The G-8 is not about to save the world. It's time the United States started planning for the G-Zero.
As leaders of the G-8 industrialized countries gather at Camp David later this week, there will be much talk of global leadership -- and of its importance for our crisis-prone world. In a world where so many challenges transcend borders -- threats to the stability of the global economy, climate change, cyberconflict, terrorism, and risks to reliable supplies of food and water, to name just a few -- the need for international cooperation has never been greater. Yet, cooperation depends on leadership. Only global leaders have the leverage to coordinate multinational responses to transnational problems, as well as the wealth and power to persuade other governments to take actions they would not otherwise take. They provide services no one else will pay for and resources that others cannot afford. On issue after issue, leaders set the agenda.
Unfortunately, for the first time in seven decades, the world lacks leadership. In the United States, mounting federal debt, a feeble recovery from the Great Recession, and Washington's political paralysis have stoked fears that America can no longer afford its postwar leadership role. Across the Atlantic, a debt crisis has shaken confidence in Europe, its institutions, and its future. In Japan, reconstruction following 2011's triple disaster of the earthquake, tsunami, and nuclear fallout has proved much easier than recovery from two decades of political and economic malaise, a paralysis that has left Japan's government less willing and able to contribute to international projects where others do the heavy lifting.
A generation ago, these were the world's powerhouses. With Canada, they made up the G-7 -- the group of free market democracies that powered the global economy forward. Today, they are struggling to find their footing.
Yet the world's most promising emerging states are not ready to fill this vacuum. China's leaders are focused as never before on foreign-policy plans with important implications for the next stage of their country's domestic development. However, like their counterparts in Brazil, India, and Russia, they are far too preoccupied with complex challenges at home to accept the risks and burdens that come with assuming a much larger share of international leadership.
Nor are multinational institutions likely to step into the breach. The expanded group of leading powers known as the G-20 includes members with such a broad divergence of economic and political values that it can only produce coherent, substantive solutions for problems that have already become crises -- and only then when each of its most powerful members is threatened at the same moment. The World Bank and International Monetary Fund do not have the political or financial leverage they once did, and rivalries within the U.N. Security Council have rarely allowed for purposeful cooperation. In short, international politics and the global economy have entered a period of transition, one that I call a "G-Zero" order. Today, there is no single power, or alliance of powers, capable of providing consistent international leadership.
Yet, nature abhors a vacuum, and this period of transition cannot last indefinitely. Governments will not accept new costs and risks until they believe they have to -- and until they become convinced that others will not do it for them. Just as it took World War II to generate a new international financial order at the Bretton Woods conference, lifting the United States to superpower status, it will most likely take some form of calamity, or the credible fear that one is imminent, to give birth to a new uncertain global order.
But what comes next, and who will lead this new world?
The answers to two crucial questions will define the post-G-Zero balance of power. First, will the problems generated by the leadership vacuum force the United States and China to act as partners, or will those problems push them toward confrontation? No political and commercial relationship is more important for 21st-century peace and prosperity than relations between Washington and Beijing. If U.S. companies continue to earn large profits inside China, they will have a stake in China's success and in stable relations with Beijing -- pressing the White House and U.S. lawmakers to avoid unnecessary friction. On the other hand, if Chinese companies use their growing influence within China's bureaucracy to craft new rules that sharply tip the competitive playing field in their direction, U.S. companies will push the two governments toward more aggressive political competition.
There are dozens such scenarios that could encourage collaboration or stoke hostility between the world's two premier powers. A shock that sends oil prices sharply higher might give U.S. and Chinese officials a powerful common interest in reducing their dependence on hydrocarbon energy, for example, but a major cyberattack launched by one side against the other might provoke a politically reckless response.
The second crucial question: Will China and the United States dominate geopolitics, or will global power instead be broadly divided among several established and emerging states? If the European Union's core and peripheral economies can harmonize policies and re-establish confidence in the eurozone, Europe will remain a force to be reckoned with. If Japan can reinvigorate growth and develop a political system that inspires greater public confidence, perhaps it would become a more active and assertive international actor. If India can further liberalize its economy and manage an accelerating flow of migrants from the countryside into its cities, it can counterbalance China's influence in Asia. If Brazil's government can keep inflation in check and wisely manage development of the country's natural wealth, this Latin American power can greatly expand its influence. If Turkey can avoid a showdown that pits the ruling Justice and Development Party against determined secularists within the business, media, and military elite, its government too can become a formidable regional power broker. And so on.
