In Southeast Asia, Non-Alignment Is Development Policy

India may have been the pioneer of political non-alignment in the 1960s — proposing that countries should align themselves neither with the West nor the Communist bloc — but 21st century non-alignment is more economic than political and its homeland is Southeast Asia.

Over the summer, Singapore decided to split its decision on who would build the next tranche of data centers on the island: Chinese companies got two contracts (with an assist from Australia’s AirTrunk) and US companies got two. While the US has been trying, with some success, to corral countries into a kind of digital alliance that keeps China out, states in the global economy’s fastest-growing region are refusing to choose. This will prove to be the non-aligned movement that matters for the near future.

Compared to other of the world’s regions, Southeast Asia has had far more experience of both China and the US in the role of major powers: the US since its defeat of Spain in 1898 and especially since 1942, when it entered World War II; China over two millennia, most recently following a policy of Maoist subversion in the 1950s-1970s and commercial expansion and influence from the 1990s to today. Southeast Asia has also had a unique experience of consistent inward investment from other highly developed economies with labor shortages such as Japan, Korea and Taiwan. Indian capital began to look more seriously at the region a few years ago, as has some European and Middle Eastern capital. The gradual redirection of US capital away from the Chinese mainland after 2016 and the slowing of China’s economy strengthened pre-existing trends favoring Southeast Asian growth.

One result is a regional political culture with a deep tradition of not taking sides. The elevation of Chinese-American strategic and economic competition into the digital realm — begun under Trump and greatly extended under Biden — has been met in Southeast Asia by a determination to maintain digital non-alignment. The term itself has been toyed with by Russia and has been more substantively explored by India since its initial banning of Chinese apps in 2020. But Russia has neither tradition nor credibility as a disinterested actor outside its borders and its declining IT sector is increasingly hostage to China, while India’s mini-hegemonic aspirations and hostility toward Islam hinder its acceptance by others as a leader. Southeast Asia walks the walk as well as talking the talk.

Ultimately the US and China have little choice but to go along, because in the digital realm their strategic positions are decisively shaped by their respective private sectors. The politically driven “techlashes” in both the US and China over the past five years were driven by state and popular (in the US) fears of overweening private-tech power, but the tech sector can only be reined in up to a point or it starts to lose its vitality, as may be happening already to some degree in China — and that leads to the sort of strategic weakening that is precisely what the American and Chinese states are most hoping to avoid. For the good of the state, they need their tech sectors to thrive in private markets. The most important of those, for a great many reasons, is Southeast Asia, which is why the 21st century’s distinctive form of non-alignment is being born there.

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Betting on Different Horse

Today, only the most ideologically committed, old-school liberal internationalist would hold that we have not moved out of the world of the “rules-based international order,” in which countries were all meant to obey a set of common rules — rules established by Western powers during the Cold War and thought to be triumphant after that war’s end.

As Julien Barnes-Dacey and Jeremy Shapiro, both of the European Council on Foreign Relations, wrote in Foreign Policy:

[T]he West has embraced a comforting illusion about a liberal rules-based order . . . International law could tame war, defend sovereignty, and protect human rights, all the same time.

It was a wonderful vision, but it never had a chance. The temptations of power meant that the West repeatedly violated its own rules. Western actors invaded countries when they felt the need (Iraq), hired fancy lawyers to exempt themselves from the laws they expected others to follow (Kosovo), preached human rights while cutting deals with authoritarian regimes (Saudi Arabia), and set up an International Criminal Court to try African leaders (including those from Sudan) while refusing to recognize its jurisdiction over themselves (the United States). For the less powerful countries, the rules-based order based was always little more than hypocrisy on a global scale . . . [and they] have become increasingly vocal in their frustration about the hypocrisy at the core of the global order.

They have taken particular issue with the West’s demand that they sacrifice core material interests in defense of this so-called order, a step that the West has always been wholly unwilling to do itself. So U.S. and European entreaties that global states cut financial and energy ties to Russia following the invasion of Ukraine have fallen on deaf ears, while Western attempts to rally international support behind Israel have faltered.

A key point that is now fully evident — as discussed in a recent post on the SIGnal blog (see “The Pulling Apart,” 1 November 2023) — is that we cannot even agree what the rules might be for a rules-based international order. And it has become clear that many of us do not really want to agree, because different rules reflect different identities. In effect, they say :“I am different from you, I don’t believe what you believe, and I don’t follow your rules.”

