International capitalism requires a low-wage, high-growth region for
high rewards on risk capital. Following (past China) are 16 countries with a total
population of about 1.15 billion people where entry-level manufacturing is
currently going.
The world has been restructuring itself since 2008, when Russia invaded
Georgia and the subprime financial crisis struck. Three patterns have emerged.
First, the European Union entered a crisis that it could not solve and that has
increased in intensity.
Europe
The European Union will be unable to solve its fundamental problem,
which is not the eurozone, but the free trade zone. Germany is the center of
gravity of the European Union; it exports more than 50 percent of its GDP, and
half of that goes to other EU countries. Germany has created a productive
capability that vastly outstrips its ability to consume, even if the domestic
economy were stimulated. It depends on these exports to maintain economic
growth, full employment and social stability. The European Union's structures,
including the pricing of the euro and many European regulations, are designed
to facilitate this export dependency.
This has already fragmented Europe into at least two parts.
Mediterranean Europe and countries such as Germany and Austria have completely
different behavioral patterns and needs. No single policy can suit all of
Europe. This has been the core problem from the beginning, but it has now
reached an extreme point. What benefits one part of Europe harms another.
Nationalism has already risen significantly. Compounding this is the
Ukrainian crisis and Eastern European countries' focus on the perceived threat
from Russia. Eastern Europe's concern about Russia creates yet another Europe,
four, total, if we separate the United Kingdom and Scandinavia from the rest of
Europe. Considered with the rise of Euroskeptic
parties on the right and left, the growing delegitimation
of mainstream parties and the surging popularity of separatist parties within European
countries, is clearly evident.
These trends will continue. The European Union might survive in some
sense, but European economic, political and military relations will be governed
primarily by bilateral or limited multilateral relationships that will be small
in scope and not binding. Some states might maintain a residual membership in a
highly modified European Union, but this will not define Europe.
What will define Europe in the next years is the re-emergence of the
nation-state as the primary political vehicle of the continent. Indeed the
number of nation-states will likely increase as various movements favoring
secession, or the dissolution of states into constituent parts, increase their
power. This will be particularly noticeable during the next few years, as
economic and political pressures intensify amid Europe's crisis.
Germany has emerged from this mass of nation-states as the most
economically and politically influential. Yet Germany is also extremely
vulnerable. It is the world's fourth-largest economic power, but it has
achieved that status by depending on exports. Export powers have a built-in
vulnerability: They depend on their customers' desire and ability to buy their
products. In other words, Germany's economy is hostage to the economic
well-being and competitive environment in which it operates.
There are multiple forces working against Germany in this regard. First,
Europe's increasing nationalism will lead to protectionist capital and labor
markets. Weaker countries are likely to adopt various sorts of capital
controls, while stronger countries will limit the movement of foreigners,
including the citizens of other EU countries, across their borders. We forecast
that existing protectionist policies inside the European Union, particularly on
agriculture, will be supplemented in coming years by trade barriers created by
the weaker Southern European economies that need to rebuild their economic base
after the current depression. On a global basis, I can expect European exports
to face increased competition and highly variable demand in the uncertain
environment. Therefore, our forecast is that Germany will begin an extended
economic decline that will lead to a domestic social and political crisis and
that will reduce Germany's influence in Europe during the next 10 years.
At the center of economic growth and increasing political influence will
be Poland. Poland has maintained one of the most impressive growth profiles
outside of Germany and Austria. In addition, though its population is likely to
contract, the contraction will most probably be far less than in other European
countries. As Germany undergoes wrenching shifts in economy and population,
Poland will diversify its own trade relationships to emerge as the dominant
power on the strategic Northern European Plain. Moreover, we expect Poland to
be the leader of an anti-Russia coalition that would, significantly, include
Romania during the first half of this decade. In the second half of the decade,
this alliance will play a major role in reshaping the Russian borderlands and
retrieving lost territories through informal and formal means. Eventually as
Moscow weakens, this alliance will become the dominant influence not only in
Belarus and Ukraine, but also farther east. This will further enhance Poland's
and its allies' economic and political position.
Poland will benefit from having a strategic partnership with the United
States. Whenever a leading global power enters into a relationship with a
strategic partner, it is in the global power's interest to make the partner as
economically vigorous as possible, both to stabilize its society and to make it
capable of building a military force. Poland will be in that position with the
United States, as will Romania. Washington has made its interest in the region
obvious.