By placing U.S.-Chinese relations along one axis of a graph and the relative strength of other countries along the other, we can map the four likeliest post-G-Zero scenarios:
This grid gives us four distinct quadrants. If the United States and China become by far the world's most powerful states and the G-Zero phenomenon broadly aligns their interests, we would likely see the emergence of an order in which Washington and Beijing find benefit in burden-sharing. Let's call this scenario the G-2. If a generally cooperative United States and China share leadership with other strong states, we might see a kind of concert of nations that would bring about real cooperation within a more robust G-20-like institution.
If the United States and China emerge far stronger than any conceivable coalition of other states and the G-Zero drives them toward conflict, superpower rivalry would force other governments to choose sides or struggle to remain outside either orbit. Let's call this scenario Cold War 2.0. But if Washington and Beijing find themselves at odds in a world with other strong states, global power would fragment into a "world of regions" in which local heavyweights try to establish dominance within their respective neighborhoods.
These scenarios represent extremes, of course, and the future will provide some combination of at least two of these scenarios. The options break down like this:
Let's look more closely at these four broad scenarios:
Economist C. Fred Bergsten was the first to popularize the term G-2 to symbolize a U.S.-Chinese strategic partnership. In his 2005 book, The United States and the World Economy, he argued that none of the world's most pressing challenges could be effectively addressed without cooperation from Washington and Beijing. After all, the United States and China are, respectively, the leading established and emerging markets, the world's two largest economies, the largest trading nations, and the largest polluters. China is the world's largest creditor state, and the United States has become the world's largest debtor state. It is impossible to rebalance the world economy, reinvigorate global trade talks, take on climate change, and manage other transnational problems unless Washington and Beijing share plans, costs, and risks.
A U.S.-Chinese partnership need not be institutionalized. On security issues ranging from Iran and North Korea to relations between Indians and Pakistanis and between Israelis and Palestinians, former U.S. National Security Advisor Zbigniew Brzezinski has proposed an "informal G-2" -- a partnership based in the complex interdependence that binds the two countries' futures.
But what would it take for Washington and Beijing to form such a partnership?
First, Beijing would have to decide that it can afford it. That is not simply a matter of continuing China's impressive economic expansion. It requires a broad, prosperous, and self-confident middle class that owns a lasting stake in the success of its government. Legitimacy at home is essential for leadership abroad. China would also have to create sustainable balance in its economy, by shifting its reliance for growth from heavy dependence on exports toward greater consumption at home -- but without "decoupling" from Western consumers to a degree that isolates China from the world's other largest economies. The country's next generation of leaders would have to see cooperation with Washington as a cost-effective way to invest in a global system that works to China's advantage.
Paradoxically, a G-2 would require that Chinese policymakers avoid a costly military expansion that diverts resources away from the need to rebalance its economy and create a durable social safety net for an aging population. Thus, Beijing would have to rely on U.S. military power to provide most global public goods outside Asia, necessitating a degree of bilateral trust that does not yet exist. On the American side, the U.S. economy would have to recover enough of its vitality to persuade taxpayers that the United States can again afford to invest in a more ambitions foreign policy. U.S. lawmakers would also have to ensure that an economic rebalancing between the two countries that plainly favors China -- sharply narrowing the wealth gap between the two countries -- does not breed U.S. public hostility toward Beijing. But combine enough common threats (from North Korea to cyberattacks to oil prices), and partnership on security issues might become a habit.
A G-2 world, however, requires no other power or alliance of powers having the political and economic muscle to compete with the United States or China. In this scenario, the European Union is divided from within or stumbles toward to a less dynamic future, Japan's government cannot fully reinvigorate its economy, and emerging powers like India, Brazil, Turkey, and others fail to emerge fully enough to play a strong independent role on the international stage. In this scenario, U.S.-Chinese leadership would be indispensable.
