Feature

How's That New World Order Working Out?

The multipolar moment has arrived -- and it's nothing like Americans imagined.

Looking for a sign of when the multipolar moment suddenly seemed real? You could do worse than mark the day when Brazil and Turkey -- two of the world's most avidly internationalist emerging powers -- joined together this May to announce they had stepped in to broker a nuclear-fuel swap deal with Iran that potentially -- though sadly not actually -- paved the way toward a peaceful solution to the standoff. Turkey and Brazil aren't superpowers, nor are they permanent U.N. Security Council members. But just as U.S. President Barack Obama came into office preaching a renewed focus on multilateralism, rising powers are reminding us that respect for hierarchy is no longer on anyone's agenda.

What a difference a couple of decades makes. A little over 20 years ago, then U.S. President George H.W. Bush -- who had just witnessed the fall of the Berlin Wall and saw the Soviet Union disintegrating before his very eyes -- stood at the granite podium of the U.N. General Assembly in New York and proclaimed a "new world order," a U.S.-dominated international system "where the rule of law supplants the rule of the jungle." Two decades later, the "new new world order" we are in fact living looks almost nothing like what Bush -- and most Americans -- imagined or hoped.

The United States still has the world's most powerful military, of course, but its utility is diminishing as the capacity to deter and resist spreads. Just look at Iraq and Afghanistan. Military might and political influence no longer necessarily go together, and too much of the former can even undermine the latter. More fundamentally, the world has quickly become multipolar, with the European Union a larger economic player than the United States while China rises quickly on all measures of hard and soft power. Obama couldn't give the "New World Order" speech today; he'd have to negotiate it first with his peers in Brussels and Beijing. And as for democracy: Meet authoritarian state capitalism, a new entry into our lexicon that underscores the non-Western options every state can pursue today. Nobody's talking about the Washington Consensus anymore -- instead the Beijing Consensus, the Mumbai Consensus, and even something only half-jokingly called the Canuck Consensus are competing for the hearts and minds of global elites.

Rather than a world of alliances, it's a world of multi-alignment. Globalization means never having to choose sides. Look at the Persian Gulf states. They make big-ticket arms deals with Washington, buying weapons to recycle their petrodollars and deter Iran; sign huge trade agreements with China, where ever more of their oil flows; and negotiate currency arrangements with the European Union. If there is any doubt as to the general lack of foresight that governs international relations today, just consider how America has ceased certain joint weapons production with Israel as punishment for Israel's selling sensitive technology to China, which in turn sells missile technologies to Iran, whose leadership wishes to eradicate Israel from the map. Everyone is playing everyone else in what seem like endless single-iteration prisoner's dilemma games.

Bush Sr. chose to give the speech at the United Nations for a reason: America was the preeminent power, but he was a multilateralist. Paralyzed during the Cold War, the United Nations now had a chance toplay the central role as arbiter of global governance for which it was envisioned. But rather than personify multilateralism itself, the United Nations is proving to be at best just one manifestation of it. Free-standing functional agencies like the World Trade Organization and the International Monetary Fund -- which has only become more important in the wake of the financial crisis -- are our only effective global bodies, and they are solely economic in nature. But the G-20 has hardly lived up to its billing as the new "steering committee for the world." Before the most recent Seoul summit, world leaders described U.S. proposals for harmonizing current account surpluses and deficits as "clueless." The Security Council has long ceased to be legitimate or effective, with little prospect for reform in sight. As we learned so painfully this year, the United Nations can't forge a global climate deal and can't make the world meet the Millennium Development Goals. For every issue there are now several specialized agencies, like the World Food Program and Office of the U.N. High Commissioner for Refugees, that mostly secure their own funding contributions and are evolving at their own pace.

The closest thing we have to multilateral governance happens on a regional level, and it is far more promising, whether the deeply entrenched and supranational European Union, the rejuvenated Association of Southeast Asian Nations, or the nascent African Union. Each is building a regional order tailored to its members' priorities and level of development. On Sudan and Somalia, it's Uganda leading the new diplomatic and peacekeeping push. For Palestine, the Arab League is considering a peacekeeping force. And on Iran, Turkey is now in the lead.

The world of 1990 was expected to remain fundamentally international. Yet instead its very structure has changed as globalization has empowered legions of transnational nonstate actors from corporations to NGOs to religious groups. As a result, today's world features overlapping and competing claims to authority and legitimacy. The Gates Foundation gives away more money each year than any European country. Villagers in Nigeria expect Shell to deliver the goods, not their government. And Oxfam shapes the British development agency's priorities more than the reverse.

Neither the United States nor the United Nations can put the genie back in the bottle. With each passing year, deal-making at Davos and the Clinton Global Initiative become more important than the glacial advance of empty declarations at international summits. These and other venues are the places where the "new new world order" is being built. And it's happening from the bottom up rather than the top down.

ADRIANO MACHADO/AFP/Getty Images

Feature

We Can't Say They Didn't Warn Us

A guide to who's still standing in the post-crash marketplace of ideas.

