Foreign Policy 2020 02 Spring

SPRING 2020 IS THIS THE END OF GLOBALIZATION? Philippe Legrain on the coronavirus and nativism | Orville Schell on the end of Chimerica Raghuram Rajan on the need to boost local governance | James Crabtree on Britain’s post-Brexit identity crisis | Henry Farrell on the EU in an age of nationalism

contents 023 Will the Coronavirus Kill Globalization? The pandemic is legitimizing nationalists and turning their xenophobia into policy. By Philippe Legrain 026 The Ugly End 038 Britain’s of Chimerica Post-Brexit Identity Crisis The coronavirus pandemic has turned Boris Johnson has contradictory ideas a conscious uncoupling into a messy breakup. for his country’s future—and no clear paths By Orville Schell for getting there. By James Crabtree 031 How to Save 044 Global Capitalism From Itself A Most Lonely Union Decentralizing decision-making can help The EU is a creature of multilateralism. left-behind regions get back on track. Can it survive in a deglobalized world? By Raghuram Rajan By Henry Farrell Cover illustration by BRIAN STAUFFER/Above illustration by JUSTIN METZ

contents feature reviews 050 075 War Movies After War Why America Shouldn’t TV shows like Occupied and Blackout Country give viewers a Abandon the Middle East sense of life in a world of grayzone conflicts. By Elisabeth Braw Trump has wrecked a cornerstone 078 Dismantling the of U.S. foreign policy, causing irreparable damage to the Middle East—and World’s Largest Democracy the world order. By Hal Brands, Steven A. Cook, and Kenneth M. Pollack A new book recounts the inspiring story of how India’s constitution introduced democracy insights to people who had never experienced it before. Those freedoms are now in jeopardy. By Sonia Faleiro 006 Hindi Fighting Words 082 The Tyranny of Property Jai Shri Ram was meant to celebrate a Hindu god. But the phrase has turned into a code for Thomas Piketty’s new book argues that rising attacking India’s Muslims. By Snigdha Poonam inequality is explained by politics, not economics, and offers some radical solutions. By Keith Johnson arguments 086 Books in Brief 009 After the Coronavirus Recent releases on Chinese industrial espionage, the dissent The pandemic has already disrupted channel in American diplomacy, and British anti-colonialism. the world. We asked 12 leading global thinkers to predict what happens next. 088 A Train to Nowhere 014 Trump Is Pushing Hovertrains were meant to revolutionize British transport. But they never arrived. By Kitty Wenham-Ross Israel Toward Apartheid FOREIGNPOLICY.COM 1 Most Israelis hate their country being compared to South Africa, but the deal of the century could make it a reality. By Alon Liel 016 First Suleimani, Then the Potemkin Proxies Why the United States should broaden the fight against countries that use local militias to do their dirty work. By Svante E. Cornell and Brenda Shaffer Illustration by MIKE MCQUADE

contributors Sonia Faleiro is an award-winning author and co-founder of Deca, a Snigdha Poonam is a national affairs global journalism cooperative. She is writer with the Hindustan Times in New the author of Beautiful Thing: Inside Delhi. She is the author of Dreamers: the Secret World of Bombay’s Dance How Young Indians Are Changing the Bars. Her new book, The Good Girls, World. She has recently written on will be published in January 2021. Chinese dating apps, TikTok, conflict, and India’s justice system. Kitty Wenham-Ross is a freelance journalist and former editorial fellow Raghuram Rajan is a finance professor at the Tempest. She writes on topics at the University of Chicago Booth including international politics and School of Business. He previously women’s literature and history. For served as the 23rd governor of the FOREIGN POLICY, she has most recently Reserve Bank of India and chief covered British politics. economist at the International Monetary Fund. He is the author of James Crabtree is an author and The Third Pillar: How Markets and the journalist based in Singapore. State Leave the Community Behind. He is an associate professor in practice at the National University Henry Farrell is a professor of political of Singapore’s Lee Kuan Yew School science and international affairs at the of Public Policy and the author of George Washington University and The Billionaire Raj: A Journey Through editor in chief of the Monkey Cage India’s New Gilded Age. blog at the Washington Post. His most recent book, with Abraham L. Newman, is Of Privacy and Power: The Transatlantic Struggle Over Freedom and Security. 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from the editor in chief CASSIDY DUHON WHEN WE FIRST STARTED PLANNING THIS ISSUE a few political globalization and return some decision- months ago, I never imagined that, at the last min- making authority to the lowest possible levels of gov- ute, we would have to make room for discussion of a ernment (“How to Save Global Capitalism From Itself,” then-unheard-of virus that would soon circle the globe. Page 31). Similarly, Orville Schell’s alarming article on how the coronavirus has made the impending U.S.- Of course, I also didn’t imagine that I’d be making China breakup even messier (“The Ugly End of Chi- the final edits to this issue from my kitchen table merica,” Page 26) complements James Crabtree’s look while my stir-crazy 5-year-old practiced tae kwon do at the irreconcilable problems a post-Brexit Britain over FaceTime; while my wife, who works on tech- will face (“Britain’s Post-Brexit Identity Crisis,” Page nology innovation for New York City, scrambled to 38) as well as Henry Farrell’s analysis of the chal- somehow find millions of N95 face masks; and while lenges the European Union—the very embodiment two pounds of venison jerky quietly cooked away in of globalization—will confront in a rapidly fracturing the backyard meat smoker I’d bought a week earlier world (“A Most Lonely Union,” Page 44). during a late-night session of online apocalypse prep. (It seemed like a good idea at the time.) Taken together, these and the other articles in this special issue may make for alarming reading. But But if there’s one thing the coronavirus has taught the fact is that our current predicament is alarm- us—and it has taught us plenty—it is that our plans ing. Especially since the most depressing aspect of mean nothing. We all remain nature’s playthings. the coronavirus crisis is the same thing that makes the onslaught of deglobalization so frustrating: Both Apart from its obvious deadliness, one of the most are the result of, or have been made much worse by, striking things about the virus, and one reason it the persistent failures of governments to face and causes so much fear, I think, is the way it embodies help mitigate the biggest problems of our day. Still, and exploits the very aspects of our modern world that there’s a piece of good news even in that last, dispir- have caused so much political turmoil in the last few iting conclusion—and that is that what people did, years. The features of globalization that have fueled people can undo. There will be a world after this virus populism and sparked social unrest—namely, mass is finished with us. It’s all our job to ensure that that migration, offshoring, economic interdependence, and world is as prosperous, equitable, and free as it can a weakening of state sovereignty—are the very same be, and we at FOREIGN POLICY hope that this issue, things that allowed the virus to spread so far and so fast. and our ongoing work, can help. Fortunately for us at FOREIGN POLICY, we had Jonathan Tepperman decided months ago to focus this issue on the push- back against globalization. As a consequence, much of our newer coronavirus content has fit right in with the pieces we had been working on for weeks. So Philippe Legrain’s brilliant essay on how nationalists around the globe are exploiting the virus to insert xenophobia into government policy (see “Will the Coronavirus Kill Glo- balization?” Page 23) neatly complements Raghuram Rajan’s equally brilliant discussion of how the best way to save economic globalization is to sacrifice FOREIGNPOLICY.COM 3

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insights Hindi Fighting Words that could force people to prove their citizenship, the government’s plans Jai Shri Ram was meant to celebrate could hurt the many millions of poor a Hindu god. But the phrase has and illiterate Indians who don’t possess turned into a code for attacking India’s any documents to further their claims. Muslims. By Snigdha Poonam Until the recent pandemic-related lock- downs, mass protests had seized the “JAI SHRI RAM!” THOSE WERE THE WORDS 25-year-old Kapil Gujjar DECODER country’s cities and towns after the shouted as he pointed his semi-automatic pistol at hundreds CAA was passed on Dec. 11; in scenes of unarmed women and children at Shaheen Bagh, a predomi- INTERPRETING unprecedented in modern India, thou- nantly Muslim colony in New Delhi, on Saturday, Feb. 1. It was THE ESSENTIAL sands of demonstrators formed human a cool, smog-infused afternoon, and Indians from all walks chains, sang the national anthem, and of life had gathered in a peaceful protest against a controver- WORDS read the constitution aloud. Shaheen sial new citizenship law that especially affected the country’s THAT HELP Bagh, where hundreds of local Muslim poor, women, and, perhaps most of all, Muslims. Gujjar fired EXPLAIN THE women staged a sit-in at the start of this three bullets in the air. The crowd scattered. Later, while being year, became the center of the national handcuffed by the police, Gujjar explained his motive: “In our WORLD movement as more and more Indians— country, only Hindus will prevail.” students, professionals, activists, sing- ers, artists—joined them every day. Jai Shri Ram literally translates as “Victory to Lord Ram,” a popular Hindu deity. But while this seemingly harmless Two days before Gujjar walked into phrase originated as a pious declaration of devotion in India, Shaheen Bagh, another young man, a it is today increasingly deployed not only as a Hindu chau- teenager, produced a pistol near the area vinist slogan but also as a threat to anyone who dares to chal- and shot at anti-CAA demonstrators, lenge Hindu supremacy. injuring one and terrifying hundreds. The juvenile shooter, whom Indian law GUJJAR’S MESSAGE WAS AIMED AT INDIA’S 200 MILLION MUSLIMS— prohibits the media from naming, had the largest religious minority in a mostly Hindu population apparently been prepared to become a of 1.3 billion people—who have become unwitting targets in martyr in what he perceived as a war an us-versus-them culture war waged by Prime Minister Nar- for Hindu supremacy. In a Facebook endra Modi and his ruling Bharatiya Janata Party (BJP). The video he recorded while on his way latest catalyst for tensions is the new Citizenship Amendment to Shaheen Bagh, he had left instruc- Act (CAA), which discriminates on the basis of religion. The tions for his fellow warriors: “On my law grants citizenship to refugees from Afghanistan, Bangla- final journey, cover me in saffron clothes desh, and Pakistan who are Buddhists, Christians, Hindus, and chant Jai Shri Ram.” The phrase Jains, Sikhs, or Zoroastrians—but not Muslims—as long as has provoked terror in the capital since they entered India before 2015. the beginning of this year: On the night of Jan. 5, a group of masked attackers Activists point out that the CAA goes against the secu- affiliated with the Hindu far-right cried lar principles enshrined in the Indian Constitution. And “Jai Shri Ram” as they entered Delhi’s when coupled with a proposed national registry of citizens Jawaharlal Nehru University, a hub of left-wing politics, and brutally beat up students who had been protesting against a recent fee hike. 6 SPRING 2020

RAM, THE POPULAR HINDU GOD, is the pro- exclamation, and in folk songs. The dei- in Hindi-speaking parts of India, and tagonist of the Sanskrit epic Ramayana, ty’s political influence goes back even it depicted Ram as an ideal, pious man said to be written sometime between further. In the 12th century, a “sudden with a beatific smile—until he encoun- the seventh and third centuries B.C. rush of temples [were] built for Ram” in tered evil, which he slew on sight. But In modern, mainstream depictions of response to the establishment of the first Ram never used his special powers the Ramayana, Ram is extolled as the sultanate in Delhi in 1206, the journalist unless it was warranted. “Attacking the embodiment of the perfect man: an Shoaib Daniyal points out in Scroll.in. weak or the innocent to show your arro- exiled prince who rescues his abducted “In the 17th century, for example, two gance or your might doesn’t count as the wife and destroys an evil empire before Marathi Ramayans were written, one dharma [duty] of the brave,” Ram’s spiri- returning home to assume his rightful which compared Mughal Emperor tual mentor, Vishwamitra, advises while throne. Ram is always described as just, Aurangzeb to Raavan [Ram’s nemesis] awarding him with celestial weapons. brave, self-sacrificing, and righteous. His and the other to Raavan’s gluttonous followers even justify the fact that he later brother Kumbhakarna,” he writes. Some purported followers of Ram abandoned his wife, Sita, after common- now seem to have a different inter- ers questioned her purity—after all, they But the phrase’s cultural relevance pretation of dharma. Last year, across argue, Ram’s role as king superseded his changed markedly in the last four several incidents, dozens of poor and duties as a husband. He was likely only decades, when it began to take on a dif- innocent Indians were attacked because following the social mores of his era. ferent meaning. I first heard the words they refused to say the words Jai Shri while watching the late 1980s television Ram. On June 18, a 24-year-old man In Hindi-speaking regions, Hindus adaptation of Ramayana that aired on was lynched in Jharkhand; on June have invoked Ram’s name for more the national broadcaster Doordarshan. 20, a 40-year-old cleric was hit by a car than a century in regular greetings, in The program became a Sunday ritual in Delhi; on June 23, a 25-year-old cab Illustration by ANONYMOUS FOREIGNPOLICY.COM 7

insights driver was beaten up in Thane near Ramanand Sagar’s TV Mumbai; and on July 28, a 15-year-old adaptation of the epic boy was set on fire in Uttar Pradesh. In Hindu poem Ramayana. each of these attacks, the victims were Muslim, and they were asked to chant Hindus worship the goddesses Durga and Last June, cries of Jai Shri Ram Jai Shri Ram by as few as three and as Kali, Ram’s name doesn’t resonate widely. many as 30 Hindu assailants. echoed through the Indian Parlia- But Ram’s imprint has spread in the The slogan is deployed as effectively years since the BJP chose him as the ment after the BJP was reelected with in violence as it is in entertainment. mascot for its project to build and culti- Last July, as Muslims were being forced vate a Hindu base of voters. The center a sweeping majority, winning 303 of 543 to intone Jai Shri Ram, the country for this project was the city of Ayodhya, seemed gripped by a viral music video where a 16th-century Mughal mosque parliamentary seats in an ugly, polar- (now deleted) on YouTube titled “Jo Na occupied what some believe to be the bole Jai Sri Ram, bhej do usko kabris- site of Ram’s birth. Around the mid- ized election. The words were used to tan” (Those who don’t say Jai Shri Ram, 19th century, regional Hindu organi- send them to their graveyards). The ref- zations attempted to claim the site and heckle Muslim legislators as they took erence to cemeteries made clear that build a temple to Ram on the mosque’s the message was directed at Muslims grounds. But then, in the 1980s, the BJP their oaths to uphold the Indian Con- and Christians. Four people involved in and its ideological allies turned the making and uploading the video were local demand for a Ram temple at the stitution. Five months later, India’s later arrested. There is no stopping the site into a sweeping Hindu nationalist messages of hate, however. On YouTube, movement. The slogan for this move- Supreme Court settled the country’s one can now find dozens of songs glori- ment, which was led by BJP leader and fying Ram and denigrating minorities. then-Home Minister L.K. Advani, was longest-running property dispute by Most of them mix Hindi hate speech Jai Shri Ram. The words were chanted, with electronic beats. Some are so pop- loud and clear, as the foundation for ruling in favor of a Ram temple to be ular that they are requested at weddings the temple was laid next to the mosque and played in clubs. “Hindu Blood Hit,” and bricks were loaded into trucks and built in Ayodhya at the same site where for example, has been viewed more than trains headed for Ayodhya. And the 3.8 million times. Between psychedelic same words tore through the city on the mosque was demolished by Hindu repetitions of Jai Shri Ram, the singer Dec. 6, 1992, as thousands of Hindu warns India’s Muslims that their time is volunteers pounded the mosque with nationalists in 1992. The Muslim peti- up. Other viral songs can be geopolitical: hammers and axes. In a matter of hours, “Jai Shree Ram DJ Vicky Mix” calls for a the building was razed; riots sparked tioners were granted 5 acres elsewhere future in which “there will continue to throughout India. Jai Shri Ram now had be a Kashmir but no Pakistan.” an additional meaning: an expression in the city to build a mosque. On Nov. of Hindu dominance and the BJP’s rise. THE 1980S TELEVISION SHOW of the 9, as the government commenced Ramayana reached millions of Indians right as the BJP accelerated its project arrangements for building the temple, to unite Hindi-speaking Hindus around the figure of Ram. This was a bold politi- Modi tweeted his response to the court cal experiment. Although widely known as the hero of the Ramayana, which has verdict: “May peace and harmony pre- been published in multiple languages and dialects, Ram was worshipped only vail!” But those words seem lost amid selectively in India. In some parts such as Tamil Nadu, his worship elicits hos- the dog whistles sounded by senior tility by those who see the Ramayana’s narrative as racist toward Dravidians, the leaders and amplified on social media ancestral inhabitants of southern India. In West Bengal, where the majority of with impunity. It is no surprise then that the devotees firing bullets at Shaheen Bagh have different intentions. Q RAMANAND SAGAR PRODUCTIONS SNIGDHA POONAM (@snigdhapoonam) is a journalist with the Hindustan Times in New Delhi and the author of Dreamers: How Young Indians Are Changing the World. 8 SPRING 2020

