Last week’s Economist had a couple of nice articles on China’s National Day on October 1st, when the Chinese showcased their military, including the DF-31 nuclear-tipped ICBM, which can hit any city in America.  Most of these armaments have “Made in China” tags, not unlike all of our clothes and toys.

The Economist leader on the subject lamented this show of militarism, even comparing modern-day China to Prussia/Germany and Japan in the late 19th century.  I recall attending Bastille Day celebrations along the Champs Elysee in Paris in years past, when the glory-obsessed French showcased their military hardware; yet nobody got bent out of shape about French militarism.

Yet the rise of China should rightfully be compared to the rise of powers-past, such as Germany, Japan, Russia and the U.S.  We should consider how status-quo powers such as Britain might have mismanaged some of these rises in the 19th century and how we might avoid such mismanagement with regard to China today.  The blame for German militarism rests largely on the shoulders of Germans, this is true, especially on the fragile shoulders of Kaiser Wilhelm II and his cabal (though even Bismarck shares some of the blame).  Even so, the Western Powers could have better managed Germany’s rise.  They lacked an agenda for providing Wilhelmine Germany with enhanced international privileges to match its rising power.  Matching privileges with power is key to peacefully managing a power’s rise.  And, anchoring a rising power in the institutions of the status quo is likewise critical.

With the Concert of Europe and the Congress system of Metternich dead by the late 19th century, there were no international institutions to anchor Germany.  China, by contrast, is a card-carrying member of the U.N. Security Council, the WTO, the IMF and World Bank, the G-20, G-2, and other institutions.  Furthermore, although China may still feel somewhat dissatisfied because Taiwan and other East Asian assets (such as oil reserves in the South China Sea) are not being handed to it on a silver platter, Chinese privileges in the world are being equated step-by-step with Chinese power.  The ”peaceful rise” of the dragon is taking place, at least in part thanks to Western statecraft.

The parallel with Wilhelmine Germany is a nice one, but on one key parameter, China falls short of authoritarian Germany.  Germany of that era was a pluralist, if not a liberal, society.  There was the Reichstag, in which the Social Democratic opposition was well represented.  Sure, the Kaiser and his ministers were not beholden to the German parliament.  Yet the nascent democratic institutions were there, whereas Chinese communism has not provided such vehicles for democratic development.  Likewise, Bismarck had provided Germany of those days with the most progressive social security safety net in Europe, neutralizing in part the appeal of the left.  In China’s Workers’ Paradise, the social safety net is woefully inadequate.

A few months ago, observers worried that the global financial crisis could weaken the Chinese Communist Party’s hold on power.  As long as the CCP delivered economic growth north of 8% a year, few questions were asked by the populace.  But this social contract was seen as at risk.  These days, observers are applauding the resilience of the Chinese economy at weathering the storm.  However, China’s recovery has been driven by a huge fiscal stimulus and a massive state-directed lending boom, which could lead to banking sector weakness in the future.  True, China is much less-leveraged than the US or almost any Western nation, so it has room to be a little profligate.  Nevertheless, an economic shock in China, followed by political turmoil, cannot be ruled out.  Note that China’s leaders told Beijingers earlier this month to stay home in their crowded apartments to watch the National Day Parade on television, instead of thronging over to the Forbidden City, which couldn’t have a more suggestive name.  Since 1989, popular protests are the nightmare of China’s leaders.

America’s decline is a false prophecy. Writing in the latest issue of Foreign Affairs and yesterday’s International Herald Tribune, Josef Joffe, co-editor of Die Zeit and a fellow at the Hoover Institution, argues that even though it is fashionable again to speak of America’s fall and the rise of others, the United States will remain the world’s default power for years to come.

The story of America’s decline is everywhere, but according to him the tale is wrong. “The history of declinism shows that doom arrives in cycles, and what comes and goes, logically, does not a trend make,” he writes. “Today, as after past prophecies of imminent debility, the United States remains first on any scale of power that matters – economic, military, diplomatic or cultural – despite being embroiled in two wars and beset by the worst economic crisis since the Great Depression.”

