In the last part of my interview with Tom Barnett (part 1, part 2, part 3, part 4, part 5, part 6), Tom explores how changes in the emerging markets may flow into the developed world. Tom Barnett's recent book is Great Powers (and you can read it on your Kindle).
GP: Your depiction of the necessary shifts to realign the globalized Core and the developing Gap includes an interesting distinction on emerging markets governance where they are over-ambitious on the scope or reach of governance but not as committed to ensuring the strength of the institutions themselves. You make the case that we will see globalization driving better institutions (rule of law for example) in emerging markets, I am curious if you expect to see a true dialogue, are there examples where best practices in emerging markets drive new behaviors in globalized Core?
Thomas Barnett: Not so much in corporate governance, because of the high state involvement (either past or present) in most emerging markets. There are some who expected us to be treated to a long lecture from emerging markets on the dangers of too little state involvement, but that message just hasn’t come through as predicted. We made the assumption that, because there’s more state involvement in the New Core (rising pillars in East and South), that that component is what accounts for their recent growth. In truth, and from their perspective, it’s the diminishment of state involvement that’s triggered the growth, not its maintenance. So the Old Core West, coming off this economic crisis, which culminates a three-decade period of progressive deregulation, anticipated a dialogue that hasn’t really come.
In general, emerging markets remain—to us, at least--surprisingly committed to privatization and embracing globalization, and it’s largely our own anti-market types with whom we must contend. But even there, the crisis doesn’t seem to have triggered much political change. Sure, there’s the temporary state involvement in banking, but we haven’t seen any raft of Leftist governments come into power. They still don’t have a credible alternative to markets as we’ve come to know them in all their flavors (oligarchic, state-directed, big firm, or more entrepreneurial). As far as I can see, the “end of history” on that debate hasn’t been restarted—as it were, despite plenty of handwringing by pundits.
The debate that has ensued as been appropriately structural in focus: the rebalancing of trade (West must consume less, the East more), the regulation of cross-border banking activities (no great new answer there, just a general retrenchment, which is probably wise given the lack of will to put in place sufficient new rules), and the question of a global reserve currency that replaces the dollar and relieves America of that burden/temptation.
The last one interests me the most. As I see it, it would be best for an “Asia” basketed currency (based on the Won, Yen and Yuan, to begin with) to emerge as the third leg to the reserve currency “stool” whose other legs would be the dollar and the euro. As soon as the combined weight of the euro and “asia” matched the dollar, we’d have a natural balancing function, far better than the collusional efforts of the past (Plaza Accord-like agreements to manage the tectonic movements of major currencies). The idea of creating something new and artificial is—to me, at least—a lot scarier and untested (it would be, by definition, far more subject to political manipulation because it wouldn’t be based on any underlying economic reality). We simply don’t know how that would work, and, given the lack of global resolve now on regulating cross-border banking activity, I just don’t see the will to make something that complex work any time soon.
I think the reason why China, for example, wants to leapfrog to something like a new global reserve currency is that such an effort would allow it to delay making the necessary moves on the yuan (convertibility, etc.). By making the case for the new currency, Beijing is basically asking for our help, saying in effect, “don’t mess up the global economy with your lack of fiscal discipline, because it’ll be a long time before we can manage our own part of a global disciplining function.”
Where the dialogue on new rules has been most evident to date is on global warming and new energy technologies. I expect to see the best outcomes here in the next decade or so.
GP: As Green Bay fan, are you happy with Packers' draft results?
Thomas Barnett: I like to point out that Aaron Rodgers had almost exactly the same stats as league MVP Peyton Manning did last year—just not the same number of wins. So the big question from last year has been adequately answered. Looking over the rest of the offense, the O line looks solid and the receiver corps is strong. Tight end is weak and there’s not the depth on running back that I’d like (although I hope to be surprised there). Add it all up and there wasn’t much reason to concentrate the draft on the offense.
Instead, in my mind, the defense was the clearly inferior half last year, thus the radical shift to the 3-4 (which I don’t think we’ve played in GB since its heyday about 20 years ago, yes?). Given that demand, the draft focus on the D side made sense, starting with the interior lineman in the first pick.
I like our chances this year. The Vikes still lack a caliber quarterback and I think the Bears will be tougher but not that much improved with their new guy, so I think we’ll be competitive and definitely over .500 for the year, assuming Rodgers follows through on further development.
This wraps up the interview with Tom Barnett. I'd like to thank Tom for his thoughtful answers and sparking some good debates.
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