After the Coronavirus The pandemic has already disrupted the world. We asked 12 leading global thinkers to predict what happens next. MUCH LIKE THE FALL OF THE BERLIN WALL or the collapse of that will become apparent only later. Lehman Brothers, the coronavirus pandemic is a world- To help us make sense of the ground shattering event whose far-ranging consequences we can shifting beneath our feet as this crisis only begin to imagine today. This much is certain: Just as the unfolds, FOREIGN POLICY asked 12 lead- disease has shattered lives, disrupted markets, and exposed ing thinkers from around the world to the competence (or lack thereof) of governments, it will lead weigh in with their predictions for the to permanent shifts in political and economic power in ways global order after the pandemic. Illustration by BRIAN STAUFFER FOREIGNPOLICY.COM 9

arguments A World Less The End of A More Open, Prosperous, Globalization China-Centric and Free as We Know It Globalization by STEPHEN M. WALT by ROBIN NIBLETT by KISHORE MAHBUBANI THE CORONAVIRUS PANDEMIC will THE CORONAVIRUS CRISIS could be the THE CORONAVIRUS PANDEMIC will not strengthen the state and reinforce straw that breaks the camel’s back of fundamentally alter global economic nationalism. Governments of all types economic globalization. China’s grow- directions. It will only accelerate a will adopt emergency measures to ing economic and military power had change that had already begun: a move manage the crisis, and many will be already provoked a bipartisan determi- away from U.S.-centric globalization loath to relinquish these new powers nation in the United States to decouple to a more China-centric globalization. when it is over. China from U.S.-sourced technology and intellectual property and try to Why will this trend continue? The U.S. The crisis will also accelerate the force allies to follow suit. Increasing population has lost faith in globaliza- shift in power and influence from West public and political pressure to meet tion and international trade. Free trade to East. South Korea and Singapore carbon emissions reduction targets agreements are toxic, with or without have responded best, and China has had already called into question many U.S. President Donald Trump. By con- reacted well after its early mistakes. companies’ reliance on long-distance trast, China has not lost faith. Why not? The response in Europe and the United supply chains. Now the coronavirus is There are deeper historical reasons. Chi- States has been slow and haphazard forcing governments, companies, and nese leaders now know well that China’s by comparison, further tarnishing the societies to strengthen their capacity century of humiliation from 1842 to 1949 aura of the Western brand. to cope with extended periods of eco- was a result of its own complacency and nomic self-isolation. a futile effort by its leaders to cut it off What won’t change is the fundamen- from the world. By contrast, the past few tally conflictive nature of world poli- It seems highly unlikely in this con- decades of economic resurgence were tics. Previous plagues—including the text that the world will return to the a result of global engagement. The Chi- influenza pandemic of 1918-1919—did idea of mutually beneficial globaliza- nese people have also experienced an not end great-power rivalry nor usher tion that defined the early 21st century. explosion of cultural confidence. They in a new era of global cooperation. And without the incentive to protect believe they can compete anywhere. Neither will the coronavirus. We will the shared gains from global economic see a further retreat from hyperglo- integration, the architecture of global Consequently, as I document in my balization, as citizens look to national economic governance established in new book, Has China Won?, the United governments to protect them and as the 20th century will quickly atrophy. It States has two choices. If its primary states and firms seek to reduce future will then take enormous self-discipline goal is to maintain global primacy, it vulnerabilities. for political leaders to sustain interna- will have to engage in a zero-sum geo- tional cooperation and not retreat into political contest, politically and eco- In short, the coronavirus will cre- overt geopolitical competition. nomically, with China. However, if the ate a world that is less open, less pros- goal of the United States is to improve perous, and less free. It did not have to Proving to their citizens that they the well-being of the American peo- be this way, but the combination of a can manage the coronavirus crisis will ple—whose social condition has dete- fast-spreading virus, inadequate plan- buy leaders some political capital. But riorated—it should cooperate with ning, and incompetent leadership has those who fail will find it hard to resist China. Wiser counsel would suggest placed humanity on a new and worri- the temptation to blame others for their that cooperation would be the better some path. failure. choice. However, given the toxic U.S. political environment toward China, STEPHEN M. WALT (@stephenWalt) is a ROBIN NIBLETT (@RobinNiblett) is the wiser counsel may not prevail. professor of international affairs at director and chief executive of the Harvard Kennedy School. Chatham House. KISHORE MAHBUBANI (@mahbubani_k) is a distinguished fellow at the National University of Singapore’s Asia Research Institute. 10 SPRING 2020

Democracies Lower Profits This Pandemic Will Come Out but More Stability Can Serve of Their Shell a Useful Purpose by SHANNON K. O’NEIL by G. JOHN IKENBERRY by SHIVSHANKAR MENON IN THE SHORT TERM, the coronavirus cri- THE CORONAVIRUS IS UNDERMINING the IT IS EARLY DAYS YET, but three things sis will give fuel to all the various camps basic tenets of global manufactur- seem apparent. First, the coronavirus in the Western grand strategy debate. ing. Companies will now rethink and pandemic will change our politics, both The nationalists and anti-globalists, the shrink the multistep, multicountry within states and between them. It is China hawks, and even the liberal inter- supply chains that dominate produc- to the power of government that soci- nationalists will all see new evidence for tion today. eties—even libertarians—have turned. the urgency of their views. Given the Government’s relative success in over- economic damage and social collapse Global supply chains were already coming the pandemic and its economic unfolding, it is hard to see anything other coming under fire—economically, due effects will exacerbate or diminish than a reinforcement of the shift toward to rising Chinese labor costs, U.S. Pres- security issues and the recent polar- nationalism, great-power rivalry, strate- ident Donald Trump’s trade war, and ization within societies. Either way, gic decoupling, and the like. advances in robotics, automation, and government is back. Experience so far 3D printing, as well as politically, due shows that authoritarians or populists But just as in the 1930s and ’40s, there to real and perceived job losses, espe- are no better at handling the pandemic. might also be a slower-evolving counter- cially in mature economies. The coro- Indeed, the countries that responded current, a sort of hardheaded interna- navirus has now broken many of these early and successfully, such as South tionalism similar to the one that Franklin links: Factory closings in afflicted areas Korea and Taiwan, have been democ- D. Roosevelt and a few other statesmen have left other manufacturers—as well racies—not those run by populist or began to articulate before and during the as hospitals, pharmacies, supermar- authoritarian leaders. war. The 1930s collapse of the world econ- kets, and retail stores—bereft of inven- omy showed how connected modern tories and products. Secondly, this is not yet the end of an societies were and how vulnerable they interconnected world. The pandemic were to what FDR called “contagion.” On the other side of the pandemic, itself is proof of our interdependence. What FDR and other internationalists more companies will demand to know But in all polities, there is already a conjured was a postwar order that would more about where their supplies come turning inward, a search for auton- rebuild an open system with new forms from and will trade off efficiency for omy and control of one’s own fate. We of protection and capacities to manage redundancy. Governments will inter- are headed for a poorer, meaner, and interdependence. The United States vene as well, forcing what they con- smaller world. couldn’t simply hide within its borders, sider strategic industries to have but to operate in an open postwar order domestic backup plans and reserves. Finally, there are signs of hope and required building a global infrastructure Profitability will fall, but supply sta- good sense. India took the initiative of multilateral cooperation. bility should rise. to convene a video conference of all South Asian leaders to craft a common So the United States and other West- SHANNON K. O’NEIL (@shannonkoneil) regional response to the threat. If the ern democracies might travel through is the vice president, deputy director pandemic shocks us into recognizing this same sequence of reactions driven of studies, and a senior fellow at the our real interest in cooperating multi- by a cascading sense of vulnerability; Council on Foreign Relations. laterally on the big global issues facing the response might be more nation- us, it will have served a useful purpose. alist at first, but over the longer term, the democracies will come out of their SHIVSHANKAR MENON (@Shivshanka shells to find a new type of pragmatic Menon) is a distinguished fellow at and protective internationalism. Brookings India. G. JOHN IKENBERRY is a professor at Princeton University’s Woodrow Wilson School of Public and Interna- tional Affairs. FOREIGNPOLICY.COM 11

arguments U.S. Power Will The History of A Dramatic New Need a New the Coronavirus Stage in Global Strategy Pandemic Capitalism Will Be Written by JOSEPH S. NYE JR. by the Victors by LAURIE GARRETT by JOHN R. ALLEN IN 2017, U.S. PRESIDENT DONALD TRUMP AS IT HAS ALWAYS BEEN, history will be THE GREAT SHOCK to the world’s finan- written by the victors of the coronavi- cial and economic system is the rec- announced a new national security rus crisis. Every nation, and increas- ognition that global supply chains and strategy that focused on great-power ingly every individual, is experiencing distribution networks are deeply vul- competition. The coronavirus crisis the societal strain of this disease in new nerable to disruption. The coronavirus shows this strategy to be inadequate. and powerful ways. Inevitably, those pandemic will therefore not only have Even if the United States prevails as a nations that persevere—by virtue of long-lasting economic effects but lead great power, it cannot protect its secu- their unique political and economic to a more fundamental change. Glo- rity by acting alone. As former U.S. systems, as well as from a public health balization allowed companies to farm Navy Secretary Richard Danzig sum- perspective—will claim success over out manufacturing all over the world marized the problem in 2018: “Twenty- those that experience a different, more and deliver their products to markets first century technologies are global devastating outcome. To some, this on a just-in-time basis, bypassing the not just in their distribution, but also in will appear as a great and definitive costs of warehousing. Inventories that their consequences. Pathogens, AI sys- triumph for democracy, multilateral- sat on shelves for more than a few days tems, computer viruses, and radiation ism, and universal health care. To oth- were considered market failures. Sup- that others may accidentally release ers, it will showcase the clear benefits ply had to be sourced and shipped on a could become as much our problem of decisive, authoritarian rule. carefully orchestrated, global level. The as theirs. Agreed reporting systems, coronavirus has proved that pathogens shared controls, common contingency Either way, this crisis will reshuffle can not only infect people but poison plans, norms, and treaties must be the international power structure in the entire just-in-time system. pursued as means of moderating our ways we can only begin to imagine. It numerous mutual risks.” will continue to depress economic activ- Given the scale of financial market ity and increase tension between coun- losses the world has experienced since On transnational threats like the tries. Over the long term, the pandemic February, companies are likely to come coronavirus and climate change, it is will likely significantly reduce the pro- out of this pandemic decidedly gun- not enough to think of U.S. power over ductive capacity of the global economy, shy about the just-in-time model and other nations. The key to success is also especially if businesses close and indi- about globally dispersed production. learning the importance of power with viduals detach from the labor force. This The result could be a dramatic new others. Every country puts its national risk of dislocation is especially great for stage in global capitalism, in which interest first; the important question is developing nations and others with a supply chains are brought closer to how broadly or narrowly this interest large share of economically vulnera- home and filled with redundancies is defined. The coronavirus pandemic ble workers. The international system to protect against future disruption. shows the United States is failing to will, in turn, come under great pressure, That may cut into companies’ near- adjust its strategy to this new world. resulting in instability and widespread term profits but render the entire sys- conflict within and across countries. tem more resilient. JOSEPH S. NYE JR. (@Joe_Nye) is a uni- versity distinguished service pro- JOHN R. ALLEN is the president of the LAURIE GARRETT (@Laurie_Garrett) fessor emeritus at the Harvard Brookings Institution. is a Pulitzer Prize-winning science Kennedy School. writer and a columnist at FOREIGN POLICY. 12 SPRING 2020

More Failed States The United States In Every Country, Has Failed the We See the Power by RICHARD N. HAASS Leadership Test of the Human Spirit by KORI SCHAKE by NICHOLAS BURNS PERMANENT IS NOT A WORD I AM FOND OF, THE UNITED STATES WILL NO LONGER BE SEEN THE CORONAVIRUS PANDEMIC is the great- as little or nothing is, but I would think est global crisis of this century. Its depth the coronavirus crisis will at least for as an international leader because of and scale are enormous. The public a few years lead most governments to its government’s narrow self-inter- health crisis threatens each of the 7.8 turn inward, focusing on what takes est and bungling incompetence. The billion people on Earth. The financial place within their borders rather than on global effects of this pandemic could and economic crisis could exceed in what happens beyond them. I anticipate have been greatly attenuated by hav- its impact the Great Recession of 2008- greater moves toward selective self-suffi- ing international organizations pro- 2009. Each crisis alone could provide ciency (and, as a result, decoupling) given vide more and earlier information, a seismic shock that permanently supply chain vulnerability; even greater which would have given governments changes the international system and opposition to large-scale immigration; time to prepare and direct resources balance of power as we know it. and a reduced willingness or commit- to where they were most needed. This ment to tackle regional or global prob- was something the United States could To date, international collaboration lems (including climate change) given have organized, showing that while it has been woefully insufficient. If the the perceived need to dedicate resources was self-interested, it was not solely United States and China, the world’s to rebuild at home and deal with eco- self-interested. Washington has failed most powerful countries, cannot put nomic consequences of the pandemic. the leadership test, and the world is aside their war of words over which of worse off for it. them is responsible for the crisis and I would expect many countries to lead more effectively, both countries’ have difficulty recovering, with state KORI SCHAKE (@KoriSchake) is the credibility may be significantly dimin- weakness and failed states becom- director of foreign and defense pol- ished. If the European Union cannot ing an even more prevalent feature of icy studies at the American Enter- provide more targeted assistance to the world. The crisis will likely con- prise Institute. its 500 million citizens, national gov- tribute to the ongoing deterioration ernments might take back more power of Sino-American relations and the from Brussels in the future. In the United weakening of European integration. States, what is most at stake is the abil- On the positive side, we should see ity of the federal government to provide some modest strengthening of effective measures to stem the crisis. global public health gover- nance. But overall, a crisis In every country, however, there rooted in globalization will are many examples of the power of weaken rather than add to the human spirit—of doctors, nurses, the world’s willingness and political leaders, and ordinary citizens ability to deal with it. demonstrating resilience, effective- ness, and leadership. That provides RICHARD N. HAASS (@Rich- hope that people around the world can ardHaass) is the president prevail in response to this extraordi- of the Council on Foreign nary challenge. Relations. NICHOLAS BURNS (@RNicholasBurns) is a professor of diplomacy and international relations at the Har- vard Kennedy School. FOREIGNPOLICY.COM 13

arguments Trump Is Pushing Israel Toward Apartheid Most Israelis hate their country being compared to South Africa, but the deal of the century could make it a reality. By Alon Liel IIN THE HEYDAY OF SOUTH AFRICA’S APARTHEID REGIME, the country’s Ciskei, and Transkei) and six supposedly white minority government planned to create 10 so-called self-governing territories. Foreign gov- homelands—also known as Bantustans—where black South ernments for the most part dismissed the Africans could live far away from the cities it hoped to keep puppet states for what they were; South white. It was the culmination of what the regime called “sep- Africa was the only country in the world arate development”—an effort to deflect attention from to officially recognize the Bantustans, racial oppression by claiming black people had been granted and the major decisions regarding their independence in their own states and weren’t second-class affairs were made exclusively in Pretoria. citizens in South Africa. The apartheid government ultimately created only four I have devoted decades of my life ostensibly independent Bantustans (Bophuthatswana, Venda, to Israel’s foreign service, including serving as a South Africa desk officer 14 SPRING 2020

in the Israeli Ministry of Foreign Affairs Left: Palestinians walk past a house occupied The details of the proposal, and during the apartheid era and as the by Israeli settlers in the West Bank on July 26, the rhetoric used by both Trump and Israeli ambassador to South Africa 2017. Above: Palestinian President Mahmoud Netanyahu, made it clear that this was from 1992 to 1994, during the coun- Abbas holds up U.S. President Donald Trump’s not a deal but rather the implementa- try’s transition to democracy. Vision for Peace map while speaking at the tion of Netanyahu’s long-standing plan United Nations in New York on Feb. 11. to further entrench Israel’s control of During these years, I learned, to my the West Bank by giving its residents dismay, that no country in the world including pressure and boycotts— disconnected enclaves of territory (with the exception of South Africa) con- despite white supremacist Afrikaner without granting them real freedom tributed more to the economy of the groups defending the Bantustans until or basic political rights. That was pre- Bantustans than Israel. Israelis built the dying days of apartheid. cisely the goal of the old South African factories, neighborhoods, a hospital, government’s Bantustan policy, too. and even a soccer stadium and an alliga- It is now clear that attempts to white- tor farm in these South African puppet wash a discriminatory, oppressive regime Trump did not just try to hand his states. Israel went so far as to allow one by creating fictitious autonomous states friend almost a third of the West Bank, of them, Bophuthatswana, to maintain inhabited by subjects who have no real but he also—and perhaps primarily— a diplomatic mission in Tel Aviv, and political rights did not work in South tried to provide Netanyahu with a route its leader, Lucas Mangope—shunned Africa and they will not work elsewhere. toward international acceptance. Sim- by the entire world for advancing and ilar to U.S. recognition of Israeli sover- legitimizing apartheid by cooperating This lesson, however, is now being eignty over the Golan Heights and the with the South African regime—was a tested. With active support from the move of the U.S. Embassy to Jerusa- frequent guest in Israel. United States in the form of President lem, Trump continues to signal that Donald Trump’s so-called “deal of the he can and will erase the time-honored As the entire world boycotted the century,” Israel is seeking to introduce policies of the international commu- Bantustan sham, Israel—motivated and develop the new millennium’s ver- nity with his own diktats. by the desire for security cooperation sion of the old South Africa’s deplor- and an export market for its arms indus- able policy. This is bad news for millions of Pales- try—mobilized to support the apartheid tinians—but not for them alone. Over the regime. Israel’s security cooperation In late January, Trump bestowed yet years, the United Nations has established with South Africa began in 1974 and another gift on his close friend Israeli that partitioning the land between the ended only with the election of Nelson Prime Minister Benjamin Netanyahu Jordan River and the Mediterranean Sea Mandela in 1994. ahead of the March 2 election in Israel, into two independent states is the only presenting a plan that his son-in-law just and sustainable solution. The 20-year relationship was and emissaries devised without any Pal- wide-ranging in scope and included joint estinians present. This solution is predicated on the development of arms between the two belief that all 14 million people cur- countries and Israeli supply of military rently living on that land have a right training and arms to South Africa. In to independence, equality, and dignity fact, South Africa was at times the larg- and that the best way to ensure this out- est buyer of Israeli arms. This coopera- come is an end to the Israeli occupa- tion had been going on for almost two tion, now in place for more than half decades by the time I became ambassa- a century, and partition based on the dor and was so intricate that even I, as pre-1967 borders. ambassador, was not privy to its details; it was coordinated in large part by the Prominent institutions such as the defense ministry rather than the for- European Union and the Arab League eign ministry. Through this cooperation, Israel became one of South Africa’s clos- The map attached to the Trump plan est allies—economically, militarily, and is an imitation of the Bantustan model, diplomatically—and heeded its request with Palestinian fragments surrounded to help develop the Bantustans. by territory fully under Israeli control, making permanent the domination of one Ultimately, of course, these Ban- ethnic or religious group over another. tustans fell, along with the apartheid regime, thanks in part to interna- tional organizing and nonrecognition, FOREIGNPOLICY.COM 15

