Power Shift: Economic Imperatives for the Post-Cold War Order
March 5, 1993
<< Previous Panel | Next Panel >>
Panelists:
William Colby
Counsel, Donovan, Leisure, Rogovin & Schiller; former Director, Central Inteligence Agency
Amb. Eamonn Gallagher
Fulbright Scholar; Former European Communities Ambassador to the United Nations; former Deputy Director-General for External Relations, EC
Shafiqul Islam
Senior Fellow in International Economics and International Finance, Council on Foreign Relations; Former Director of Industrialized Countries Program, New York Federal Reserve Bank; Author, Yen for Development: Japanese Foreign Aid and the Politics of Burden-Sharing and The United States as a Debtor Nation; Co-Editor, Making Markets: Economic Transformation in Eastern Europe and the Post-Soviet States
Charles P. Kindleberger
Ford Professor of International Economics emeritus, Massachusetts Institute of Technology; Author, Power and Money: The Politics of International Economics and the Economics of International Politics
Vaclev Kupka
First Deputy Minister of Development and Economic Policy, The Czech Republic
Leonard Silk
Senior Research Fellow, Ralph Bunche Institute; Former Chief Economics Correspondent, The New York Times; Author, Forecasting Business Trends, Capitalism: the Moving Target, and The Economists
Interlocutor:
Jeswald Salacuse
Dean, The Fletcher School of Law and Diplomacy; Author, Making Global Deals: Negotiating in the International Marketplace
Moderator:
Rosalina Yap
EPIIC Colloquium
"[T]oday's global society, even more than its predecessor sixty years ago, confronts the task of reconciling technological change and economic integration with traditional political structures, national consciousness, social needs, institutional arrangements, and habitual ways of doing things."
-Preparing for the Twenty-First Century by Paul Kennedy
| ||
| ||
|
"In an increasingly interdependent world, the need for cooperation appears to increase relentlessly. If we focus on the global level, there are four areas in particular for which this need seems well established; the problems of the poorest LDCs, the systemic transition of the NMEs (new market economies), the challenges facing the international trade system and global environmental problems."
-Scanning the Future
There are many global shifts now taking place that are changing the nature of international relations: shifts in power and influence, shifts in rules, and shifts in global actors. Many argue that economic issues have now replaced the military and political tensions of the Cold War, as the global imperatives for a rapidly evolving world. What are the new global economic imperatives?
What will be the engine for growth in the global economy? How will growth be defined when the world's population is growing by 95 million people per year? Who will be the beneficiaries, and who will be left behind? Where will the new economic center come from? Where will political leadership come from? And what will be the role of the United States? Will it continue to be the global leader, as it has been since World War II, or will it be one competitor among many?
Traditionally, sovereign nations gear their economic policies, both domestic and foreign, on narrow national measures of economic benefit. Yet the emerging issues transcend national borders. States are no longer self-contained, but now rely on other states for trade exchanges, financial exchanges, and increasingly, for technological changes. Economic competitiveness, especially in the technology sector, is now more than ever a security issue.
When national security is redefined in economic terms, the need for cooperation among nations to ensure economic growth becomes increasingly important. Failure to cooperate nationally threatens not only global prosperity, but international security as well. The Bretton Woods system, established in 1941, and the various institutions it created, such as GATT and the IMF, are faced with serious challenges as the economic environmental changes. There are some who even question their ability to survive without substantially changing their structure. GATT, after successful tariff reduction in the late 1960s, has faced new difficulties with each Round. The Uruguay Round is severely challenged by the forces of regionalism and the protection of new economic imperatives such as intellectual property rights. If these institutions cannot withstand the forces of change, what will be the future of international cooperation?
The shift towards economic strength as a source of power has caused a popular debate over the decline or relative decline of the United States, since the U.S is no longer the undisputed world economic leader. The "Declinist Debate" has two primary sides: the declinists, who argue that the U.S. has declined economically relative to its biggest competitors, Europe and Japan, affecting its power and influence. The other side, or the "Renewalists," do not necessarily disagree that the U.S. has declined in its relative economic strength, but argue that this does not constitute absolute decline, and through better policy choices, the U.S. can remain a competitive economic power.
Today, Germany and Japan are, along with the U.S., the strongest economic competitors. Reflecting this new leverage, in the past year, both Germany and Japan have requested permanent seats on the U.N. Security Council. Germany, despite its concern with the absorption of East Germany, is playing a primary role in European integration. Japan, as the largest surplus nation, has yet to show how it will wield its strength. As one analyst has said, will it be a "reluctant giant," a "thin-skinned retaliator," or an "economic reformer?" If these two countries become active participants in world affairs, how will the balance of political power be altered?
Economics assumes a direct political twist with profound human consequences when used as a coercive lever. Already in the post-war era economic sanctions are increasingly being applied against aggressive and pariah nations such as Iraq, Serbia and Haiti as a means of punitive pressure. On a macro level, sanctions may or may not be effective against the regime in power. But on an individual, micro level, withholding aid or applying embargoes often affects innnocent victims and their ability to survive.
Among the most important economic considerations for the new world order are the challenges facing the international monetary system, and especially international capital flows. The continuing liberalization of domestic financial markets has led to the global integration of capital markets, where due to incredible advances in communications technology, markets are now open 24 hours a day. Foreign financial exchange transactions totaling almost $350 billion dollars per day take place, out-voluming trade transactions by a ratio of 20 to one. The awesome speed and volume of international capital exchange has profound implications for economic development in every part of the world.
To address these vast problems will require global financing, placing a great strain on international capital flows. The reconstruction of war-torn areas such as Angola and Vietnam immediately intensify the demand for global capital. And in the coming years, economic development in the Less Developed Countries (LDCs) and formerly Communist or New Market Economies (NMEs) will be necessary in order to avoid regional conflict and tension due to economic instability.
Only the industrialized nations adjusting their policies can help avoid a global credit crunch. Yet even in Japan, the largest capital exporter of the eighties, self-interested policies are shifting away from capital supply and towards domestic demand. The outcome of the the U.S.'s struggles to reduce its current-account deficit will have serious bearing on the severity of global shortage of capital. It is a serious problem, for a world shortage of capital could lead to global stagnation.
Of tremendous import is the role of transnational corporations and the evolving nature of their corporate citizenship. As Robert Heilbroner has reminded us in his review of Kennedy's book, "The total annual sales of the 350 biggest multinational corporations are equal to one third of the combined national products of the industrial world and exceed by several hundred billions that of the developing world." Is international relations an obsolete term?