Who will lead the world?

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It is a sign of the times when the BMW Foundation makes this question the theme of her annual conference on international affairs. The financial crisis has greatly accelerated geopolitical shifts. The ASEM Summit in Bejing, ahead of the G-20 World Financial Conference, has demonstrated that indeed tectonic shifts are underway in international relations.

by Michael Liebig


On Oct. 15-16, coinciding with bankruptcy of Lehman, which German Finance Minister Peer Steinbrück called the “maximum credible accident” in the financial system, the BMW Foundation held a conference on in Munich. The title of the conference was “Who will lead the world?”

The conference proceedings are confidential, along the “Chatham House rules,” but the event was covered in the Frankfurter Allgmeine Zeitung und the Neue Zuercher Zeitung, which published lengthy articles by two conference participants. And, the names of the 33 participants was made public by the BMW Foundation, which is headed by Juergen Chrobog, a former State Secretary in the Foreign Ministry and Ambassador to Washington. The German Foreign policy establishment was well represented, including the Russia expert Alexander Rahr und the China expert Frank Sieren. From the USA came Prof. John Mearsheimer, probably the leading figure of the American school of “neorealism”, which has reassumed the conceptual leadership role in the US foreign policy establishment. From Britain came Prof. Anatol Lieven.

The NZZ’s Eric Gujer noted that it could be felt at the conference how badly the “self-confidence of the West” has been shaken. The widespread, post-1989 belief that the “West is the champion of history” has evaporated. The liberal-imperialist drive to transform the world along Western standards – economically, politically and ideologically – is gone. The “geopolitical hangover” was brought about by the financial crisis, the rise of new powers and the failure of the post-1989, mostly US-generated ideological matrix.

This diagnosis is certainly correct. And the same is true for the consensus at the Munich conference that unipolar American world leadership is a thing of the past.

A closer look at “American Neorealism”

However, Mearsheimer disagreed, saying the USA will remain “the Godzilla among nations”.

After Nov. 4, almost certainly “neorealism” will shape US foreign policy, therefore Mearsheimer’s statement gains a special significance. So, what can we expect from American neorealism?

American neorealism does not mean benign, pragmatic “realpolitik”, as many would tend to hope, not only in Europe, after the eight years of neo-conservativism. For neorealists, the world is an anarchic place where a permanent struggle for the highest ranking in the global hierarchy of power is occuring. For them, more power means more security. Alliances are formed because the most powerful wants them and/or weaker states see their interests best served by following the hegemon.

For American neorealists, the biggest geopolitical challenge is China, followed by Russia. Mearsheimer said so explicitly in Munich. Short of World War III, the only neorealist option towards China and Russia is a balance of power strategy.

American neorealists would not deny the weakening of America’s economic-financial capabilities, but are confident that her unmatched military capabilities will preserve her superpower status. Both articles in the NZZ and the FAZ on the Munich event would indicate that the European participants gave economic and financial “capabilities” a quite different weighting in the definition of “power”. Frank Sieren and others reminded the conference that China through its giant financial resources is holding the keys for the survival of the American financial system. And, China is training more engineers than the rest of the world taken together. And, at least 200 million Chinese are currently learning a foreign language, which gives a foretaste of what China will be able to do in the world.

How would American neorealists see the European Union? Lasting cooperation based on reconcilation of interests does not exist in the “neorealist book”. Therefore the EU is seen as fragile, clumsy and ultimately weak. Thus, European states can be played against each other by telling the smaller states that the bigger ones merely use the EU to camouflage their aspirations of domination. However, for a global balance of power strategy, Europe is indispensable. Vis-à-vis China and Russia, the United States need the European Union a “junior partner.” In Asia, India and Japan would be assigned such a “counter-balancing” role.

But what, if the EU won’t accept the traditional “junior partner” role in trans-Atlantic relations? And there are clear and manifold indications that the EU will do just that. At the Munich conference, the head of economics department in Foreign Ministry von Fritsch and the former German UN Ambassdor Gunter Pleuger said anything short of an equal standing with America is unacceptable for Europe.

Genscher’s “Rathenau Address”

The head of the BMW Foundation, Juergen Chrobog, had been the chief of cabinet of former German Foreign Minister Hans-Dietrich Genscher. On Oct. 21, Genscher received the Walter-Rathenau-Prize in Berlin. (Rathenau was the visionary Foreign Minister in the early Weimar Republic and the architect of the 1922 Rapallo Treaty; in 1923 Rathenau was assassinated by a fascist-terrorist group, possibly with foreign connections.) In his acceptence speech, Genscher gave a pointed answer to the questions raised at the Munich event a few days earlier.

Genscher said that the two decades since the fall of the Berlin Wall were essentially wasted in respect to the necessity of building a new, sustainable and multipolar international order. The USA adopted a strategy of unipolar world domination and the Europeans could not make up their mind on what to do alternatively. But now multipolarity has become reality, and the financial crisis should have eliminated the last denials of this reality. The term “emerging countries” is outdated, said Genscher, China, India and Brazil have become “global players”. And the EU has demonstrated in the Caucasus crisis and the financial crisis that it can take the lead instead of waiting for America to issue marching orders.

Today, no clearly thinking person can deny the urgent need to create a sustainable and multipolar international order in the realm of economics and finance, said Genscher. Equally urgent is the necessity of building a new “global security architecture”. Europe has a crucial contribution to make to this international security order based on what Europe has achieved after a century fratricidal wars. What was supposedly impossible, has become a reality in Europe: Cooperation, reconciliation of interests and effective multilaterlism. The 1975 “Conference on Security and Cooperation in Europe” was the beginning of the end of the Cold War. And with this mind, there must be a constructive response to Russian President Medevdev’s initiative for a system of security and cooperation “from Vancouver to Vladivostok,” put forward in Berlin in June, Genscher said. In essence, Genscher put forward an alternative design to the American neorealist agenda.

The ASEM Summit

The Oct. 24-25 ASEM Summit of 45 Asian and European leaders in Beijing has demonstrated that Genscher’s “grand design” is a quite realistic proposition. The ASEM Summit has shown that building a new global financial order has become a matter of international realpolitik.

In their joint statement, the 45 Asian and European leaders “pledged to undertake effective and comprehensive reform of the international monetary and financial systems…[and] supported the covening of an international summit on Nov. 15 in Washington DC to address the current crisis and the priciples of reform of the international financial stability and development of the world economy.”

One should pause for a moment and think through this historical commitment of 45 governments in Eurasia. Obviously, an agreement in principle was reached in Beijing:

  • Concerted crisis management for transforming the disorderly desintegration of “debased” financial assets into their controlled unwinding and liquidation
  • A new regulatory framework, through which the financial system serves sustainable real economic development
  • Coordinated stimulation of the national economies to offset the impact of the financial crisis
  • Creating a new multipolar world monetary system

How did such a global-strategic policy shift come about?

German Finance Minister Steinbrück said on Oct. 25 that he expects the acute financial crisis to persist at least until the end of 2009. And in this time frame, the threat of systemic breakdown would probably remain. Indeed, beyond what we have seen so far, giant aggregates of “structured” and “securitized” financial assets will become “illiquid” because noone wants to buy them, while everyone wants to sell them. Thus, new shockwaves in the financial system are pre-programmed. The melting down of stock markets towards their levels in 2001 is probably a lesser problem in the financial system.

But, precisely this sorry state of affairs will drive the implementation of what was agreed upon in Bejing. At the forthcoming World Financial Summit and successive conferences in 2009. One wonders whether American neorealists are realistic enough to realize that they too have no realistic alternative.

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