Sunday, 27 July 2008

Let`s Enjoy the Olympics

 27th July 2008
The Malta Independent on Sunday

In the first article I published in this series last January, I had dwelt on whether this year, 2008, like 1968, could enter the history books as a landmark year for strategic shifts, in politics, in economics, in thinking and in the general approach to life.

Six months down the road, 2008 is living well up to these expectations. The changes going on around us are breathtaking and have an aura of strategic shifts and not mere tactical switches.

Historians could pin on 2008 the passage from a uni-polar to a multi polar world with at least three political centres of influence emerging and undergoing, individually and collectively, transformational change which will shape the evolution of world politics for decades to come.

Obama clinching the Democratic nomination for presidency was against all odds. In his pre-election European tour, he is showing all the hallmarks of a once in a lifetime character that moves the masses and inspires the crowds. If he becomes a world leader half as good as he speaks, then the world can expect true positive change from the western side of the Atlantic. His impromptu speech in Berlin was inspirational and convincing on the need for America to become more networked with its key allies and for Europe to assume a larger international role in places like Afghanistan where foreign troops are operating under a UN mandate. His Berlin speech reached the same calibre as the Ich bin Berliner speech of JFK and the ‘Mr Gorbachev tear down this wall’ speech of Ronald Reagan.

Winston Churchill is claimed (probably incorrectly) to have said that the Americans always get it right in the end after they exhaust all other options. Separating myth from reality with Churchill is a tricky business as his enormous appetite for success, war, technology, conversation, alcohol and cigars turned him into a legend. Hopefully, after the disaster of the Bush war presidency, that has weakened America’s power and influence in the world, the next President can regain for America the respect and position of leadership by recognising the limits of its military superiority so clearly exposed in the Iraq war, and through personality, persuasiveness and charisma, restore America’s credentials for multilateralism through supranational organisations like the UN and Nato.

There is no doubt that Obama has better credentials for performing this job than John McCain, who remains in favour of the Iraq war when in reality what is needed is structured disengagement from Iraq and focus of energy on Afghanistan from where the terrorist threat started and remains. And this must be done fast if America and its allies are to have the credibility necessary to deter Iran from pursuing its nuclear ambitions.

Europe continues to struggle with the dilemma of the limits for its growth by offering membership to countries that seek it. Having successfully integrated the former communist countries of Eastern Europe into the EU, it would be dangerous if it were to close its doors to new aspirant countries, which were formed after the disintegration of the former Yugoslavia, the former USSR and Turkey itself. The re-acquisition of economic power by the Russian State could very well fill the vacuum left if Europe shatters the membership dream of these countries.

World history shows that economic power will sooner or later morph into political power and Russia’s bullying of Georgia and Ukraine is but a mere symptom of the course history will take if Europe were to exclude countries like Turkey, Ukraine, Croatia, Serbia, Albania and Kosovo.

Yet, such vision of further expansion of the EU needs the support of existing members at granular democratic level not just at the level of its political representatives. The Irish No to the Lisbon Treaty has shown a country in the far west of the Union having scant appreciation of the collective need to continue the expansion to the East. On present rules of total unanimity resulting from the Nice Treaty, it is unlikely that the Lisbon Treaty can ever be ratified, inadequate as it already is as a platform for further expansion.

This brings back the argument whether the EU is being unrealistic in its quest for imposing uniform rules on all its members and whether, beyond certain basic standards related to the single market, it should allow a more flexible type of arrangement for opting in or out of other provisions. It seems that efforts in this direction have been given an impetus after the Irish Vote with an EU country sub-grouping making its own arrangements for mutual recognition of divorce standards and with the French taking an initiative for the Mediterranean Club, which in many ways aims to keep Med countries in the EU fold without offering them membership terms, which would add further stress to its rigid structures.

Yet, among all this uncertainty, Europe is emerging as a political and economic force that is now a serious challenge to America’s dominance in the half century after the Second World War. The strength of the euro and the weakness of the US dollar is a mere symptom of this shift as investors see more discipline and anti inflation credentials in the way the Europeans manage their economic affairs, rather than the way the Americans have of keeping their economy growing artificially by jumping from one economic bubble to the next.

Yet, I reserve the greater change to the emergence of China, with its laws of big numbers, as the third economic world power. It was announced this week that China has the largest number of Internet users in the world even though the level of Internet penetration is still very low. In spite of the quasi recession in the US and slowdown in Europe, China’s economy keeps growing in double digit terms and seems to have acquired its own internal dynamics that disengaged it from dependence on exports to the US.

Yet China remains an experiment still in the making. How realistic is it to sustain such economic growth through capitalist systems at micro level but keeping central command type of policies at macro level? If the Chinese authorities continue to filter the fruit of economic growth so that most of it remains under State control rather than be allowed to cascade down to the population to stimulate further consumption, they will be building up great imbalances in the world economy, which will eventually explode either through very sharp domestic inflation or through sudden revaluation of China’s currency.

This cannot be allowed to happen when the world’s eyes will be on the Beijing Olympics, but after that reality will have to be faced. Either way the political system in China will come under stress. Slowing down will become a necessity for maintaining the current political structures but this is easier said than done once certain internal dynamics have been unleashed. Yet without the central control of the Communist Party, China could fall into chaos as the sharp economic difference between the economic fortunes of urban and rural populations could become a great destabilising force. Democracy has never been tested successfully in countries as big and as diverse as China and, as in the case of Russia, democracy will push towards the breakdown of the country in various independent republics, which is not exactly what the world needs to become a stable place.

For now, let’s enjoy the Olympics.

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