present itself as not being developed. At the same time, the WTO is blamed for interpreting the rules to the disadvantage of the United States.

These differences can quickly escalate because there is no definitive way to defuse disputes over interpretation. The United States claims it is being treated “unfairly” by China and the WTO. But what is “fair” and “unfair” is in the eye of the aggrieved party. Is it fair or unfair to preserve order by stunting the rise of less developed countries? What is a “fair” measure of economic convergence: the absolute size of an economy or relative living standards that remain uneven between mature and emerging countries despite the latter’s much faster growth? Country-by-country answers to these questions will differ.

Challenges to the old order will most likely be indirect. Rising nations will establish parallel orders that don’t necessarily involve them leaving or openly confronting the longer established structures (Stuenkel, 2016, p. 11). A prominent example is China’s Belt and Road Initiative that offers countries in Asia, Africa, Eastern Europe and even South America, alternative sources of infrastructure funding to the World Bank and other established Western-led multilateral facilities. Given these entities have usually started on a regional – mostly Asian – basis, one of their consequences is to institutionalise the world’s fragmentation, exacerbating tensions between regional power blocs.

In particular, countries will take different approaches to developing new international rules and regulations. This applies especially to emerging technologies. The country that sets the standards in a new technology usually gives its own companies a big advantage. Clashes are already evident over cyber security and digital privacy rules, where China and the West have different priorities and goals.

Countries, or regions, don’t even need to be strong in a technology to try to assert themselves through setting rules. The EU, for example, has been seeking to set standards in car emissions and in data protection, even though its electric car industry and information technology sectors are relatively weak. The expanding international influence of the EU’s General Data Protection Regulation (GDPR) owes more to the EU’s particular expertise in rule-making than it does to European technology companies being world leaders.

Rule setting also becomes a tool for commercial competition. For instance, GDPR rules constrain international businesses from sending customer data collected in Europe into the United States. Data flows are even further restricted into China. This can hold back the development of both American and Chinese headquartered firms. Meanwhile, Chinese companies leading global technology in sectors like electronic payments and bike sharing systems are unable to operate freely in developed countries without falling foul of stricter Western regulations (Beattie, 2019).

The weaponisation of rules and standards leads to specific international organisations becoming battlegrounds between nations. Recently, the United States has been citing “national security” imperatives to exclude Chinese companies from its technology supply chains in areas from 5G mobile networks to surveillance cameras. In response, China has been working through existing international organisations such as the International Organisation for Standardization and the International Telecommunication Union to extend its influence and challenge United States restrictions on its products and equipment.

Even when countries succeed in getting their national standards agreed as the global norm, nothing is permanently settled in today’s febrile climate. Other countries might still go their own way. We can anticipate the regional segregation of rules, standards and institutional structures over some newer technologies: not only probably 5G but also possibly the internet-of-things, artificial intelligence (AI), facial recognition, payment systems, drones and driverless cars. The regionalisation of rules through parallel institutional systems is likely to be a significant way that global fragmentation and friction spreads.

The Choices: Mercantilism, Globalism or Democracy

In these strained conditions, how can prosperity be secured and the drift to war averted?