“Never before in modern history have the gaps between great powers been so wide.” The US economy is worth three times as much as the world’s second largest economy, Japan, and it’s almost as large as the combined total of the four closest competitors, Japan, China, Germany and France. And Washington’s defense spending is nearly half the globe’s total military expenses – no one else comes close.

The United States will also retain its position and international role because of its “warrior culture” and “unmatched research and higher-education establishment.” America’s world-renowned universities and research and development outlays will enable the country to project power in the future.

“The United States is the default power because there is nobody else with the requisite power and purpose. The default power does what others cannot or will not do.” It’s hard to imagine any other country defending common goods.

But what about the rising powers?

While it is the most touted emerging economy, “China, it seems, still has a way to go before it can dethrone the United States.” Beijing will face myriad challenges, including economic reforms, social cohesion and demographic deterioration. “Estimates that China’s economy will grow by six percent in 2009 are another cautionary tale. China’s growth has dropped by half from a historical high of almost 12 percent in 2007, which serves as a warning that its miraculous growth is foreign made – China is a place where the rest of the world essentially rents workers and workspace at deflated prices and distorted exchange rates.”

Don’t believe all the hype and hysteria, America isn’t going anywhere. “Gainsayers will still dramatize China’s growth rates as a harbinger of a grand power shift. But as the 21st century unfolds, the United States will be younger and more dynamic than its competitors.”

If this is all true, maybe we should rename this blog. Perhaps we can call it America’s Lasting Power.

Image from The New York Times Magazine.

The Economist has been publishing a series of articles and videographics on how the world’s largest economies – including the United States, China, Germany and an analysis of Japan next week – must change to ensure future global growth. “A rebalanced global economy requires America to consume less and save more. That means the world’s three big surplus economies – China, Germany and Japan – will have to save less and spend more.”

Video from The Economist.

Leslie Gelb, president emeritus at the Council on Foreign Relations and author of Power Rules: How Common Sense Can Rescue Foreign Policy, argues that even though the United States is the world’s “indispensable leader” it cannot dictate solutions to global ills. The US lacks the power to act alone. America needs the support of some coalition of the eight “indispensable partners” – China, Brazil, Britain, France, Germany, India, Japan and Russia – to solve problems. “Together we can succeed. Alone we fail.”

For more, listen to Mr. Gelb’s critique of soft power and military force and thoughts on power and effective foreign policy.

Clip from Big Think.

Despite Russian objections to “meddling” in its sphere of influence, the European Union launched an “eastern partnership” with six former Soviet republics – Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine – at a summit yesterday in Prague. The plan is designed to extend political and economic ties and promote democratic reforms. Notably, leaders from Britain, France, Italy and Spain did not attend the event, possibly indicating a lack of enthusiasm or divisions over the initiative.

The partnership was conceived by Poland and Sweden in 2007 to reinforce the existing European Neighborhood Policy. The EU will provide nearly $800 million in incentives by 2013, improve trade conditions and simplify visa procedures (but the partnership does not come with the promise of eventual EU membership). In turn, the six countries agreed to improve human rights and practice good governance.

Depending on one’s perspective, the nations lying between Russia and the European Union are in Russia’s near abroad or Europe’s neighborhood. Russian Foreign Minister Sergei Lavrov expressed concern that “there are those who may wish to present the invited participants with the choice: either you are with Russia, or with the European Union.” But European leaders believe that the partnership does not threaten Russia. Czech Prime Minister Mirek Topolanek emphasized that the initiative “should not be a renewal of two blocs east and west, it should not be a fight for influence” and German Chancellor Angela Merkel said that it is “directed against no one, including Russia.”

Andrew Wilson and Nicu Popescu from the European Council on Foreign Relations argue that the “EU’s influence is evaporating in its own back yard” and avoiding a new iron curtain is essential. Even though “all of EU’s eastern neighbors, except Belarus, trade more with the EU than with Russia…the EU is losing political relevance in the east. Throughout the last years the EU has not managed to prevent the region from collapsing deeper into growing authoritarianism and instability.”

