by Robert Muggah and Yves Tiberghien
February 2, 2018
Three competing versions of the future world order clashed at the World Economic Forum’s gathering in Davos last week. There was the one pushed by a feisty Donald Trump calling for economic nationalism and his country’s retreat from the current order. Another was advanced by Chinese leaders who proposed a new global economic system built around Beijing. And then there was Canada’s Justin Trudeau and France’s Emmanuel Macron who urged western leaders to double down on the current liberal order.
It would be a mistake to dismiss their speeches as spectacle alone. This debate is enormously consequential. Whichever way the global order turns will shape global stability and the security and prosperity of all people, not least Canadians. If the leaders of the world’s major countries and most important international organizations cannot find a satisfactory way forward, the potential for conflict and meltdown will sky-rocket. Rather than withdraw, what is needed more than ever are new ideas, institutions and skill-sets to navigate the coming storm.
Make no mistake — we are living in abnormal times. While it still has some fight, the global liberal order which prevailed for the past seven decades is facing its greatest battle since its inception. And as international affairs shifts toward a multi-polar reality, profound instability is inevitable. If not handled with extreme caution, the potential for a major collapse is real. The question that emerged from Davos is whether the current crop of world leaders are able to fully grasp what is happening, much less forge the necessary collective action to set new rules of the road.
While battered, the global liberal order served as the bedrock of peace, prosperity and stability since 1945. It was conceived of and installed by the U.S. and its western allies in order to prevent the recurrence of world war and the economic nationalism giving rise to it. It is made up of the United Nations, the International Monetary Fund and World Bank, the World Trade Organization, the North Atlantic Treaty Organization, the G20 and a vast array of treaties and agreements. While not benefiting everyone equally, it nevertheless enabled a positive-sum game after eons of anarchy.
While no one disputes that a rules-based system is essential to managing security and trade, a power struggle is underway over who writes and enforces it. The spectacular rise of China over the past two decades and the relative decline of the U.S. mean that tensions are inevitable. Yet most westerners are only dimly aware of what’s occurring since the carpet was so quickly pulled out from under them. The potential for catastrophic miscalculations — including rash U.S. trade actions against China — are rising with potentially disastrous cascading effects to the global economy.
To get to grips with the seismic shifts underway, consider these five facts.
First, China is in the process of surpassing the U.S. economically. It already exceeds the U.S. in purchasing power parity, or PPP. By one measure, 35 per cent of all global growth between 2017 and 2019 will be generated by China, 18 per cent from the U.S., 9 percent from India, and 8 per cent from Europe. By 2050, the top five largest global economies are most likely to be China, India, the U.S., Brazil, and Indonesia. The question is whether the West is prepared for this new economic order?
Second, China is bank-rolling the largest urbanization and infrastructure development scheme on the planet. Already in its fifth year, the $900 billion “One Belt and One Road” (OBOR) initiative includes new roads, shipping lanes and building projects stretching to over 65 countries. The Chinese are literally rewiring global trade across Asia, the Middle East, Africa and Europe. While details are still murky, OBOR is financed by Chinese state banks and the Chinese-backed Asian Infrastructure Investment Bank in partnership with other institutions.
Third, China is well on its way to becoming a global green powerhouse. China signalled its intention to take the lead on climate change reduction after signing the 2015 Paris Climate Agreement. By 2025, most new vehicles in China will be fully electric vehicles. China is also aggressively cutting coal usage. Already, over 60 per cent of high speed rail in the world is being laid in China (10 times the length set down in Japan, for example). China also recently committed to achieving clean air in all of its major cities within three years. The changes are already being registered: Beijing air is 30 per cent cleaner this winter than last winter.
Fourth, China is also setting the global pace in terms of its digital economy, including cashless transactions. In major Chinese cities, up to 90 per cent of all commercial and retail transactions in convenience stores and cafes are occurring through Alipay and Wechat. E-commerce delivery in large Chinese cities through Alibaba is the currently the fastest in the world. The company also racked up sales of $25 billion in just one day — dwarfing the returns of so-called Black Friday and Cyber Monday in the U.S.