There are many reasons why a G-2 world remains unlikely. First, there is no historical precedent for a durable multidimensional partnership between the world's two most powerful states, particularly when they have such different political and economic systems. Unless events lead China toward fundamental political reform and away from the state dominance of markets, it will be hard for any event to align the two countries' interests for very long. Nor is there any guarantee that China's leadership would ever feel confident enough in the country's ability to accept such a role. Many people have called for a G-2 in recent years, but none of them are Chinese. The volatile G-Zero era is unlikely to change that. In addition, it's highly unlikely that both the United States and China will emerge from the G-Zero period with a new self-confidence -- especially given just how ambitious China's reform plans are and an increasingly insecure American middle class.
Further, it is hard to imagine that China and America will be the only two countries to emerge from the G-Zero with their ambitions intact. Whatever happens to the eurozone, Europe's skilled workforce and its tradition of innovation bolster the odds that it will show long-term resilience. Japan, too, has suffered many setbacks, but it is still the world's third-largest economy. Nor is there any reason to believe that growth in leading emerging states will be stunted to an extent that robs them of their steadily increasing influence. Their growth may slow, but only a truly global disaster would return us to a bipolar world.
A Concert of Nations
If there are indeed multiple centers of power a decade from now, imagine a scenario in which the global power vacuum generates a crisis, or series of crises, so damaging that established and emerging powers are virtually forced to collaborate, compromise, and share the risks and burdens of leadership. This is a G-20 order that actually works, a kind of "concert of nations" -- a structure similar to the so-called Concert of Europe that aligned Britain, the Russian Empire, Austria, Prussia, and later France in a bid to restore and maintain Europe's peace following the French Revolution and Napoleonic wars. This institutionalized balance of power brought stability in Europe from the early 19th century until the outbreak of World War I.
But this scenario is especially unlikely to develop because there are so few conceivable circumstances that could create that degree of widespread fear and maintain it for very long. Imagine a meltdown in European financial markets that develops much further and lasts much longer than America's "Lehman moment." Spain and Italy -- countries too large to bail out -- lose investor confidence. German and French banks with exposure to bad loans in these countries go under. The eurozone collapses, and Europe fragments. The United States and China lose a crucial trade partner and the hundreds of thousands of jobs that it helps create.
Yet it is hard to imagine that lasting cooperation would emerge from such destruction. As with the 2008 financial crisis, the effects of even a much greater shock to the system would last longer in some places than others, and the temptation to find advantage in the weakness of others, rather than to partner to buttress international trade, might prove too great for some to resist.
Let's imagine an even more global problem: Perhaps rising global demand for grain begins to far outstrip supply, and a series of weather-related disasters sends food prices soaring across South and Southeast Asia, North Africa, and much of Latin America and the former Soviet Union. Protests in Russia provoke a brutal state response that strips the government of any vestige of popularity. Uprisings in India swell across state borders. Venezuela, Thailand, and Egypt see surges of unrest. Violence grips China. But here again, food shocks will always hit emerging powers and the developing world much harder than the United States, Europe, and Japan, because people in the developed world spend a far smaller percentage of their income on staple foods. Once again, even this scenario doesn't hit everyone at once, or equally -- and history demonstrates that food fights are as likely to produce finger-pointing as cooperation.
In the end, it is hard to imagine a crisis large enough to force lasting cooperation from established and emerging powers, and the complexity of the threats facing the foreign ministers of 19th-century Europe pale beside those of the G-Zero era.
Cold War 2.0
If the G-Zero era pushes China and the United States toward more direct forms of conflict, and if Washington and Beijing are left with much more economic, political, and military power than any other country or bloc of countries, it could generate a new kind of Cold War. This war, however, is less likely to be waged with military hardware because, thanks to global economic interdependence, conflict with economic weapons or cyberespionage comes with much lower costs than traditional warfare for those who provoke it. Its weapons will be currency valuation strategies, restrictions on market access and foreign direct investment, or cyberattacks and counterstrikes designed to disrupt information flows or disable critical infrastructure. No one can know who would hold the advantage in such a contest -- not even the U.S. and Chinese strategists who might stumble into it.
The origins of this potential conflict are not difficult to trace. Earlier stages of China's development provided U.S. companies and consumers with access to Chinese markets, cheap labor, and inexpensive consumer products. Chinese manufacturers gained access to the American middle class and the advanced technology that only Western companies could provide. But the West's economic woes have added urgency to Chinese plans to reduce dependence on exports to U.S. and European consumers in favor of greater domestic demand for Chinese products.
