Surge of the 'Second World'

April 25, 2012 Topic: NATOWTOGreat PowersRising Powers

Surge of the 'Second World'

Mini Teaser: Those nations falling between the developed West and the world’s poorest countries are jockeying for position in their own regions and playing powers against each other. They will make life increasingly difficult for the reigning great powers.

by Author(s): Parag Khanna

NOW LET’S look at these emerging Second World states through the second prism of regionalization. Ambitions for a new global structure along the lines of George H. W. Bush’s “new world order” suffered a massive blow with the rise of China, the ascent of the Second World and the unwillingness of Second World countries to support traditional global institutions (meaning Western norms). The active evasion and corollary erosion of Western norms was the first step toward creation of a new system, however lacking it may be in hierarchy and widespread acceptance. Indeed, the old U.S.-centric global system is being replaced by increasingly robust regional power centers fostered largely by the Second World. This growing volume of interregional diplomacy and trade is already the new dominant pattern of world affairs. Hence, it offers an avenue for understanding the emerging phase of world order. Particularly as interregional summitry and associated commercial ties deepen within such dyads as the Latin-Arab, Sino-African, Euro-Asian and others, this analytical lens becomes increasingly difficult to ignore.

Although global interdependence is on the rise, actual institutional and policy integration is fundamentally a regional phenomenon. Most European trade is within Europe, and most Asian trade is within Asia—not across the oceans with America. In South America, Brazil has steadily championed the building of a more robust regional organization, now called the Union of South American Nations. As in other regions, trade and investment flows within South America have experienced rapid gains in recent years. Brazil has displaced the World Bank and Inter-American Development Bank as the region’s largest lender and aid donor. Not surprisingly, it has championed numerous cross-border infrastructure projects in the energy, power and transport sectors to connect Pacific-facing nations on the continent with Atlantic-facing ones. Regional orders are therefore logical anchors for any global order, and global governance will often defer to regional sensibilities.

Similar dynamics are at play in the Middle East and East Asia as well. Saudi Arabia, which represents approximately half the Arab world’s total GDP, spearheaded an intervention into neighboring Bahrain last year that was backed by other members of the Sunni Gulf Cooperation Council (GCC), and earlier this year the Saudis tabled a motion to rename the GCC the “Arabian Gulf Union.” In the Far East, despite America’s much-touted pivot to Asia, the fundamental economic picture is one of intensifying regionalization at the expense of trans-Pacific trade and investment, underpinned by an ever-deeper set of regional bodies such as the East Asian Community.

Regionalism is where balancing and bandwagoning occur at the same time. Anchor states such as China and Brazil create incentives for lesser states to support their leadership, while these states also coalesce in ways to mitigate their hegemony. On the bandwagoning side, China offers confidence-building measures to ease regional diplomatic tension such as joint military exercises, oil and gas exploration, and commercial projects. But there is also a new assertiveness in balancing would-be hegemons through mutual surveillance, shaming tactics and drawing in outside powers. The Association of Southeast Asian Nations, for example, has embraced America’s renewed visibility in the region and intensified its internal cooperation on environmental diplomacy in order to raise pressure on China to slow down its dam-construction activities on the upper Mekong River.

China occupies a special place as the premier Second World state as well as regional anchor and superpower. As a trade-dependent, exporting nation, its ability to leverage globalization to rise rapidly into the core of the global economy makes it a role model for other Second World countries seeking regional importance. Further, its insatiable demand for natural resources has been a boon to Second World natural-resource exporters from Latin America and the Middle East.

THROUGH THE third prism, we see new modes of governance and economic structuring in the Second World. The success of authoritarian capitalism in China, petromonarchies in the Persian Gulf and strongman rule in central Asia have presented alternative models of governance that have resisted democratic pressures from outside and to some extent from below. Rather than converging toward democratic standards, they exhibit a diversity of regime types and ideologies. In the economic sphere, state capitalism is the new norm across the Second World. State-owned enterprises, sovereign wealth funds, national champions, blatant subsidies, capital controls, currency intervention and other measures are all fair game in the varieties of industrial policy that underpin Second World economic strategies.