The pull of the European Union provides regional security (this strength is often overlooked), but the six countries arguably characterize the limits of European power. The EU has not effectively exerted influence and exported stability in the volatile region. Armenia and Azerbaijan are still trying to resolve the seemingly frozen Nagorno-Karabakh conflict. Belarus is dubbed the “last dictatorship in Europe.” Georgia is straddled with internal dissent, burdened with Russian pressure and entangled in the strained NATO-Russia relations. Moldova recently faced violent unrest following a disputed election. And Ukraine needs financial assistance and the crisis is heightened by debilitating rivalry between political leaders and tensions with Russia.

Energy disputes and the war between Russia and Georgia have caused the EU to look east with increasing anxiety. The struggle for influence in the region will continue and will help shape the global balance of power. But leaders from the six ex-Soviet states will complicate the competition as they are adept at playing Russia and Europe off against one another.

Clip from France 24.

The current issue of the Economist highlights the changing balance of economic power in Europe. European powers have been unevenly impacted by the global financial crisis. The article argues that a “new European pecking order has emerged, with statist France on top, corporatist Germany in the middle and poor old liberal Britain floored.”

While the downturn has “confirmed that the continental [economic] model has some strengths…the strengths that have made parts of continental Europe relatively resilient in recession could quickly emerge as weaknesses in a recovery.” After all, “the latest forecasts are that the United States and Britain could rebound from recession faster than most of continental Europe.”

Regardless of the underlying economic philosophies, strong revivals will rely on “pragmatism and efficiency.”

Image from the Economist.

Democracies with weak and/or fragmented party systems seem to produce sub-optimal public policies, including heavy government debt burdens.  From Israel to India, Italy to Japan, Brazil to Belgium, governing coalitions held together by paying off key constituencies have yielded chronic deficits and high debt.  By contrast, countries with a small number of strong political parties – usually ideologically-based — that can form stable governments have tended to mind the public purse better (e.g. the U.S., U.K., Germany, and Mexico are examples). 

Some countries with fragmented multi-party systems have been moving in the direction of two or three ideological groupings in recent years, which could be a positive development.  This has been the case in India, Italy and Japan, with some promising signs in Brazil.  This year the financial crisis will continue to unfold, and elections are taking place in such Rising Powers as India and Indonesia.  The conclusion that weak coalition governments produce fiscal irresponsibility will no doubt be tested. 

Recent debt/GDP ratios of selected countries:

India                77%

Brazil               65%

Indonesia        32%

Mexico            31%

Japan              180%

Israel               76%

Italy                103%

Belgium           88%

U.S.                  62%

U.K.                  50%

Germany         64%

Note: Debt/GDP ratios are not strictly comparable, as wealthier countries have a higher “debt tolerance.”

Weimar Germany was the poster child of a weak democratic system.  Electoral and legislative rules hindered the formation of stable governments, and therefore the public had little faith in democratic government.  To avoid the errors of the past, the architects of Germany’s postwar constitution, the 1949 Basic Law, erected a system that balanced fairness with effectiveness.  It was a mixed proportional representation/first-past-the-post system that excluded parties garnering less than 5% of the popular vote from the legislature and produced two large, ideologically-opposed parties of the right and the left.  Stable governing coalitions alternated in power. 

Konrad Adenauer, postwar Germany's first chancellor

Konrad Adenauer, one of postwar Germany’s architects, and his Christian Democratic Union were able to govern West Germany democratically and effectively from 1949 till 1963, two years longer than his totalitarian predecessor.  His center-right CDU/CSU and the center-left SPD have largely governed Germany ever since.  Currently, these two strong parties cooperate (to some extent) in a grand coalition, but will head back to the polls this fall to see if they can oust their opponents from power.  Germany’s constitution has worked so well that democratic reformers the world over consider adopting portions of it.

