Mugged by Reality

History is catching up with me. In my last two notes I wrote variously about the tendency for some authors to use the opening line from Dickens’ Tale of Two Cities…’it was the best of times the worst of times’ and, the ability of ChatGPT to write essays and speeches.

On Monday, I dug out an old speech from Xi Jinping – and to my horror found it contained the sentence ‘it as the best of times the worst of times’, and it was written in such a balanced, anodyne way, with an obvious appeal to the Western reader, that it must have been written by a ChatGPT engine- the Chinese are apparently years ahead of thus here.

The speech in question is worth dwelling on. It was given at Davos in 2017, only a few days before Donald trump was inaugurated. As America struggled with the reality of Trump’s election victory, Xi Jinping came to Davos to claim globalization for China and to place China in the vanguard of the world order.

After the speech I saw American CEO’s wander out of the Assembly, partly in shock and mostly in recognition that China’s time had come. It should have been the beginning of an era for China, but instead it was the beginning of the end for globalization. Xi’s autocracy, China’s hunger for productivity boosting technologies, and Trump’s telling, though infantile, castigation of China, all opened a sharp divide between the two biggest economies in the world.

The Davos crowd is still debating whether globalization has simply changed its spots or stripes, but I think the wider consensus view is that it is being replaced by a multipolar world order (of large regions that ‘do things’ increasingly differently).

What is much less a consensus view is the intensity of the strategic competition between the USA and China, and increasingly Europe. For the moment, Europe’s stance reminds me of the description that Iriving Kristol gave for a neoliberal as a ‘a liberal who got mugged by reality but has not pressed charges’. Europe is being mugged by the reality of strategic competition but has not quite yet decided how to proceed.

Armed with this insight I took my soapbox up the ‘magic mountain’ last week. As ever Davos is a mixture of James Bond and ‘The Pink Panther’ (á la Peter Sellers), with sleek security combining with the rich and famous slipping around on the snow.

On Wednesday we had a very good discussion (thanks to Creative Dock and Roland Berger) around the implications of ‘strategic competition’ for European companies. The audience was mostly made up of German and Swiss business people so I, diplomatically as ever, wasted no time wading into the topic of German politics (I was heavily outnumbered by experts on the topic).

Today, more than any other European country, Germany embodies the dilemma that many nations face of being ‘forced to choose sides’. Having spent decades managing and cultivating relationships with European neighbours and countries like Turkey and Russia, Germany now has to choose.

It must choose between being economically and politically close to the US, and commercially bound to China, more so than it realises. In different ways, it is coming under pressure from the US, and at the same time being subject to a charm offensive from China.

Within German politics, there are also multiple contortions – the Greens acquiescing to coal mining and the sale of weapons is an example, and traditional relationships with the likes of France are fracturing. Perhaps German politicians thought that its economic power would render it influential diplomatically, which was certainly the case – but it has now become a liability.

The debate over the provision of Leopard tanks to Ukraine is sapping Germany’s credibility, and especially that of its leader Olaf Scholz. He appears to be the outlier in a long line of generally impressive German leaders since the 1960’s. If he believes that his indecision will create an environment where negotiations become likely, then he is badly wrong – morally and strategically.

Appropriately, the indecision in Berlin is a reminder of the lack of decisive policy making during the euro-zone crisis. Neither I expect, and again I am not an expert here, does the German public realise the extent to which the political mood has shifted in the West and what other nations now expect of Germany.  

Before I hector Germany too much, I also acknowledge that Ireland may also be on the cusp of a similar geopolitical dilemma. On a per capita basis, it has one of the best and most effective diplomatic services in the world, and a very large stock of soft power. However, it has ignored the creation of a proper defence and security policy and compared to other small nations (Denmark for instance), it effectively has no hard defence capability. It is the opposite of Israel – lots of soft power and little hard power.

The cases of Germany and Ireland demonstrate how crises occur – broad strands of policy are left neglected for years (often for good reasons), and then a shift in the world order makes demands upon them that cannot be met.

We are now living the great geopolitical ‘mugging’.

Have a great week ahead,

Mike

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