In addition, a growing number of increasingly self-confident Chinese companies now rely on state-sponsored protection from foreign competition. They can use political connections to rewrite commercial rules and regulations in their own favor and use local print, broadcast, and online media to manipulate Chinese public opinion of U.S. companies. In short, China is already becoming less dependent on American economic strength, and U.S. companies will discover that long-term bets on China might not pay off.
As the commercial ties that have encouraged policymakers on both sides to look beyond political and ideological differences fray, the two countries will compete much more aggressively for influence and commerce all over the world. Long-simmering tensions over the value of China's currency, the Chinese government's inability or unwillingness to protect foreign-owned intellectual property, and U.S. criticism of China's human rights record are increasingly likely to boil over.
Cold War 2.0 would be much more dangerous than the first one. Yes, tomorrow's Washington and Beijing are no more likely than yesterday's Washington and Moscow to wage nuclear war. The destructive power of a nuclear-armed intercontinental ballistic missile and the ease of figuring out where it came from continue to make a nuclear exchange extremely unlikely. But cyberattacks in particular render that stability obsolete because they need not kill millions to inflict devastating damage and their origin can be hidden. This is a weapon that has already been used more than once.
Yet, there is another important difference that makes an especially destructive U.S.-Chinese conflict less likely. During the U.S.-Soviet conflict, the Iron Curtain was not simply the wall that kept invaders out and prisoners in. It was a buffer between the capitalist and communist worlds. The Soviet Union was an important energy supplier for Europe, but East-West trade ties were extremely limited. It was much easier for one side to inflict harm on the other without damaging its own interests.
Today's U.S.-China relations, on the other hand, rest on some degree of interdependence -- a "mutually assured economic destruction" -- even if China succeeds in reducing its dependence on U.S. consumer purchasing power. The United States will need China to help finance U.S. debt for years to come, and China must be sure that America can and will pay its debts -- and that the currency it uses will be worth more than the paper it is printed on. This scenario also assumes the relative weakness of the world's other states, which is unlikely for the reasons cited above. This order is more likely to emerge than either the G-2 or Concert of Nations scenarios, but it is not the most likely post-G-Zero outcome.
World of Regions
The fourth scenario is one in which regional leaders provide some public goods within their respective spheres of influence, but political elites in these countries ignore calls for multilateral cooperation that demands sacrifice for the global good. The United States remains the world's only military superpower, but the growing economic muscle and technological sophistication of rising powers limit the importance of this advantage. The growth of regional powers is, of course, a worldwide phenomenon, but one that develops differently in each part of the world. This is the most likely of the post-G-Zero scenarios because it requires no compromises among powerful states and no multinational leaps of faith on problem-solving, and because it follows along the path the world is already on.
Each region would have its unique power structure. In Europe, a loss of confidence in the creditworthiness of several European countries leaves reserve-rich Germany in an enhanced leadership role -- whether German officials and taxpayers like it or not. Berlin will be crucial to any plan to reform the eurozone, the Schengen agreement on borders, or the European Union itself. And if Germany can persuade European leaders to forge agreements among eurozone member states that combine a new commitment to the single currency with much closer coordination on state spending and tax policies, the continent will emerge as the world's most efficiently run region.
Then there is a less voluntary form of unity imposed by a local heavyweight. If Russia can better diversify its domestic economy, or if oil prices remain high enough to continue to fill Russian coffers with cash, Moscow can build greater political and economic influence across much of the former Soviet Union. A state like Kazakhstan, which enjoys substantial commercial relations with outside powers like China and Germany, can limit its dependence on Russia, but countries like Ukraine and Georgia are much more likely to fall under Russia's shadow.
The two regions most likely to generate conflict in this scenario are the Middle East and Asia. In the former, which has long depended on outsiders to maintain an unstable security equilibrium, the influence of increasingly cost-conscious and risk-averse foreign governments has already begun to diminish. Political earthquakes rumbled through North Africa and the Middle East in 2011, but only in Libya did the United States and NATO actively intervene in a national crisis -- and intervention occurred only from high altitude and following an appeal from other Arab governments. The retreat of outside powers will produce intense competition for leadership among Saudi Arabia, Iran, Turkey, and perhaps Egypt -- governments that will have quite different visions of the region's ideal balance of power and influence.
