UGCC chapter 9 What can we expect in the future?
Beyond the Post Cold War World by George Friedman Summer 2013
An era ended when the Soviet Union collapsed on Dec. 31, 1991. The confrontation
between the United States and the Soviet Union defined the Cold War period. The
collapse of Europe framed that confrontation. After World War II, the Soviet and
American armies occupied Europe. Both towered over the remnants of Europe's forces.
The collapse of the European imperial system, the emergence of new states and a
struggle between the Soviets and Americans for domination and influence also
defined the confrontation. There were, of course, many other aspects and phases of
the confrontation, but in the end, the Cold War was a struggle built on Europe's
Many shifts in the international system accompanied the end of the Cold War. In
fact, 1991 was an extraordinary and defining year. The Japanese economic miracle
ended. China after Tiananmen Square inherited Japan's place as a rapidly growing,
export-based economy, one defined by the continued pre-eminence of the Chinese
Communist Party. The Maastricht Treaty was formulated, creating the structure of
the subsequent European Union. A vast coalition dominated by the United States
reversed the Iraqi invasion of Kuwait.
Three things defined the post-Cold War world. The first was U.S. power. The second
was the rise of China as the center of global industrial growth based on low wages.
The third was the re-emergence of Europe as a massive, integrated economic power.
Meanwhile, Russia, the main remnant of the Soviet Union, reeled while Japan shifted
to a dramatically different economic mode.
The post-Cold War world had two phases. The first lasted from Dec. 31, 1991, until
Sept. 11, 2001. The second lasted from 9/11 until now.
The initial phase of the post-Cold War world was built on two assumptions. The
first assumption was that the United States was the dominant political and military
power but that such power was less significant than before, since economics was the
new focus. The second phase still revolved around the three Great Powers -- the
United States, China and Europe -- but involved a major shift in the worldview of
the United States, which then assumed that pre-eminence included the power to
reshape the Islamic world through military action while China and Europe single-
mindedly focused on economic matters.
The Three Pillars of the International System
In this new era, Europe is reeling economically and is divided politically. The
idea of Europe codified in Maastricht no longer defines Europe. Like the Japanese
economic miracle before it, the Chinese economic miracle is drawing to a close and
Beijing is beginning to examine its military options. The United States is
withdrawing from Afghanistan and reconsidering the relationship between global pre-
eminence and global omnipotence. Nothing is as it was in 1991.
Europe primarily defined itself as an economic power, with sovereignty largely
retained by its members but shaped by the rule of the European Union. Europe tried
to have it all: economic integration and individual states. But now this untenable
idea has reached its end and Europe is fragmenting. One region, including Germany,
Austria, the Netherlands and Luxembourg, has low unemployment. The other region on
the periphery has high or extraordinarily high unemployment.
Germany wants to retain the European Union to protect German trade interests and
because Berlin properly fears the political consequences of a fragmented Europe. But as the creditor of last resort, Germany also wants to control the economic
behavior of the EU nation-states. Berlin does not want to let off the European
states by simply bailing them out. If it bails them out, it must control their
budgets. But the member states do not want to cede sovereignty to a German-
dominated EU apparatus in exchange for a bailout.
In the indebted peripheral region, Cyprus has been treated with particular economic
savagery as part of the bailout process. Certainly, the Cypriots acted
irresponsibly. But that label applies to all of the EU members, including Germany,
who created an economic plant so vast that it could not begin to consume what it
produces -- making the country utterly dependent on the willingness of others to
buy German goods. There are thus many kinds of irresponsibility. How the European
Union treats irresponsibility depends upon the power of the nation in question.
Cyprus, small and marginal, has been crushed while larger nations receive more
favorable treatment despite their own irresponsibility.
It has been said by many Europeans that Cyprus should never have been admitted to
the European Union. That might be true, but it was admitted -- during the time of
European hubris when it was felt that mere EU membership would redeem any nation.
Now, Europe can no longer afford pride, and it is every nation for itself. Cyprus
set the precedent that the weak will be crushed. It serves as a lesson to other
weakening nations, a lesson that over time will transform the European idea of
integration and sovereignty. The price of integration for the weak is high, and all
of Europe is weak in some way.
In such an environment, sovereignty becomes sanctuary. It is interesting to watch
Hungary ignore the European Union as Budapest reconstructs its political system to
be more sovereign -- and more authoritarian -- in the wider storm raging around it.
Authoritarian nationalism is an old European cure-all, one that is re-emerging,
since no one wants to be the next Cyprus.
I have already said much about China, having argued for several years that China's
economy couldn't possibly continue to expand at the same rate. Leaving aside all
the specific arguments, extraordinarily rapid growth in an export-oriented economy
requires economic health among its customers. It is nice to imagine expanded
domestic demand, but in a country as impoverished as China, increasing demand
requires revolutionizing life in the interior. China has tried this many times. It
has never worked, and in any case China certainly couldn't make it work in the time
needed. Instead, Beijing is maintaining growth by slashing profit margins on
exports. What growth exists is neither what it used to be nor anywhere near as
profitable. That sort of growth in Japan undermined financial viabilit