Stratfor's Decade Forecast
2000-2010: A New Era In A Traditional World
STRATFOR.COM Global Intelligence Update
December 20, 1999
For the last 500 years, since European imperialism began the
process of creating a single, global system of international
relations, the international system has maintained a certain
predictable rhythm and pattern. During each successive era, at
least two and frequently more powers have competed against one
another for preeminence.
>From the Portuguese and Spaniards in the 16th century to the
Americans, Russians and Chinese toward the end of the 20th century,
the world arena has seen an unchanging pattern of great power
competition. In this competition, all nations eventually became
players, prizes or victims. Each competition was global not only in
the sense that it covered the entire world, but also in the sense
that it involved all arenas of competition: economic, military,
political, cultural and ideological. Each epoch came to an end,
usually in a cataclysmic war, often with the implosion of one or
more of the competitors.
As each epoch ended, a short interregnum occurred in which it
appeared that the victorious powers would enjoy permanent,
unfettered dominion. From the Congress of Vienna in 1815, to
Versailles in 1919 to the United Nations in 1945, it always
appeared the end of an epoch would permanently change the
underlying pattern of the international system. The victors always
harbored the hope that victory would remain permanent and
unchallenged, the interests of the victors effortlessly
perpetuated. Yet the dream always proved an illusion. Victory was
never so absolute as to preclude the emergence of new powers or
coalitions of old ones dedicated to limiting the power of the
victors or even overthrowing the order they created. Sometimes
entirely new competitors emerged. Sometimes the same competition
re-emerged. Whatever the particular circumstances, competition
among great powers was permanent.
The end of the Cold War is no different than the end of any other
epoch. The coalition formed by the United States became victorious
when the Soviet Union collapsed. The institutions that the anti-
Soviet coalition created seemed to have inherited the world. The
distinction between NATO, the IMF and the United Nations, for
example, seemed to become irrelevant, as all were equally bent to
tasks set for them by the United States and its allies. Even more
important, the cultural and ideological victory of the anti-Soviet
coalition appeared to be absolute. Liberal capitalism became the
universally accepted doctrine. Even China's official communism
appeared to be irrelevant, as it was swept into the single,
integrated system of relationships dominated by American power.
Apart from a handful of "rogue" nations like Iraq or Serbia, the
world appeared finally at peace, integrating rapidly into a single
global system where everyone shared in the benefits of free trade,
human rights and prosperity.
Yet the last ten years did not constitute the end of history. They
were simply an interregnum, like so many others before it, in which
the victory of a single power or coalition could appear to be so
complete that the emergence of a new challenge to that power was
unthinkable. America's victory over the Soviet Union was so
stunning, unexpected and absolute that it seemed that American
values were now global values and that American power was now
absolute. However, no set of values is ever global, and no nation's
power, no matter how great, is ever absolute.
Beneath the surface of the last ten years, the shape of the next
epoch has been quietly emerging. Its shape is not yet fully
revealed, but can be seen well enough to describe. Most important,
the next epoch will look much like the last five hundred years. The
details will change, the dynamics will shift, but the essence will
remain the same. The game of nations is not over.
The United States remains at the center of the international
system. It is the preeminent global military, economic and
political power. Militarily, the U.S. Navy controls the world's
oceans more completely than any empire in history. As important,
the United States exercises almost complete control of space,
enabling its intelligence apparatus to see deep and its military to
shoot deep and with precision. Economically, the United States is
experiencing an unprecedented boom, surging past all other regions
of the world. This military and economic power yields unprecedented
political influence. This is complemented by geography. As the only
great power native to both the Atlantic and Pacific oceans, it can
influence events globally with an ease that magnifies its inherent
power.
Thus, the fundamental question of the next decade - for both
individual countries and the international system as a whole - will
revolve around the United States. The question, increasingly, will
be this: How can other countries limit American power and control
American behavior?
There are two processes that will shape the manner in which this
question is answered. One is the permanent process whereby the
international system seeks equilibrium. The second is a process
that we feel will drive the early stages of the next epoch. We call
this process the de-synchronization of the international economic
system. The former process will drive nations to form coalitions to
block the power of the United States. The second process will
generate intensifying friction between not only the United States
and the anti-American coalition, but between all regions and within
regions as well. It points to a decade of increasing political and
economic tension - both between great powers and within the spheres
of influence created by the great powers.
The Search for Equilibrium
The international system has been in a state of disequilibrium
since the fall of the Soviet Union. The unipolar world in which the
United States is the only power with global economic, political and
military influence, creates certain inevitable responses that tend
to move the world toward equilibrium. Less powerful nations see
themselves as being placed in a disadvantageous position by
American power. Some experience the disadvantage militarily, some
politically, some economically. Some experience it across a broad
spectrum. None of these nations, by themselves, have the ability to
resist the process.
