GIS Statement by Prince Michael of Liechtenstein
The Munich Security Conference (MSC) stands among the world’s oldest and most important fora for security discussion, with the attendance of top-level decision makers from key countries around the globe, nongovernment organizations, industry, academia and media. The latest edition of the MSC was gloomy, mirroring the current international situation.
The February 2018 conference, named “To the Brink and Back,” brought to the fore irreconcilable differences among the world powers. Every discussion pointed to further conflict. Leaders hurled accusations at each other in the most aggressive way. They all did it: Americans and Russians, Israelis and Iranians, to name just a few. In the past, the participants at least pretended that the world might become a safer place as a result of their efforts. In 2018, bad news prevailed.
The MSC head, Ambassador Wolfgang Ischinger, observed in his concluding remarks that while some great ideas, good insights, and bold visions had been presented during the event’s two and a half days, not enough “concrete steps” to “implement good visions” and “prevent the bad perspectives” were being taken by world leaders. Coming from one of the world’s most experienced diplomats, this was an alarming observation.
Why is such darkness setting around us?
Surely, there are positive developments in today’s world. Great strides have been made in eradicating extreme poverty and hunger, especially in Asia and Latin America. Illiteracy, holding back half of the global population only 50 years ago, today stands at some 15 percent. This enormous progress has been achieved through entrepreneurship, technological innovation, higher productivity, market economies and global trade.
And yet, these benevolent mechanisms are increasingly under attack from politicians and special interest groups. Policies are evolving in ways that are detrimental to further development. The old populist canard of a “zero-sum game” is again gaining traction with claims that one person’s gain must be someone else’s loss. The possibility that everybody gains from technological progress, innovation and higher productivity is ignored. The purported solution – a remedy which failed repeatedly in the past – is to fight poverty and economic inequality with government-enforced redistribution.
Assault on trade
The rising wave of protectionism is curbing trade, but the even worse consequence hides in limiting competition, which leads to lower productivity and less incentive to innovate. Different excuses are used to justify such policies. Most commonly, foreign producers are vilified. In the United States, which has a long tradition of shielding its market, the justification is the protection of jobs. The European Union, always quick to criticize U.S. trade practices, is even more restrictive, using the pretense of consumer protection. The big emerging economies, such as China and India, are playing a two-faced game: they erect walls around their domestic markets while loudly presenting themselves as free-trade champions (and of course harping about the policies of U.S. President Donald Trump).
Research by Gowling WLG, an international law firm, shows that the world’s top 60 economies have adopted as many as 7,000 protectionist measures since the financial crisis of 2008. From 2009 to 2016, the EU introduced 5,657 restrictive trade policies, and only 4,594 that liberalized trade. The numbers show a thickening protectionist jungle handicapping global trade flows.
Realistically speaking, trade conflicts have always existed and even “free trade zones” are not completely void of protectionist elements. Even such banner trade-liberation initiatives as the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP) would have discriminated against third-party countries. Still, these projects would have lifted the markets and helped the participants. What we are seeing instead is a strong increase in protectionism.
Looming financial disaster
Staggering sovereign deficits are another alarming symptom of the crisis we are in. These deficits necessitate excessive borrowing by governments and, in consequence, lead to monetary policies that are bound to cast doubt on the inherent value of all major currencies. Such overspending, to the debit of the future, cannot continue indefinitely – the scheme works only as long as societies continue to trust their institutions. And this may end abruptly, stalling the wealth-producing engine.
The result would be a drastic increase in poverty, mainly in areas with low to negative demographic growth, and new pressure on the present governance structures, especially in developed, democratic nations. These structures’ basic soundness would be questioned. Breaches of legal and constitutional principles are already taking place, even in Western democracies, allegedly because governments have no other choice. If things do not change, such violations will only become more frequent. The consequences would be felt most dramatically in the countries with aging populations, as their retirement systems are largely underfunded. Even the best economists cannot come up with satisfying solutions to such formidable challenges.
This financial predicament, created by the governments themselves, puts a huge strain on politics. Leaders are too focused on managing the intertwined economic and financial crises at home to pay sufficient attention to issues of global security. Moreover, countries’ foreign and security policies are increasingly shaped by internal considerations.
Economy and war
History teaches us that unsolved economic problems often lead to wars. There are at least several prominent exceptions to the theory that democracies do not start wars in general, and especially not with each other. Unfortunately, leading political parties in the West have already resorted to subverting the basic principles of democracy to remain in power. Instead of the democratic “end of history,” predicted after the collapse of Soviet communism, democracies appear to be in decline. Sinking in self-made economic and political quicksands, they now resort to ever greater protectionism and nationalism. All this is laying the groundwork for war. Wars tend to fix economic misalignments in a terrible way.
The danger is not fully appreciated because foreign policy strategists tend to ignore the importance of the economy, while the economists are not sufficiently versed in foreign and security policy issues. Good geopolitics brings together all these elements.
While governments are busy struggling with their self-inflicted problems, the geopolitical framework of security structures, shaped after World War II, is undergoing a tectonic change. The economic and social problems discussed above are only adding to these tensions.
In 1945, the U.S. found itself the predominant financial power with the dollar as a global currency. Politically, a bipolar system dominated by the U.S. and the Soviet Union emerged, with two worlds apart political, ideological and economic systems. After the Soviet system cratered in the late 1980s, the U.S. and a handful of other highly developed, democratic nations seemed destined to continue in the role of a benevolent Western hegemon bringing well-being to the rest of the world.
After the turn of the millennium, however, new powers, China in particular, began to challenge the Western system, especially the financial, geopolitical and military dominance of the U.S. The financial crisis of 2008 cast huge doubt on the West’s superiority in economic and monetary matters …
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Economic inequality bad thing
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