Zhou Hong


In the last few decades, there have been dramatic shifts of powers in the world we live in. Those shifts fundamentally influence our lives and way of thinking by challenging the existing notions of international relations. As a result of those shifts, the international system which emerged in the aftermath of the Second World War has been greatly transformed. The end of the Cold War also terminated the confrontation of the two military blocks. The dawn of a new era started with the dramatic extension of the world market, the emergence of many new economies and the dramatic growth of wealth. This upward trend suddenly came to a stop by the end of 2008, when the greatest financial crisis since the Great Depression disrupted many people’s dreams and raised doubts on the common belief in an ever more prosperous future. The world is indeed changing.

One of the amazing new phenomena we observe in these rapid changing decades is the change of power configuration of today’s world compared to 20-30 years ago. The fall of the Berlin Wall not only ended the Cold War, but also, or even more significantly, combined the “two world markets” into one. The enlarged world market enabled the free movements of many factors, including capital and products, and with the significant improvement of transportation and telecommunication, human beings and information are flowing rapidly. The reallocation of wealth in a large context enables new accumulations of wealth, which is, however, unevenly spread out, and countries receive and utilize opportunities differently based on their mode of development. As the developed world continues to develop at a slower pace, and the emerging economies catch up, the economic power of the two in relative terms keep on changing. According to current US dollar indicators, the United States’ share of world nominal GDP declined from around 26% of the global total in the post Cold War period to about 24% today, while the big emerging economies, like China, India and Brazil, rose from 5% in 1990 to about 13.5% in 2009, among those China made the largest raise from less than 2% to more than 8%. During this entire period, the European Community’s enlargement from 12 countries to 27 helped itself maintain roughly the same percentage in the world economy today as it did 20 years ago.

GDP share does not account for the only source of power. The so called “soft power” (J. Nay), seen as the ability to make rules and to influence, often generate more fundamental and long-lasting effects on international relations. In many cases, the soft power can accomplish what the hard power cannot. Military strength used to be seen as the compound of all powers of a nation. However, it does not reflect the entire strength of a political entity any more. The EU holds very limited military power compared to the US, yet it does not shy in claiming “civilian power”, playing key roles in making the world’s rules, regulations and standards. 65 years ago, a handful of financial ministers met in Bretton Woods, discussing over the basic rules for a new world. Today, the Bretton Woods has long collapsed, yet those same rules, in particular the spirit that those rules entail, the spirit characterized by “free business” as the foundation of the world economic governance and by “subsidiarity” as the political philosophy, has prevailed, particularly in favour of those rule-makers.

The international financial system established in the Bretton Woods continues to prevail too. It started with the gold standard, followed by the dollar standard after the weakening of US economic competitiveness, and, during the current world financial crisis, still able to protect the US by allowing it serving its own national interests with the hegemonic status that it retained since Bretton Woods. The growth of the world market enabled better allocation of resources and thus the overall growth of wealth. But the free market recipe along with its extreme model, the “Washington Consensus”, has caused hinrance in the development of serveral regions. In poverty-stricken countries, where neither domestic businesses, nor the government and people are ready for the impact of the entrance of powerful multinational firms, and seen their growth rate stagnated. Thus, the world market alone does not guarantee development. Behind the curtains of world market rules, there are all kinds of interplaying powers, either economic, social, or political, playing within geographical borders, or have already crossed national borders, sowing chaos behind. It is also noteworthy that the format and rules of the interplay of powers differ among various territorial, sectoral, or professional power circles. In fact, there is never a perfect market at the work. The roads towards development are shaped differently and determined by different country backgrounds, people’s opinions, and the strategic planning of governments. The resources are therefore mobilized and distributed differently. Although all governments would claim to serve their people, the people are organized and served in different ways with different priorities. After decades of rapid development of welfare states, the European countries are trying to cut down their public provisions, and replacing them with private ones, while at the same time, countries like China, after rapid industrialization, is now aiming for a speedy build-up of a social security network that covers all its citizens. Behind these seemingly opposing trends, we see comprehensible reasonings and interplays of differnet powers in different circumstances.

Almost all the observers would agree that the world has changed and shall continue to change, but they will also disagree on the ways and directions of this change. The experiences and lessons of past changes prove to be highly divergent, and peole like to draw conclusions based on their own understandings while abandoning the more tiresome holistic perspective. As a consequence, many continue to adhere to the zero-sum thinking and act to gain at others’ expense. Conflicting concepts and rules generate chaotic interplays of world powers and offset the effectiveness of healthy efforts. The world starts to move toward different directions: when the EU is trying hard to set up stricter rules and tighten economic governance, the US continues to play with Quantitative Easing, leaving others puzzling on what really have happened. In the meantime, many serious matters, such as multilateral surveillance over the large currencies, effective coordination among partners with different interests, operational multilateral monitoring and surveillance, an early warning system for upcoming crisis, and stricter self-disciplines and greater democracy and transparency, etc. are waiting to be tackled.

The future prosperity of mankind relies on the openness of economies, free flow of capital and other economic factors. It also relies on regulations that can guarantee free trade on the one hand, and is able to offset market failure on the other. Above all, it depends on the ability of countries in tolerating different modes of development and on the ability of different peoples in mutual learning. The world economic giants club has grown now from G5 (France, Germany, Japan, the United Kingdom, and the United States) to G20. The dialogue and cooperation among different types of economies has at last become theoretically possible. But what would be on the agenda for the G20 and what new rules and regulations would be made among the 20 will make a real rather than nominal difference for the future. The rule-setting power is not only more powerful than military strength in today’s world; it is also a determining factor in the future configuration of world powers. But in order to have a longer-lasting world order, the aim has to be set high and broadly enough to encompass mutually shared interests such as sustainable prosperity, and the working plan needs to be realistic enough to embrace different developmental strategies for countries at different development stages and with different cultural backgrounds.

Prof.ZHOU Hong is director of the Institute of European Studies at the Chinese Academy of Social Sciences

Prof.ZHOU Hong is director of the Institute of European Studies at the Chinese Academy of Social Sciences

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