Finally, Chinese universities are also vaulting to the top of international rankings. Two schools — Peking University and Tsinghua University — just leapfrogged from well below the top 200 to the top 30 within five years. There are anther 40 universities that are not far behind and set to enter the elite universities in the coming years. While Chinese are still seeking out educations in elite schools in North America and Western Europe, soon they won’t have to.
There is a certain irony in the West’s current predicament. On the one hand, the world is experiencing unparalleled levels of prosperity and connectivity, due in large part to the U.S.-backed global liberal order. Yet these real advances are also accompanied by greater complexity and systemic risks, increasing the very same order’s vulnerability to collapse. The world’s global and national institutions are increasingly incapable of managing stresses to the system. Democracies, as we are starting to see, lack the system of incentives to compel higher-order and longer-term decision-making.
Faced with threats ranging from accelerating climate change to hugely disruptive technological change, the world is in desperate need of stable and able global governance. And yet there is surging opposition to precisely liberal governance due to rising inequalities — especially in the Western middle class — and legitimate frustration with the perceived failures reproduced by the liberal order. Francis Fukuyama, Ed Luce, and Jan-Werner Mueller view populist nationalism as among the gravest threats to future stability. The risk of a disorderly collapse of the global liberal order is at the highest level since its inception.
If the world is to survive the global geopolitical transition, we must first acknowledge that the era of U.S. hegemony is over. Instead, the world is shifting to a new multi-polar order with the U.S. and China at its center and other major powers exerting spheres of influence. What is required, then, is the rebuilding of stable institutions and rules that accept the changed context. They will need to be more inclusive, representative, and legitimate than before. The role of global cooperation mechanisms such as the G20, regional organizations, financial and philanthropic agencies and others — will also need to be elevated. And cities must claim their place, as many already are — witness the U20 of the world’s largest cities to be formally launched in October 2018.
Clearly one of the most important, and complex, features of this monumental transition is the trade chessboard. There are many challenges facing trading nations such as Canada. For example, how can Canada and its allies nudge the global trading system toward more diversification and institutional reform in a way that benefits societies while avoiding triggering a chain-reaction of protectionist moves? How can necessary reforms be introduced at the domestic level without deepening inequalities and tipping the balance even more against those left behind? Ultimately, Canada needs to join the TPP in order to buttress its partnerships with Japan (with a view of extending its relationships with Korea and Indonesia, among others) while also pursuing robust agreements with China, India and across Southeast Asia.
Many of these changes will be hard to swallow for traditional stalwarts of the global liberal order, accustomed as they are to the trans-Atlantic alliance with the U.S. at its core. The trade-offs pursued by countries such as Canada will need to be explained to a public that is accustomed to more gradual linear change. The current and future geopolitical and economic transformations are both non-linear and increasingly exponential processes that are hard for people to grasp. Most westerners adhere to a world view that anticipates the forward march of democracy and adherence to the principles on which they are based. To thrive, Canadians and others will be required to compromise and accommodate multiple value systems.
The emerging global order will doubtlessly be more complicated and potentially more precarious than the present one, but that is the brave new world we face. The challenge for Canadians is to prepare for a world of tomorrow, rather than reverting to the world of yesteryear. Canada has an essential role to play as a mediator and broker, but also as a progressive hub of global governance entrepreneurship. There is no time to lose. Innovation and experimentation are the order of the day. Canada would do well to closely examine not only its own rich experiences, but also the successful experiments underway in places like Singapore, South Korea, and indeed some provinces of China. Now is the time to generate new partnerships across government, business and social and academic institutions.
Robert Muggah is the co-founder of the Igarapé Institute and SecDev Group, visiting faculty at Singularity University and UBC and an associate of the World Economic Forum
Yves Tiberghien is an Associate Professor of Political Science, Director Emeritus of the Institute of Asian Research at UBC, and Founding Chair of Vision20.