The first rule of traditional recessions: don’t talk about recessions. There’s a certain logic to it; economic recessions are based not just on underlying economic numbers, but consumer sentiment. Simply talking about recessions has the tendency to unnerve people, making it more likely that a recession will actually hit. But there are other kinds of recessions out there, ones we don’t talk about nearly enough. And the same rules don’t apply.
Economic cycles move through boom and bust phases every seven to eight years. It happens with such frequency and regularity that we have established a technical definition for the occurrence—two consecutive quarters of negative growth. The severity of a downturn can differ (see: the 2008 financial crisis), but there is a recognizable pattern when it comes to financial markets that investors and policymakers can use to guide their decision making. The frequency and regularity of economic recessions have also allowed professionals to develop tools to manage the inevitable fallout that comes with them.
But global politics move in cycles, too. Rather than running their course over 7 to 8 years, though, they play out over generations. There is no technical definition for a geopolitical downturn, and they happen so infrequently that there are no established rules to herald its arrival. Every geopolitical bust cycle must be dealt with in its own way, a product of its particular time and challenges. The challenge we face today is the unwinding of the American-led world order, and the absence of global leadership to step in and take its place. We live in a G-Zero world… and the geopolitical recession is its effect. In a geopolitical recession, fracturing global politics fuels global risks instead of helping solve them.
The election of President Donald Trump and the U.K.’s vote to Brexit are widely regarded as the tipping points that pushed us into this new era of global politics. But these events are not the cause of our geopolitical recession, but rather the logical results of it. The world has been hurtling towards this dysfunctional era of global politics for some time now, and there is no shortage of contributing factors. Four of them stand out, and each will eventually need to be addressed before the world can begin to emerge from the G-Zero:
Domestic Politics. The rise of “my country first” politics in the world’s advanced industrial democracies has been accompanied by the domestic delegitimization of political institutions in democracies, with spillover into the international sphere. Many books have been written on why nationalism is on the rise across the entire world (including by me). The short answer is growing inequality; the longer answer is more complicated. Some blame globalization and the economic dislocations it’s brought about; others migration, refugees and the free movement of people; still others point their fingers to the rise of social media and the attendant political mayhem. Whatever the reason—or more accurately, the combination of reasons—the end result has been extreme political polarization in many of the countries that were once responsible for global leadership. These countries are now producing leaders who are not only overtly critical of the entire model of liberal democracy and the rules-based multilateralism that comes with it, but often actively seek to undermine them.
International Politics. As the 20th-century’s most advanced and economically-successful democracies grapple with their very real existential crises here in the 21st, there are countries actively operating to undermine them even further—Russia foremost among them, who 30 years after the end of the Cold War is looking for ways to destabilize the West while boosting its own geopolitical fortunes. But as disruptive as Russia has obviously been these last few years, it is China’s ascent as a genuine economic power that has truly thrown the world order into flux.
China is not content to simply thrive in a post-war, U.S.-led world order; it wants to reshape the world to better reflect its own place within it, and has set about doing just that. It has built the Asian Infrastructure Investment Bank (AIIB) to compete with the Western-backed World Bank and IMF; it has undertaken the most ambitious international program in history by financing the Belt and Road Initiative, a sprawling network of infrastructure projects designed to deliver goods and commodities to Beijing efficiently while lashing these countries’ political and economic fortunes to China’s continued rise. But China is not a free-market democracy; its rise in both economic and political clout fundamentally complicates both the global free market as well as the political institutions created to deal with the anarchy inherent in the international system. China’s rise, whether it intends for it or not, fundamentally destabilizes the world’s geopolitics.
The Structure of the International System. Which leads to a related point—the multilateral institutions the world currently has in place to help manage global politics and assist worldwide coordination are no longer fit for purpose. They were plenty fit when they were being designed in the wake of World War II and accurately reflected the power structure of the time. But it’s 75 years later now, and the world has evolved while these institutions haven’t. Germany and Japan for example, as the losers of World War II, were not given permanent seats on the UN Security Council; today, their relative stability and political leadership compared to other countries who do occupy permanent seats would be very much welcome. NATO was established to counter threats from the Soviet Union; the Soviet Union no longer exists, and Russia’s nuclear threat pales in comparison to the destabilizing potential of a rising China and cyberterrorism. And countless other examples, all pointing to the same conclusion—today’s multilateral institutions aren’t suitably flexible to respond to 21st century challenges. Absent serious and structural reform, that’s only going to grow more true going forward.
U.S. Indifference. Finally, the decision of the U.S. to actively take a step back from global leadership cannot be overstated. In retrospect, it was a move long in the making—as the political and economic costs of failed wars kept mounting, Americans increasingly felt the U.S. was shouldering too much on behalf of others, militarily and otherwise. That’s always been a compelling, if contentious, argument; yes, the U.S. pays a lot to keep the international system running, but it also an international system designed to benefit and prioritize U.S. interests. But the reality is that the U.S. had begun stepping away from global leadership under Barack Obama, and accelerated the move under Trump. Make no mistake, though—Americans had the luxury of walking away from leading responses to global problems because they were the ones most insulated from them by dint of their money, food and energy independence, and technological prowess (it also helps having Canada, Mexico and two oceans as your neighbors).
At least that was the calculus until Coronavirus came ashore. So long as the U.S. remained relatively isolated from global problems, Americans and their elected leaders could argue that what was good for the world was not necessarily good for the U.S. Now the U.S. is in the same boat as the rest of the world. This is an opportunity for the U.S., still the country with the best scientists and most resources at its disposal, to show true global leadership. Sadly, signs so far point to the opposite taking place. And the geopolitical recession grows ever deeper. At least now we can talk about it.