arguments First Suleimani, Then the Potemkin Proxies have repeatedly expressed their sup- Why the United States port for and commitment to this should broaden the fight model, as have previous U.S. admin- against countries that use istrations, led by both Republicans and local militias to do their Democrats. Unfortunately, the inter- dirty work. By Svante E. national community’s professed com- Cornell and Brenda Shaffer mitment to the two-state solution has yet to manifest itself in any substan- By killing Suleimani, the United States indicated it would tive way, which seems to have led Net- no longer tolerate Iran’s use of proxies to circumvent its anyahu and Trump to the conclusion responsibility for killing Americans and for other acts of that the coast is clear for their annex- terrorism and mass bloodshed. Washington decided to de ationist vision. al with the source of the terrorism, not its emissaries. The same principle should apply to the many proxy regimes The map attached to the Trump plan established by various states—Russia most prominently—to is an imitation of the Bantustan model, circumvent responsibility for illegal military occupations. with Palestinian fragments surrounded by territory fully under Israeli control, Countries around the world are increasingly realizing that making permanent the domination the most convenient way to occupy foreign territories is to set of one ethnic or religious group over up a proxy with the ceremonial trappings of a state, includ- another. It thus violates the principles ing a government, parliament, and flag. Why go through all of the rules-based international order, that trouble? Because the norms of the liberal international signaling that Trump believes he can order, which outlaw changing boundaries by force, risk lead- disregard international law and legiti- ing to sanctions for the perpetrator state. Creating a proxy mize a new 21st-century model of apart- regime generates a convenient falsehood that obfuscates heid. This arrogant show of force must reality and helps states evade such consequences. be met with a clear answer. The most systematic user of this tactic is Russia. Since the It was just three years ago that the early 1990s, it has manipulated ethnic conflicts in three dif- U.N. Security Council adopted Reso- ferent states and helped set up nominally independent enti- lution 2334, asserting that settlements ties over which it exerts control. Moscow’s practice began in the occupied Palestinian territories in Moldova’s Transnistria region and in two breakaway ter- were unlawful and that no unilateral ritories of Georgia, Abkhazia and South Ossetia. Following changes to the pre-1967 borders would be recognized. To respond to Trump and Netanyahu—and given the latter’s announcement of plans to annex ter- ritory within a few months—regional and Western leaders and major inter- national institutions must once again speak up loudly and clearly. No one must give even tacit approval to this new form of apartheid and the ideology undergirding it. Doing so would betray not only the legacy and efficacy of international resistance to South African apartheid but also the fate of millions of people living in Israel and what should be a truly independent Palestine. Q ALON LIEL served as Israel’s ambassa- dor to South Africa from 1992 to 1994 and was the director-general of Isra- el’s Ministry of Foreign Affairs from 2000 to 2001. 16 SPRING 2020

A pro-Russian activist guards a barricade next to a flag of the so-called People’s Republic of Donetsk in the eastern Ukrainian city on April 21, 2014. ANATOLIY STEPANOV/AFP VIA GETTY IMAGES Vladimir Putin’s consolidation of power powers refer to these lands as what they Similarly, Armenia not only occu- in the early 2000s, the Kremlin’s con- are: occupied territories. pied a sixth of Azerbaijan’s territory in trol of these territories became tighter. the war in the early 1990s but evicted Putin appointed Russian military and Moscow’s tactic proved so success- 700,000 occupants of these lands. But security officials to ministerial positions ful in undermining the statehood of Armenia is subject to no sanctions what- in the governing structures of these ter- Georgia and Moldova that the Krem- soever, mainly because Yerevan hides ritories, indicating their direct subor- lin decided to use the same tactic in behind the fiction that it is not really a dination to Russia. Following its 2008 eastern Ukraine. And it worked: Con- party to the conflict at all but that the war with Georgia, Russia established trast the international reaction to any “Republic of Nagorno-Karabakh” is. permanent military bases in Abkhazia of these conflicts with Moscow’s inva- Never mind that Nagorno-Karabakh’s and South Ossetia and formally recog- sion of Crimea. Unlike these other two most prominent leaders went on nized the independence of the two ter- cases, Moscow annexed Crimea out- to serve as Armenia’s presidents for ritories. This allowed Moscow to create right, thereby accepting responsibil- 20 years and that other senior officials a fictive legal basis for its military pres- ity for its actions. This led to serious rotate seamlessly between Armenia and ence, based on so-called interstate agree- sanctions that remain in force to this Nagorno-Karabakh. The entity’s most ments it signed with its proxies. day. But where Moscow hid behind the recent foreign minister was an Armenian fiction of a “Donetsk People’s Repub- diplomat for several decades, and on But until the 2008 war, the United lic,” which it created from thin air, it has completion of his term in Nagorno-Kara- States and European Union treated largely escaped those consequences. bakh, he returned to the Foreign Ministry Russia like an arbiter in these conflicts, in Yerevan. Likewise, Armenia’s deputy long after it was clear it was in fact a The United States chief of the general staff was immedi- party to them. Twice a year, for exam- and European Union ately appointed to serve as the defense ple, Western powers approved exten- treated Russia like minister of Nagorno-Karabakh in 2015. sions to the United Nations monitoring an arbiter in these As in Russia’s case, the fiction of a proxy mission in the Abkhazia conflict that conflicts, long after regime seems enough to achieve impu- included overt praise for a so-called it was clear it was in nity. Even a considerable Armenian Russian peacekeeping force that in fact fact a party to them. effort to build settlements in the occu- was part of Moscow’s effort to shore pied territories has led to a yawn in the up Abkhazia’s separation from Geor- international community. gia. Even today, only rarely do Western FOREIGNPOLICY.COM 17

arguments Still, the United States has enter- to have an easy way out. If accepting the problem with soldiers or settlers in the tained the notion that Nagorno-Kara- fiction of a proxy helps reduce the load West Bank? Perhaps Israel would have bakh is somehow separate from on their policy agenda, they appear spared itself a lot of headaches if it had Armenia. The U.S. Justice Depart- happy to do so. The U.S. State Depart- declared a so-called independent state ment’s record of foreign agents in the ment does not challenge these fictions. in the occupied territories. Why should United States lists “Nagorno Karabakh” It is a convenient non-truth that removes Myanmar not blame Rakhine forces for and allows the so-called “Nagorno the issues from the State Department’s the killing of Rohingya and thus evade Karabakh Republic” to present itself policy agenda. In Europe, however, the international responsibility as a sover- as a foreign government and not be European Court of Human Rights has eign? It works for Russia and Armenia. listed under the Armenia filing. Sev- established that Russia exerts “effec- eral U.S. Congress members host meet- tive control” in Transnistria and that Similarly, the proxy fiction by design ings with the proxy representatives, Armenia does so in Nagorno-Karabakh. makes conflict resolution impossible. often visit the region and hold direct The EU has yet to allow these determi- Whenever there is pressure on Arme- meetings with Armenians from the nations to guide its policies, but at least nia to make concessions in its conflict occupied territory, and some even refer key institutions have begun to question with Azerbaijan, for example, Armenian to Nagorno-Karabakh as a state. Few, the fiction of the proxy regimes. leaders emphasize that negotiations if any, Western leaders point out the should really be held with the “Repub- exchange of personnel between Arme- Why do proxies matter? Are they not lic of Nagorno-Karabakh,” thus evading nia and Nagorno-Karabakh, let alone just one of the many inequities in inter- responsibility for their military occupa- impose any consequences for it. national politics that, while regrettable, tion—and escaping any consequences for are just a fact of life? There are two key it. The fact that Armenia is not willing to Through establishing proxies, occu- reasons the United States should pay even admit that its forces are actively at pying states succeed to not be labeled as more attention to this problem. First, war with Azerbaijan is not a basis for con- such. U.S. officials rarely mention Arme- the fiction of proxies has directly caused fidence-building in the peace process. nia’s occupation of Nagorno-Karabakh greater instability in areas important or Russia’s occupation of Abkhazia and to U.S. national interests. And second, The proxies also facilitate illicit activ- Transnistria the way they refer to Rus- they effectively serve to make conflict ity. With no state formally acknowledging sia’s occupation of Crimea or Israel’s resolution impossible. its control and therefore responsibility occupation of the Golan Heights. U.S. for activity in the proxy regimes, these government-funded media broadcasts The danger of the use of proxies regions have become centers of human like Radio Free Europe/Radio Liberty is that its effectiveness has made it trafficking, money laundering, and coun- use awkward wording to avoid saying increasingly popular. When weighing terfeit goods production. They are also directly that Armenia’s forces occupy options in Ukraine in 2014 and onward, likely locations of sanctions violations, Nagorno-Karabakh: The “region has Putin no doubt operated on the basis of for Russia and for Iran. been under the control of ethnic-Arme- the Russian experience in Georgia and nian forces that Azerbaijan says include Moldova: Setting up proxies in east- In the Middle East, the Trump admin- troops supplied by Armenia” and “Arme- ern Ukraine would achieve the goal istration understood that Iran’s use of nia-backed separatist forces,” ignoring of undermining Ukraine and block- proxies was helping it to undermine the fact that they are official units of the ing its move toward NATO while car- U.S. interests and the stability of a half- Armenian military and that Armenia’s rying few costs for Russia. While Putin dozen states in its neighborhood. It is press regularly reports that Armenian may have underestimated the tenac- now working to put an end to this sub- soldiers are killed in skirmishes in the ity of the U.S.-led sanctions regime, terfuge. The time has come for Washing- conflict zone. The U.S. government-spon- his calculation was essentially correct. ton to call the same bluff everywhere. Q sored broadcasts also refrain from stating Thus, because the West tolerated the that Moscow occupies regions of Ukraine proxy fiction in small states like Geor- SVANTE E. CORNELL (@SvanteCornell) is and Georgia, preferring “Moscow-backed gia and Moldova, it now has to deal the director of the Central Asia- separatists in Ukraine’s eastern regions with a threat to a much larger Euro- Caucasus Institute and co-founder of of Donetsk” and “Moscow-backed break- pean state. If that works, the strategy the Institute for Security and Develop- away Georgian regions of Abkhazia and will be used elsewhere, too. ment Policy. BRENDA SHAFFER South Ossetia.” (@ProfBShaffer) is a visiting Further, if the proxy model is allowed researcher at Georgetown University. Why this double standard? Maybe to continue, others will copy it. What is They are the authors of the report because the United States, EU, and the to stop Israel from telling the Palestin- “Occupied Elsewhere: Selective Poli- international system writ large are happy ians to talk to the “Republic of Judea cies on Occupations, Protracted Con- and Samaria” any time they have a flicts, and Territorial Disputes.” 18 SPRING 2020

WLEOVMERENS OAFS CHANGE UNLEASHING THE POWER OF WOMEN TO TRANSFORM MALE-DOMINATED INDUSTRIES A PREVIEW OF FP ANALYTICS’ SPECIAL REPORT

WOMEN AS Increasing gender diversity in traditionally male-dominated LEVERS OF CHANGE ǩǿǏȣșȠȖǩǓș ljƺǿ LjǓ ƺǿ ǓАǓljȠǩΚǓ ǾǓƺǿș Ƞȅ ƺǏǏȖǓșș ǓșljƺǹƺȠǩǿǠ challenges as well as facilitate and accelerate progress toward PREVIEW global sustainable development. Representing half of the global labor force and half of new graduates with higher education Today, a number of well-established each year, women are a major—but often overlooked or legacy industries are facing growing neglected—source of talent. Increasing women’s participation pressure to innovate and transform could not only enhance companies’ human resources, but also to remain competitive in the global boost their innovation and organizational performance. economy. Increased governmental regulation; intensified global Amid growing global advocacy movements for gender competition; and rising consumer, equality and diversity, evidence has emerged demonstrating employee, and investor concerns over șǩǠǿǩЙljƺǿȠLjȣșǩǿǓșșॹǓljȅǿȅǾǩljॹƺǿǏșȅljǩƺǹLjǓǿǓЙȠșƺșșȅljǩƺȠǓǏ the environment, human rights, and with increasing women’s participation. Crucially, however, a global health are pushing companies major knowledge gap remains as to how women are advancing to improve business practices and organizational and industrial transformation, and what can products. Failure to address and be done to unleash women’s potential as changemakers. surmount these challenges could vǩȠǦȅȣȠ ȠǦǩș ȣǿǏǓȖșȠƺǿǏǩǿǠॹ ǓАȅȖȠș Ƞȅ ǩǿljȖǓƺșǓ ǠǓǿǏǓȖ compromise these industries’ ǏǩΚǓȖșǩȠΡǾƺΡǏǓΚȅǹΚǓǩǿȠȅșȣȒǓȖЙljǩƺǹǿȣǾLjǓȖșǠƺǾǓșȠǦƺȠǟƺǩǹ survival and may even render some to tap into women’s talent and institute concrete, meaningful companies obsolete. change at scale. To address this research gap and contribute to the ongoing discourse, FP Analytics (FPA) conducted a pioneering study of fourteen legacy industries, which are among the most male- WOMENASLEVERSOFCHANGE.COM

dominated and have wide-reaching environmental, health, FP Analytics found that the and social impacts. Through data analysis of over 2,300 companies with the highest publicly listed companies around the world and more than percentage of women in 160 in-depth, one-on-one interviews and follow-up surveys, management were, on average, this study illuminates the current levels of gender inequality 47 percent more profitable in these legacy industries; examines the relationships between than those with the lowest. ǠǓǿǏǓȖǏǩΚǓȖșǩȠΡƺǿǏljȅȖȒȅȖƺȠǓЙǿƺǿljǩƺǹॹǓǿΚǩȖȅǿǾǓǿȠƺǹॹƺǿǏ șȅljǩƺǹȒǓȖǟȅȖǾƺǿljǓআǩǏǓǿȠǩЙǓșȠǦǓǾƺǿΡΛƺΡșȠǦƺȠΛȅǾǓǿljƺǿ by advancing greener production processes and advance or are advancing positive change; pinpoints factors innovating environmentally sustainable alternatives. preventing gender diversity; and highlights best practices that companies and advocates are taking to address them. Pushing their organizations to proactively address corporate social responsibility: FPA’s data analysis Across the 14 legacy industries studied, women on average found a positive correlation between gender diversity represent just over 20 percent of the employees hired by on corporate boards and companies’ performances with publicly listed companies, constitute only 18 percent of ȖǓǠƺȖǏȠȅșȅljǩƺǹȖǓșȒȅǿșǩLjǩǹǩȠΡঀvȅǾǓǿƺȖǓǩǾȒǹǓǾǓǿȠǩǿǠ executive management, and hold a mere 13 percent of board socially responsible practices within their industries seats. However, despite being substantially under-represented, by protecting safety and labor rights, integrating ΛȅǾǓǿ ȅǟ ǏǩАǓȖǓǿȠ ȅljljȣȒƺȠǩȅǿș ƺǿǏ șǓǿǩȅȖǩȠΡ ǹǓΚǓǹș ƺȖǓ șȠǩǹǹ community development into business strategies, and ƺǏΚƺǿljǩǿǠ șǩǠǿǩЙljƺǿȠॹ ȒȅșǩȠǩΚǓ ȅȖǠƺǿǩΦƺȠǩȅǿƺǹ ƺǿǏ ǩǿǏȣșȠȖΡ building local capacity and empowering women. changes by: Creating inclusive corporate and industry Contributing to profitability and cultures:vȅȖǷǟȅȖljǓǦȅǾȅǠǓǿǓǩȠΡƺǿǏǠǓǿǏǓȖেLjƺșǓǏ competitiveness: FPA analysis found that the discrimination and harassment limit the recruitment companies with the highest percentage of women and retention of women and other minority groups in in management were, on average, 47 percent more these industries. In response, women are creating more ȒȖȅЙȠƺLjǹǓȠǦƺǿȠǦȅșǓΛǩȠǦȠǦǓǹȅΛǓșȠঀvȅǾǓǿ diverse and inclusive workplaces by leveraging leadership interviewed for this study detailed how they are positions to create top-down change, and pushing ǹǓƺǏǩǿǠȠǦǓǩȖȅȖǠƺǿǩΦƺȠǩȅǿșǏȅΛǿǿǓΛȖǓΚǓǿȣǓে ljȅȖȒȅȖƺȠǓǹǓƺǏǓȖșȠȅǩǿșȠǩȠȣȠǩȅǿƺǹǩΦǓǠǓǿǏǓȖǓȕȣƺǹǩȠΡƺǿǏ generating paths, advancing innovation in inertia- inclusivity through practical policies and initiatives. prone industries, advocating for products and practices that safeguard against human exposure to harm, and Meanwhile, women are still facing a variety of barriers to increasing transparency to build stakeholder trust. entry and advancement in these industries, which limit their ȒȅȠǓǿȠǩƺǹ Ƞȅ ǏȖǩΚǓ ȅȖǠƺǿǩΦƺȠǩȅǿƺǹ ƺǿǏ ȅȒǓȖƺȠǩȅǿƺǹ ljǦƺǿǠǓșঀ Reducing environmental impacts of business vǦǩǹǓǾƺǿΡȅǟȠǦǓLjƺȖȖǩǓȖșƺȖǓljȅǾǾȅǿƺljȖȅșșƺǹǹǩǿǏȣșȠȖǩǓșॹ practices and products: Companies with greater they can be particularly severe in male-dominated legacy gender diversity on boards were found to have better environmental performance, and those with increased gender diversity over time also demonstrated higher likelihood of improvement in this area. For example, companies with improved gender diversity on boards from 2013 through 2018 were 60 percent more likely than those without it to reduce energy consumption. Mission-driven women are also ǦǓǹȒǩǿǠȠǦǓǩȖȅȖǠƺǿǩΦƺȠǩȅǿșȖǓșȒȅǿǏȠȅȖǓǠȣǹƺȠȅȖΡ pressure and societal backlash against pollution WOMENASLEVERSOFCHANGE.COM