In a letter to shareholders written just after the dot-com bust, Warren Buffett observed, "You only find out who is swimming naked when the tide goes out." The 2008 financial crisis had a similar effect on our economic and financial gurus: It revealed whose thinking was based on whiggish, End-of-History assumptions about the essential triumph of Western democratic capitalism and whose mental framework admitted the possibility of radical disruption. The thinkers whose intellectual -- and maybe even psychological -- starting point was that Western market democracy is neither perfect nor eternal turned out to be much better at foreshadowing the financial crisis, and it is those thinkers whose ideas are the most relevant today, in the uncertain, post-crisis world.

These specialists in uncertainty are a broad church: They range from academic economists who saw the crisis coming, like New York University's Nouriel Roubini and the University of Chicago's Raghuram Rajan, to philosophers of finance like George Soros and Mohamed El-Erian, who have made huge market bets, as well as intellectual ones, on how bubbles are formed and how they burst. One striking similarity between many of them is that they have seen regime change up close.

The most dramatic example is Soros, whose formative life experience was the Nazi invasion of Budapest when he was 13 years old. That trauma taught him two things: that the world could change overnight, and that those, like his beloved father Tivadar, who responded to that upheaval instantly were the ones who survived. Roubini, who is sometimes caricatured as either Dr. Doom or the Hugh Hefner of the dismal-science set, is likewise best described as a specialist in revolution. He spent his childhood being moved around volatile parts of the world from Istanbul to Tehran to Tel Aviv -- and began his career as an economist studying the 1990s emerging-markets crises in Latin America, Asia, and Russia. El-Erian, Rajan, and Daron Acemoglu, a widely cited young Turkish economist, also have both personal and professional experience of rapidly, and sometimes traumatically, changing social and economic orders.

These men were all born or at least partly raised outside the United States. That is surely no accident. In the 20th century, and even in the 19th and 18th, America was the world's laboratory, the place where many of the best, and most revolutionary, ways of organizing government and the economy were being worked out. The United States is still the world's most powerful country and most intellectually vibrant -- after all, these global thinkers now make their home in America -- but partly because the United States is so big and has been so prosperous for so long, American-centric thinkers have been relatively slow to spot the challenges to the Washington Consensus and offer coherent alternatives.

Being a "global nomad," as Roubini calls himself, has another intellectual advantage. Thanks to communism's collapse, the lowering of trade barriers, and the technology revolution, the world economy is more interdependent than ever. This group takes America's connection to the global economy as the starting point for its analysis -- hence El-Erian's emphasis on global financial imbalances (also a signature theme of Martin Wolf's Financial Times columns) and the relationship Rajan traces between rising income inequality and its U.S. political manifestation in subprime mortgages.

This crew is all about big ideas and the big picture -- their frame of reference is global, and their intellectual strength is their ability to understand that entire economic systems can, and do, collapse. Paradoxically, the opposite impulse is simultaneously in fashion: You might call it the economics of small steps, an approach that eschews the big theory altogether in favor of smaller, achievable, and, crucially, measurable proposals.

Enter Esther Duflo and her frequent collaborator Sendhil Mullainathan, guiding lights of the "randomista" strategy pioneered by the Massachusetts Institute of Technology's Poverty Action Lab, of which they are co-founders. They are bringing medicine's randomized drug-trials approach to poverty reduction, a marriage of the practical with the idealistic that has tremendous appeal both on Main Street and in the academy (she is a winner of the John Bates Clark medal, the "junior Nobel" for economists, and they are both MacArthur-anointed geniuses).

The broader movement of behavioral economics is in many ways animated by a similar spirit. As the title of Nudge, co-written by Richard Thaler, a father of the field, suggests, one of the most popular uses of the insights of behavioral economics is to propose small public-policy "nudges" that can create better outcomes. A favorite is designing cafeterias in ways that subliminally encourage us to eat healthier foods.

Small-steps economists and big macroeconomic theorists would seem to spring from opposite -- and even opposing -- ways of thinking about the world. That is partly true: Some of the latter crowd are frustrated by what they see as the timidity of small-bore economics, while randomistas and nudgers are enraged by big ideas backed by nothing more solid than big rhetoric. But the two approaches also draw on a common intellectual foundation -- a shared critique of the once dominant, now widely attacked, efficient-market school, which holds that free markets, unfettered by regulation, swiftly find the best collective outcome -- and they are sometimes both practiced by a single person, as is the case with Yale University's Robert Shiller, a leading behavioral economist who is also one of the big-picture guys who saw the financial crisis coming.

The other world that brings together both a talent for responding to revolution and an ability to recommend practical, measurable action is the world of business. That's true of the financiers on FP's Global Thinkers list and even of some of its senior government officials, like Federal Reserve Chairman Ben Bernanke, who is acting on his academic conclusions about the Great Depression with quantitative easing -- using central-bank intervention to keep interest rates extremely low -- of heroic proportions.

But this combination of the small and practical with the big and theoretical is probably best manifested by the leaders of what is surely the most significant, underlying shift of our age -- the technology revolution. Amazon's Jeff Bezos and Apple's Steve Jobs are businessmen with very focused briefs: One invents and sells consumer electronic devices; the other sells things, especially books, online. Yet they and a handful of other technology giants, like Google's Larry Page and Sergey Brin, are also the biggest-picture economic thinkers we have these days, driving revolutionary transformation of the way we do just about everything.

The big challenge of the coming decades is for our public intellectuals, and our public policy, to catch up.

Marcus Bleasdale/VII