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US, China and the Rest - Is the Global Order Really Changing?

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This year, the elites in Davos - debating the future of capitalism - faced a little more self-doubt than usual as to whether they have the best ideas to run the world, not least in the face of the intractable euro crisis. But the future of capitalism is just one big global challenge among many facing today's world including climate change, poverty, conflict, instability and oppression.

And one big part of the answer as to how - and how well or badly - we deal with these challenges in the coming decades will depend on who takes global decisions. Much ink has been spilt already on the emerging multipolar world order. But there is no agreement as to how big a change the rise of China and others represents, let alone how much it will change the power of the US or the role of multilateral institutions not least the UN.

Will this be a more complex, unstable, power-hungry world or will it stay the mixture of national-interest, alliances, values, rules and ad-hockery we see today?

In a recent article Robert Kagan argues the decline of the US is a myth. The rest may be rising, he says, but US economic and military strengths will continue.

Joe Nye makes a similar point about the future of power - and predicts that China will grow but will not surpass US power. He describes a three-dimensional chessboard, with the US dominant on the first level - military power; on the second level - economic power - he says a multipolar world already exists, and then on the third level - transnational relations with all sorts of transnational actors from NGOs to multinationals to organised crime - there is something more like chaos than clear powers.

How much does size matter?
As China has grown to be the second largest economy after the US, much attention has been given to rankings by economic size - with predictions of 'the West' shrinking as China, India, Brazil, Mexico and others catch up. These changes are big, and will surely impact on geopolitics, global power relations, who has an influential voice at the UN or G20 or WTO and so on.

But change is often slower than it seems. And it depends how you measure things - including unknowns like future growth rates. So let's take just one set of estimates - from the respected Carnegie think tank - of rankings of the top ten by their gross domestic product (and note, they rank countries in so-called market prices not the 'purchasing power parity' - PPP - measures which adjust for the fact that costs of food or housing are so much cheaper in India or China; PPP measures always rank the emerging economies higher).

This Carnegie 2010 study estimates economic size in 2030 and 2050 compared to 2009. And yes by 2050, China is bigger than the US. But what is interesting is how little the country names in the top ten change. By 2030, Canada and Italy have fallen off the list, and Mexico and Russia are on it. But interestingly it's the same names in 2030 and 2050 - though crucially with the order changed:

2030 ranking: US, China, Japan, India, Germany, UK, France, Russia, Brazil, Mexico
2050 ranking: China, US, India, Japan, Brazil, Mexico, UK, Germany, France, Russia

And of course there's always a European question - if the European Union survives the euro crisis and its single market remains, then counted as one 'country', the EU would be in the top five in 2030 and 2050.

So what's new?
Quite a lot is the answer, even from this simple list by economic size.

Diverging economic views: Firstly, in the past, economic size and wealth has tended to go together - the biggest economies also had amongst the highest incomes per head. But China, India and Brazil have a long long way to go to catch up with US or European standards of living. The UN's overarching measure of human development (which considers, wealth, health, education and more) in 2010 has the US ranked number four, China at 89, Brazil at 73 and India at 119. In that sense, the US may be more of a global model and leader - but it will have lost some relative clout as others catch up in size.

And China, Brazil, Mexico and India as they grow - and if they keep growing - will surely have increasingly influential voices in places like the G20 and WTO. But their views on what global decisions should be taken on free trade, or climate change or development assistance may differ a lot from the US and Europe - not just because of different political systems or foreign policy priorities but because they are at different stages of development.

And, as and when the world fully emerges from the global economic crisis and the euro fiasco, where will different countries stand on protectionism, on interventionist industrial policies, on regulating finance or exchange rates? Wherever the new global consensus settles (if it does) these emerging powers will be much more influential than before. And creating a consensus - as the limited success so far of the G20 shows - will be more difficult.

Diverging interventionist views: Secondly, while the US for now is by far the dominant military power in the world, even in the face of rising Chinese defence spending, the experience of the last ten years shows clearly that there is little convergence on whether, when, why and how to intervene in other countries. The recent Libya intervention saw China, Russia, Brazil, India and Germany abstain - with Russia clearly now wishing it had vetoed the UN resolution.

Brazil and India are democracies and more supportive of human rights than China or Russia. But they are wary of supporting UN human rights resolutions that target particular countries, wary of international intervention even in words.

Where will the emerging world order end up on defence of human rights, or on military interventions - a mixture of principles, self-interest, ad-hoc alliances and occasional UN endorsement like today, or more just a power-based/Hobbesian world?

Tackling Poverty? The biggest providers of development aid today remain the wealthiest countries but countries like China, Brazil and India are getting into the aid business too. But with 75% of the poor now in middle-income countries - not in the poorest countries - it looks likely that the development sector will change a lot too. How long will India or Brazil continue to welcome western NGOs into their country or accept policy-lessons from the World Bank or US or EU? Whether that is good news for the world's poor is another big question but change is on the agenda for development too.

Climate catastrophe? By 2050, on current trends global temperatures will have risen by more than 2 degrees and could be heading for a three or four degree rise in the years after that, with huge effects on many countries. The most affected will mostly be in poorer countries, with much of sub-Saharan Africa set to face migration, drought, conflict in a three or four degree scenario. But even a quick look at big rivers across the borders of India, China and Pakistan show that climate change could create big conflicts in the coming decades.

Will the emerging multipolar order be any better than we are today at tackling climate change or at tackling its fall-outs if temperatures go over two degrees? The 2009 Copenhagen summit - which fell apart without agreement - suggests not. The more recent 2011 Durban summit which made a breakthrough to agree to aim at a global deal, though not til 2020, suggests movement (even if so far not enough) is possible.

A New Global Settlement?
After the second world war in 1945, there was a whole new global deal - the UN was founded, the Bretton-Woods institutions - the World Bank, IMF - were set up, Keynesian economics, welfare states, the Marshall plan meant active regulatory government were the order of the day. After the 1975 economic crisis, the Keynesian order gave way to the neoliberal economic approach of Reagan and Thatcher.

So after today's economic crisis, and in the face of a changing global political scene, what sort of new global settlement will we see? The 'West' - the US and Europe - are having to share their global influence and voice with more countries both east and south. Will these countries come together to forge a clear new system or will the current one adjust and shift a bit, setting up bodies like the G20? And in either case, will there be more difference and diversity - and will that be creative or conflictual, liberal or repressive?

The answers are not clear and will be debated for years to come. But the answers will depend on political choices and arguments made today, not only on economic size, or military clout. And they will determine the sort of world we live in over the next decades.

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