01.12.2003
The World of Tomorrow
№4 2003 October/December

Prophecies are always risky, particularly if they come from an
economist like myself. Economists are trustworthy only when they
speak about the past, the audience has to be cautious when they
speak about the present. But if they start to talk about the future
you have to be extremely cautious.

Yet, I will take the risk of looking into the future – I can
boast of one small proof of my forecasting ability. I have recently
re-read a speech that I gave about 20 years ago in Beijing, China –
it was the time of Deng Xiaoping and of Yuri Andropov. I had
predicted that by the end of the century there would exist three
powers of global importance, namely the U.S., China and Russia.
Today, that prediction has come true – although some Americans do
not like to admit that and there remains certain circumspection
toward Russia.

However long Russia’s present domestic and economic weaknesses
may last, Russia will continue to be a world power. This is due to
its vast territory, which is rich in oil, gas and other natural
resources, as well as its enormous military power, which includes
thousands of units of nuclear weapons. Of course, the Russian
economy is not in an optimal shape as yet. But I think it is likely
that Russian people and Vladimir Putin will find their own way to
make the country internationally competitive and to integrate
Russia into the global markets – beyond its dependence on oil and
gas exports.

The best that we in the West can do is to show respect to the
one-thousand-year-old Russian nation and offer cooperation on an
equal footing.

Vladimir Putin is obviously prepared for international
cooperation and has shown his willing to be a dependable partner.
He is somewhat irritated by the East European enlargement both of
NATO and – although to a lesser degree – of the EU. The West would
be prudent and follow its own interest, yet try and avoid any
humiliation of Russia, whether this be in the field of armaments
and disarmament, trade and finance, or elsewhere. My warning or
exhortation to observe equality when dealing with Russia applies
not only to governments but to private Western corporations, banks
and investors as well. Of course, they will be very reluctant to do
business with what the Russians themselves call the “Russian
Mafia.” The country’s judiciary system is not complete as yet.

Aside from these points, Russia’s macroeconomic figures over the
last couple of years have been quite encouraging. This is
demonstrable, for example, by the real growth rate, the formation
of fixed capital, the current account surplus, the reduction of
external debt and the increase in currency reserves.

It appears as normal that there is some economic cooling at
times. But over a long haul, I believe, we are going to see a
moderate growth in Russia. Of course, oil prices on the global
markets will still be a major factor, while the speed of
institutional and domestic reform is the other major factor. To
create resilient institutions will take time, and this of course
depends on the domestic political stability. I would guess that
sufficient stability is to be expected – which means that for a
lengthy period of time a rather authoritarian type of government is
to be expected.

One footnote here from a German point of view. We Germans feel
rather relieved that despite the two bloody wars in the 20th
century there does not seem much mutual hatred left between us.
Instead, we sense the will for a fair and equal partnership on both
sides; this must be seen as another positive aspect for Russia’s
future.

The German nation boasts a millennium-long history – much like
the Russian nation. For half a century Germany has been gradually
integrating into the European Union, formerly known as the European
Economic Community. Despite the present standstill within the
European Union and the internal rift brought about by the member
states’ differing positions in face of the Iraqi war, I believe
that the current status of 15 EU nation states, which in a short
while will expand to 25 states, should be considered as an enormous
success. One only needs to reflect back onto the last millennium of
devastating intra-European wars to understand the significance of
our achievement. Inside Europe, the permanence of the common
market, together with the common currency of the Euro, appears to
be highly likely. With a little less certainty on my part, I expect
the EU to overcome its present crisis, because none of the European
nation states will be able to stand up on their own against global
challenges. The leaders will realize this fact and will understand
that the creation of a well-functioning union is a must for
maintaining the basic national interests of their individual
countries.

Nevertheless, the establishment of an efficiently functioning
common foreign policy may take anything between 30 and 50 years.
(It must be remembered particularly that the future role of Great
Britain is as yet undecided.) A common defense policy inside Europe
may take even longer to coordinate: it has taken us 50 years to get
this far, and if we need just another 50 years to attain a fully
operative entity it would not be bad at all.

