How to survive the Age of Fragmentation
HISTORIANS love sweeping four-word titles such as “The Age of Capital” or “The Age of Reagan.” For our own era, “The Age of Fragmentation” will surely prove irresistible. The liberal world order that was forged after the Berlin Wall fell has smashed apart on the triple rocks of Chinese power, financial turmoil, and domestic populism. Global organizations are seizing up, starting with the World Trade Organization (WTO) and the World Health Organization (WHO). “’Tis all in pieces, all coherence gone,” as the poet John Donne put it of another great coming-apart.
The most pressing problem today is how to survive in this new world disorder. What does “fragmentation” mean in practice and in detail? How do we design international institutions for a world in which the liberal dream of growing harmony is no more? And what does all this mean for businesspeople?
In his new book, Global Discord: Values and Power in a Fractured World, Sir Paul Tucker, a Harvard academic and a former deputy governor of the Bank of England, sketches “four scenarios for the next quarter to half century”: 1.) lingering status quo — a continuing but constrained US-led system; 2.) superpower struggle — prolonged strategic, ideological, and commercial competition; 3.) a new Cold War — semi-autarkic blocs; 4.) a (truly) reshaped world order — a multipolar top table in a world of checks and balances and reformed international organizations.
Reasonable but hardly pathbreaking. But then Tucker makes a clever intellectual maneuver in a book full of clever intellectual maneuvers: He suggests that bits of all four orders (or certainly of the first three) might coexist at the same time. Sometimes we flit between one order and another — it increasingly feels as if we live in a no-man’s land between superpower struggle (2) and a new Cold War (3). Sometimes — and in some policy areas — one particular order prevails.
When it comes to Tucker’s bailiwick of monetary policy, we live in a world of a lingering superpower. The dollar’s dominance is so entrenched that it is likely to survive for some time, though it will be challenged by new digital currencies or by grumpy oil powers threatening to shift invoicing out of dollars. The Washington-based International Monetary Fund (IMF) will continue to play a central role in the global economy. Both the dollar and the IMF provide far more benefits than problems — the dollar because it provides a defense against chaos and the IMF because it provides all sorts of public goods ranging from sound data to crisis management.
The United States is likely to remain dominant in both military affairs and culture (though China’s power is increasing rapidly in the first and Hollywood has performed dismally of late). But the picture is very different in other areas. China is rapidly eroding America’s dominance in the multilateral world through a dual strategy of increasing its say in the United Nations — boosting its funding and heading up UN specialized agencies in areas such as Civil Aviation, Food and Agriculture and Telecoms and tabling motions at the UN General Assembly — while at the same time establishing China-led organizations in the emerging world (the Shanghai Cooperation Organization’s formal mission is to promote a “new international political and economic order”). America’s lackluster fight to retain control of institutions that it itself established in the wake of the Second World War is nothing short of scandalous.
The superpower struggle (2) is reshaping trade policy much more rapidly than most of us (and certainly than most European policymakers) expected. The United States is refashioning its economy to guarantee the supply of semiconductors and other “strategic” goods. But China is already the world’s largest goods-trading nation and operates a worldwide program of state-sponsored and state-directed investment. Meanwhile, rising powers such as India and Turkey are pressing for their place at the top table in a reshaped global order (3), and are willing to exploit the tensions between the superpowers to secure it.
The coexistence of four different worlds inevitably makes the design of governance regimes much more difficult. How can the West and other constitutional democracies maintain their liberal traditions in the face of interdependencies with rising non-liberal states? Can global peace be maintained without any fundamental agreements on values and culture? The liberal world needs to avoid two yawning traps: sticking so firmly to its principles that it inflames tensions with China without achieving anything practical, on the one hand, and taking a purely pragmatic approach and thereby betraying its own soul, on the other.
Tucker suggests a series of concentric circles. Cooperate most with countries with which we share common values and intertwined histories. But also work hard to nurture cooperative relations with non-likeminded powers so that you can continue to negotiate over matters of mutual interest such as trade or climate change. The days of liberal triumphalism, when global bureaucrats (particularly economists) tried to impose a common set of values and even a common way of doing business (shareholder capitalism) on the rest of the world are best forgotten for the time being. Better to turn a blind eye and agree to disagree than to risk splitting the world asunder.
This approach still leaves many practical questions. How far can we go in abandoning moral universalism without betraying our own deepest values? What do you do if an agree-to-disagree power tries to spread lies through a supposedly neutral global organization, as China did with the WHO during COVID? Where does trade end and military power begin? The US is already telling companies that they can’t trade with China in goods that might have military applications. But doesn’t trade in general make China stronger and therefore more capable of supporting a mighty military machine? These questions will provide the meat and drink of international politics for years to come.
The coexistence of four different worlds is arguably the worst possible news for mainstream businesses that crave order and simplicity (more exotic businesses such as insurance and hedge funds that thrive on instability are a different story). It might be easier from the planning point of view if the world simply chose one default position and stuck to it rather than oscillating confusingly between several.
To add to their miseries, mainstream businesspeople must contend with two other sources of confusion. The first is the blurring of the distinction between political policy and economic policy to create a new entity called “geoeconomics.” Businesspeople like to think in neat categories. Geoeconomic policy depends on the use of economic tools to achieve political ends: for example, sanctions (embargoes, asset freezes, travel bans, ejection from critical infrastructure such as SWIFT); tariffs and trade barriers; expanding regional trade pacts; regulatory diplomacy; currency manipulation; strategic use of foreign aid; rationing the export of rare earths; and cyber-politics.
The second is the cacophony of experts. The study of “geoeconomics” brings into play several tribes of experts lodged in the universities and various professional organizations: economists, particularly trade theorists; lawyers, particularly human rights lawyers; political scientists, particularly international relations specialists; war-study types and, increasingly, philosophers. These various tribes all have their own esoteric methodologies and languages (status in academia seems to be measured by the extent to which you adopt the latest rococo phraseology). They barely talk to each other let alone to the ordinary people who live outside their scholastic caves. Tucker has mastered numerous rival disciplines, hopping from Grotius’s thinking about the law of the sea to Bernard Williams’s opinions on human dignity. He recognizes that we can’t make sense of a fragmented world with a fragmented academia. But he’s been less good at translating these esoteric ideas into a language that people outside Harvard Yard or the halls of the IMF can understand. The world of “global discord” desperately needs a John Maynard Keynes or a Milton Friedman who can range over a variety of disciplines like a master but also translate them into gripping English.
Future historians will at least be able to bring the benefit of hindsight to all this and thereby impose some order on the chaos. But for now, the overall impression is one of extraordinary flux and confusion: Europeans are trying to come to terms with America’s growing nationalism; companies are flexing their supply chains for an unstable world; emerging powers are shifting their alliances; economic globalization and national and regional politics are pulling in different directions at once; global organizations are losing their legitimacy; and the academics who are supposed to make sense of these things are so immersed in their sub-disciplines that they either can’t see the bigger picture or, if they can see it, they can’t explain it to lesser mortals. The World of Disorder remains a World of Confusion as well.
BLOOMBERG OPINION