The logic of the two-party, or nearly two-party, system is that if one party mucks up the economy while in power, the voters will “throw the rascals out.” Hence, the incentive to mind the public purse.  On the other hand, if a party’s survival in power is based less on success at the polls and more on maintaining complex coalitions, then the dominant coalition partner will be more interested in using the public purse to buy off smaller parties than in maintaining fiscal prudence. 

This is exactly how the State of Israel functions.  In its February 2009 election, the largest party, Kadima, only garnered 22.5% of the vote.  With twelve parties in the Israeli legislature, the six smallest obtained only 2.5%-3.4% of the popular vote apiece.  The German constitution (and by the way, newly reformed Italian electoral rules) wouldn’t even seat these parties.  It can be argued that Israel’s system is fairer, giving voice to the country’s diversity, but it is not very effective.  Only during Ariel Sharon’s popular rule beginning in 2001, when his party reached close to 30% of the popular vote (quite high in Israel), was his strong finance minister, Benjamin Netanyahu, able to implement reforms to public finances that reduced the deficit and got the debt/GDP ratio on a downward trajectory.

Italy functioned in much the same way until the reforms of the mid-1990s.  Belgium, Brazil and India have functioned this way as well, with public debt levels rising as a result.  Although Japanese politics has long been dominated by one party, the center-right LDP has for all intents and purposes engaged in coalition politics and a consequent public spending spree. The LDP is a collection of personality-based factions, interest groups, local constituencies, and patron-client relationships.  As a result, by opening up the public spigot, the LDP holds together these factions, keeping itself in power. 

Interestingly, the U.S. is embarking on a very large increase in its public debt, and this will occur in a two-party system with one party now overwhelmingly dominating two branches of government.  This must be seen as an aberration, however, an exception to the rule, given the size of the fiscal stimulus required to prevent a collapse of the financial system and to support sagging demand.  This unprecedented increase in public outlays is not being implemented in order to keep a coalition together.  Nevertheless, should the Democrats not act quickly, once the economy rebounds, to re-establish fiscal rectitude, an adjustment that will be very painful, then the government’s credibility will suffer, foreign investment will slow, the dollar will fall, interest rates will rise, and American voters will “throw the rascals out.”

As for India’s election, as spelled out by my colleague, David Kampf, the world’s largest democracy is in the midst of a month-long national election that will be tallied on May 16.  Some commentators believe that the two large parties, the center-left Congress Party and the center-right BJP Party, will lose ground to smaller and regional parties.  This will put pressure on the coalition leaders to spend their way into power.  Rulers of Rising Powers be forewarned: history shows that a sustained mismanagement of public finances often precedes the decline of nations.        

Thomas Wright, an expert on international relations, says the “great dramas of the 21st century will play out in Asia rather than Europe.”

Mr. Wright is the executive director of studies at the Chicago Council on Global Affairs and previously served as the senior researcher for the Princeton Project on National Security. I interviewed Mr. Wright about soft power in Asia, rising powers and international institutions.

He says that China has been a “responsible power but its rise makes its neighbors nervous” and as long as East Asian countries “want a significant US presence in the region the United States will remain a major Asian power.” With the global financial crisis, the “US led international order is facing the first great internally induced crisis in its history.” While the US-China relationship is “incredibly important” in addressing transnational threats, the “vital thing is to disaggregate the various challenges and tailor multilateral solutions that suit each.”

The recent survey conducted by the Chicago Council on Global Affairs on Soft Power in Asia found that the United States “is the region’s undisputed soft-power leader.” Despite China’s rise and perceived decline in America’s influence, the United States still ranked above China in soft power. Are you surprised by these findings? What is the significance of the relative soft powers in Asia?

I am personally not surprised by these findings although they do go against the conventional wisdom. The United States has long played a constructive role in Asia.  It supports the status quo, and is democratic, open and far enough away not to be threatening. On the other hand the rise of China introduces a great unknown into regional politics. China has been a responsible power but its rise makes its neighbors nervous.

