The Mythical Liberal Order
Mini Teaser: A cooperative, law-based international system remains an aspiration, not a reality.
Six years ago in this magazine we wrote about the development of a new configuration in international politics that we called a “World Without the West.” We argued that an important group of emerging states was neither assimilating into the Western order (as optimists hoped) nor attacking it (as pessimists feared). Instead, they were finding ways to bypass it and “route around” it by enhancing their own interconnectivity at a rate faster than global interconnectivity as a whole was increasing. This in turn made the Western order progressively less relevant.
Though this was a controversial idea when first proposed, it has now become mainstream to note its foundational claim: that deepening interconnectivity in the non-Western world is outstripping both global and North-South integration. But many who have come to accept this basic notion still discount its significance. They fall into the mind-set traps that we anticipated: either doubting the sustainability and resilience of these emerging linkages or ignoring their increasingly profound impact on the way international politics works.
To be clear: “Routing around” is not a high-concept description of an alternative world-order system. And, like “balancing,” “bandwagoning” and similar concepts that analysts use to categorize state behaviors, routing around doesn’t necessarily imply some deep intentionality or master plan for international politics. Rather, the phrase simply describes a set of strategic choices that share driving forces and results.
The drivers come from the specific histories, economies and interests of today’s emerging powers. Postcolonial legacies combine with weak and unstable polities to oppose international intervention in domestic affairs. State-fueled manufacturing and large agrarian populations repress support for open and free trade. And the intense need for energy and other resources shapes external priorities throughout the world. Strategic behavior emerges from these self-interested priorities and objectives as well as the mind-sets they engender.
THE EASE with which emerging powers route around liberal rules and institutions is perhaps the most conclusive evidence that the liberal order is a myth. Their greatest opportunities to act strategically arise because the actual liberal world order, weak and patchy as it is, bears little resemblance to the beliefs and aspirations of its defenders and promoters, who want badly to believe it is much stronger and more vibrant than in reality. Arbitraging against these wishful thoughts has become the best way to diminish further the influence of the liberal world order.
Consider regulatory arbitrage in the financial sector as a vivid example of routing around the weak structures of liberal interdependence. Recently, a number of China’s biggest state-owned banks began moving sizable pieces of their European portfolios to Luxembourg in a clear bid to bypass London’s tougher regulations. Several Russian banks—including the large parastatal Gazprombank—serve openly as conduits for Syrian oil sales and other financial transactions, collecting enormous fees made possible by the deviant economics of sanctions. Since these banks don’t operate in London or New York, they are impervious to Western sanctions and can instead arbitrage against banks that play by the rules of the liberal world order.
The expanding heft of state-driven capitalist practices is another example. Sovereign wealth funds and other vehicles for state-directed finance are not new, but the volume of money sloshing around the emerging economies is unprecedented. And this government-directed finance is largely unregulated. The export-financing volume of the Export-Import Bank of China is estimated at more than that of the G-7 combined. While the Export-Import Bank of the United States is governed by the Organisation for Economic Co-operation and Development’s strict competitiveness and transparency rules and a tightly circumscribed congressional mandate, state financing elsewhere in the world need not play by the same rules. Why should it, when genuine integration into a liberal world order is so restrictive and costly, and when free riding on it is so beneficial?
Trade is typically thought to be the one international issue on which all agree in principle on the universal gains from liberal interdependence. But even here a number of emerging powers have routed around the existing system and charted their own course. We have demonstrated, using a gravity model of trade, that key emerging economies are preferentially trading more and more with each other, and shifting the globe’s economic center of gravity. When the BRICS—Brazil, Russia, India, China and South Africa—held their fourth annual summit in New Delhi in March 2012, they agreed on new measures to further deepen trade ties within the bloc. They also agreed on a deal to bypass the dollar—the linchpin of the liberal economic system—by extending credit facilities to each other in BRICS currencies. This follows on the heels of a growing network of bilateral currency swaps and agreements to settle trade accounts in nondollar currencies and commodities—between China and Russia; India and Iran; and China and Brazil, among others. On aggregate, the size of these currency-swap systems makes them harder to dismiss as a vanity play. These countries have yet to agree on how to set up a BRICS development bank to bypass the Bretton Woods institutions, but they have opened up talks on the matter.