This leaves them with three options. The first is to directly
resist American power and influence. This is always a dangerous
option. By definition, the United States possesses a series of
counters to resistance that can devastate any isolated nation,
should the United States choose to act. The second option is to
seek to accommodate one's own policies to those of the United
States. To most nations, this appears the optimal course. It, too,
is extremely dangerous. The United States, like any other nation,
tries to generate relationships that are advantageous to it.
Decisions that are extremely limited and focused, from the American
point of view, can have devastating effects on partners. A decision
to ban the import of bananas from a small country is a microscopic
decision from the American point of view, but has macro-economic
consequences of epic proportions for small banana exporters.
The very size and scope of American interests creates a situation
in which a vast number of microscopic decisions are made which have
enormous effects on other nations. The sheer size of American
interests creates a management problem in which avoiding
devastating outcomes for other nations is impossible - even if this
was the American goal, which it is frequently not. Policy makers at
the center can't possibly oversee the range of issues being dealt
with. The opportunity for interests inside and outside the United
States to manipulate the decision-making process at the microscopic
level is enormous. While the central thrust of policy is
manageable, the micro level is easily manipulated. The result is a
seemingly random set of policies that make it impossible for many
countries to find a stable, safe standpoint in their relations with
the United States.
With isolated resistance and accommodation being difficult for many
to exercise, the natural result is coalition-building, designed to
constrain the United States. This is not a simple process and
doesn't operate in a straight line. As the optimal outcome, most
nations want a shift in U.S. policy. It is difficult to even get
American attention on most policy issues relevant to weaker
nations, let alone to generate sufficient threats to motivate the
United States to shift its policies. The virtue of anti-American
coalition-building is not that it builds a coalition, but that it
increases the probability of attracting American attention and
generating sufficient threats to force favorable policy shifts in
Washington.
Thus, most countries move into anti-U.S. coalitions less out of a
desire to confront the United States than out of a desire to reach
accommodation with it. For example, the Russians and Chinese both
engaged in anti-American coalition building with each other less
out of a desire to confront the United States than out of a desire
to extract concessions. To some extent this process works. But the
range of demands placed on the United States makes universal, or
even frequent, accommodation impossible.
Thus, the coalitions that are formed to extract concessions from
the United States transform themselves over time into fixed
relationships designed to both resist the United States and create
alternative systems of relationships to allow nations to function
insulated from American power. Some of these relationships have
already formed, particularly on the economic level. Others will
form over time. They will increasingly create a fragmented global
system in which American unipolar power confronts a complex of
opposition coalitions.
Global Economic De-Synchronization
The geography of this confrontation will be driven by global
economic de-synchronization. The fundamental assumption of liberal
capitalism is that, freed from the constraints of military force
and domestic tyrannies, the attractiveness of liberal human rights
doctrines and the tremendous efficiencies of capitalism would draw
all nations together into a single system in which war and conflict
would be irrational. The foundation of this theory was that the
emergence of a single, integrated global economy would erode
nationalism on every level, including cultural differences. The de-
nationalized corporation would become more important than national
institutions. International institutions would supplant national
institutions in managing what were, after all, international
issues.
For everyone to accept the primacy of international institutions,
it was presupposed that everyone would have the same basic
interests. To be more precise, it was assumed that the decisions of
the international system would leave no one at a fundamental and
unrecoverable disadvantage. Given the diversity of the world, this
seems an unreasonable expectation. Those who believed this to be
not only possible but inevitable rested their argument on what
appeared to them as a reasonable assumption: the increased mobility
of capital across borders would create an integrated global
economy.
There was another vital assumption behind this vision of a global
economy. People assumed that the global economy would be, on the
whole, synchronized. The logic and necessity of the business cycle
is well understood. Recessions are needed in order to enforce
efficiencies against businesses whose rates of return on capital
are below norms. It is also understood that different monetary,
fiscal and trade policies are mandated by different stages of the
business cycle. The assumption behind economic globalism was that
increased international economic integration would also lead to
increased synchronization among the world's leading economies.
Japan, the United States and Europe would be synchronized,
requiring compatible economic policies. Therefore, the
internationalization of economic policy-making would increase
rather than decrease economic harmony.
In 1997, the foundations of this theory were falsified. Asia went
into the worst recession it had seen since the end of World War II.
It was generally expected that the Asian meltdown would generate a
global crisis. The exact opposite happened. Asia's meltdown led to
a massive flow of capital out of Asia and into the United States.
That, coupled with the general state of the American economy,
intensified a boom already underway. The world experienced de-
synchronization as one region sank into depression while another
region boomed. The very process that was supposed to harmonize the
global economy into a single business cycle, actually worked to
intensify the de-synchronization. This de-synchronization violated
most expectations of the world's conventional observers. It also
created an extraordinarily dangerous situation that persists today.
As the year 2000 approaches, two overwhelming forces are shaping
the international system. The first is the process of coalition-
building in which weaker powers seek to gain leverage against the
overwhelming power of the United States by joining together in
loose coalitions with complex motives. The second process, economic
de-synchronization, erodes the power authority of the international
organizations used by the United States and its coalition during
the Cold War and the interregnum. More important, de-sychronization
creates a generalized friction throughout the world, as the
economic interests of regions and nations diverge.