industries. However, many leading companies are striving Connecting female professionals: 2ǿǾƺǹǓে ȠȅȖǓƺȒȠǦǓLjǓǿǓЙȠșȅǟǠǓǿǏǓȖǏǩΚǓȖșǩȠΡƺșȅȠǦǓȖșȠƺǷǓǦȅǹǏǓȖș ǏȅǾǩǿƺȠǓǏǩǿǏȣșȠȖǩǓșॹǟǓǾƺǹǓȒȖȅǟǓșșǩȅǿƺǹșƺȖǓƺȠ ƺǿǏ ƺǏΚȅljƺȠǓș ȠƺǷǓ ȠƺȖǠǓȠǓǏ ƺljȠǩȅǿș Ƞȅ ȖǓǾȅΚǓ ȠǦǓșǓ LjƺȖȖǩǓȖș ǦǩǠǦǓȖȖǩșǷȅǟǩșȅǹƺȠǩȅǿǟȖȅǾȅȠǦǓȖΛȅǾǓǿॹǩǿljǹȣǏǩǿǠ and support women’s contribution to business growth and ȒǓǓȖșƺǿǏȖȅǹǓǾȅǏǓǹșॹƺǿǏǓΠljǹȣșǩȅǿǟȖȅǾȒȖȅǟǓșșǩȅǿƺǹ ȠȖƺǿșǟȅȖǾƺȠǩȅǿॹǩǿljǹȣǏǩǿǠॸ ǿǓȠΛȅȖǷșঀvȅǾǓǿঢ়șȅȖǠƺǿǩΦƺȠǩȅǿșΛǩȠǦǩǿƺǿǏ ǓΠȠǓȖǿƺǹȠȅljȅȖȒȅȖƺȠǩȅǿșƺȖǓȒǹƺΡǩǿǠƺșǩǠǿǩЙljƺǿȠȖȅǹǓ Building the pipeline of female talent: The ǩǿșȣȒȒȅȖȠǩǿǠǟǓǾƺǹǓȒȖȅǟǓșșǩȅǿƺǹșLjΡǓΠȒƺǿǏǩǿǠ persistent gender gap in science, technology, ǿǓȠΛȅȖǷșॹǟƺljǩǹǩȠƺȠǩǿǠȠǦǓǩȖƺljljǓșșȠȅǓǏȣljƺȠǩȅǿƺǹ engineering, and mathematics (STEM) education ƺǿǏȒȖȅǟǓșșǩȅǿƺǹȖǓșȅȣȖljǓșॹƺǿǏǩǿljȖǓƺșǩǿǠȠǦǓǩȖ and negative industry reputations contribute to visibility within industries and to the public. șǩǠǿǩЙljƺǿȠȣǿǏǓȖেȖǓȒȖǓșǓǿȠƺȠǩȅǿȅǟǟǓǾƺǹǓȠƺǹǓǿȠǩǿ ȠǦǓȒȖȅǟǓșșǩȅǿƺǹȒǩȒǓǹǩǿǓșȅǟȠǦǓșǓǾƺǹǓেǏȅǾǩǿƺȠǓǏ Supporting female entrepreneurship: Female ǩǿǏȣșȠȖǩǓșঀ^ȣljljǓșșǟȣǹǩǿȠǓȖΚǓǿȠǩȅǿșॹǹǓǏLjΡǿȅǿেȒȖȅЙȠ ǓǿȠȖǓȒȖǓǿǓȣȖșǩǿǾƺǹǓেǏȅǾǩǿƺȠǓǏǩǿǏȣșȠȖǩǓșșȠȖȣǠǠǹǓॹ ȅȖǠƺǿǩΦƺȠǩȅǿșƺǿǏǠȖƺșșȖȅȅȠșǿǓȠΛȅȖǷșȅǟΛȅǾǓǿॹƺȖǓ even more so than in other business ecosystems, to ȖǓƺljǦǩǿǠȅȣȠȠȅΛȅǾǓǿƺȠƺǹǹșȠƺǠǓșȅǟȠǦǓǩȖljƺȖǓǓȖșॹ ƺljljǓșșǟȣǿǏǩǿǠƺǿǏLjȣǩǹǏȠǦǓǩȖLjȣșǩǿǓșșljƺȒƺljǩȠΡঀ providing education, training, and job opportunities, Public and private organizations are stepping ƺǿǏǩǿljȖǓƺșǩǿǠȠǦǓǩȖǟƺǾǩǹǩƺȖǩȠΡΛǩȠǦǩǿǏȣșȠȖǩǓșƺǿǏ ȣȒǓА ȅȖȠșȠȅșȣȒȒȅȖȠȠǦǓǾॹǩǿljǹȣǏǩǿǠȠǦȖȅȣǠǦ occupations. Additionally, companies are implementing ǠǓǿǏǓȖেǹǓǿșǩǿΚǓșȠǩǿǠƺǿǏLjȣșǩǿǓșșǩǿljȣLjƺȠȅȖșƺǿǏ inclusive hiring practices in order to proactively accelerator programs, but more needs to be done. increase gender diversity within their organizations. 'ƺǩǹȣȖǓȠȅǩǿljȖǓƺșǓȠǦǓȖǓȒȖǓșǓǿȠƺȠǩȅǿȅǟΛȅǾǓǿƺljȖȅșșȠǦǓșǓ Creating inclusive workplaces: (ǓǿǏǓȖেLjƺșǓǏ ǾƺǹǓেǏȅǾǩǿƺȠǓǏॹǹǓǠƺljΡǩǿǏȣșȠȖǩǓșΛǩǹǹǹǩǾǩȠȠǦǓǩȖȒȅȠǓǿȠǩƺǹȠȅ ǏǩșljȖǩǾǩǿƺȠǩȅǿƺǿǏǦƺȖƺșșǾǓǿȠॹǹƺljǷȅǟșȣȒȒȅȖȠǩΚǓ ǩǿǿȅΚƺȠǓƺǿǏȠȖƺǿșǟȅȖǾǟȅȖȒȅșǩȠǩΚǓǠǹȅLjƺǹǩǾȒƺljȠșƺǿǏȠȅȖǓƺȒ ȒȅǹǩljǩǓșƺǿǏǟƺljǩǹǩȠǩǓșॹƺǿǏǹƺljǷȅǟǟǓǾƺǹǓȖȅǹǓǾȅǏǓǹș ȠǦǓЙǿƺǿljǩƺǹƺǿǏȅȖǠƺǿǩΦƺȠǩȅǿƺǹǏǩΚǩǏǓǿǏșȅǟƺǠǓǿǏǓȖেǏǩΚǓȖșǓ represent three main barriers to success that can drive ΛȅȖǷǟȅȖljǓঀ EǓƺǿǩǿǠǟȣǹ ȒȖȅǠȖǓșș Λǩǹǹ ȖǓȕȣǩȖǓ ƺ ljȅǿljǓȖȠǓǏ ΛȅǾǓǿȅȣȠȅǟȠǦǓΛȅȖǷȒǹƺljǓঀАǓljȠǩΚǓȒȖƺljȠǩljǓșȠȅljȖǓƺȠǓ ǓА ȅȖȠ ǟȖȅǾ ƺ ΚƺȖǩǓȠΡ ȅǟ șȠƺǷǓǦȅǹǏǓȖșॹ ǩǿljǹȣǏǩǿǠ ȒȅǹǩljΡǾƺǷǓȖșॹ ǩǿljǹȣșǩΚǓΛȅȖǷȒǹƺljǓșॹǩǿljǹȣǏǩǿǠȖǓǾȅΚǩǿǠǠǓǿǏǓȖেLjƺșǓǏ companies, investors, industry associations, and NGOs. It is pay gaps and providing mentorship and sponsorship ȅǿǹΡ ȠǦȖȅȣǠǦ ȠǦǓ ljȅǿljȣȖȖǓǿȠ ƺǿǏ ljȅǹǹƺLjȅȖƺȠǩΚǓ ΛȅȖǷ ȅǟ ȠǦǓșǓ ȒȖȅǠȖƺǾșǟȅȖΛȅǾǓǿॹƺȖǓǓǾǓȖǠǩǿǠǟȖȅǾljȅǾȒƺǿǩǓș ƺljȠȅȖșȠǦƺȠǠǓǿǏǓȖǓȕȣƺǹǩȠΡƺǿǏȠǦǓƺșșȅljǩƺȠǓǏLjǓǿǓЙȠșljƺǿLjǓ ȠǦƺȠƺȖǓljȅǾǾǩȠȠǓǏȠȅǏǩΚǓȖșǩȠΡǟȖȅǾȠǦǓȠȅȒেǏȅΛǿॹ achieved. This study sheds new light on the concrete actions ƺǿǏƺȖǓȠƺǷǩǿǠƺǦȅǹǩșȠǩljƺȒȒȖȅƺljǦȠȅΛȅȖǷȒǹƺljǓǠǓǿǏǓȖ ǓƺljǦȅǟȠǦǓșǓǠȖȅȣȒșljƺǿȠƺǷǓȠȅǾǓƺǿǩǿǠǟȣǹǹΡƺljljǓǹǓȖƺȠǓljǦƺǿǠǓঀ equality with clear targets and explicit roadmaps. WLCEOVHMEARENNSGOAEFS Learn more about how READ MORE UNLEASHING ATLHEE-DPOOMWIENRATOEFDWINODMUESNTTROIE S FP Analytics can enable your AND DOWNLOAD RANSFORM M organization to act strategically THE FULL REPORT AT T through data-driven insights at ForeignPolicy.com/FP-Analytics WOMENASLEVERSOFCHANGE.COM This report was produced by FP Analytics with support from the Foundation for a Smoke-Free World. FP Analytics is the independent research division of Foreign Policy. The content of this report does not represent the views of the editors of Foreign Policy magazine, ForeignPolicy.com, or any other FP publication.

WILL THE CORONAVIRUS KILL GLOBALIZATION? The pandemic is legitimizing nationalists and turning their xenophobia into policy. by PHILIPPE LEGRAIN Illustration by JUSTIN METZ FOREIGNPOLICY.COM 23

U NTIL RECENTLY, MOST POLICYMAKERS AND INVESTORS particularly at risk. The cost advantage of pro- ducing in China has eroded in recent years as the remained complacent about the potential economic impact country has become richer and wages have soared. The risks were highlighted by Trump’s imposi- of the coronavirus crisis. Until late February, most wrongly tion of punitive tariffs on imports from China in 2018 and 2019, leading businesses to scramble assumed that it would have only a brief, limited, China- for alternatives. specific impact. Now they realize that it is generating a global While the January deal marked a fragile truce in the U.S.-China trade war, the perils of pro- shock, which may be sharp—but which most still expect to be ducing in China remain; both Democrats and Republicans increasingly view China as a long- short. But what if the economic disruption has an enduring term strategic rival that needs to be contained. And no sooner had the trade war abated than the impact? Could the coronavirus pandemic even be the nail coronavirus intervened. The extended shutdown of many Chinese factories has pushed exports in the coffin for the current era of globalization? down 17 percent in the first two months of the year compared with a year earlier, and it has dis- The coronavirus crisis has highlighted the downsides of rupted the production of European cars, iPhones, and other consumer goods. extensive international integration while fanning fears of Inertia is a powerful thing. And there are still foreigners and providing legitimacy for national restrictions many advantages to producing in China, such as scale and efficient logistics. But the coronavirus on global trade and flows of people. crisis could mark a tipping point that prompts many businesses to remodel their supply chains All sorts of businesses have suddenly realized the risks and invest in more resilient and often more local patterns of production. One option is to shift and of relying on complex global supply chains that are specific diversify operations across other Asian econo- mies, such as Vietnam or Indonesia. Another is not just to China—but to particular places such as Wuhan, to shorten supply chains, with U.S. companies moving production to Mexico and European ones the epicenter of the pandemic. Chinese people—and now to Eastern Europe or Turkey. A third is to invest in robots and 3D printing within advanced econ- Italians, Iranians, Koreans, and others—have become widely omies, producing locally closer to consumers. seen as vectors of disease; senior Republican politicians in A second enduring consequence of the coro- navirus crisis may be reduced business travel. the United States have even labeled the disease the “Chi- Technology gurus have long argued that videocon- ferencing and chat apps would eliminate the need nese coronavirus.” Meanwhile, governments of all stripes for most business travel and allow many people to work from home more. Yet until the coronavi- have rushed to impose travel bans, additional visa require- rus crisis, business travel had continued growing, seemingly inexorably. Now, whether because of ments, and export restrictions. The travel ban on most government bans, business decisions, or individ- ual caution, all but the most essential international arrivals from Europe that U.S. President Donald Trump travel has been canceled, and those who can work announced on March 11 is particularly broad but far from from home are increasingly staying put. Thanks to this forced grounding, busi- unique. All of this is making economies more national and nesses may discover that while face-to-face politics more nationalistic. Much of this disruption may be temporary. But the corona- virus crisis is likely to have a lasting impact, especially when it reinforces other trends that are already undermining glo- balization. It may deal a blow to fragmented international supply chains, reduce the hypermobility of global business travelers, and provide political fodder for nationalists who favor greater protectionism and immigration controls. The complex China-centered global supply chains on which so many Western companies have come to rely are THE COMPLEX CHINA CENTERED GLOBAL SUPPLY CHAINS ON WHICH SO MANY WESTERN COMPANIES HAVE COME TO RELY ARE PARTICULARLY AT RISK. 24 SPRING 2020

meetings are sometimes neces- MANY OSTENSIBLY LIBERAL GOVERNMENTS HAVE sary, technological alternatives SLAPPED RESTRICTIONS ON TRAVEL AND TRADE are often just fine—and also much less costly, time-consuming, and det- MORE DRACONIAN THAN EVEN TRUMP DARED rimental to family life. And at a time of IMPOSE AT THE HEIGHT OF HIS CONFLICT increasing concern about the impact of air- WITH CHINA LAST YEAR. plane emissions on the climate, and with many businesses keen to highlight their commitment Italy’s urgent appeal for medical assistance—though China did. to environmental awareness and sustainability, there is both an environmental reason and an Granted, the coronavirus crisis has also exposed the hol- economic one why business travel may decline. lowness of nativists’ assertions that their anti-immigration Perhaps most significantly, the coronavirus cri- sis plays into the hands of nationalists who favor and protectionist policies make people safer. Even though greater immigration controls and protectionism. the nationalist coalition that runs Lombardy’s provincial The speed and scope of the virus’s spread across the globe have spotlighted people’s vulnerability government is led by Matteo Salvini’s far-right League party, to seemingly distant foreign threats. The corona- virus has not just spread to global hubs such as it has not been successful in protecting the region from the London and New York. It has also leaped directly to provincial cities such as Daegu, South Korea’s coronavirus. Nor, for all his desire to decouple from China, fourth-largest city; nursing homes in the suburbs of Seattle; and even small towns such as Castigli- has Trump been able to prevent the coronavirus from reach- one d’Adda (population: 4,600)—one of the 10 towns in Lombardy first quarantined by the Ital- ing the United States. ian government in February. Trump himself may yet pay a price in November’s presiden- While internationally minded leaders have mouthed fine words about the need for cross-border tial election for his insouciance and inept mismanagement cooperation in the face of an unprecedented com- mon threat, their actions have often belied this. of a public health crisis. But in general, the coronavirus crisis Many ostensibly liberal governments have slapped restrictions on travel and trade more draconian is a political gift for nativist nationalists and protectionists. than even Trump dared impose at the height of his conflict with China last year. It has heightened perceptions that foreigners are a threat. Jacinda Ardern, New Zealand’s leftist prime It underscores that countries in crisis can’t always count minister, was quick to bar travelers from China who are not New Zealand citizens from entering on their neighbors and close allies for help. And with India the country. While such blanket bans may or may not be warranted on public health grounds, they limiting exports of life-saving drugs from its vast pharma- provide greater legitimacy for those who view clos- ing the border as the solution to every ill. ceutical sector, it provides ammunition to those who wish Even within the European Union’s ostensibly bar- to localize production of all sorts of products on national rier-free single market, France and Germany have banned the export of face masks; so much for the security grounds. More broadly, it may strengthen those liberal internationalism and commitment to the EU of President Emmanuel Macron and Chancellor who believe in strong government, prioritizing societal Angela Merkel. More shocking still is that none of the 26 other EU governments responded rapidly to needs over individual freedom, and national action over international cooperation. As a result, the coronavirus crisis threatens to usher in a less globalized world. Once the pandemic and panic abate, those who believe that openness to people and products from around the world is generally a good thing will need to make the case for it in fresh and persuasive ways. Q PHILIPPE LEGRAIN (@plegrain) is the founder of the inter- national think tank OPEN, a senior visiting fellow at the London School of Economics’ European Institute, and the author of Immigrants: Your Country Needs Them. FOREIGNPOLICY.COM 25

