Puzzling through the geopolitical implications of the financial crisis

Posted By Daniel W. Drezner Monday, April 6, 2009 - 3:26 PM Share

A surprising number of people are curious to know my thoughts about the political implications of the global financial crisis -- a sure sign that Martin Wolf, Niall Ferguson, and Nouriel Roubini and about 50 other people on the geopolitics "A list" are just too damn busy.

Until recently, I had been busy thinking furiously about how the crisis affected skirt lengths, so only know am I trying to look at The Big Picture. Which, of course, means I'm starting out by reading what other people are writing.

Quentin Peel provides a nice overview in the Financial Times of the emerging conventional wisdom -- power shifting to the East, yadda, yadda yadda. And in The Washington Quarterly, Matthew Burrows and Jennifer Harris update the National Intelligence Council's Global Trends 2025 report to incorporate the effects of the crisis (they should know how to do that, since Burrows was the principal drafter of the original report).

Here's where I keep bumping my head. I by-and-large agree that a long-term implication of the crisis is that America's relative market power should shrink vis-a-vis China and India. The thing is, an awful lot of the short-term crisis steps are not moving in that direction. The United States is trying to boost its consumption spending. China appears to be boosting pursuing fiscal expansion as well, except a closer look at what they are doing shows that they're doubling down on an investment strategy that increases their export dependence. Furthermore, the head of China's central bank doesn't think that Chinese consumption is going to rise anytime soon, because Confucian cultures value, "thrift, self-discipline, zhong yong or Middle Ground (low-key), and anti-extravagancy."

After a certain point, short-term trends can congeal into long-term trajectories. So, my question to readers: will the short-term moves actually throw off long-term projections about power trends?

EXPLORE:INTERNATIONAL RELATIONS, FINANCIAL MELTDOWN, GEOPOLITICS, INTERNATIONAL POLITICAL ECONOMY, INTERNATIONAL RELATIONS THEORY

(3)

HIDE COMMENTS LOGIN OR REGISTER REPORT ABUSE

BRETT

8:32 PM ET

April 6, 2009

Of course they will. What

Of course they will. What this all amounts to is the New Multi-Polarians trying to cover their asses and reinforce their positions.

I've always been skeptical of such people. They assume that China is just going to straight-shot it to the top, when the key sector of their economy is dependent on exports, they have horrendous environmental damage, and anything like a First World lifestyle for hundreds of millions of Chinese will drive the basic costs of resource inputs sky-high.

You know what I'm honestly surprised about, though? That few of these guys seem to be predicting a new wave of Middle East- style Resource Politics.

BLUE13326

5:10 AM ET

April 7, 2009

There are so many variables;

There are so many variables; a country can't take on the amount of debt the US is taking on without losing influence. But even that rather noncontroversial statement could be influenced by many variables; for example, we could have some technological breakthrough that could negate that, such as a real alternative to oil or a cure for cancer. You could have made the same statement about the debt Reagan ran up, but within a few years after his retirement, the Soviets were history, and we were smashing Saddam in Desert Storm and many were complaining we were just too darn powerful. History doesn't seem to work in straight lines; in the 70s, it seemed the Soviets were going to rule the world, in the 80s, it seemed the Japanese were going to eclipse our economy. And, of course, there were the decoupling theorists, who, fresh from wiping the egg off their faces, are now predicting a China-dominated world.

If I had to put money on it, I'd say the US will lose influence, largely due to the continued mismanagement of this financial crisis, which will produce at minimum a significant period of sub-par growth; and we're already seeing some of the externalities that flow from this: A loss of confidence from our allies, the slashing of defense budgets, the growth of confidence of rogue states and our enemies. But what's not clear is who will gain from this. The obvious choice is China, which seems more adept at negotiating this new landscape, for example, in its quest for natural resources abroad. But it's still a fairly unstable place.

Also, there are major events that will culminate soon that have the potential to radically change the course of things. For example, if Iran gets nuclear weapons that will shift things a great deal, and we could see a continuation of the recently-broken trend of the rise of resource-rich states like Iran, Russia, and Venezuela. These countries will likely have a greater degree of insulation from the world economy, and could achieve significant influence and power.

DAVID LAOSHI

6:55 AM ET

April 8, 2009

Are we talking soft power or hard power?

In terms of soft power, China may be the winner out of all this, in the short term as well as the long. I'm surprised nobody's yet mentioned China's special drawing rights currency proposal, which is one of the more innovative modifications to Bretton Woods to come out in a while. With this proposal, China has earned some aura of global leadership, and it can be tied pretty directly to the financial crisis. Whether or not it's true, since this crisis started China has come out *looking* like a global leader - and in certain situations perceptions can become more important than reality.