The search for geopolitical equilibrium and global de-
synchronization combine to create an international system that is
both increasingly restless and resistant to the United States.
Indeed, de-synchronization decreases the power of the United States
substantially. During the Cold War and the 1990s, the United States
could control the behavior of nations with the inducement of
economic cooperation. As the international system de-synchronizes,
economic cooperation with the United states becomes not only less
attractive, but also genuinely harmful to many nations.
For example, economic cooperation with the United States can
threaten a country like Japan. As the American economy matures
during this business cycle, there will be a natural tendency to
raise interest rates. As interest rates rise, capital will flow out
of Japan to the United States. Japan, badly in need of investment
capital and at a totally different place in its business cycle,
will seek to protect itself from U.S. fiscal and monetary policy,
rather than to participate in it. Economics become a disincentive
for cooperation rather than an incentive. It follows that if
economic collaboration becomes less interesting to the Japanese, an
American lever for political and military cooperation dissolves as
well.
De-synchronization removes incentives for economic cooperation with
the United States and reduces the economic penalties for
resistance. Nations are freed to resist. Indeed, they are given
added incentive. This will particularly be the case if and when the
economic cycles shift, as they always do, and the U.S. economy
becomes weak while others grow strong.
Forecasts
Let us consider some particular forecasts that we can make if the
basic model we are working from is correct.
* De-synchronization will undermine the integrated global economic
system, replacing it with regional economic groupings. This will be
particularly visible in Asia and in the former Soviet Union as well
as Europe. De-synchronization will diverge national interests
within the regions, leading to intra-regional stress and poaching
within the regions. Anti-American coalitions will emerge within
regions and between regions.
* The United States will continue to lead the world economically, in
spite of the probability of a recession some time in the first half
of the decade. However, structural problems, including an aging
population liquidating capital holdings in retirement and severe
labor shortage indicate serious problems later in the decade.
* Except for a few countries with relatively healthy banking
systems, Asia will not recover during this decade. Asia's economic
problems cannot be solved without a wrenching remake of its
financial system. Lacking the will and political capacity to carry
this out, most Asian countries, including Japan and China, will
remain in a long-term stagnation mode. Intermittent upturns will be
mistaken for recovery, but the basic pattern remains flat to
negative. The most important issue in the region will be the
political consequences of this economic deterioration. Both China
and Japan will experience profound political repercussions from
their inability to solve underlying economic problems.
* Russia, essentially cut off from Western capital and unable to
compete in Western markets, will be forced by circumstances to
regain the components of the former Soviet Union. The general
inability of the former republics to participate in Western
economic activities will make the prospect of some form of re-
federation attractive to many outside of Russia. Nationalism will
compete with economic reality, creating a complex and dangerous
situation. Russia will spend most of the next decade in the painful
process of reconstructing its empire. It will seek to cooperate
with China to block U.S. interference in the reconstruction
process.
* Since German reunification in 1989, the fundamental question in
Europe has been whether Germany will represent a challenge to
European stability, as Germany did in 1871, 1914 and 1939. The
basic assumption has been that the existence of the European Union
has changed the dynamics of German nationalism, by abolishing
Germany's sense of geopolitical insecurity while creating an
economic framework too valuable for Germany to abandon. Two tests
face Europe. The first is whether the European Union's monetary
union can survive de-synchronization, in which some regions of
Europe are booming, while others are in recession. The second test
will be whether the rest of Europe is prepared to join Germany in
defending the eastern frontiers of Poland in the face of resurgent
Russian power. We remain pessimistic about the long-term prospects
of a united Europe.
* We remain optimistic about an Arab-Israeli peace, so long as it is
understood that this peace will be about as friendly as is normally
the case in the region. The absence of massive bloodshed is the
most that can be hoped for. With the long-term decline of oil and
commodity prices over, a floor has been placed under many Arab
economies for the first time in a generation. This opens the door
for the return of a degree of prosperity in some parts of the
region.
* South Africa is returning slowly to its natural role of hegemon in
southern Africa. No longer limited by Apartheid, South Africa's
ability to manipulate and guide affairs in sub-Saharan Africa is
substantial, assuming that it can maintain its internal stability.
* Latin America is beginning to experience a division into two
parts. There are growing signs of instability in the northern tier,
running from Panama and Ecuador to Venezuela. While the rest of the
continent remains stable, deterioration of the northern tier can
spread and destabilize the continent. The central question is
whether Venezuela's President Hugo Chavez will be able to maintain
a reformist strategy or whether the process will get away from him
and turn into revolution. If so, the revival of the left in Latin
America, colliding with the technocrats who manage ministries and
governments, could create a volatile political situation.
(c) 1999, Stratfor, Inc. stratfor.com
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