A new cold war: Money versus Military

Here is a proposition. That we have been so caught up in our own political change, concerns in the neighbourhood and day-to-day news-breaks that we have forgotten to note how the world has changed meanwhile. Even National Interest, which gets four opportunities a month, has remained besieged in ideas closer home.

Five days in Davos at the World Economic Forum (WEF) – which my friend and brilliant Pakistani intellectual Husain Haqqani calls the Disneyland of the mind – do not bring you any special wisdom, or even access to knowledge and ideas. Because these flow freely, and if you look for them, you can find them. Of course you can add to your stock of grandfather’s tales, nuggets like, oh and then I ran into Bono in the loo… But importantly, this gives you the gift of distance from home, forcing you to listen to concerns and ideas of smarter people from around the world. And if you did that this year, you’d realise that while we have been busy installing a new government, celebrating the rise of our most exciting new leader in a decade, enjoying the Kiran-Kejriwal tu-tu-main-main, and debating the aerodynamics of aircraft that supposedly flew between planets in Vedic times, the architecture of the global economic and strategic power has altered in a fascinating manner.

The agenda at this year’s WEF deftly shows the change. Instead of the breathless celebration of capitalist glory that it is alleged to be, there is much questioning – of self and indeed of capitalism.

There are so many panels on inequality of income distribution rather than growth, and on negative gifts of boom years like climate change, that it even provoked me to remark, on the first morning, that it seemed as if my favourite povertarians had taken over Davos, or had probably been co-opted. Sections of the WEF this year would make you wonder if you were at the World Social Forum.

European intellectuals have a reasonable explanation: everybody had expected that while the growth of boom years would not benefit all equally, sufficient wealth would trickle down to leave populations happier. That hasn’t happened. This inequality has produced a few very rich people and millions others who are either unemployable or barely employable at low-level service sector jobs. Think about them.

You can’t argue with this. But you need to do a fact-check on where these concerns, economic decline, rising unemployment, even strategic and tactical insecurities now emanate from.

As we speak, American growth is back at a robust 3.5 per cent. Don’t compare that with India’s, for heaven’s sake. It is a $19-trillion dollar economy growing at 3.5 per cent, adding almost half an India to the GDP this year, and promising to accelerate. Some of the emerging markets, notably India, show signs of recovery. Chinese growth has slowed but the immediate crisis it causes is elsewhere, particularly resource-based economies and global corporations as oil and commodity prices crash.

With America recovering, China consolidating, other emerging markets mostly middling, Europe has emerged, not surprisingly but perhaps unnoticed in India (OK, OK, we agree the Ministry of External Affairs must have known it before anybody), as the centre of the biggest global concerns. Declining economies, old-fashioned conflict between uniformed forces (Ukraine), global and home-grown Islamist terror (France and Belgium lately), a Russia increasingly seen as rogue, and a monster called ISIS on its eastern flanks (Syria, Iraq, Turkey) and across the southern coast in parts of Africa. This is a change of picture and text, cartography and tectonics in the global balance of power.

One significant consequence is a challenge to the fundamental idea the WEF represents: globalisation. Declining economies, debt traps, frustrated populations and now security threats are forcing most European countries to think, once again, like individual nations that they taught themselves to forget in decades of Europeanisation. Today, European currency is unstable, the odd solvent country (mostly Germany) is seen as the new International Monetary Fund of Europe, willing to bail out distressed cousins, but with brutal “conditionalities” that their welfare-fattened, ageing and declining populations refuse to accept. Italy’s rock-star new prime minister (Matteo Renzi, already a year in the job, turned just 40 earlier this month), with a killer fiscal deficit, needs a German bailout but is too proud to concede lender’s limits being put to its deficits. Renzi, therefore, has ignited an austerity-has-failed-so-let’s-return-to-growth model. Distant Finland is worried about pressures on it to write off a billion-dollar debt to Greece: how can we, our GDP is just about $260 billion, Nokia collapsed and there is an election coming up. Spain is having its debt-stressed assets bought out, the Swiss franc is going through the roof and the Russian ruble to the bottom of the sea, falling neatly lower than the value of an Indian rupee. All this while Ukrainian President Poroshenko goes around pleading that his country needs the European umbrella, that Putin only understands the language of power. He also “thanks” Putin for “helping persuade” a majority of Ukrainians to want to join the European Union.

At the same time, contrary forces rise elsewhere, from France to Greece, with a clamour to break away, and a return of nationalism. It remains entirely below the radar and even under a thick cloud cover in Indian discourse, mired in the clutter of America, terror, Pakistan and its Lashkars, a few scores of barely armed Chinese delivering a message in the Karakoram. But all of Europe is now fixated on internal politics. What if the protectionists win in Greece? Or the rise of Marie Le Pen’s party continues in France? They even want Schengen abolished, riding the new, post-Charlie Hebdo paranoia and Islamophobia. Never mind that the killers were born and brought up in France, and if the question is, how did they get here, it should have been raised before colonising Algeria.

All this has resulted in nations looking inwards, thinking like individual nations with their respective and often conflicting concerns. David Cameron appeals to the US Congress to go easy with sanctions on Iran, there is reluctance and discord on using sanctions against Putin. It is too early to say that a de-Europeanisation of the European mind, or a fraying of the broad Western alliance, is underway. But the unthinkable is at least getting debated now.

Two sizeable elements lie behind this set of changes: the dramatic crash in oil prices and the rise of Putin as the new “villain” and his Russia as the new “rogue” state. A wise old global corporate chief said ruefully that the third world war is already on and this time it is not Germany but Russia versus the rest. Except that, he adds, Western nations now have no stomach to fight militarily. They have aligned instead to fight Russia economically and casualties will now be suffered not by their armies, but by their corporations. You would presume he is watching the dwindling balance sheets of many energy and resource companies.

Talk of a third world war is simplistic and hasty, but certainly you see indications that a new Cold War is on in Europe, and it is indeed being fought economically. Nobody quite believes that oil price decline is only because of the American shale gas boom, which has made it the largest oil producer in the world now. There is certainly either a co-opting of OPEC or the Saudis have broken rank with it, thus refusing to cut production. It is simple. When nations look at the big picture, larger strategic interests always take precedence over today’s profits. Oil at a hundred dollars can finance Putin’s expansionism, even Iranian adventurism. At $45, the equation reverses. The US shares a common threat with Europe in Russia, and with the Saudis in Iran. Cheap oil punishes both, delivering that neighbourly, if less important, irritant, Venezuela, as a bonus.

No surprise then that Europe is now back to being the heart of the greatest global concerns. While instability will be bad for all, India, not surprisingly, is the biggest beneficiary of these changes, with declining commodity prices and rich societies’ crises. Never mind, therefore, if nobody is talking too much about India this year despite its delegation being the second largest, after the US.