THE UGLY END OF CHIMERICA The coronavirus pandemic has turned a conscious uncoupling into a messy breakup. by ORVILLE SCHELL WASHINGTON’S POLICY OF ENGAGEMENT TOWARD BEIJING has been embraced, with a few bumps along the way, by eight successive U.S. presidents—an incredible record of conti- nuity. The approach was born in 1972, when the fervently anti-communist President Richard Nixon and his national security advisor, Henry Kissinger, set off for Beijing to make a game-changing proposal: The United States and China should end their decades-long hostility by allying against the Soviet Union. As Nixon declared to Chinese Premier Zhou Enlai, whose hand former U.S. Secretary of State John Foster Dulles had refused to shake at a Geneva conference in 1954, “If our two people are enemies, the future of this world we share together is dark indeed.” He went on to insist that the two countries had “common interests” that tran- scended their differences and that “while we cannot close the gulf between us, we can try to bridge it so that we may be able to talk across it.” He ended grandiloquently: “The world watches … to see what we will do.” The world is watching again, but most are expecting a very different outcome. Two giant powers that once seemed to be moving closer together are now tearing themselves away from each other—propelled by both politics and the impact of the global spread of the coronavirus. Decoupling was already underway, pushed by both Chinese President Xi Jinping’s rigid ideology and U.S. President Donald Trump’s nationalism. But as each country tries to blame the other for 26 SPRING 2020 Illustration by JUSTIN METZ

the coronavirus crisis, as the world becomes starkly aware of supply chains and their vulnerability, and as the global order shifts tectonically, China and the United States are moving further and further apart. UNTIL TRUMP CAME TO POWER, the world took Washington’s lead by expanding cooperation with China, especially in the years following Mao Zedong’s death in 1976, when Deng Xiaoping committed his country to a bold new agenda of “reform and opening to the outside world.” Advocates of engagement hoped that this new policy would goad China into aligning itself with the existing liberal democratic rules-based world order so that over time it would also become more conver- gent with the interests of the United States. Convinced of the seductive power of democracy and lulled by the promise of a seemingly ineluctable historical arc that bent toward greater openness, freedom, and justice, Amer- icans tended to view the prospect of such convergence as almost inevitable. After all, if China wanted to participate fully in the global marketplace, it had no choice but to play by the existing rules—and after the end of the Cold War, that meant America’s rules. So certain did the likelihood of greater convergence seem that there was even talk of a so-called “Chimerica” or forming a “Group of Two.” These promises of a less contentious future allowed differences between China’s values and political systems and those of the dem- ocratic world to be downplayed. Proponents of engagement with China emphasized its future evolution under the tonic effects of its putative economic reforms and cautioned that a tougher U.S. policy would only harm the country’s reformers. A remarkable consensus began to form on the topic of U.S.- China cooperation, one that transcended ideological boundar- ies within the United States. In 1979, President Jimmy Carter, described as America’s first “human rights president,” ignored China’s manifold rights abuses and not only welcomed Deng to the White House but restored formal diplomatic relations with great fanfare. In 1989, President George H.W. Bush bent over backward to preserve friendly relations after the Tianan- men Square massacre by twice dispatching National Security Advisor Brent Scowcroft to Beijing to beseech Deng not to let the hard-won U.S.-China relationship languish. When the Soviet Union imploded in 1991 and engagement needed another rationale, President Bill Clinton galloped into the breech. After promising not to “coddle tyrants, from FOREIGNPOLICY.COM 27

Baghdad to Beijing,” and chastising his predecessor for repentant China produced a host of reckless pol- conducting “business as usual with those who murdered icies: He occupied and then militarized the South freedom in Tiananmen Square,” he ended up embracing China Sea; turned a generation of Hong Kongers Chinese President Jiang Zemin, lobbying to extend “most against Beijing by gratuitously eroding the high favored nation” status to Beijing, and even helping to usher it level of autonomy they had been promised in into the World Trade Organization. Clinton was the first U.S. 1997; antagonized Japan over the Diaoyu/Senkaku president to name this new policy “comprehensive engage- Islands, which the country had long administered ment.” His hope was that once China got the needle of cap- in the East China Sea; rattled sabers at Taiwan italism in its arm, democracy would follow. so artlessly he alienated even the once reliably pro-Beijing Kuomintang party; and essentially President Barack Obama continued to pursue this prom- turned Xinjiang into a giant detention camp. ise, trying to breathe new life into the relationship by hav- ing Secretary of State Hillary Clinton reassure Beijing that The result has been not only tenser diplo- his administration would not allow sensitive questions like matic relations with Washington, a trade war, human rights to interfere with cooperation on climate change and a decoupling of elements of the two powers’ and economic crisis. economies but a dangerous fraying of the fabric of transnational civil society cooperation and even a U.S. corporations and consumers both profited from these disruption of cultural exchanges. Put together, Xi policies, even as the country was forced to compromise some provided Washington with all the ammunition it of its democratic principles and tolerate a growing trade defi- needed to reformulate its once forgiving stance. cit. But China derived the largest benefit: Engagement neu- The result has been a far more unaccommodat- tralized the United States as an adversary at a time when it ing official posture supported by one of the most was most beneficial to Beijing. During those 30-plus years, unanticipated coalitions in U.S. politics: a united China emerged out of its revolutionary cocoon, developed congressional front of Republicans and Democrats its fragile economy, laid down its modern infrastructure, who agree on little else. Without the catalytic ele- and became an important part of global institutions. In a ment of Chinese political reform still in the mix, it sheltered environment, one in which it was relieved of the is hard to imagine a Sino-American convergence threat of war with another big power or even serious hostil- regaining credibility anytime soon in the United ity, China not only survived but thrived. States. And with divergence replacing conver- gence, engagement makes no sense. WITH XI’S 2012 ENTHRONEMENT, however, the chemistry of this critical bilateral relationship began to change. Xi replaced his But what was Xi’s logic in implementing pol- predecessor’s slogan of “peaceful rise” with his more bellig- icies that rendered engagement so unworkable erent “China Dream” and “China rejuvenation.” These ideas when they were working so well? What moved laid out a grand vision of a far more assertive and influential him to so alienate the United States when he did Chinese government at home and abroad. But Xi’s implacable not need to? There are, of course, myriad specific assertiveness in foreign policy and his expanding domestic rationales, but Xi has never articulated an over- authoritarianism soon began alienating the United States arching explanation that speaks to China’s actual as well as many other lesser trade partners, which found national self-interest. The most plausible might be themselves caught in increasingly unequal, and sometimes the simplest: Muscular nationalism and overt pro- even abusive, relationships they could not afford to vacate. jections of power often play well at home among those ginned up on national pride. Xi’s ambitious new vision of a more aggressive and less But such indulgences are a luxury that can end CHINA DERIVED THE LARGEST BENEFIT: up being costly in times of crisis. And the unex- ENGAGEMENT NEUTRALIZED THE pected arrival of the coronavirus pandemic has UNITED STATES AS AN ADVERSARY AT A TIME been just such a moment. Xi’s initial inability to WHEN IT WAS MOST BENEFICIAL TO BEIJING. manage the crisis has undermined both his air of personal invincibility and the most import- 28 SPRING 2020 ant wellspring of the Chinese Communist Party’s political legitimacy—namely, economic growth. The initial numbers out of China for the Jan- uary-February period show a 20.5 percent drop in consumption and a 13.5 percent drop in manufacturing year on year.

Even as the country struggles back XI’S INITIAL INABILITY TO MANAGE THE CRISIS to its feet, markets in the rest of the HAS UNDERMINED BOTH HIS AIR OF PERSONAL world are going into lockdown. INVINCIBILITY AND THE MOST IMPORTANT DESPITE CHINESE EFFORTS TO RECLAIM THE CRISIS WELLSPRING OF THE CHINESE COMMUNIST as a global propaganda victory—aided by the PARTY’S POLITICAL LEGITIMACY botched handling of the outbreak in the United NAMELY, ECONOMIC GROWTH. States—the domestic blow dealt may be a mortal one, not to the party-state regime but to Xi himself, contacts and possibilities have been cut off. The U.S.-China who has staked his credibility on the handling of the crisis. Unfortunately, the pandemic may also relationship has found itself left floating in a gravity-free envi- end up being the final coup de grâce of the rela- tively stable relationship China once enjoyed with ronment in which both Xi and Trump, because of their mis- the United States. handling of the viral challenge, are struggling to find their feet. The Obama administration had already started reappraising the wisdom of trying to unilaterally To be sure, if the virus is temporarily contained in China, keep engagement functional when along came Trump and his posse of China hawks (such as Peter as recent statistics on new cases seem to suggest, Xi may Navarro, Steve Bannon, and Michael Pillsbury) who had long warned that an increasingly aggres- claim victory at home. And if U.S. efforts to control the out- sive, autocratic, and well-armed China was both inevitable and a threat to U.S. national interests. break under Trump’s leadership continue to flounder, it will Then, just as a debate over decoupling from only add to Xi’s luster. But Xi has still suffered major repu- China’s supply chains got rolling, the coronavi- rus reared its head. As airlines canceled flights, tational damage, especially facing criticism for suppressing trade shows were postponed, tourism screeched to a halt, investment flows dried up, exports and the alarms raised by medical professionals in China that imports plummeted, and high-tech exchanges were truncated, the debate was ripped out of the could have prevented the virus from spreading. Nor does hands of policy wonks and thrust into the hands of the gods. By decoupling the United States and it help him that U.S. leaders from Trump to Secretary of China almost overnight, the pandemic has mooted the debate and provided Trump and his hawks State Mike Pompeo are determined to name it the “Chinese with exactly the kind of cosmic sanction they needed to put a final stake through the heart of virus” to put responsibility where they say it belongs—and engagement—and perhaps even the whole notion of globalization as a positive force. to distract from their own failures. Yet most Americans continue to want global- Win or lose, however, the pandemic has given Xi an excuse ization of some form—but perhaps with China playing far less of a dominant role. Now that U.S. to both road-test and extend myriad new mechanisms of businesses have turned skeptical of the old style of engagement, that policy has lost its last boost- party and state control. New color-coded apps that desig- ers. Even before the coronavirus crisis, compa- nies made more aware of the risk of having all nate who can move where, temperature-checking police their eggs in one basket by the trade war were diversifying manufacturing away from China and scanners, new kinds of mass mobilization tactics, and digi- toward other developing economies like Vietnam. The pandemic may only accelerate that process. tal censorship tools will allow the state to intrude even fur- The U.S. military, churches, media, think tanks, ther into Chinese life in the future. civil society, and even academia have since seen a sudden dearth of engagement advocates as old If the battle against the virus spins out of control again as he rushes workers back to assembly lines to rescue China’s economy, Xi will most certainly claim that the threats to the country’s survival and nationhood have now escalated to such a high threat level that an even more centralized, pow- erful, intolerant, and controlling government is the only way forward. Whatever happens to China’s epidemic, Beijing is likely to emerge from its viral trauma more autocratic, more pugnacious, and more inclined toward conflict with the lib- eral democratic rules-based order that many Americans still wistfully imagine their country commands. Q ORVILLE SCHELL is the Arthur Ross director of Asia Society’s Center on U.S.-China Relations. FOREIGNPOLICY.COM 29

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HOW TO SAVE by RAGHURAM GLOBAL CAPITALISM R A JA N FROM ITSELF Decentralizing decision-making can help left-behind regions get back on track. Illustration by BEN FEARNLEY FOREIGNPOLICY.COM 31

A S NEW TECHNOLOGIES INTEGRATE MARKETS across the world, has arrived suggest the world will require global cooperation to a degree it has never seen before. making them more competitive and more demanding, small The further closing of the world would make this manufacturing towns in industrial countries are bearing kind of cooperation virtually impossible. Fortu- the brunt of the resulting economic disruption. They have nately, there are ways to restore faith in the liberal been devastated as big employers move factories overseas open market system that has brought the world so or automate operations and reduce workforces. While this much prosperity—and many of the answers lie in trend started decades ago, the volume and speed of expan- reviving the very communities that have suffered sion of Chinese manufacturing and exports in the past 20 under modern globalization. years have significantly accelerated the process. Left-behind communities face a Catch-22. New Historically, markets have created new jobs as they destroyed jobs do not come to these areas because people do old ones. Unfortunately, the new jobs today are typically emerg- not have the required skills—and there is wide- ing in the service sectors of flourishing megacities like London spread poverty, substance abuse, and sometimes and New York, not in the small single-employer-dominated crime. Continuing economic devastation means manufacturing towns where job losses have been most acute. these areas lack good local schools and training And even among these jobs, the ones paying good salaries institutions that could help people get skills. These require higher education or cutting-edge skills. Naturally, those communities therefore need to work on a variety who have slipped from comfortable middle-class employment of fronts to revive themselves. Top-down solutions into the ranks of the precariat are angry, focusing their ire on devised in remote capitals do little, however, to an economic system they think has pummeled them unfairly. tackle the impediments to economic and social recovery. Locals typically know far more about In response, politicians across the political spectrum have what needs to be fixed—and they must be empow- proposed barriers to immigration, trade, and even doing ered to help their communities pull themselves up. business with certain foreign companies. A clamor for deglo- balization seems to have begun. And as a result, the world is TECHNOLOGICAL CHANGE IS DISRUPTIVE, not just becoming less open. Yet none of these responses will help because it has destroyed old jobs but because it against the inexorable march of automation. alters significantly the capabilities needed for new ones. A high school diploma is no longer enough Indeed, technologies already exist to replace even the low- for a good job. Advanced training in science, tech- skill service jobs that have emerged in urban areas, such as nology, engineering, math, or highly developed driving for Uber or putting together packages for Amazon with interpersonal skills have become necessary to an earpiece telling you which shelf to go to next. Border walls succeed in today’s world. do little when they are being undermined from the inside. In her book Janesville: An American Story, Amy Moreover, aging industrial countries will need immigrants Goldstein describes how some of the workers laid to supplement the shrinking workforce and to help pay for off when the General Motors plant in Janesville, retiree entitlements. At present, there are three workers in Wisconsin, closed in 2009 did not even know how Germany for every person over the age of 65. By 2035, the to use computers. These workers clearly needed ratio will be 1-to-1, according to a 2018 study by the Bertels- an enormous amount of retraining to get similarly mann Foundation. Without reforms, spending on older peo- compensated jobs elsewhere. Older unemployed ple will push the country’s public debt to over 200 percent of workers, held back by their more dated knowl- GDP by 2060. The foundation also found in a separate study edge and tied down by family obligations, have in 2019 that Germany will need 260,000 new immigrants per always found it difficult to retool. Even younger year to meet its labor needs. workers find it difficult to upskill when the entire basis of economic activity disappears from their Aging countries will also need to export goods and services communities. Local institutions that can impart to younger populations elsewhere as their domestic demand these skills are also dragged down as a community shrinks. Allowing trade relationships to deteriorate, as some experiences job losses: Unemployment is just the politicians advocate, is a form of self-harm whose effects beginning of a vicious cycle of decline. will be even more pronounced in the future. And imposing bans on foreign corporations will lead to the dismantling of global supply chains, making products costlier everywhere. Even as countries turn inward, the ongoing coronavirus pandemic and the very visible signs that climate change 32 SPRING 2020