So if we have moved de facto if not yet entirely de jure out of the rules-based order, then what have we moved into?  

We now live in a multi-polar world, with two superpowers, possibly two other major powers (Russia and the EU), and many more middle powers — countries such as Turkey, India and Brazil, with powerful economies and sometimes powerful militaries. Most of these are in no mood, and see no need going forward, to kowtow to Western interests, policies or rules. We have moved into a world that is fragmented and continues to splinter, very probably with more transitory international alliances based on the practical or Realpolitik needs of the moment — a world, unfortunately, of more conflict  between states, among states and non-state actors, and within states themselves.

It is also a world in which economic factors will probably not move nearly as much in tandem. In a de-globalized world, what is sauce for the goose is not necessarily sauce for the gander. Events that significantly disadvantage one region or nation have always had the potential to significantly advantage another region or nation. The tightly coupled globalized order has to some extent dampened this effect. The dampening is now likely to decrease or even end.

Climate change and related resource challenges will exacerbate this “performance decoupling” and will do so in ways that are largely unpredictable. Expanded geopolitical conflict — related to all the factors mentioned above — will add fuel to the fire. Finally, these and other factors are rife with feedback loops that can intensify effects, again, in ways that are often not detectable until they are manifest in events.

All of this means that the performance of economies and of investments in different places — and in different sectors in different places — are likely to be far more variable, discontinuous and uncoupled than has been the norm during the past 30 years.

This brings both risk and opportunity. Investors who keep their eyes on the ball can take advantage of opportunities related to performance discontinuities, arbitrage and the like. In other words, they can bet on different horses. Nevertheless, we will not be living in the simpler environment of the past few decades, a time when stable trends could be projected to drive overall macro performance. Change closes off old possibilities and opens up new ones. We need to think differently to maximize them.

An Unexpected Unity at Riyadh Summit

An Unexpected Unity at Riyadh Summit

On Saturday, 57 Arab and Muslim nations called for a halt to military operations in Gaza, dismissing Israel's self-defense rationale for its actions against Palestinians. In an extraordinary joint summit in Riyadh, the 22-member Arab League and the 57-member Organization of the Islamic Conference (to which all Arab League members belong) unanimously called for the International Criminal Court to probe “war crimes and crimes against humanity” being perpetrated by Israel in the Palestinian territories. The summit also urged an arms embargo against Israel and the establishment of an Arab-Islamic committee to supervise diplomatic efforts aimed at securing a ceasefire in Gaza. The summit called for the immediate entry of humanitarian aid convoys to bring food, medicine and fuel into the Gaza Strip. Leaders including Iranian President Ebrahim Raisi, Turkish President Tayyip Erdogan, and Qatar's Emir Sheikh Tamim bin Hamad Al Thani attended: the Sunni and Shia worlds alike, and the newly welcomed-back Syrian President Bashar al-Assad. Raisi’s trip to Saudi Arabia is the first by an Iranian head of state in more than a decade. Saudi Arabia’s Muhammad bin Salman presented himself as leader of the Arab-Muslim world, inviting both allies and foes.

Led by Algeria, certain Arab nations advocated for a total severance of diplomatic ties with Israel. However, other Arab countries that have established diplomatic relations with Israel resisted this stance, emphasizing the importance of maintaining open channels with the government of Prime Minister Netanyahu. Just as interesting was the abrupt resurgence of the Palestinian cause in the awareness of Arab and Muslim nations. Deep divisions continue to impede the formulation of a shared vision to conclude the ongoing conflict and establish a diplomatic framework for what lies ahead. But what led to the merging of the Arab League and OIC conferences was precisely disagreement. The lack of unity created political pressure, and MBS and others responded with a move to show unity. The surprising thing is not that there are still sharp regional divisions but that the joint summit occurred at all.

Hamas’s action on 7 October, grotesque as it was, did have a rationale: To upset the emerging consensus, as the Abraham Accords continued to bring Israel and various Muslim states into a new and less hostile configuration, that the fate of Palestinians could safely be ignored. That message was sent not just to Israel but also, perhaps primarily, to Arab states like Saudi Arabia. The illusion that the Palestinians could be ignored indefinitely as the Abraham Accords process expanded has now been dispelled.

