Page 1 of 4
IMAGINE SOMEONE HAD TOLD YOU in early 2008 that the U.S.
stood on the verge of a financial market meltdown of
historic proportion and the longest and deepest
recession since the 1930s. Would you have believed it? What if
you were told that the euro zones very survival would
soon become a subject of front-page debate? Or that a wave of
unrest would soon sweep the Middle East, toppling autocrats
across the region, forcing Egyptian president Hosni Mubarak
into prison and plunging Syria into civil war?
Would you have believed that all of those things would
happen within five years?
Recent news appears more encouraging. The U.S. economy looks
to be slowly regaining its footing, and equity markets have
climbed to new heights. Europe, despite continued queasiness,
appears headed toward calmer waters. The upheaval in the Arab
world has so far generated limited global market impact. Yet
the convulsions of the past five years arose from structural
faults financial, economic and political that
have not been fully resolved. And there are new worries.
Economic growth among leading emerging markets has slowed
considerably as much-needed reforms have been postponed. In
particular, China on track to become the worlds
largest economy while still a poor country has lately
behaved in erratic ways on the international stage. Talk of a
peaceful rise rings increasingly hollow for many of
Chinas neighbors as its military picks fights with Japan
in the East China Sea; with Vietnam, the Philippines and others
in the South China Sea; and with India along the Line of Actual
Control that has divided the two states since 1962. A wave of
cyberattacks on U.S. companies and government agencies traced
to the Chinese military creates more friction. But the biggest
longer-term worry is that Chinas new leadership faces the
most ambitious economic reform process in history as its
unstable, unbalanced and ultimately unsustainable development
model must be rebuilt to shift wealth from politically
connected elites and state-run companies toward an increasingly
plugged-in and demanding middle class.
Adding to the volatility, were living in a G-Zero
world, in which no single power or working alliance of powers
has both the muscle and the appetite to provide global
leadership. Thats important, because the world needs
leaders that are willing and able to accept the costs and risks
of establishing and maintaining a coherent global order
putting out fires, writing the checks others cant afford
and imposing compromise to prevent conflict.