It will also be good for our common neighbor, the Poland. The
Poles have voted in favor of their participation in the EU. After
more than two centuries of being illtreated by the Prussians, the
Austrians and the Germans – all from the West, as well as by the
Russians from the East, Poland’s entrance into the EU offers it a
better perspective. Of course, some disappointments will occur, as
the Poles, having been hitherto sandwiched between Moscow and
Berlin, will regard the alliance with America as being of greater
importance – even if they do not necessarily pronounce this
evaluation loudly. Their Russian and German neighbors, as well as
their future EU partners, will have to understand this ranking
order as a natural result of history and thereby as a fact of life.
But nor will this situation present any sort of danger to our
union.

The former Soviet Union had overstretched its military and
armaments efforts and its hegemony over many neighboring countries.
I believe that future historians will find that the inevitable
corrections that transpired during the 1990s have served as a great
relief to the Russian nation. Of particular importance is the
disappearance of the imminent danger of war between the two
communist giants. This is a great relief to both  the Russians
and the Chinese, and it has opened up many opportunities for
economic and social progress in both countries.

The tendency for the globalization of information and technology
is likely to proceed. As a result, interdependence across the globe
is likely to grow – whether one likes it or not. Any country which
tries to seal itself off from that process is likely to be left
behind – North Korea is an illustrative example. Also, badly
governed and poorly organized of the least developed and lesser
developed countries will be left behind or left out. They will only
very partially benefit from globalization.

When we ask ourselves the question, “Who is winning under
globalization and who is losing,” the answer is threefold.

First, the winners so far are predominately representatives of
the highly developed industrialized countries and their
populations, certainly including the U.S., Canada, the European
Union, Japan, and Australia.

Second, the winners among the developing countries seem to be
those which are governed by economically enlightened governments,
albeit governed in a strictly authoritarian way. China stands as
the outstanding example, and there are a few oil-exporting
countries which serve as a good example. It is also relevant to
consider the so-called ‘Four Little Tigers’ – Singapore, Hong Kong,
Taiwan and South Korea. Each of them has done well for its people
and can no longer be placed in the category of developing
countries. I believe that it remains possible, yet still uncertain,
that Russia will also fall into the winners’ column someday.

Third, a number of developing countries trying to establish
democracy are failing in the socio-economic realm; this precludes
many of them failing politically as well. In my view, it is a
shameful mistake to urge these nations to open their borders for
the import of manufactured goods while at the same time deny them
the opportunity to export their agricultural products. The U.S.,
the European Union and Japan remain the egoistic perpetrators of
such behavior in the world today. They continue to preach free
trade without obeying their own sermons; instead they indulge, as
ever before, in protecting their own farmers, steel makers and so
on.

On top of that, many developing countries have been persuaded to
open their economies to accept foreign short-term loans and
credits, as well as to liberalize their current accounts, thereby
opening themselves up to all kinds of speculation from the outside.
The result is they are getting deeply indebted. The Southeast Asian
credit and currency crisis five years ago should have taught the
world a lesson. The rescue operations of the International Monetary
Fund and the World Bank (which extended from Indonesia to Mexico,
even including Russia!) have to a lesser degree bailed out the
recipient developing countries; to a greater degree they have
benefited the private Western financial institutions, which accrued
the due interest and dividends of these large loans.

It might be a good idea to give the IMF the important mission of
developing a new concept for fair order and stability in the
globalized financial markets. The IMF should not be regarded as a
lender of last resort to countries all over the globe. Instead, its
major role should be monitoring, providing transparency methods and
stabilizing the social and economic policies of sovereign states.
The enormous volume of transnational flows of capital and money,
the wave of crazed speculation and fraudulent manipulations of
stock prices, as well as the mergermania in the private financial
institutions call for better surveillance and regulation. But,
personally, I am not very optimistic that this goal is
achievable.

Some Asian countries and most African countries originated from
former colonies and protectorates, the frontiers of which were
arbitrarily determined by the imperialist powers, with no regard
for ethnic, religious or cultural factors. As a result, such
developing countries embrace very heterogeneous populations.
Stability and good governance are rather rare in such heterogeneous
countries, and this distinction will persist. Therefore the
majority of the developing countries are also likely to suffer in
upcoming decades.