The global community is confronted with a radical Israeli government uninterested in compromise, an ineffectual Palestinian leadership further weakened by recent events, and a U.S. administration preoccupied with impending presidential elections. The conditions for a political initiative are unfavorable.Therapidly diminishing window for peace and regional integration signals a heightened risk for Israel of regression to the conditions of 1948. The swift reversal of the United States' role as a security provider has invited comparison in the region to the speed with which France in West Africa went from the center to near the margins of the regional security balance. What was really striking, then, about the Arab League-OIC joint summit was that it showed the regional players, large and small, willing to get together with some urgency and compromise on reaching a modest common platform. What that might mean for Palestinians is unclear but it does suggest a certain reflex for peaceful discussion and a minimal unity that have not been features of regional politics before.

Going Global Goes South

Going Global Goes South

Recently Joseph Nye, a venerable and influential Harvard professor and former government official, and the Financial Times’s senior trade writer, Alan Beattie, have taken against the popular political term Global South. They attack it as inaccurate, misleading, and “deeply unhelpful” (Beattie). They are not exactly wrong, but getting rid of the term will not make any difference. Another will replace it, because, like “less developed countries” and “developing countries” and “emerging markets” and “frontier markets” and the Third World, it serves a genuine need. Unlike globalization 1.0 (1830-1914), which concerned a world divided into imperial powers and colonies, globalization 2.0 (1960 -?) has taken place in a world of relatively stable sovereign states among poor as well as rich, and with much higher rates of capital mobility, common education, and intellectual-property transfer. Very crudely put, the colonized of the 19th century have enough power and shared experience in the 21st century to constitute a kind of collective. Banning the use of Global South won’t change that, and ignoring the realities that generated the term and its many ancestors will lead to bad analysis.

Nye and Beattie rightly point out that much of the Global South is in the North. China and the U.S. are at about the same latitude. China, India and most of Africa are above the Equator, as is most of the world, while prosperous countries like Australia, New Zealand and Chile are south of it. (Nye’s article is here. Beattie’s Trade Secrets columns are behind a paywall but appeared on 14 September and 5 October.) If you were to mark out the Global South on a map the result would be interesting but also a bit silly. On political-economic grounds, the attack on the Global South is less compelling. The inclusion of Russia, because Jim Neill put it in the BRICS in 2001 and Vladimir Putin has sought to exploit this position to harry his wealthy enemies, is scarcely credible, even to Russians. More plausibly, Nye and Beattie underline that the Global South’s aspiring champions, India and China, are at odds with each other and opportunistic in their support for other Southerners. China, indeed, is not looking very Southern any more along its prosperous eastern seaboard, where its world-beating high-technology companies gather. And its Belt and Road Initiative, useful as it was for off-loading excess heavy-industrial capacity a decade ago, no longer looks much like disinterested solidarity.

All this may be granted. However, Global South and its terminological ancestors did not come into being for geographical reasons or to satisfy the ambitions of the largest players. The Global South would still be a thing under whatever name even if China were to move on, which it well might as it pursues autarkic policies of self-sufficiency (zili gengsheng, a revived Maoist term) under Xi Jinping. Global South exists primarily because Global North exists. The U.S. under Trump and now Biden has been moving toward its own zili gengsheng, what Trump called “economic nationalism”, for seven years. One of the core reasons for the European Union was to create a common market that could rival the North American one is achieving economies of scale, growth through the refinement of internal comparative advantages, and efficiencies of regulation and distribution.  Intensification of anti-immigrant policies in Italy, Britain, Germany and Austria — the Netherlands might join in after 22 November elections — only increases the sense that the non-South wants to take its winnings and leave the table. Given the size and centrality of Northern markets, capital, and technology, their clear desire to withdraw inside themselves will only increase the importance of the Global South concept if not its current name.