Russia
It is unlikely that the Russian Federation will survive in its current
form. Russia's failure to transform its energy revenue into a self-sustaining
economy makes it vulnerable to price fluctuations. It has no defense against
these market forces. Given the organization of the federation, with revenue
flowing to Moscow before being distributed directly or via regional
governments, the flow of resources will also vary dramatically. This will lead
to a repeat of the Soviet Union's experience in the 1980s and Russia's in the
1990s, in which Moscow's ability to support the national infrastructure
declined. In this case, it will cause regions to fend for themselves by forming
informal and formal autonomous entities. The economic ties binding the Russian
periphery to Moscow will fray.
Historically, the Russians solved such problems via the secret police,
the KGB and its successor, the Federal Security Services (FSB). But just as in
the 1980s, the secret police will not be able to contain the centrifugal forces
pulling regions away from Moscow this next years. In this case, the FSB's power
is weakened by its leadership's involvement in the national economy. As the
economy falters, so does the FSB's strength. Without the FSB inspiring genuine
terror, the fragmentation of the Russian Federation will not be preventable.
To Russia's west, Poland, Hungary and Romania will seek to recover
regions lost to the Russians at various points. They will work to bring Belarus
and Ukraine into this fold. In the south, the Russians' ability to continue
controlling the North Caucasus will evaporate, and Central Asia will
destabilize. In the northwest, the Karelian region will seek to rejoin Finland.
In the Far East, the maritime regions more closely linked to China, Japan and
the United States than to Moscow will move independently. Other areas outside
of Moscow will not necessarily seek autonomy but will have it thrust upon them.
This is the point: There will not be an uprising against Moscow, but Moscow's
withering ability to support and control the Russian Federation will leave a
vacuum. What will exist in this vacuum will be the individual fragments of the
Russian Federation.
This will create the greatest crisis of the next years. Russia is the
site of a massive nuclear strike force distributed throughout the hinterlands.
The decline of Moscow's power will open the question of who controls those
missiles and how their non-use can be guaranteed. This will be a major test for
the United States. Washington is the only power able to address the issue, but
it will not be able to seize control of the vast numbers of sites militarily
and guarantee that no missile is fired in the process. The United States will
either have to invent a military solution that is difficult to conceive of now,
accept the threat of rogue launches, or try to create a stable and economically
viable government in the regions involved to neutralize the missiles over time.
It is difficult to imagine how this problem will play out. However, given our
forecast on the fragmentation of Russia, it follows that this issue will have
to be addressed, likely in the next years.
The issue in the first half of the decade will be how far the alliance
stretching between the Baltic and Black seas will extend. Logically, it should
reach Azerbaijan and the Caspian Sea.
The Middle East and North
Africa
The Middle East, particularly the area between the Levant and Iran,
along with North Africa, is experiencing national breakdowns. By this we mean
that the nation-states established by European powers in the 19th and 20th
centuries are collapsing into their constituent factions defined by kinship,
religion or shifting economic interests. In countries like Libya, Syria and
Iraq, we have seen the devolution of the nation-state into factions that war on
each other and that cross the increasingly obsolete borders of countries.
This process follows the model of Lebanon in the 1970s and 1980s, when
the central government ceased to function and power devolved to warring
factions. The key factions could not defeat the others, nor could they
themselves be defeated. They were manipulated and supported from the outside,
as well as self-supporting. The struggle among these factions erupted into a
civil war — one that has quieted but not ended. As power vacuums persist
throughout the region, jihadist groups will find space to operate but will be
contained in the end by their internal divisions.
This situation cannot be suppressed by outside forces. The amount of
force required and the length of deployment would outstrip the capacity of the
United States, even if dramatically expanded. Given the situation in other
parts of the world, particularly in Russia, the United States can no longer
focus exclusively on this region.
At the same time, this evolution, particularly in the Arab states south
of Turkey, represents a threat to regional stability. The United States will
act to mitigate the threat of particular factions, which will change over time,
through the use of limited force. But the United States will not deploy
multidivisional forces to the region. At this point, most countries in the area
still expect the United States to act as the decisive force even though they
witnessed the United States fail in this role in the past decade. Nevertheless,
expectations shift more slowly than reality.
As the reality sinks in, it will emerge that, because of its location,
only one country has an overriding interest in stabilizing Syria and Iraq, is
able to act broadly, again because of its location, and has the means to at
least achieve limited success in the region. That country is Turkey. At this
point, Turkey is surrounded by conflicts in the Arab world, in the Caucasus and
in the Black Sea Basin. But Turkey has avoided taking risks so far.
Turkey will continue to need U.S. involvement for political and military
reasons. The United States will oblige, but there will be a price:
participation in the containment of Russia. The United States does not expect
Turkey to assume a war-fighting role and does not intend one for itself. It
does, however, want a degree of cooperation in managing the Black Sea. Turkey
will not be ready for a completely independent policy in the Middle East and
will pay the price for a U.S. relationship. That price will open the path to
extending the containment line to Georgia and Azerbaijan.
