Archive for the ‘Foreign Policy’ Category

The emerging-world consumer is king

Intelligence agencies seldom take a sunny view of the world. Yet the latest report from America’s National Intelligence Council (“Global Trends 2030: Alternative Worlds”) is rather cheerful. The council frets about threats ranging from cyber-sabotage to nuclear holocaust (in a brilliant piece of understatement it warns that “Russia could become a very troublesome country”). But it argues that the most important trend in the coming decades will be the growth of the global middle class.

Britain, where the industrial revolution began, took 150 years to double its income per head. America took 30. China and India have pulled off the same feat in a fraction of the time and on a larger scale. The result is an explosion in the number of people who can afford middle-class luxuries, such as a nice home and a good start for their children.

The council is not alone in thinking that, despite the threat of bubbles and hard landings, the new middle class is the future. The Boston Consulting Group (BCG) predicts that there will be nearly a billion middle-class Chinese and Indians—some 320m households—by 2020. McKinsey & Co, another consultancy, points out that consumption tends to follow an “S” curve. When people’s income hits a certain point, demand for consumer goods surges. It later levels off: a family’s first fridge is a colossal blessing, but two would make the kitchen seem crowded.

Western companies ask: how can we appeal to the new kings and queens of consumerism? And how can we compete with sharp-elbowed rivals from the emerging world? Dozens of books and articles have tried to grapple with these questions. Two stand out: “The $10 Trillion Prize” by Michael Silverstein and three colleagues at BCG and “What Chinese Want” by Tom Doctoroff, of J. Walter Thompson, a marketing company. Read more…

As published in www.economist.com on January 5, 2013.

World Politics After the Boom in Unconventional Energy

By Aviezer Tucker

Dmitri Medvedev wishes “Good Luck!” to the Nord Stream pipeline. (Alexander Demianchuk / Courtesy Reuters)

The energy map of the world is being redrawn — and the global geopolitical order is adrift in consequence. We are moving away from a world dominated by a few energy mega-suppliers, such as Russia, Saudi Arabia, and Venezuela, and toward one in which most countries have some domestic resources to meet their energy needs and can import the balance from suppliers in their own neighborhood. This new world will feature considerably lower energy prices, and in turn, geopolitics will hinge less on oil and gas. Within the next five to ten years, regimes that are dependent on energy exports will see their power diminished. No longer able to raise massive sums from energy sales to distribute patronage and project power abroad, they will have to tax their citizens.

The revolution in unconventional energy production results from technologies that make drilling and extraction from underground shale formations increasingly easy and cheap. One cutting-edge procedure, hydraulic fracturing, involves injecting a mixture of sand, chemicals, and either water, gel, or liquefied greenhouse gases into shale rock formations to extract hydrocarbons. Although the technique was first conceptualized in 1948, only recently have other technologies arrived to make it commercially viable. (One such procedure, horizontal drilling, allows operators to tap into shallow but broad deposits with remarkable precision.)

Hydraulic fracturing has been used widely for only about the past five years. But the result — a staggering glut of natural gas in the United States — is already clear. The price of natural gas in the country has plunged to a quarter of what it was in 2008. The low price has prompted changes throughout the U.S. economy, including the projected retirement of one-sixth of U.S. coal power generation capacity by 2020, the conversion of hundreds of thousands of vehicles from gasoline to compressed gas, and the construction and repatriation from China of chemical, plastic, and fertilizer factories that use natural gas as both raw material and fuel. By 2025, the professional services firm PricewaterhouseCoopers predicts, energy-intensive industries will create a million new U.S. jobs. Read more…

Aviezer Tucker is Assistant Director of the Energy Institute at the University of Texas at Austin.

As published in www.foreignaffairs.com on January 9, 2013.

Eve of Disaster

By Charles Emmerson

The leading power of the age is in relative decline, beset by political crisis at home and by steadily eroding economic prowess. Rising powers are jostling for position in the four corners of the world, some seeking a new place for themselves within the current global order, others questioning its very legitimacy. Democracy and despotism are locked in uneasy competition. A world economy is interconnected as never before by flows of money, trade, and people, and by the unprecedented spread of new, distance-destroying technologies. A global society, perhaps even a global moral consciousness, is emerging as a result. Small-town America rails at the excessive power of Wall Street. Asia is rising once again. And, yes, there’s trouble in the Middle East.

Sound familiar?

In many ways, the world of 1913, the last year before the Great War, seems not so much the world of 100 years ago as the world of today, curiously refracted through time. It is impossible to look at it without an uncanny feeling of recognition, telescoping a century into the blink of an eye. But can peering back into the world of our great-grandparents really help us understand the world we live in today?