But there is a twist. The Global South is not just about staring forlornly at a border wall or dying on a raft near Lampedusa. As Beattie acknowledges, in analyzing possible changes in voting shares at the International Monetary Fund, the Global South has a large and growing share of global production. He cites this as more evidence of its misleading nature. But the idea of the West didn’t weaken as its wealth increased. Neither, interestingly, has the idea of Asia. (See Parag Khanna’s The Future Is Asian.) Nor, in a global context of both splintering and forms of consolidation like large-market self-sufficiency, will the idea of a Global South. It should be able to generate its own credibility for some time to come.

https://nltimes.nl/2023/09/21/omtzigt-calls-firm-cap-many-forms-immigration-50000-people-per-year 

https://www.project-syndicate.org/commentary/global-south-is-a-misleading-term-by-joseph-s-nye-2023-11

The Pulling Apart

The Pulling Apart

By Dee Smith

We live in a singular moment in history: the world has been knitted together by technology and commerce, but it has become in the process an extraordinarily unhappy human family. And that brings a huge, largely unrecognized, problem.

From the 1940s onward, there was an assumption, particularly in the West, that trade and consumerism would bring convergence. The universal desire for washing machines and the like and the triumph of American popular culture would make life in Jakarta very similar to life in Miami.

After the fall of the Soviet Union in 1991, the true age of globalization arrived and with it the American unipolar moment. The US was the only superpower, militarily, economically and culturally. American-style market economics were ascendant. Production could be located where costs were lowest; products could be sold where prices were high. To make global markets work smoothly, rules were required and readily accepted as necessary for participation in global prosperity. Economic self-interest reigned and everyone would play nice because it was in their economic interest to do so. “People who trade don’t fight” became an article of faith. This was The End of History and the world was flat.

But a series of signal events—the dot-com bust, the 9-11 attacks, the global economic crash of 2007 and 2008, and the arrival of widespread social media—were harbingers of a sea change. For many sophisticated observers, such events had to be seen as anomalies, so strong was their faith in the economics-based and rules-based global system, and so convinced were they of its inevitability. Why was it thought to be inevitable? Because we believed that we had finally discovered and mastered the true drivers of human activity: economic need and desire. So, when trouble arrived, the tendency was to double down and keep going. The systems had to be right; they just needed to be tweaked. In the intelligence world, this is called confirmation bias. It is a failure of imagination.

But there is more than one kind of self-interest and more than one driver of meaning and purpose. Some are more compelling than economic self-interest. Perhaps the most important is the need for identity. The desire to gather into groups based on similar beliefs and passions (the latter often to redress past or current wrongs) can be more powerful as a driver of human action than the supposedly cooler forces of economic self-interest. Even some economists are now saying this.

The networking technologies that have become globally ubiquitous over the past 25 years — first visual telecommunications, then social media — have had the opposite of the effect they were meant to have. They have led people to compare, and then to celebrate and intensify their differences rather than their similarities. They have increased attachments to identity, rather than decreasing them. And they have provided just enough evidence to falsify the claims of politicians without providing the facts and discipline to counter and improve on them. Social media provide people with enough evidence to conclude they are being betrayed but no means to do anything about it except to create grievance communities. This has led to an immediacy of visual and visceral information about attacks, wars, political disturbances, and so forth, self-selected by adherents to these new groups to reinforce the beliefs they share. Such effects can and do have triggering and multiplying effects across the planet, literally in seconds.

We do not all believe in the same rules. We never did, actually, but now we are no longer prepared to pretend that we do, even for the sake of almighty trade.

How is it possible to have a rules-based order — international or domestic — when we can’t even agree on the rules under which we are to live and by which we are to be governed?

Simply put, it isn’t.

So where will this lead? It is hard to see how it leads to anything other than much more pronounced splintering and fragmentation, both within societies and between nations. Groups within countries may separate into smaller societies that internally share beliefs and rules. As with the USSR at the end of the past century, some nation-states and political units — even large ones — may collapse due to internal stresses. Resource depletion, especially of food and water, and climate change — addressing either of which would require global rules-based agreements — as well as vastly increased numbers of displaced and migrating people, plus a nostalgia for the old world and politicians who exploit this emotion by making impossible promises about restoring it, are adding to the feedback loops driving a political and social pulling apart. Because the problem is global as well as internal and often intensely local, it is hard to discern what possible countervailing forces there might be. We are moving from a largely centrifugal world to a largely centripetal world.

To survive this with an intact civilizational system of some kind — or at least without ubiquitous and utterly devastating conflict — will require us all to think far outside the proverbial box. The solutions to these problems have not yet been found. They are probably not to be found in the structures of the past.