It is becoming clear that a renewed liberal international order will not be the guiding global framework for the future of Second World states. There is a complacent view held by numerous American scholars that because China, India and other rising powers do not present an alternative, off-the-shelf global institutional framework to rival the legacy of the postwar order, Western diplomatic leadership will sustain itself by default. This is false. Neither universalistic liberalism nor a world managed by a concert of great powers will command the loyalty and support of Second World states. They will pursue both international recognition and regional integration at the same time, paying lip service to global procedural norms while operating according to local customs in their own neighborhoods. This means that even as countries pursue inclusion in the G-20 or support a strengthened IMF, they will still shield themselves from antiprotectionist regulations and invest in regional trade agreements. This will mean horizontal structures as opposed to new international authorities emerging at the transnational level, particularly regionally and interregionally. It is a mistake, then, to conflate participation in bodies such as the World Trade Organization (WTO) with support for their rules. China’s manipulation of its WTO membership to extract concessions from trading partners while yielding little ground on internal reforms is a case study in this regard. Even the G-20, which has convened regularly with high expectations since 2009, is not a truly global body but an informal coordination platform—one that has achieved precious little meaningful coordination. The West cannot simply “integrate the BRICS” by inviting them to a summertime summit in France.

Postwar international institutions such as the International Monetary Fund and the World Bank, vestiges of Bretton Woods, no longer enjoy the standing of previous times, given the volume of global capital pools. No doubt both have witnessed a certain revival in assisting nations suddenly afflicted with investment drop-off and massive debts in the aftermath of the 2008 financial crisis. But fundamentally, these institutions only matter to such states in need and not beyond. Neither body is effectively preventing financial and trade protectionism, providing a global bailout fund or ushering in a new global reserve currency. This opens the door to regional currency agreements and development banks, which are gaining ground in Latin America, the Middle East and Africa.

Viewing this Second World phenomenon through the three prisms, we see it is foolish to impute any kind of coherence to the diverse rising powers of the Second World or to ignore their ascent. The Second World is out for itself—collectively, when beneficial, but otherwise individually. To paraphrase de Gaulle: these countries have no allies, only interests.

Even if they are individually unable to qualify as systemically revisionist powers, Second World states increasingly agitate in diverse combinations and coalitions. For example, the World Bank was caught off guard by the growing influence of the Gulf states, India and China as providers of economic assistance to countries in Africa, the Middle East and central Asia. This has led to hastily planned OECD discussions on the need for “greater coordination” among donors—something Western nations have rarely accomplished themselves. The same goes for the growing influence of Arab and Asian sovereign wealth funds, which have prompted Western treasuries to attempt another toothless rearguard regulatory declaration known as the Santiago Principles, aimed at ensuring the nonpolitical usage of bilateral sovereign investments. But emerging markets now hold the savings glut that Western economies need in order to finance low interest rates, and that is likely to soften opposition to Second World foreign investment in the West. Thus, the 2006 case of Dubai Ports World’s blocked purchase of U.S. port facilities would appear to be an aberration.

Second World diplomatic axes have been influential in geopolitical affairs as well. Most visibly, Russia and China have been consistent in wielding their UN Security Council vetoes to slow Western interventionist reflexes in Syria. And the Brazilian-Turkish effort to mediate the Iranian nuclear standoff in 2011 ruffled the United States and core European powers, which prefer to operate as the only legitimate stewards of negotiations with Iran.

HOW CAN the United States maintain leverage in dealing with the Second World? America’s relevance increasingly depends on whether it can act as a coanchor of various emerging regional orders. Its traditional approach of using offshore-balancing tactics to maintain its hegemonic status seems unlikely to continue. The new basing posture in the Pacific and allusions to a “Global NATO” comprised of India, Japan and Australia to surround China are essentially negative formulations. If the United States doesn’t work within regional systems to promote stability, it will be ignored as an outsider. A sound model is the balanced American policy vis-à-vis Vietnam, which deftly combines rapprochement, defense cooperation and economic investment. Malaysia, Indonesia and Thailand represent three other Second World relationships in Asia that could be effectively rekindled.

Image: Pullquote: In the environment of uncertainty that prevails in today’s transition toward multipolarity, small perturbations among nations can quickly ripple into much larger confrontations.Essay Types: Essay