Let’s get the caveats out of the way upfront. History does not repeat itself — at least not exactly. Analogies from one period to another are never perfect. However tempting it may be to view China in 2013 as an exact parallel to Germany in 1913 (the disruptive rising power of its age) or to view the contemporary United States as going through the exact same experience as Britain a century ago (a “weary titan staggering under the too vast orb of its fate,” as Joseph Chamberlain put it), things are never quite that straightforward. Whereas Germany in 1913 explicitly sought a foreign empire, China in 2013 publicly eschews the idea that it is an expansionist power (though it is perfectly clear about protecting its interests around the world). Whereas the German empire in 1913 had barely 40 years of history as a unified state behind it and was only slightly more populous that Britain or France, China in 2013 can look back on centuries of continuous history as a player in world affairs, and it now boasts one-fifth of the world’s population. Whereas Germany’s rise was a genuinely new geopolitical phenomenon in 1913, the rise of China today is more of a return to historical normality. These differences matter. Read more…

Charles Emmerson is the author of the forthcoming “1913: In Search of the World Before the Great War” and is a senior research fellow at Chatham House.

As published in www.foreignpolicy.com on January 4, 2013.

The troubling similarities between the fiscal mismanagement in Washington and the mess in the euro zone

For the past three years America’s leaders have looked on Europe’s management of the euro crisis with barely disguised contempt. In the White House and on Capitol Hill there has been incredulity that Europe’s politicians could be so incompetent at handling an economic problem; so addicted to last-minute, short-term fixes; and so incapable of agreeing on a long-term strategy for the single currency.

Those criticisms were all valid, but now those who made them should take the planks from their own eyes. America’s economy may not be in as bad a state as Europe’s, but the failures of its politicians—epitomised by this week’s 11th-hour deal to avoid the calamity of the “fiscal cliff”—suggest that Washington’s pattern of dysfunction is disturbingly similar to the euro zone’s in three depressing ways.

Can-kicking is a transatlantic sport

The first is an inability to get beyond patching up. The euro crisis deepened because Europe’s politicians serially failed to solve the single currency’s structural weaknesses, resorting instead to a succession of temporary fixes, usually negotiated well after midnight. America’s problems are different. Rather than facing an imminent debt crisis, as many European countries do, it needs to deal with the huge long-term gap between tax revenue and spending promises, particularly on health care, while not squeezing the economy too much in the short term. But its politicians now show themselves similarly addicted to kicking the can down the road at the last minute. Read more…

As published in www.economist.com on January 5, 2013 (from the print edition).

Self-defeating antics of US Congress reflect declining status and global influence

By Kenneth Weisbrode

Governance in the United States is at a standoff. The crisis over the federal budget has led many people around the world to wonder if Americans haven’t lost their minds. Ultimately, as Winston Churchill infamously observed, they may be counted on to do the right thing after exhausting all other options. But this hardly is sound policy with every new vote in Congress. Maybe the latest crisis is symptomatic of a deeper and even more serious problem.

War at home and abroad: US invasion of Iraq precipitated decline of influence abroad (top); Republican opponents of President Obama, John Boehner and Mitch McConnell (below) – inability of a deeply partisan US Congress to agree on taxes and spending contributes to the sense of American decline

The future of the United States – and the American experiment – seems bleak. The optimism for which Americans are known comes less readily. While pessimism is nothing unique in American history – widespread since the time of the Puritans – its prevalence today is spread by the realization that the country’s position of global superpower may soon be lost.

This realization, regarded as a “post-hegemonic” fact, is no longer controversial. All empires vanish eventually. Hegemony indeed may be a form of imperial rule – it’s been called an empire with good manners – but that’s beside the point. American hegemony may be giving way to some other post-hegemonic condition. It is hard to say where it will lead, or what it signifies.

“After forty, all life is a matter of saving face,” Thomas Heise has written. “For those whose successes have run out early, the years are measured less by the decreasing increments of honors achieved, than by the humiliations staved off and the reversals slowed.” This diagnosis for America itself, increasingly difficult to refute, raises the simple question: Will life go on as before, only with less ostensible concern for the rest of the world, or more?

Some may say this would make the US a more “normal” nation. Normality resides in the eye of the beholder. Each nation is as normal or as abnormal as its people and observers imagine it to be. Many Americans still regard superpower status as being normal, however unpopular the burdens of global leadership are at times. The power of the US dollar, visa-free travel throughout much of the world and the global prevalence of English are still widely taken for granted, despite the country’s difficulties.

Yet this moment may represent a major psychological, even metaphysical, shift in the way that Americans relate to the rest of the world. To understand the change we must begin with perceptions.

The sheer size of America’s military and economy, its commercial and technological success, and the global penetration of its culture have underwritten a high standard of living and influence over others. Earlier, its reputation as a dynamic, free, prosperous nation – in the words of William Penn, a “good poor man’s country” – allowed some people to champion a special destiny for the proverbial people of plenty. This was later matched by the growth of the nation’s physical power. Read more…

Kenneth Weisbrode is a writer, editor and historian. His latest book is On Ambivalence (MIT Press).

As published by Yale Global on January 2, 2013.