The World of Tomorrow

1 december 2003

Helmut Schmidt

Resume: Domestic political stability is a must for building a flexible yet stable and effective state system in Russia. Its desire for stability means that a rather authoritarian type of government is to be expected for a lengthy period of time.

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. 

Last updated 1 december 2003, 14:50

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