Soft power in East Asia matters because it tells us about what countries in the region want and as long as they want a significant US presence in the region the United States will remain a major Asian power.

Some argue that hard power is easier to measure than soft power. Do you agree? How can soft power be effectively evaluated?

It is true that hard power is easier to measure than soft power but only to a certain degree. While it is obviously easier to count tanks and aircraft carriers than measure the power of attraction we also know from wars like Iraq and coercive diplomacy like US-North Korea relations, that it is often difficult to predict how effective the instruments of hard power will be once they are employed.

To measure the soft power of the four major powers in Asia, the Chicago Council’s survey examined the attractiveness of different national cultures and values, the effectiveness of nations as regional leaders and problem-solvers, their attractiveness as trade partners, levels of human capital, the emergence of regional identities, as well as perceptions of growing economic and political integration in East Asia and the impact this has on underlying regional tensions.

You commented that the “center of gravity in international politics is moving from the Atlantic to the Pacific.” What are the implications for US foreign policy?

The implications are enormous because it implies that the great dramas of the 21st century will play out in Asia rather than Europe. Let me just focus on two implications that don’t get as much attention as they should.

The first has to do with strategic culture. The United States is used to great power politics in the Atlantic area and most US foreign policy experts have learned their trade from studying that experience. The United States must be careful not to assume that the lessons learned from that are transferable to Asia. India-China-Japan relations will not necessarily play out like Germany-France-Britain relations in the 19th century. So it will be important for the US foreign policy community to appreciate and understand the specific context of great power relations in the 21st century. Given that strategic misunderstanding and misperceptions can heighten the risk of conflict, it is tremendously important that America gets this right.

The second has to do with worse case scenarios. East Asia is probably the only place on the planet where one could imagine a major war or struggle on a par with the conflicts of the 20th century. Regional multipolarity, volatility in economics, rising nationalisms, historic animosities and grievances, legitimate differences of interests and dramatic power transitions make East Asia unique in the modern world. It falls to the United States, as the world’s strongest power and as a Pacific nation, to take the lead in managing this situation, reassuring all nations, dissuading and deterring aggression and guiding them to a mutually beneficial future. This may be America’s greatest foreign policy challenge of the next half century.

How important is the bilateral relationship between the United States and China for addressing transnational threats (climate change, nuclear proliferation, etc.)?

The US-China relationship is incredibly important in a wide range of areas. One is preserving peace and stability in East Asia. Another is the global economy and unwinding the massive financial imbalances that may have contributed to the international financial crisis. And then there are transnational threats although we should be careful not to lump them all in together. The US-China relationship will determine whether or not we are successful in tackling climate change although it may be more peripheral to non-proliferation where relations with Russia and Pakistan are probably more important. The vital thing is to disaggregate the various challenges and tailor multilateral solutions that suit each.

You have written several pieces on rising powers and international institutions. Last year, in a paper with G. John Ikenberry, you argued that the global order is “easier to join and harder to overturn.” In a recent brief for the Stanley Foundation, you wrote that “reform of international institutions should bring about more effective international cooperation on critical challenges in a way that does not inadvertently worsen tensions with other states.” What are your impressions of the recent G20 summit in London?

The G20 summit in London went better than expected but it was still not good enough. The US led international order is facing the first great internally induced crisis in its history. The global economy may be in a tailspin. Meanwhile, fundamental problems, like the financial imbalances between the United States and China, went ignored at the G20 as leaders focused on what united them. This is not the time to be papering over differences. We should be identifying where major countries disagree on important matters and then encouraging intensive diplomacy to reach some understanding about the path forward. This will probably mean multiple and flexible multilateral arrangements, some with a very small number of members, that allow a deepening of cooperation that ultimately works to the benefits of all countries.

The Stockholm International Peace Research Institute released a report today detailing the global arms trade. The United States, Russia, Germany, France and the United Kingdom are the five biggest suppliers of major conventional weapons. The US and Russia account for over half of all exports.