It has now been more than a decade since China joined the World Trade Organization—more than enough time for liberal magnetism to have had a significant effect. Instead, China has used dispute-resolution procedures against others much more aggressively than it has liberalized its own practices. The rare-earths and alternative-energy sectors illustrate how China manages to advance its own strategic interests while pushing against the rules to see just how much give there is—playing to the letter of the law rather than to its spirit. This runs directly counter to the hopes of liberal internationalists that China would play a leadership role in breaking the decade-plus Doha deadlock.
Consider, too, efforts to strengthen the role of rules and institutions in the South China Sea, where the likelihood of near-term military conflict in East Asia is arguably the greatest. Based on a narrow reading of the challenge, the liberal solution is to pressure and prod China and other regional states to advance their claims in accordance with international maritime law. This strategy hinges on the application of the UN Convention on the Law of the Sea, which outgoing secretary of defense Leon Panetta has described as “the bedrock legal instrument underpinning public order across the maritime domain.” But the United States is not party to the convention. Even if it were, the agreement is silent on land-based sovereignty disputes, has no binding enforcement procedures and provides members with ample ways to opt out of participation in dispute-resolution mechanisms. The code of conduct being discussed between ASEAN and China would be no stronger in terms of providing hard rules and enforcement processes with teeth. The fundamental problem in the South China Sea is not China seeking to overturn some existing order or that China is refusing to integrate. It is that the prevailing order is so thin and weak as to be meaningless.
Routing around or arbitraging against the idea of the liberal world order has been an effective strategy for emerging powers seeking various objectives. Sometimes they simply want different outcomes from global governance. Brazil, China, India and South Africa brokered the deal they wanted with the United States at the Copenhagen climate summit in 2009, successfully avoiding commitments to emissions caps. Sometimes key states are seeking simply to oppose Western freedom of action. (Russia has made an art of this.) And other times, they desire to break global-governance institutions so that they can ultimately reconfigure them in their own interests. In some cases, rather than arguing about their rules versus old rules, emerging powers prefer no rules at all. Routing around can be a combination, in mixed proportions, of all of these objectives—as illustrated by China and Russia vetoing multilateral action on Syria at the UN Security Council in July 2012.
What does this look like from a systemic perspective? Not what many Western analysts are looking for—that is, a cogent, coherent and comprehensive alternative order that does everything the liberal world order was supposed to do and one day snaps into place as a replacement package. We’ve never expected that, because in our view the nature of contemporary global competition is not about one order fighting to replace another, like the two mobile operating systems—Android and iOS—fighting it out for market dominance. A better understanding is to view the World Without the West’s strategies and choices as little bits of software code, partially completed beta-style apps, that countries mix and match, use and discard, upgrade and replace. Competition is not head-on, but indirect and oblique, and innovation is disruptive, not linear. Although the ordering principles of international politics in the developing world may not compute with the sophisticated “consumers” that espouse a liberal world order, they do appeal to, and provide tangible benefits for, a different and less developed constituency.
Disruptive innovation works when newcomers enter what looks like the low end of the market and then outpace the current leader. This is the game being played now in international politics, and the fallout from the global financial crisis has quickened the pace and raised the stakes. Five years after the initial meltdown, the United States is mired in partisan gridlock that renders Washington unable to make a plausible commitment to address its unprecedented public-finance crater. The EU’s signature project of the last twenty years—the single currency—is at real risk of dissolution. By contrast, core players in the developing world have been the engine of growth for the world as Western economies wait for an elusive recovery. Consider as an obvious thought experiment what this landscape looks like to swing states in the developing world. Should a new post–Arab Spring regime clamor to join the liberal world order or look elsewhere as it constructs its new economy and state-society compact?
Image: Pullquote: International cooperation on security matters has been relegated to things like second-tier peacekeeping operations and efforts to ward off pirates equipped with machine guns and speedboats.Essay Types: Essay