In a 2017 study of areas in the United States that LOCALS TYPICALLY KNOW FAR MORE ABOUT suffered large trade-related unemployment, pri- WHAT NEEDS TO BE FIXED AND THEY marily in states in the Midwest and Southeast, the MUST BE EMPOWERED TO HELP economists David Autor, David Dorn, and Gor- THEIR COMMUNITIES PULL don Hanson found that as economic opportunity THEMSELVES UP. declines, social disintegration increases. Unem- ployed workers are unattractive long-term part- paid manufacturing jobs as long as they can. And when there ners; consequently, there are fewer marriages, are no jobs available, they drop out of the labor force entirely. more divorces, and more single-parent families. Broken families, hopelessness, loneliness, and In the past, the United States was famous for easy mobility. the associated despair often lead to alcoholism “Go west, young man,” the New-York Tribune editor Horace and drugs and sometimes crime. The opioid crisis Greeley supposedly exhorted when the West was still unset- was not caused solely by greedy doctors eager to tled. Later, the Great Migration of African Americans out of overprescribe; economic decline contributed, too. the South between the 1910s and 1960s, and its more mod- erate reversal after the civil rights movement, attested to the A declining community is unable to support continuing importance of mobility in improving the lives of local institutions like schools and community Americans. Most recently, mobility has been in decline. Cen- colleges. This is not just because of a shrinking sus data suggests that even as late as 2000, 1 in 10 Americans tax base but because parents in stressed families made a significant move (out of their county) over the previ- cannot provide their children with a good learning ous five years. By 2010, only 1 in 15 were doing so. environment at home, let alone help out in school activities, while the few distressed firms left in the Ambitious progressive solutions—for example, free col- community have little ability to provide mentor- lege education for all—are expensive and largely ineffective ship, financial support, or apprenticeships to stu- in helping people in these left-behind places. How do you get dents attending community colleges. into college when you are competing with middle-class kids who went to good public schools in prosperous cities? And As institutions deteriorate in quality, they can- even if you are accepted, how do you benefit from college when not help unemployed workers retool—a necessity if your schooling has been grossly inadequate? Even today, far new jobs are to be attracted to the community or if too many students drop out of college, not just because of the the workers are to find jobs elsewhere. Worse, with- high fees but because they are unprepared for it. out good schools, children have bleak prospects in a world where education has become so important. In a world with limited mobility, policies ought to be directed at People who have the means to go leave for thriving reversing these vicious cycles, resurrecting communities wher- areas elsewhere, taking their children with them. ever possible so that there are more jobs there and capability- This secession of the successful leaves the rest fur- creating institutions like schools and community colleges ther mired in poverty and unemployment. thrive again. Fortunately, technological change, which created the imbalances in the first place, can be instrumental in the A similar exodus has occurred in northern resurrection, helping to build a more sustainable capitalism. England, eastern Germany, and parts of Spain— places that once had an industrial base centered LOCATION BASED POLICIES such as the U.S. government’s “oppor- on small towns. tunity zone” tax incentives for job-creating investment attempt to address the problem of stressed communities Workers in stressed communities could, in theory, more directly. However, such centrally determined proposals move to richer cities to retrain and get good jobs. can flounder on the hard-to-map shoals of local conditions. The reason many do not is because those places are expensive to live in and congestion is making them Amazon’s decision to build a second headquarters across costlier (and environmentally less viable). Going the river from midtown Manhattan in Long Island City, back to school is challenging in the best of envi- Queens, promising 25,000 jobs paying an annual average ronments. In addition, if a worker has to move for a few years to an expensive city to get that school- FOREIGNPOLICY.COM 33 ing, earning no income while supporting a family, it becomes more daunting still. So, many workers seem to cling on to nearby and progressively less well-

salary of at least $150,000, seemed the ideal outcome of such and regional governments in setting indirect taxes. tax incentives. Yet local politicians rejected it. Too few in In turn, as globalization has accelerated in the community may have had the skills to get the jobs, and the influx of skilled outsiders could have raised rents and recent decades, national governments across property taxes, pushing out longtime residents. Clearly, a the world have given up some of their powers to proposal better tailored to the community’s needs could international bodies and treaties. For example, have persuaded it, but because the decision was negotiated the European Commission limits the regulatory by high-ranking company and city officials without really discretion of individual member states so that taking the community into confidence, these alternatives firms face similar harmonized regulatory envi- were left unexplored. Community leaders could only pro- ronments across the union. test against the decision, not shape it. While some harmonization is beneficial, cen- At one level, this is not surprising. As markets have inte- tralization—indeed globalization—of governance grated, first spanning regions, then countries, and then the has obtained a momentum of its own. National world, the power to make decisions has also moved steadily and international administrators, egged on by away from local political entities and toward national and inter- powerful large firms that want seamless borders, national structures. Take, for instance, support for the unem- find restraint difficult. Bank regulators meet in ployed. In many industrial countries in the 19th century, this Basel, Switzerland, to set capital requirements used to be provided by the local parish. Community solidarity, and other regulations for the entire globe, argu- coupled with local knowledge and information, made it work— ing that there would otherwise be a regulatory the community helped families that had fallen on hard times. race to the bottom. However, as markets became more integrated and reces- The recently negotiated United States-Mexico- sions became deeper and more long-lasting, communities Canada Agreement (the successor to the North were overwhelmed. Only regional or national governments American Free Trade Agreement) mandates that had the resources to provide support. Naturally, if they were Mexico ensure internet companies are not liable called on to provide support periodically, they wanted the for content their users post even though this is power to set the rules and even take over the entire function. still being democratically debated in the United Today, across the industrial world, unemployment insurance is States. Top-down imposition is even more com- typically provided by the central or regional government, with mon within countries. If a regional or national gov- local community-based support, including from churches and ernment supplements a community’s resources, charities, kicking in only when official support is exhausted. its administrators want to impose standards so that their support is not wasted. Yet these often Similarly, as interregional trade increased within a coun- leave little agency for community members and try, firms pressed for seamless regional borders and com- are insensitive to community views or needs. The mon national regulation and taxation—after all, a financial desire to constrain localities is especially strong in firm will find it harder to manage if each locality it operates countries where administrators believe that left in regulates compensation, liquidity, and minimum cap- to their own devices, communities will invariably ital differently, while an automaker would want common become corrupt, sectarian, or reactionary. nationwide emission requirements. The net effect has been a steady disempower- Through much of the 20th century, the governments of ment of local, and even national, government. industrial countries centralized power. Emerging markets are And with local governments disempowered, it is now doing so too, with India recently enacting a national goods hardly surprising that voters have directed their and services tax that eliminates the discretion of municipalities anger at distant authorities and embraced popu- lists closer to home. The Brexit slogan that reso- IF GOVERNMENTS WANT TO nated in the small devastated towns of northern PRESERVE THE GLOBAL INTEGRATION England was “Take back control!”—not just from OF MARKETS, THEY MAY HAVE TO GIVE UP Brussels but also from London. It was a clear indi- THE HYPERINTEGRATION OF GOVERNANCE. cation that people wanted more democratic con- trol over their futures as they reacted to the market 34 SPRING 2020 forces pummeling them. If governments want to preserve the global integration of markets, they may have to give up the hyperintegration of gov- ernance. They must be much more

careful about new international agreements that DECISIONS SHOULD BE TAKEN BY bind countries unnecessarily, especially if they go THE LOWEST LEVEL CAPABLE OF way beyond low tariffs. The goal should be to bring more powers back to the country level, provided TAKING THEM EFFECTIVELY. global markets remain open. book The Passion Economy: The New Rules for Thriving in Yet the devolution of power cannot stop at the the Twenty-First Century, enabling specialized potential national level. Capitals must devolve power and buyers to find them. For instance, the Wengerds, an Amish funding further to the local level so that communi- family in Ohio, have built a flourishing business selling high- ties can reinstill a sense of engagement and iden- tech horse-drawn farm equipment—a niche market if ever tity in their members. This is, of course, not to say there was one. The buyers? Other Amish farms across the that global climate change should be tackled only United States, of course. at the community level (though communities can do their bit) or that countries should pass on build- Such enterprises need continued easy access to national ing national infrastructure. or global networks. Online platforms like Amazon and Ali- baba provide such access today but are also gaining in mar- Delegation should be guided by the principle of ket power. Clearly, small entrepreneurs can share some of subsidiarity, which requires decisions to be taken their profits with the platform, but when platforms quickly by the lowest level capable of taking them effec- replicate a successful seller’s products and sell them under tively. So, for instance, communities will clearly their own brand, while charging high fees off of others, they not decide their own auto emission standards. That make it much less attractive for such enterprises to start up. should be a national decision. But what businesses To make the platform space more competitive and friendly will be licensed to operate locally and choices over to small entrepreneurs, antitrust authorities should be vig- minimum wages, qualifications, operating hours, ilant. Instead of using old-style remedies like breaking up and benefits (obviously all above the national min- platforms, which will reduce access to global markets, they imums) should be a community decision. should instead preserve these networks but make access easier, both for clients and for competitors. Switzerland is a small country with extreme pop- ulation diversity. (It has four national languages, For instance, mandating interoperability across networks— and 25 percent of the population is foreign.) How- in the same way as a phone on a T-Mobile network can reach ever, it functions efficiently precisely because so a customer on the AT&T network—will allow small networks many decisions are decentralized to its 26 cantons to challenge large ones, keeping them competitive. Faced and further to the thousands of municipalities. Sub- with breakup or interoperability, giants like Amazon might sidiarity guides education decisions; the federal gov- well choose the latter. Allowing clients to own their data and ernment is responsible for institutes of technology, to share them with other platforms—as the European Union the cantons for high schools, and the municipalities is in the process of doing in financial services—will also keep for primary schools and kindergarten. clients from getting tied to a provider. Devolution of powers will not be easy, especially Successful small enterprises can help lift a sinking commu- since strong interests—international bureaucra- nity, not just by providing jobs and an example but because cies, administrators and politicians in the national they belong fully within the community and can help sup- capital, and top management in large firms—pre- port its activities. In the past, large corporations also provided fer centralization. However, sensible devolution such help. They found it hard to manage far-flung outposts, on issues such as education, business regulation, so local management was given substantial autonomy, and local infrastructure, and funding is critical to com- they worked with community leadership on issues of mutual munity revival. interest. However, as improvements in communications tech- nology have allowed headquarters today to respond quickly IF SMALLER TOWNS AND SEMIURBAN AREAS depend only to local developments, more staff resources have moved to on local demand, there won’t be many new jobs. the headquarters in the big cities, where they can service However, if the menu includes national or global corporate units all across the country more efficiently. Each demand, there are plenty of possibilities. Technol- local unit is left with far less autonomy. ogy helps connect the local to national and inter- national markets; online platforms allow small FOREIGNPOLICY.COM 35 enterprises to advertise niche products across the world, as Adam Davidson points out in his

Rather than using antitrust law to keep firms small, which emerge. Taxes could be reduced for those who live could be a disservice to consumers given the significant in stressed communities; the college loans of those scale of production today, it would be better if large cor- who return to stressed communities for a number porations decentralized their corporate social responsibil- of years could be partly forgiven so that college ity activities. These should be more focused in left-behind becomes a route to training locals, not just a means communities where they have a significant presence and of escape for the talented; and capable immigrants can aid community revival. Even a firm like Walmart, often could be given residence visas if they agree to stay accused of eroding a community’s economic basis, is start- in communities that need them. ing to push local engagement through (still small) initiatives like Walmart Rise, which gives each Walmart store a small Pilsen’s leaders engaged the community to lobby amount to spend on community engagement. the city licensing authorities to close down seedy bars where criminals congregated. They involved Community revival, of course, requires more than decen- local businesses in creating training opportu- tralization of the relevant government and corporate activ- nities for youth as an alternative to crime. They ities. Left-behind communities in industrial countries face encouraged locals to report criminal incidents to similar challenges to those historically found in underdevel- the police collectively so that gangs could not tar- oped countries, but they have an important advantage. They get individual informants and to come out on the are located in rich countries, which already have thriving streets after criminal incidents. As Pilsen crowded economies and strong legal, regulatory, and business insti- out crime, businesses started crowding in. While tutions. The easiest way to generate economic activity is to Pilsen is far from rich today, many residents have restore community links to the thriving national and global decent livelihoods, the community is much safer, economies so they can piggyback on broader growth. While its schools are better, and its children have a future. there is no magic formula, four elements that appear repeat- edly in successful revival efforts are leadership, engagement, Leaders can draw communities into focal proj- infrastructure, and funding. ects, such as reducing crime in Pilsen. They can create focal meeting points. A vacant plot of land Finding effective leaders is difficult because existing lead- can become a communal garden, a volleyball ership is often paralyzed and many capable people have court, or in Tulsa, Oklahoma, a public park such left. Indeed, one of the main arguments against devolv- as the Gathering Place, which has done much to ing power is that the available local decision-makers are enliven the local community and attract tour- incompetent and corrupt. ist interest with landscapes of fantasy and play. Yet, even in seemingly hopeless situations, local leadership New technologies like social media help hold can emerge. Chicago’s Pilsen neighborhood was a war zone in leaders accountable. An engaged community can the late 1980s; 21 different gangs fought each other on a 2-mile use information technology to monitor its offi- stretch of the main thoroughfare, with horrific death rates. cials, thus curtailing corruption and laziness. For Pilsen needed to bring crime down to have any hope of revival. instance, the SeeClickFix app allows residents in In Pilsen, new leadership emerged from desperation. When Chicago to photograph and upload the location a young man was shot across the street from a local church of a pothole, graffiti, or an abandoned car to the and the pastor asked his congregation how long they could municipality website. It stays there until an offi- see it as someone else’s problem, a group of young commu- cial fixes the problem. nity members stepped up. They chose one of their own, Raul Raymundo, to lead the suitably named Resurrection Project, Infrastructure is also important. New physical and three decades later, he is still there, having attracted hun- infrastructure, such as a refurbished downtown, dreds of millions of dollars of investment from government, an accessible waterfront, or inviting new trails, can business, and philanthropic interests into his community. make a community attractive to businesses and young skilled workers. Physical connectivity to eco- Such communities need creative ways to draw able people nomic hot spots helps. The Conservative govern- back and increase the talent pool from which such leaders can ment in the United Kingdom plans to spend billions of dollars to link hollowed-out towns through road EVEN IN SEEMINGLY HOPELESS SITUATIONS, and rail with flourishing regional centers like Man- LOCAL LEADERSHIP CAN EMERGE. chester. This shows that not every decision needs to be local but that taking local needs into account 36 SPRING 2020 when reconfiguring infrastructure is vital and can be economically transformative. For instance, a 2018 study by the Federal

Reserve Bank of Philadelphia found that in north- Without any community involvement, however, they may eastern Pennsylvania, 88 percent of low-income just be an ineffective tax windfall to the wealthy. worker commutes took over an hour, even though 73 percent of suitable jobs were within a 15-minute A far-sighted community will take ownership of local assets walk of a bus stop. Why? Because most regional at the outset when they are cheap so it can then obtain greater transit systems first take you to a central hub and funding resources as the community revives and local assets then back to where you need to go. More appropri- become more valuable. In the 1990s, Copenhagen’s city gov- ate bus routes linking job-heavy locations directly ernment sold land to private developers and used the pro- with worker-heavy residential areas would help ceeds to build out a metro system. This increased the value low-income workers get to work quickly, which is of the land the municipal government still owned near the key to their dealing with recurring personal emer- new metro line, which was then sold to expand the metro gencies and retaining jobs. further. The value obtained from such community-owned assets can also be used to help community residents who do Local financial infrastructure is also crucial. For not own property but are in danger of being pushed out by instance, in 2013 Pilsen’s main community bank the rise in local rents. was at risk of failing. At the time, nearly 30 per- cent of the bank’s mortgages were delinquent, and MANY OF THESE POLICIES CAN ALSO HELP residents of historically many local borrowers would have faced eviction if the bank had closed down or been sold. Vacancies disadvantaged communities, usually minorities, in urban would have pushed house prices down and brought crime back. Together with philanthropic support, areas. Healthy local communities are not just necessary to the community rescued the bank. Its delinquen- cies are now down to 4 percent of its mortgage help individuals get good jobs; they can also help mitigate portfolio because it worked with its borrowers and nursed bad loans back to health. conflict as people from different cultures come together in Finally, digital infrastructure is critical for eco- increasingly ethnically mixed industrialized countries. Pop- nomic inclusion. Many areas in wealthy coun- tries like Germany and the United States still do ulist nationalists inflame majority groups with fears that not have access to digital broadband. This has to be remedied if economic activity is going to be their culture will be diluted. They want the majority culture better distributed geographically than it is today. Better virtual connectivity will also be environ- to be imposed throughout the nation, even while immigra- mentally friendlier because not everyone will need to move to megacities. tion is restricted severely so that their culture is not diluted. Funding is also important. Communities in eco- There is an alternative embraced by countries like Canada: nomic decline may not have much ability to raise new taxes. The problem is that much financial sup- to celebrate culture within community rather than attempt- port from the regional or national government, or from bodies like the EU or the World Bank, comes ing an impossible national homogeneity. Some communities with significant strings attached on how it must be used. To facilitate local input into spending deci- will choose monoculture, while others will choose multicul- sions, it is better that money come in the form of government grants without strings attached—also tural lifestyles. Any choice should be respected so long as known as block grants—or from private philan- thropies free from spending constraints. everyone is united by shared national values and no one is The community can still be held to performance deliberately excluded. The national government can help, standards—again, technology can be used to mon- itor performance—but it should have operational preventing rejuvenated communities from becoming segre- freedom to decide what to spend on. The current U.S. administration’s proposal for tax-incentivized gated by enforcing laws against discrimination. investments into “opportunity zones” could work if investments are designed in cooperation with Ideally, the community should have boundaries, giving community leadership to address actual needs. its people a sense of empowerment and belonging, but keep them porous enough that goods, services, and people can flow freely across them. An inclusive localism may, some- what paradoxically, be the best answer to the challenges from technological change and globalization. Sustainable capitalism is not just about competitive mar- kets. It is also about the societal underpinnings that allow most people to benefit from them and give the markets their democratic support. Rather than closing borders and aban- doning capitalism, the leaders of the industrialized world must fix capitalism—by starting with the communities it has left behind. Q RAGHURAM RAJAN is a finance professor at the University of Chicago Booth School of Business and the author of The Third Pillar. FOREIGNPOLICY.COM 37