Two rising powers – China and India – are the world’s largest recipients of arms, with Russia supplying the vast bulk to both countries. In the last two years, however, transfers of major weapons systems to China fell dramatically. China is shifting its “focus to domestic procurement” and did not place any “new ‘big ticket’ orders for combat aircraft or naval vessels with Russia in 2007 and 2008.”

Image from the Economist.

Last Thursday, Indonesians headed to the polls and today India’s election gets underway. With South Africans voting next week, we are in the midst of an election season for the world’s rising powers. Results of the upcoming ballots will have international implications.

Here is a rundown of several critical elections this year.

Indonesia – April and July
Voters marched to the polls last week in the world’s third largest election. Candidates for the 560-seat parliament are selected by 171 million registered voters from over 900 inhabited islands. This is the third election since the fall of Suharto’s dictatorship in 1998 and by most accounts “democracy is thriving.” The April parliamentary elections come ahead of the presidential vote in July. Candidates for the presidency must represent a party or coalition of parties that won over 20 percent of the seats in parliament or 25 percent of the popular vote.

President Susilo Bambang Yudhoyono is on course for re-election. If exit polls and preliminary figures hold up, his Democratic Party will take first place among the contesting parties. Allegations of fraud were heard, but the results are unlikely to be nullified or changed. Attention now turns to who the candidates and their running mates will be. If no one receives 50 percent of the vote in July, a run-off will be held in September.

India – April-May
The world’s most populous democracy stretches its general election over four weeks. 714 million people are eligible to vote (100 million for the first time) and 5,500 politicians from over 1,000 political parties are vying for 543 parliamentary seats. Voting is staggered in five stages and the results will not be announced until mid-May.

The economy, national security and local issues are influencing votes and the outcome is far from certain and difficult to predict. The Congress Party, Bharatiya Janata Party and Third Front are all possible victors, but the declining power of major parties and rise of small, local and regional parties will influence the government’s formation and stability. A coalition headed by Congress is the most likely result, as no party seems poised to win enough seats to command a majority. If Congress is able to form a ruling alliance, Manmohan Singh will remain prime minister (although Rahul Gandhi, heir apparent in the Gandhi-Nehru dynasty, could soon take the helm).

For more, see a backgrounder on India’s electoral politics produced by the Council on Foreign Relations.

South Africa – April
The African National Congress has governed South Africa since the end of apartheid in 1994 and the party is essentially assured victory in next week’s parliamentary election. The Democratic Alliance and Congress of the People, a recently formed party of ANC dissidents, are competing in the election but the ruling party expects to win easily. Some fear that the country’s democratic miracle is fading.

The new parliament will elect the nation’s next president, which will undoubtedly be Jacob Zuma. The ANC’s leader has been hounded by criminal allegations. The National Prosecution Authority withdrew charges of corruption, racketeering, tax-evasion, money-laundering and fraud against him last week, arousing suspicions of political manipulation. Zuma will need to address the country’s domestic concerns – poor education, ill health, crime and violence, poverty and inequality and lack of infrastructure – while demonstrating regional leadership.

Iran – June
The hardline Iranian President Mahmoud Ahmadinejad faces re-election in June (he has not officially announced his candidacy, but is widely expected to compete). The other leading candidate is Mir Hussein Moussavi, a former prime minister. Moussavi, remembered for his protectionist economic policies during the 1980s, offers a moderate alternative to Ahmadinejad and would potentially seek rapprochement with the West. Regardless of the victor, Ayatollah Ali Khamenei will remain the country’s ultimate arbiter.

Iran’s rising regional power concerns some and others blame Ahmadinejad for mismanaging the economy and antagonizing the West. Several experts believed little progress would be made in negotiations over Iran’s nuclear program, until after the counting was completed. But both sides recently made conciliatory gestures.

Other notable elections include the European Parliament (June), Mexico (legislative elections in July), Germany (parliamentary elections in September) and Japan (parliamentary elections must be called by September).

Photo from Reuters.