I expect the instability in the Arab world to continue through the next
years, or even next decade. I also expect Turkey to be drawn in to the south,
inasmuch as its fears of fighting so close to its border, and the political
outcomes of that fighting, will compel it to get involved. It will intervene as
little as possible and as slowly as possible, but it will intervene, and its
intervention will eventually increase in size and breadth. Whatever its
reluctance, Turkey cannot withstand years of chaos across its border, and there
will be no other country to carry the burden. Iran is not in a position
geographically or militarily to perform this function, nor is Saudi Arabia. Turkey
is likely to try to build shifting coalitions ultimately reaching into North
Africa to stabilize the situation. Turkish-Iranian competition will grow with
time, but Turkey will keep its options open to work with both Iran and Saudi
Arabia as needed. Whatever the dynamic, Turkey will be at the center of it.
This will not be the only region drawing Turkey's attention. As Russia
weakens, European influence will begin inching eastward into areas where Turkey
has historical interests, such as the northern shore of the Black Sea. I can
foresee Turkey projecting its power northward certainly commercially and
politically but also potentially in some measured military way. Moreover, as
the European Union fragments and individual economies weaken or some nations
become oriented toward the East, Turkey will increase its presence in the
Balkans as the only remaining power able to do so.
Before this can happen, Turkey must find a domestic political balance.
It is both a secular and Muslim country. The current government has attempted
to bridge the gap, but in many ways it has tilted away from the secularists, of
whom there are many. A new government will certainly emerge over the coming
years. This is a permanent fault line in contemporary Turkey. Like many
countries, its power will expand in the midst of political uncertainty.
Alongside this internal political conflict, the military, intelligence and
diplomatic service will need to evolve in size and function during the coming
decade. That said, I expect to see an acceleration of Turkey's emergence as a
major regional power in the next 10 years.
East Asia
China has ceased to be a high-growth, low-wage economy. As China's
economy slows, the process of creating and organizing an economic
infrastructure to employ low-wage workers will be incremental. What can be done
quickly in a port city takes much longer in the interior. Therefore, China has
normalized its economy, as Japan did before it, and as Taiwan and South Korea
did in 1997. All massive expansions climax, and the operations of the economies
shift.
The problem for China in the coming years are the political and social
consequences of that shift. The coastal region has been built on high growth
rates and close ties with European and American consumers. As these decline,
political and social challenges emerge. At the same time, the expectation that
the interior, beyond parts of the more urbanized Yangtze River Delta, will grow
as rapidly as the coast is being dashed. The problem for the next years will be
containing these difficulties.
Beijing's growing dictatorial tendencies and an anti-corruption
campaign, which is actually Beijing's assertion of its power over all of China,
provide an outline of what China would like to see in the next decade. China is
following a hybrid path that will centralize political and economic powers,
assert Party primacy over the military, and consolidate previously fragmented
industries like coal and steel amid the gradual and tepid implementation of
market-oriented reforms in state-owned enterprises and in the banking sector.
It is highly likely that a dictatorial state coupled with more modest economic
expectations will result. However, there is a less likely but still conceivable
outcome in which political interests along the coast rebel against Beijing's
policy of transferring wealth to the interior to contain political unrest. This
is not an unknown pattern in China, and, though we do not see this as the most
likely course, it should be kept in mind. Our forecast is the imposition of a
communist dictatorship, a high degree of economic and political centralization
and increased nationalism.
China cannot easily turn nationalism into active aggression. China's
geography makes such actions on land difficult, if not impossible. The only
exception might be an attempt to take control of Russia's maritime interests if
we are correct and Russia fragments. Here, Japan likely would challenge China.
China is building a large number of ships but has little experience in naval
warfare and lacks the experienced fleet commanders needed to challenge more
experienced navies, including the U.S. Navy.
Japan has the resources to build a significantly larger navy and a more
substantial naval tradition. In addition, Japan is heavily dependent on imports
of raw materials from Southeast Asia and the Persian Gulf. Right now it depends
on the United States to guarantee access. But given that we are forecasting
more cautious U.S. involvement in foreign ventures and that the United States
is not dependent on imports, the reliability of the United States is in
question. Therefore, the Japanese will increase their naval power in the coming
years.
Fighting over the minor islands producing low-cost and unprofitable
energy will not be the primary issue in the region. Rather, an old three-player
game will emerge. Russia, the declining power, will increasingly lose the
ability to protect its maritime interests. The Chinese and the Japanese will
both be interested in acquiring these and in preventing each other from having
them. We forecast this as the central, unsettled issue in the region as Russia
declines and Sino-Japanese competition increases.
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