China is by far the greatest developing country with
millenniums-long cultural evolution and a high degree of
homogeneity of the population. Given an unbelievable civilizational
and economic success made by China in the 1980s and the 1990s, I
deem it likely that it will carry on with equal success through the
next decades. China is a political world power today; it is going
to become an industrial and economic world power as well. If China
maintains its stability and effective government, its economy and
GNP will surpass those of Japan within three decades, and in the
future its economy will reach the same order of magnitude and
weight as the economies of the United States and the European
Union. There will then be three great currencies – the U.S. dollar,
the European euro and the Chinese yuan. Of course, the Chinese will
have to overcome enormous problems in the process and they are sure
to encounter setbacks on the path as well. One of those may arise
from tensions across the Taiwan Strait; this situation  has
somewhat mellowed recently; if prudence on both sides prevails in
the future, then the danger of a military conflict will be kept
under control.

The same may apply to the Cashmere conflict; at any rate, 
India is likely to become a world power. (But whether the European
Union will become a world power remains to be seen.) Brazil may
even one day be regarded as a world power too.

It appears unlikely that there will be wars between world
powers; the existence of nuclear weapons on all sides will prevent
that from happening. But military technology will be further
developed and perfected. Today there are eight states that have
nuclear weapons and their number may further increase. It is likely
that arms limitation talks will remain on the international agenda.
Not only weapons but also oil and natural gas will continue to play
a major role in such talks. Therefore, it is not only the Middle
East that will continue to be a source of tension, but Central Asia
possibly as well.

Many Americans believe that September 11th has changed the
world. But this is not correct. Rather, it has deeply changed the
Americans’ perceptions of the outside world. They had been told –
and believed – that their country was the only superpower; but
notwithstanding all their power, for the first time in their
national history, they suffered from a violent attack on their own
soil. This experience led the American leadership to the decision
to use their enormous military power to fight the so-called “war on
terrorism.” As a consequence, the already existing tendency for
hegemonial and imperialist behavior vis-?-vis other nations has
prevailed. The imperialist element within the foreign policies of
the U.S. goes back to the middle of the 19th century, back to the
wars against Mexico and Spain, and back to Theodore Roosevelt. In
modern times we have heard catchwords like “rogue states” or “axis
of evil;” former American presidents Ronald Reagan and Bill Clinton
took the initiative to bomb places like Grenada, Belgrade and Sudan
without securing any decision by the UN Security Council.

Of course, America is by far not the only state that has
neglected and violated the UN and its Charter. American leaders are
certainly not the only ones who verbally abuse other countries and
their leaders. They also are not the only ones who forcefully
attempt to spread their ideologies beyond their borders. Today a
new evangelical zest and zeal has sprung up. Inspired by the fact
that the U.S. is the only globally operable military superpower,
some American leaders believe that it is their mission to
proselytize and convert the rest of mankind toward their ideas of
human rights and democracy. That sense of mission has been an
element of the U.S. strategy for quite a long time – suffice it to
recollect the U.S. participation in the war against Hitler, or
later in the Cold War.

America’s current strategy can be characterized by three
catch-phrases – freedom of action, ability to fight a preventive
war, and democratic imperialism. This guideline is likely to
persist beyond the maximum duration of President George W. Bush’s
term in office.

Presently, only a minority of sovereign states are satisfied
with America’s strategic attitude, not to mention the extension of
the U.S. sphere of influence. A majority of people in Asia, Africa,
Latin America and Europe would prefer, of course, American
internationalism or multilateralism. All of us will try to
influence America in that direction. My guess, however, is that for
quite some time we will have to live with a considerable degree of
American unilateralism. But such situation should not immediately
tempt other nations to resort to voluntaristic actions. After all
it is the UN and its Charter that the rule of law in international
affairs is based on – the world has no other globally binding
Constitution.

In the long run, other traditional elements of the U.S. strategy
will again come into the open, namely multilateralism and
internationalism, but possibly also isolationism. These elements
have traditionally coexisted with unilateralism; occasionally one
or another would prevail. Due to the vitality of the American
nation and due to the differing trends inside American society, the
present hegemonial unilateralism will not prevail forever.

America will probably recover from its present-day psychosis;
the Americans will once again become aware of the fact that in the
new century mankind will certainly face many dangers and challenges
which no nation, not even as powerful as the U.S., will be able to
address on its own. Whether in the field of population explosion or
global warming, global environmental decay or global epidemics,
globalized crime or global monetary disorder – in none of these
fields will America be able to unilaterally provide the answers and
the means. Nor will the country be able to provide shelter for
itself. The U.S. leaders have long since known that in all these
fields they need international cooperation. I strongly believe that
they will once again lead into this direction.