Whose rise and decline? The G20 and the post-European era

Since the onset of the current financial crisis, and for that matter even before it, animated debates have taken place suggesting an impending decline of the West against the backdrop of a rising Rest. The current economic mess has only accelerated a structural process that was already underway, the “decliners” have insisted. These naysayers have it all wrong, others have argued, and the West is still number one. Just look at the crisis, highlight the “pro-number-ones”, to see that when the West falls everyone falls. The latest G20 summit in London has been held up by both camps as the ultimate revelation and crystallization of their prophecies. Power is being defused from West to East the “decliners” point out. To the contrary, the “pro-number-ones” rebut, the whole world has been once more looking to America for leadership. Paradoxically, both arguments are right, but miss an important point. America is still number one and Asia is indeed rising, but then who is declining? Europe is. This harsh truth was captured by the iconic meeting between Presidents Barack Obama and Hu Jintao in London, when the G20 was nicknamed the “G2”. 

The myth of American decline
On a cyclical basis the fable of the United States’ decline fills American nightmares, European dreams and increasingly Asian hopes. At every turn thus far, however, prophecies describing a waning of American power have been met by facts proving otherwise. Following America’s defeat in Vietnam in the 1970s and throughout the 1980s, the mood was bleak. As historian Paul Kennedy and the likes were reminding the US, great powers rise, but also fall. Indeed they do, as the collapse of the Soviet Union showed, leaving the US as the world’s sole and unchallenged “hyperpower”. September 11th spelled the beginning of the end for America’s hegemony, argued some. However, it also brought a further expansion of American power right into the heart of the Middle East and central Asia. With the current financial crisis, once again accounts of an imminent US decline are filling the news. Particularly in Europe, many have been quick to proclaim the end to American-style laissez-faire and the birth of a new multipolar world. Europeans, which had entered the G20 summit hailing the death of “Anglo-Saxon” economics and suggesting that finally their turn had come to rewrite the global rule book on capitalism, could not have been more delusional.

Indeed, rather than supplanting the much despised “Anglo-Saxon” capitalism, the G20 strengthened that same American-led liberal economic order. First, the meeting called for more free trade, not less. Second, the commitment to restoring lending and promoting trust, by repairing the financial system and strengthening regulation, aims to improve and uphold financial markets rather than replace them with something else. Last, the promises of injecting new resources and reforming the International Financial Institutions’ (IFIs) governance system are aimed at making them more effective instead of ditching them. Not only has the US proven to be the indispensable nation at the negotiating table once more, but the G20’s outcome will have the effect of boosting its leadership by strengthening the very global governance system founded on American rules and hegemony.

The reality of Europe’s decline (and Asia’s rise)
Like a company that expands, its CEO has to lose control over some operations in order to gain broader powers and responsibilities. Having expanded the G8 to the G20, and promising to make the IFIs more representative, the US finds itself in a similar position. By including emerging economies in the structures of global governance, particularly China and India as rising powers, the reality is that power is not being diffused from the West to the Rest, but from Europe to Asia, while simultaneously enhancing US leadership. These changes in global governance are the tip of the iceberg in a broader European geopolitical, military, economic and cultural decline.

Europe is increasingly marginal to the strategic calculations of both the US and the rising Asian powers. America’s attention, after having shifted from Europe to the Middle East in the past decades, will continue to wander away from the Atlantic shores towards Asia. Robert Kaplan, Senior Fellow at the Centre for a New American Security, suggests that the Indian Ocean may indeed be the centre stage for the XXI century. As China and India continue to rise, they will be competing with each other for regional influence and with the US – not with the EU – for international standing. Europe is seldom taken into consideration by Asian powers. A recent cover of The Economist painstakingly captured this in mapping out how China sees the world: Europe was a distant speck on the horizon, the smallest of all continents, good only for fashion shopping and far less relevant than (resource rich) Africa.

Europe’s geopolitical marginalization is paralleled by its military weakness. The reluctance of Europeans to spend more on their militaries, or even just pulling resources together, is well known, but the figures are impressive. The Stockholm International Peace Research Institute (SIPRI) estimates that in the decade between 1998 and 2007 military expenditure has grown 65% in North America, 62% in the Middle East, 57% in South Asia, 51% in both East Asia and Africa. Western Europe, with a mere 6% increase, has instead been the region with the lowest growth. The inability to act in the former Yugoslavia, the divisions over Iraq and the unwillingness to both beef up its forces and risk any casualties in Afghanistan, have increasingly relegated the Old Continent to military irrelevance.

No matter what Europeans like to believe, they also count less economically. The economists Alberto Alesina and Francesco Giavazzi have pointed out that Europe’s economic power is indeed declining relative to the rest of the world. If in twenty to thirty years Europe does not reform, they argue, its share in the world economy will be significantly lower than it is today. In the 1980s GDP per capita was 80% that of the US, today it is 70%. While the gap is widening, Asian economies are also catching up. Despite high hopes the Euro has failed to take off as an international currency. Beijing mostly holds US dollars, not euros. Reports regularly show Europe lagging behind in technological innovation, while tomorrow’s industries such as software, biotechnologies and space exploration are thriving in the United States, India and China. Europe’s stagnant demographics and aging population are an increasing economic burden, and its highly restrictive immigration policies keep the most talented individuals outside its borders. Using the size of movie industries as an index of (pop) cultural production, its epicentres are Hollywood, Bollywood and Hong Kong, not Paris or Cinecittà.

While the debates on the West and the Rest’s rise or decline may be misplaced, representing all too often the fears and hopes of either side, they nevertheless capture an ongoing systemic change. Indeed power is shifting, but at a closer look America still appears to be number one and Asia is clearly rising –  it is Europe which actually is losing out. The greatest of ironies may be that Europe’s successes contain the seeds of its demise. The historical achievement of the European Union, with its long lasting peace and prosperity along with the unification of a previously divided continent, are increasingly tying Europe down to an inward looking institution-building process. Without a politically coherent centre, Europeans can still carry on dreaming of an impending multipolar system, but it is unlikely that they will have much of a say in it. Rather than into Fareed Zakaria’s looming post-American world, we may have actually entered a post-European one.