Asia might prove even more volatile. Increased competition for resources and local influence will bring Asia's most powerful states -- China, India, and Japan -- into various forms of conflict. States like Indonesia, South Korea, and Thailand are large enough to resist being pulled entirely into another country's orbit. Asia will probably enhance its role as the engine of global growth, but from North Korea to Pakistan, the region has too many potential security emergencies and will prove too large and too complex for a single country to dominate. Compounding the risks, many of China's neighbors are simultaneously trying to deepen commercial ties with Beijing and security ties with Washington -- an unsustainable balance should the United States and China find themselves in conflict.
This scenario would not be without interregional cooperation. Small groups of established and emerging powers would work together on particular issues of common interest. Brazil, Russia, India, China, and South Africa -- the so-called BRICS states -- would likely build on trade and investment ties in some areas and increase their weight within lending institutions like the International Monetary Fund and World Bank. Russia and China would continue to use organizations like the Shanghai Cooperation Organization to bolster their local influence and keep the United States from deepening ties with other members. Developing states in Latin America and Africa, led by Brazil and South Africa, would further develop "south-south" political and commercial relations. The United States, Europe, and China would continue to depend on the trade relationships that sustain their economies.
But despite the provision of public goods by would-be neighborhood hegemons, this more fragmented international order will ensure that some G-Zero-related transnational problems cannot be fully addressed.
Given the various forms of turmoil that the G-Zero vacuum of leadership is likely to create, we must also consider a wild-card scenario, one that threatens a different kind of fragmentation of the global order. What if the G-Zero creates the kinds of problems that discredit governments, cripple their credibility, and move citizens of worst-affected countries to look for alternatives of governance?
Take China today, which is in need of ambitious long-term economic and social reforms; its government will be undertaking these changes just as the G-Zero supplies the system with unexpected shocks. If Beijing cannot manage the resulting social unrest, if it can't cope with a rising tide of environmental disasters, if rising labor costs persuade enough companies to relocate operations to neighboring economies, if a more serious market meltdown inside Europe and the United States puts tens of millions of Chinese out of work, if public disgust with corruption floods the Internet, if state attempts to quell large-scale demonstrations meet resistance coordinated via modern tools of communication, we might see a fundamental change in how China is actually governed. It might not take state collapse or a revolution to bring about this change. If local officials come to believe that they can ignore Beijing's orders, China's central government could remain too preoccupied with domestic challenges to play an important international role.
There's a nightmare scenario for Europe, too. If debt burdens deprive key European governments of an even greater outlay of resources, they may find themselves without the financial muscle to create and enforce policy. Local officials might begin to usurp much of their authority, leading to fragmentation of power within states like Italy and France. The breakdown could then be exacerbated by the re-emergence of separatist movements in Britain, Belgium, and Spain.
What if the trend then spreads to regions where borders have historically been drawn by outsiders? Local governments in the Caucasus and Central Asia cite Kosovo as a precedent for small, ethnically based states to declare independence. Former European colonies in Africa, including large, resource-rich states like Nigeria and the Democratic Republic of the Congo, face tremendous stresses from within as local governments insist on greater control over natural wealth drawn from within "their" territories.
Today, Russia has a strong central government, but one that depends largely on one man, Vladimir Putin, for its legitimacy. It is a country that encompasses one-seventh of the Earth's land surface, 89 regions, 170 ethnic groups, and dozens of minority languages -- in other words, it is always at risk of fragmentation. The history of the Russian Empire, and then the Soviet Union, is one of shifting borders. If its oil and natural gas become a lot less valuable before the Russian government and its business community can better diversify the country's economy, the Russian government may one day find itself with too many internal threats to dominate its neighbors.
Thus, if the leaderless G-Zero-era in international politics generates global problems that metastasize into a thousand local emergencies, large parts of important countries could go ungoverned -- or become ungovernable. And that result would ensure that, whatever the global balance of power, the world's most powerful states would all find themselves fully occupied with management of internal crises.
Call this scenario the G-Subzero, where weakened leadership and a fragmentation of power inside individual countries create G-Zero conditions within some of the world's largest economies. After all, as much as some folks love to hate government, this scenario is (by far) the ugliest of them all.
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