BRITAIN’S would find too large to fix on its own. POST BREXIT If it works, Brexit will act as a rebuke to those IDENTITY CRISIS by JAMES globalists who argue that economic prosperity and CRABTREE democratic sovereignty are hard to reconcile. Other nations may follow suit, rejecting the strictures Boris Johnson has contradictory of multilateralism for bold new eras of national ideas for his country’s future—and autonomy. But that is a big if, given Brexit also no clear paths for getting there. leaves Britain facing awkward questions not just about the kind of trade deal Johnson may strike J UST A FEW DAYS AFTER THE UNITED KINGDOM LEFT the Euro- with the EU but also about the kind of country Britain aspires to become. pean Union on Jan. 31, Boris Johnson traveled across the Thames to the Old Royal Naval College at Greenwich to give Many arguments for Brexit were based on mis- a speech outlining the kind of country he as prime minister understandings—perhaps willful, perhaps not— now hoped to build. of globalization itself and thus the way Britain’s ties with Europe are now likely to be recast. John- Hair typically tousled, Johnson began by pointing up at son wants to believe that Britain’s future can be James Thornhill’s vast ceiling painting titled “The Triumph of simultaneously more open to the world and more Peace and Liberty Over Tyranny.” Britain’s departure, he sug- in control of its political destiny. But his policies gested, could be a moment of liberation and transformation. already look incoherent. Britain’s tight timetable An island long shackled by continental constraints would fly to strike a deal this year has been severely com- like Superman, Johnson opined, “ready to take off its Clark plicated because of its pandemic response. Even Kent spectacles and leap into the phone booth and emerge putting that aside, Johnson is balancing conflict- with its cloak flowing as the supercharged champion” for the ing future visions of a free trading, low-regulation benefits of free trade and charting your own national path. “Singapore-on-Thames” with more statist pledges to reduce yawning inequalities. More to the point, Brexit backers hope to take back control of a country he faces one ultimate Brexit conundrum—namely whose 2016 referendum realized a vote to reject not just the that the act of departure itself could worsen the European Union but also a model of globalization favoring very underlying divisions that pushed his coun- prosperous urbanites over poorer, rural communities. Even try to leave in the first place. before the new divisions and shutdowns brought about by the ongoing coronavirus pandemic, Johnson was leading BRITAIN’S REFERENDUM VOTE was a howl of frustra- the world’s most radical experiment in deglobalization: a tion, but it contained an undeniable logic. Just bloody-minded push to overturn decades of conventional before the 2016 vote, Michael Gove, a Johnson ally, wisdom that midsize nations must band together, both famously claimed that Britain had “had enough of to reap the rewards of trade and solve problems that each experts”—meaning the ranks of economists who predicted calamity were the U.K. to leave. “The 38 SPRING 2020 people who are backing the Remain campaign are people who have done very well, thank you, out of the European Union,” Gove said. Leave support- ers, he added, had not. Gove had a point. Decades of ever closer ties helped boost Britain’s economy. In 1992, the U.K. signed the Maastricht Treaty, which accelerated European economic integration by handing more powers to Brussels, including expanded cooper- ation on criminal justice and foreign policy, and laying the groundwork for the creation of the euro. At that time, British GDP per capita was nearly a fifth below that of France. Twenty-five years later, Britain had pulled ahead. Britain’s growth was uneven, however. London Illustration by BRIAN STAUFFER

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boomed, as did other major cities. Decaying industrial regions than a 10th today. Yet advanced manufacturing and hardscrabble coastal towns did not. Taken as a whole, revived during the 1990s and 2000s, notably in British household incomes remain well below their level areas like car-making, where companies such as prior to the 2008 financial crisis. Homeowners in desirable Honda and Nissan built huge factories to export areas have enjoyed a prolonged boom but only at the cost cars to Europe. Aircraft parts and pharmaceuti- of ever higher inequality among regions. During the 2010s, cals did well too as Britain became a base from house prices in London, for instance, increased twice as fast which international investors could access the as they did in the rest of Britain. EU’s so-called frictionless single market. It was voters from those left-behind areas, including Yet these British successes came at a cost, not small post-industrial towns in northern England like Con- least a pronounced hourglass-shaped labor market sett and Wigan, that propelled Johnson back to power in with a squeezed middle class. The era of hyper- Britain’s recent election. The Conservative leader now heads globalization created plenty of good jobs at the an ungainly coalition, bringing together genteel and tradi- top in both services and advanced manufactur- tionally Tory suburbs in southern England with once solidly ing. Britain’s flexible labor market also churned socialist northern cities. In what amounts to a realignment out poorly paying low-skilled jobs at the bottom, of British politics around a Remain-Leave axis, Johnson leaving millions of workers barely out of poverty. united two groups that voted strongly to leave: older, affluent But middle-skilled jobs, such as factory machin- social conservatives on the one hand and the lower-skilled ists, were caught in the middle, falling by around a working classes that used to back the opposition Labour 10th in the decade before the 2008 financial crisis. Party on the other. JOHNSON’S BREXIT PROMISE IS THAT BRITAIN can now Keeping this grouping together is now one of Johnson’s continue these positive economic trends in ser- trickier political challenges. Much more difficult, though, vices and advanced manufacturing while revers- will be finding answers to the questions Brexit posed about ing the economic divisions that came alongside the failures of Britain’s economic model. them. To do this, he says he wants a post-Brexit “Canada-style” trade deal with the EU, similar to Globalization tends to be portrayed as a uniform process, the one Canada signed in 2016. This appeals to where all nations must follow similar rules. But in truth each the British public, who are well-disposed toward country globalizes in its own peculiar way, as industries with Canada. It appeals to Johnson too, given it would competitive advantages duke it out on the world stage. That allow regulatory “divergence,” meaning Britain process helped Britain become the world’s second largest once again would set its own rules in areas like exporter of services, behind only the United States. London’s environmental and labor standards. status as a European and global financial center was a big part of this. But British firms also thrive in trading services Much of the recent Brexit debate has focused such as advertising and management consulting, telecom- on how “soft” or “hard” a future EU trading rela- munications, information technology, and business. U.K. tionship would be. A Canada-style deal is undeni- services exports are worth almost twice as much as its goods ably hard, involving the reintroduction of customs exports, according to McKinsey, a consultancy. checks and possibly tariffs. Negotiating such a deal will not be easy: Canada’s took seven years, a feat Globalization’s advances also helped some British man- Britain now hopes to achieve in less than one, ufacturers recover from the traumas of Thatcherism—the according to Johnson’s self-imposed deadline. free market, small-government policies of former Prime Set against the backdrop of the coronavirus cri- Minister Margaret Thatcher. Policies promoting dereg- sis, with both British and European political elites ulation and competition during the 1980s pushed U.K. overwhelmingly preoccupied with outbreak man- manufacturing down from about a quarter of GDP to less agement, the odds of meeting this timetable look worse than ever. JOHNSON WANTS TO BELIEVE THAT BRITAIN’S FUTURE CAN BE SIMULTANEOUSLY Of the plausible deals Britain could have struck, MORE OPEN TO THE WORLD AND MORE IN Johnson’s also threatens the greatest disrup- CONTROL OF ITS POLITICAL DESTINY. tion to trading patterns, short of crashing 40 SPRING 2020 out of the EU entirely. A Canada-style deal will leave Britain’s economy 3.5 percent smaller in a decade, according to the

London-based National Institute of Economic and FEW BRITISH INDUSTRIAL MANUFACTURING Social Research—a decline that amounts to $90 FIRMS ARE LIKELY TO REPLACE billion, or about $1,100 per person per year forever. CONTRACTS LOST IN FRANCE OR GERMANY WITH OTHERS IN Yet Johnson’s true Brexit conundrum is that SOUTH KOREA OR THAILAND. these new frictions will hit some sectors harder than others. As the author and economist Martin the single market without needing extra licenses. Global finan- Sandbu argued: “A hard Brexit … stands to exac- cial centers grow by servicing regional markets, as New York erbate the polarising characteristics of the UK’s does for the United States or Hong Kong for China, so Lon- existing economic model and harshen the social don will suffer as it distances itself from its European base as tensions to which it has given rise.” banks and brokerages shift divisions to Frankfurt or Dublin. How might this happen? A hard Brexit will hurt Services are still likely to be more resilient than manufac- British-based manufacturers that use the U.K. as turing, however. Trade in services is still growing strongly a base from which to plug into European supply around the world, in contrast to the exchange of goods, which chains, like Nissan or Jaguar Land Rover, owned is stagnant or declining. If Britain manages to sign post- by India’s Tata Motors. These companies rely on Brexit trade deals with countries like the United States and sending parts and widgets back and forth across Japan, it is likely to seek favorable conditions for its services Europe’s borders. Intermediate goods traded with industries. Services trade is also less troubled by problems Europe alone now make up roughly a quarter of Brit- of distance, meaning British banks or consultants are more ain’s imports and exports, according to McKinsey. likely than manufacturers to be able to replace lost Euro- pean business elsewhere in the world, for instance in Asia. When we speak of globalization, this is what we mean: components flying between countries Not all British factories will move: Nissan, which operates via the webs of production that trade economists Britain’s largest car factory in the northern city of Sunderland, call “global value chains,” often based on mod- recently pledged prior to the coronavirus crisis to stay even els of “just in time” delivery. In this sense, much under a hard Brexit scenario, although whether this hope of Britain’s recent globalization is actually best remains in place for Nissan and other major international understood as a process of Europeanization. A manufacturers now depends on the severity of the coming hard Brexit will undo much of this, adding costs economic downturn and potentially government support to companies via trade barriers and delays through to offset huge falls in demand. Falls in the value of sterling new custom checks. prior to the crisis helped workers and factories regain lost competitiveness, although again these effects have now been Johnson’s predecessor, Theresa May, tried to swamped by the economic turbulence brought on by the avoid this problem with her “Chequers” deal— pandemic. Still, when the coronavirus crisis subsides, thou- named after the country residence of sitting Brit- sands of manufacturing jobs, built up slowly over decades, ish prime ministers—which preserved frictionless are likely to shift gradually (or potentially at an accelerated trade in goods. Johnson rejected this because it rate due to the crisis) to countries like Poland and the Czech meant keeping common EU rules, in effect choos- Republic, where access to Europe is easier. Foreigners who ing to sacrifice car- and drugmakers on the altar might once have brought new factories to Britain will head of sovereignty. Nor are U.K.-based manufacturers to Europe too, just as Elon Musk recently began a new Tesla likely to be able to replace lost EU business. The Gigafactory in Germany. Britain, he said, was too risky. cost of moving goods over long distances remains a powerful force shaping trade patterns. Apple Just a fraction of Britain’s manufacturing employment can ship lightweight electronics from factories in comes via high-quality exporters. Even so, those jobs are China, but in heavier industries like auto and avia- often to be found in left-behind regions, while services jobs tion, production tends to be regional, for instance in banks or advertising agencies are overwhelming concen- in North America or East Asia, rather than truly trated in cities. Manufacturing jobs have knock-on effects too, global. Few British industrial manufacturing firms supporting other employment, suggested Richard Baldwin, are likely to replace contracts lost in France or Germany with others in South Korea or Thailand. FOREIGNPOLICY.COM 41 Brexit will hit trade in services too. More than half of exported U.K. services end up in Europe, where they will lose access to the single market, for instance when the city of London loses the so-called “passporting” rights that let banks sell services into

a trade economist known for his work on global value chains. minimum wage or lowering environmental and “If you lose a few hundred jobs in London, no one notices,” food safety rules. The long-term public response he said. “But if you lose a few hundred of these good jobs in to the coronavirus is certain to play into this too, left-behind areas, the secondary effects can be devastating.” by radically expanding the scope of state inter- vention in the economy and increasing public THIS, THEN, IS JOHNSON’S BREXIT DILEMMA, namely that by pursu- demand for higher spending in core public ser- ing a hard Brexit, he threatens to damage a manufacturing vices, especially health care. sector that has been a rare bright spot in Britain’s struggling regions. Two contradictory visions of Britain’s future have Indeed, it is mostly for these reasons that John- emerged to attempt to overcome this dilemma. son had begun prior to the pandemic to push a sec- ond post-Brexit strategy, which was far more statist The first is “Singapore-on-Thames,” or, to its more boisterous and populist and designed to appeal to Brexit-back- backers, “Singapore-on-steroids”—a vision of an ultra-com- ing voters in poorer regions. Some of this effort petitive island of rock-bottom taxes and lax rules, which would was symbolic, including mooted plans to relocate tempt European companies to shift business to the U.K. in Britain’s upper house of Parliament, the House of search of easier regulation or indeed to relocate entirely. Lords, to the north of England. But there were also serious proposals to rejuvenate declining northern There were elements of this vision in Johnson’s Greenwich areas via a new $100 billion infrastructure spending speech, in which he painted himself as that most unusual of pledge and to build a long-promised high-speed rail animals: an ardently free-trading populist, rather than the line between London and Manchester, all funded protectionist variety represented by U.S. President Donald by higher public borrowing. Trump. Yet Britain’s Singaporean future remains unlikely for three reasons, the first being its misunderstanding of the More radical still were the ideas of Dominic Cum- country on which it is based. Singapore is undeniably a low- mings, a Brexit architect and Johnson’s quixotic tax, competitive economy. But rather than Singapore being political advisor, to shake up the British state. Cum- a haven for deregulation, its economic management is inter- mings attracted derision with a job advert inviting ventionist, with a state that owns stakes in almost everything, “weirdos and misfits with odd skills” to apply to including telecom providers and airlines. Rather than under- join his Downing Street team. He planned to lead cutting regional rivals, Singapore prospered by offering rela- a group of self-styled insurgents at the heart of gov- tively high regulatory and legal standards, winning investment ernment, launching bold forays to scrap some state from poorer neighbors like India, Indonesia, and Malaysia. bodies and build others in their place, for instance a U.K. version of the U.S. Defense Advanced Research Then there is the second matter: Europe. Anxious about Projects Agency, which is responsible for develop- Britain’s Singaporean instincts, the EU plans to make a “level ing cutting-edge military technology. playing field”—meaning comparable social and environmen- tal standards —central to its Brexit negotiations. Britain can The idea here, attractive on its face, is that Brit- push for regulatory divergence if it wants. But Europe can ain can innovate its way into a new period of pros- then respond by raising trade barriers or with retaliatory tar- perity. Government economic measures unveiled iffs, in effect negating any benefit the U.K. might gain from in response to the pandemic may create further undercutting European rules. space for radical ideas too. Cummings imagines a radically different education system as part of this, The final barrier to Singapore-on-Thames comes via the with a focus on science, creativity, and problem British public. The U.K. already has one of Europe’s most solving. Britain’s recent decision to defy Trump deregulated labor markets. Polls show scant support for and permit the Chinese firm Huawei to play a part lowering standards further, for instance by cutting the in its future 5G rollout was part of this picture too, as Johnson and Cummings prioritized next-gen- BRITAIN CAN PUSH FOR REGULATORY eration telecom infrastructure over favorable ties DIVERGENCE IF IT WANTS, BUT EUROPE CAN with the United States. THEN RESPOND BY RAISING TRADE BARRIERS OR WITH RETALIATORY TARIFFS. Yet this second approach also comes with prob- lems. Cummings’s plans are eye-catching, but they 42 SPRING 2020 require deft state direction that would be highly unusual in recent British history. Johnson will have less money to spend either way, given the damage the coronavirus response is likely to do to national finances.

Politically, Johnson has the rest of his coalition CUMMINGS’S PLANS ARE EYE CATCHING, to think about, which includes plenty of traditional BUT THEY REQUIRE DEFT STATE Tories keen on low taxes and worried about expen- sive white elephant infrastructure schemes. Even if DIRECTION THAT WOULD BE HIGHLY they can be convinced, in part by rebranding these UNUSUAL IN RECENT plans as pandemic stimulus measures, Britain’s BRITISH HISTORY. underlying economic structure has proved sur- prisingly durable, from its flexible labor market to In the long run, there are many ways in which Brexit its deep regional inequalities and low investment levels. As the economist Diane Coyle has argued, could turn out to be a good deal. The EU as an institution even the sums Johnson presently plans to spend are nowhere close to what would be needed to may prosper over the coming decade. But if it does not, shift this pattern fundamentally. Britain’s decision to leave will seem fortuitous. More to the BRITAIN’S POST BREXIT POSITION IS FAR FROM HOPELESS. point, while there is no single template for national eco- Predictions from prominent Remainers that leav- ing would plunge the U.K. into recession have not nomic development, countries that control what Rodrik come to pass, even if the pandemic brought this about anyway. Britain’s growth rate has been well dubs their own “policy space” are often better able to figure above those of Germany and France over recent years. The U.K. is likely to remain one of the world’s out new routes to prosperity, as South Korea and Singapore 10 largest—and most competitive—economies for many decades. have done. This is a tough process with few guarantees of Over time Britain will adjust to its new circum- success. But Britain at least has the potential to become a stances too. The Harvard University economist Dani Rodrik talks about the “political trilemma” of leader in the kinds of industries that will underpin future globalization, in which deep global integration is incompatible with both national sovereignty and global growth, from renewable energy and artificial intel- democratic accountability. Nations, he suggests, must pick two of these three things. Britain has ligence to online education. decided to make its own rules and run its own insti- tutions but at the cost of forgoing the economic Yet even this cautiously optimistic vision comes with risks, benefits that hyperglobalization often brings. namely that a process promised as a cure to globalization’s Johnson rejects this trilemma, claiming Britain can now become more economically open and ills may still end up worsening the disease. Brexit is described more in control of its own destiny. More circum- spect Brexit backers think leaving the EU might as a divorce for good reason. If globalization was the heady, create a new Britain that grows more slowly but is more democratic and equal. Such a bargain, romantic rush of economic integration, then deglobaliza- they think, is probably worth having, so long as it begins to heal some of the wounds that caused tion is the slow, awkward, and painful unpicking of decades Brexit in the first place. of trading relationships. Almost every respectable estimate The coronavirus outbreak will change this trajec- tory in complex but significant ways. In the face of suggests this will leave Britain poorer outside the EU. Indeed, the worst global public health crisis in a generation, Britain’s public might rediscover some affection its economy is already about 3 percent smaller than it would for multilateralism, especially after a crisis that has seen precious little international coordination. But have been had it voted to stay. it is of course sadly possible that, as the pandemic deepens, Britain’s ties with Europe will be strained Brexit itself was a radical democratic act, but its effects are further, making Brexit negotiations far more difficult. likely to be felt in a gradual and painful process of relative economic decline for a decade at least. As Britain’s economy adjusts, the erosion of manufacturing in particular threat- ens to harm many of those who put their faith in Johnson’s promises. At its worst, Britain could face a Mediterranean future similar to countries like Italy, which have long strug- gled economically and whose politics have grown more unstable as a result. Rather than an act of national libera- tion and transformation, Brexit risks leaving Britain alone to navigate a more complex and uncertain global era, feeling more out of control than ever. Q JAMES CRABTREE (@jamescrabtree) is an associate profes- sor in practice at the Lee Kuan Yew School of Public Policy at the National University of Singapore and the author of The Billionaire Raj. FOREIGNPOLICY.COM 43

A MOST can pursue its own strategic self-interest. LONELY UNION The coronavirus crisis—in which other member The EU is a creature of states have been willing to leave Italy high and dry— shows how the EU may suffer if it does not figure out multilateralism. Can it survive how to reconcile these clashing imperatives. Geo- politics abroad may come to roost at home, under- in a deglobalized world? by HENRY mining the solidarity that the EU needs to exist. FARRELL GLOBALIZATION REMADE EUROPE before it remade the IN SEPTEMBER 2019, two months before officially taking office, world. The historian Quinn Slobodian has shown how the driving ideas of globalization—strength- the new European Commission president was already insist- ening cross-border exchange and restraining the ing that the European Union needed to change. On the one nation-state—were the motivating force behind hand, Ursula von der Leyen promised a new “geopolitical European integration. Commission,” but on the other, she wanted the EU “to be the guardian of multilateralism.” The difficult question was The EU (then called the European Economic left unstated: How exactly is the EU supposed to reconcile Community) was founded in a 1957 treaty that set the great-power maneuvering of geopolitics with the more out the new group’s aims: eliminating restrictions level playing field of multilateralism? on the import and export of goods between its mem- ber states and abolishing “obstacles to freedom of Geopolitics is the ruthless pursuit of self-interest by pow- movement for persons, services and capital.” These erful states, no matter the cost to others. Multilateralism “four freedoms”—for things, people, services, and involves mutual agreements among states pursuing their money—are still the cornerstone of the EU. collective welfare. At a minimum, the two sit awkwardly with each other; at the worst, they are radically incompati- The four freedoms were supposed to not only ble. The latter is true of the current system of globalization, power an economic dynamo but also build the foun- which has been supported by a complex system of multilat- dations of a lasting peace. For most of modern his- eral rules and agreements among states. tory, Europe had been torn apart by wars between great powers such as Germany and France. The Von der Leyen—and the EU—faces a fundamental strate- founders of the EU wanted to transform the poli- gic dilemma. More than any ordinary nation-state, the EU is tics of Europe, replacing geopolitical conflict with as pure a creature of multilateral globalization as exists in the shared institutions and cooperation. Power had world. It is most comfortable when the outside world mirrors its to be recognized: The size of the bigger member traditional internal principles of organization: free economic states meant that they got more votes on crucial exchange and mutually beneficial cooperation. EU decisions. However, their clout was balanced by institutions such as the European Commission Deglobalization has cut the EU adrift. In the new world order, and European Court of Justice (ECJ), which were geopolitics—in the form of newly assertive great powers like supposed to deal evenhandedly with all members the United States and China—is coming to trump old trade and protect the interests of the smaller states. commitments and international cooperation. Europe, for its part, has been vacillating between defending the remnants The result was a unique set of political arrange- of multilateralism and building up geopolitical muscle so it ments. The EU has never looked much like a national state. It employs fewer people than a 44 SPRING 2020 regional government, has no army, and has very limited spending power. Even today, its national security powers are negligible: The key decisions are taken by its member states. What it has is the power of rules. The commission proposes laws, drafts regulations, and makes anti- trust decisions. The ECJ interprets EU law, as well Illustration by BRIAN STAUFFER

FOREIGNPOLICY.COM 45

as the basic treaty texts that the EU is founded on, when its regulations work across different countries. national courts ask it to. Often, it was able not only to impose its rules and standards on multinational firms that wanted to Together, the court and commission drew on the four free- sell to Europe but to get them to apply these rules doms to build a European free market, enhancing their own and standards outside Europe too. This subtle authority in the process. ECJ decisions struck down national form of influence, which Columbia University’s standards and rules that restricted imports from other mem- Anu Bradford has dubbed the “Brussels effect,” ber states. The commission issued common regulations reshaped global markets. to support a truly European marketplace. Its Directorate- General for Competition acted as an antitrust enforcer against In short, the EU seemed well adapted to a glo- potential monopolists. In the 1980s and early 1990s, the balized world. The stronger the EU became, the commission implemented a highly ambitious “single mar- easier it was to influence world markets in Europe’s ket” program aimed at eliminating existing barriers to trade direction. The relationship worked the other way and exchange. Even before the current wave of globalization too: The ideas of globalization helped EU officials began, the EU was building a globalization in miniature. push for further internal reforms. It was easier to Within EU borders, markets and free movement dominated push member states to accept more European while free trade rules constrained national governments from integration in a world where everyone believed in building favored firms into national champions. open trade and free movement. Together, these created a feedback loop between European inte- When globalization really began to take off in the 1990s, gration and global markets. the EU was thus ready to help shape it. It understood how to knock down barriers to market competition. The founding NOW THAT FEEDBACK LOOP IS BREAKING DOWN. Just as director-general of the World Trade Organization (WTO), the EU began to globalize before most other coun- Peter Sutherland, had been Europe’s competition commis- tries, it started encountering problems earlier too. sioner at the height of the single market program. In some International market integration necessarily limited ways, the EU was more comfortable with globalization than national democracy—and voters didn’t always like the United States was. After all, it had been founded on the it. When EU leaders tried to introduce a new consti- belief that open commerce and shared institutions were a tution in 2005, French and Dutch voters rejected it. better guarantee of peace than great-power maneuverings. A somewhat less ambitious follow-up document, the Treaty of Lisbon, was rejected by Irish voters Like the United States, the EU resisted multilateralism in in 2008 (though it passed when they were asked areas of trade that might undermine internal political bargains to vote again in 2009). The 2008 global financial or sensitive external relationships. Europe was slow to abandon crisis demonstrated the problems of easy financial restrictions on textile imports. It was notoriously opposed to flows across borders. The EU was especially weak free trade in bananas, which might damage its ties to former in financial regulation, meaning banks could relo- European colonies. Nonetheless, it grudgingly opened up. cate their most risky and speculative lending to lax jurisdictions such as the United Kingdom and Ire- The EU gradually discovered that it could turn its embrace land without difficulty. And as the Greek debt cri- of globalization into a strategy of influence. It could use the sis mounted, power politics—and the self-interest internal market’s rules and standards to shape the rules and of Germany—reemerged within Europe. German standards of a globalized world. The EU’s combination of a taxpayers were unwilling to support further inte- large market and a common standard setting system gave gration if it meant they had to pay the bill. it unique leverage in many sectors. While the United States had a big market too, its internal regulations and standards The Brussels effect turned out to have limita- were often weak or created by squabbling private organiza- tions as well. The EU was able to spread its pri- tions. The commission was a sophisticated and internation- vacy rules worldwide, but it was too late to help ally oriented regulator, with decades of experience in making European firms. Europe’s information economy had already been eaten up by Google, Facebook, EVEN BEFORE THE CURRENT WAVE OF Amazon, and other big technology firms. These GLOBALIZATION BEGAN, THE EU WAS are not just companies that can be tamed through BUILDING A GLOBALIZATION IN MINIATURE. ordinary antitrust regulation: They aspire to become economies in their own right. Amazon, 46 SPRING 2020 for example, is already both a marketplace and

a formidable market regulator, setting rules for THE EU GRADUALLY DISCOVERED THAT IT the businesses that use its many different back- COULD TURN ITS EMBRACE OF end services. Even before 2016, it was clear that the EU’s approach to globalization needed to be GLOBALIZATION INTO A STRATEGY updated to deal with market actors that were OF INFLUENCE. themselves effectively evolving into markets. to the multilateral trade regime that Europe favors. Global free Now Europe is facing the new challenges of a trade will not survive if states can invoke national security deglobalizing world. The Trump administration more or less on a whim, but the current U.S. administration wants to tear apart the existing globalized economy may provoke an even bigger crisis if the WTO rules against it. and replace it with an “America First” approach to trade. It scorns multilateralism in favor of threats Europe now finds itself caught between two unattractive and one-sided bargains. It fears China as an adver- alternatives. It can accept deglobalization and embrace geo- sary and is trying to cut it out of global technology politics, pushing to protect its own businesses as the United supply chains. When the Trump administration States and China protects theirs. Already, there are moves decided to withdraw from the Iran nuclear deal, within Europe in this direction: Politicians are talking about it threatened to punish allies that were imperti- watering down antitrust regulations and building and pro- nent enough to uphold a treaty that the United moting European businesses. However, this would mean States itself negotiated. As the political scientist giving up on the multilateral institutions that Europe has Abraham Newman and I have argued, the United relied on and hoping that soft power can be transformed into States is weaponizing the trade and financial net- hard bargaining strength. That may be possible, but it will works that wove globalization together and turn- require luck, time, and profound internal transformation. ing them into tools of coercion. For example, the EU is unhappy with how the United States Unfortunately for Europe, the United States isn’t has used the dominance of the dollar to bully European offi- the only problem. China is not as powerful as the cials and firms. If it wants to build the euro as a credible alter- United States but is just as ruthless in exploiting native, it will have to create a real system of common banking what economic leverage it has. For example, it has regulation and shared fiscal capacities, as well as offer stabil- threatened to retaliate against German car man- ity to non-European currencies in times of economic crisis, ufacturers if Germany gives in to U.S. pressure just as the United States has. Even this might be insufficient. to block the Chinese telecommunications firm Europe has just lost its greatest geopolitical asset: the city of Huawei. When a Swedish writers’ organization London, which is one of the core nodes in the global financial gave a prize to a dissident Chinese publisher late network. Building up clout would require the EU to figure out last year, China’s ambassador to Sweden said on practical ways to bring London back into its orbit. Swedish public radio: “We treat our friends with fine wine, but for our enemies we got shotguns,” Alternatively, Europe can double down on protecting the warning of trade restrictions. existing multilateral system, working with other states such as Japan and Canada to build an “alliance for multilateralism.” Globalization is unraveling as the United States The problem is that the two other great economic powers are and China face off against each other. It will not taking just the opposite course. Even if the Trump adminis- unravel completely: The world’s economies are tration is replaced by a Democratic leadership, the days of too entangled to be easily separated from each easy multilateralism will never return. Democrats, too, are other. But the way that the global economy works hawkish about China, and presidential candidates like Ber- is now at odds with the way that Europe itself does nie Sanders are skeptical about the old free trade nostrums. business. Deglobalization has especially imper- iled the multilateral institutions governing trade. EUROPE NEEDS MORE THAN knee-jerk multilateralism or geopo- The WTO Appellate Body, which serves as a final litical cunning if it is to prosper. Naive multilateralism would court of appeal for trade decisions, cannot do its lead to the EU getting squashed. Geopolitical cunning on its work because the United States is vetoing new own would suggest that the EU should adopt Trumpism (or appointments to it. The EU is trying to keep the appellate system on life support through inde- FOREIGNPOLICY.COM 47 pendent arbitration. The Trump administration’s invocation of a national security exception to justify its tariffs on steel and aluminum may be an even greater threat

Xi Jinping-ism) with European characteristics, championing economy and the larger gear of the global econ- national firms at home while aggressively pressing its interests abroad. This is a recipe for failure. Europe’s external influence omy to power change within Europe. is based on patience and persuasion rather than brute force; it would wither if it became a crude proxy for self-interest. With- Europe is taking initial steps in this direction. out a shared commitment to problem-solving, Europe’s inter- nal market would degenerate into a sordid squabble among The new proposals to price carbon emissions into member states, each favoring its own politically connected firms. Even worse, the political union might disintegrate, border taxes provide one example of how this as member states absorbed the lesson that national interest trumps all. The EU can manage some temporary national ruth- can be done, creating a virtuous cycle between lessness, of the kind exhibited in the Greek debt crisis, or the decision of some member states to close their borders to pre- Europe’s own efforts to reduce carbon emissions vent the spread of the coronavirus. But even this is damaging, and it would undermine the EU if it continued indefinitely. and those of other world producers, which will What Europe needs is a new understanding of its place in either have to match these efforts or pay a sur- the world to connect its internal and external environments. EU experts used to describe the “bicycle theory” of European tax when selling to the European market. In con- integration, claiming that, like a bicycle, European integra- tion must keep on moving or it will fall over. In its golden trast to traditional tariffs, the ideal outcome of age, globalization acted as Europe’s bicycle chain connecting the gear of its inner order and the gear of its outside environ- this border tax is that no one will have to pay ment, propelling the whole system forward. Now it needs a new strategy and a new bike chain. it because the hope is that everyone will move It is a mistake to think of deglobalization as a universal to more carbon-efficient forms of production. withdrawal of nation-states from the world economy. It is altogether more complex. The push toward economic decou- Even better would be if Europe’s competitors pling goes together with new needs for global engagement. The challenge of climate change will require extensive global introduced carbon taxes and carbon regulation cooperation. Under the digital platform economy, algorithms designed by market actors inevitably allow global information too, making it easier to eventually build a global flows to impinge on national-level democracy. (New forms of machine learning, for example, can lump users of digital institutional infrastructure. services into self-perpetuating disadvantaged categories such that a person’s online habits might make it nearly impossible Antitrust regulation, too, is changing. Suther- for them to find a job or to get a loan on reasonable terms.) land’s distant successor as EU competition com- Both of these challenges provide new ways to connect Europe’s inside and outside. If Europe is to tackle them, it missioner, Margrethe Vestager, is pioneering a new will need to move to an unparalleled level of internal inte- gration, where it thinks about internal market rules—right approach to global enforcement. Privacy regula- from the beginning—as external means of projecting Euro- pean interests and values. Responding to climate change will tion, citizen protection, and traditional antitrust require large-scale regulation and coordinated investment. Properly regulating information platforms will mean a fun- regulation are no longer seen as separate priori- damental shift in how the EU thinks about market power so that it incorporates an understanding of how the accumula- ties but as different aspects of a single problem: tion of data creates its own forms of influence. reducing inequities of power within the market to Yet integration on its own will be insufficient: Both are global problems. Europe’s challenge, then, is to figure out prevent abuses. Again, this promises to help cre- how climate globalization and information globalization can become a new bicycle chain, using the smaller gear ate a mutually reinforcing relationship between of European integration to propel change in the global European and global rules—although here the 48 SPRING 2020 challenge is far greater, since what European and other democracies value may be seen by countries such as China as undermining their domestic sys- tem of rule. The EU will have a hard time figuring out creative rules to tame big tech companies, but if it succeeds, it can use the Brussels effect to spread these values to other jurisdictions. None of this will be easy in a world where the United States and China weaponize their eco- nomic clout. Yet it is necessary. Europe’s apparent dilemma between geopolitics and multilateralism reflects a much deeper problem. Deglobalization has broken the relationship between Europe’s way of organizing itself and Europe’s way of acting in the world. Rebuilding that relationship will require Europe to discover new ways to couple the engine of integration to the engine of globalization so that strategy and multilateralism point again in the same direction. Q HENRY FARRELL (@henryfarrell) is a professor of political science and international affairs at the George Washington University.