America, Japan, Poland, and Turkey as Great Powers in 21st Century

STRATFOR head George Friedman recently gave a fascinating talk on the next 100 years of geopolitics to the Public Affairs program at the Carnegie Council. You can watch it here. Some interesting points here:

The great powers in 50 to 100 years will include Japan, Poland, and Turkey. His analysis starts from his assumption that the United States will continue to be the dominant power in the international system for many reasons, including access to two large oceans, a powerful navy, enormous wealth, experience dealing with immigration, and a lack of rivals. Poland will benefit from the fact that it faces Russia. Like the U.S. relationship with South Korea, the United States will make sure that Poland succeeds, through technology transfer for example, so that it can balance Russia.

As for Japan, well, it has the second largest economy, a powerful navy, and an army larger than Britain's--all of this with a constitution that doesn't allow these things. Imagine what may happen when Japan modifies its constitution, Friedman says. (Friedman's analysis goes against recent bleak economic news in Japan.) As for China, Friedman "is not impressed." It is basically a poor country that is divided and lacks a social safety net. When people become unemployed in rich countries, they worry about welfare, when they lose their jobs in China, they worry about real poverty.

Meanwhile, Turkey will become ever more important in managing conflict in the Middle East. The key to Friedman's analyses is that it is important to throw away conventional wisdom, for example that Russia, India, and China will dominate the future.

On Joe Nye's concept of "soft power," Friedman has an interesting take: He says soft power is when you can exert power but choose not to. In his view, it is not "attraction" as Nye puts it. Friedman's version came to him from growing up in the Bronx where "you can get more with a smile and a gun than with a smile alone."

Chimerica Convergence: Ethical Bailout Needed

During our recent trip to Beijing (see video above), many people made the joke that just as China was becoming capitalist, the United States was going to nationalize its financial system. Which one was really socialist, some asked us? Some Chinese found America's movement back toward a socialized financial system to be frustrating: What is our benchmark? What is our goal? The target keeps moving, it seems.



More telling, perhaps, is that America and China are converging--Chimerica, as Niall Ferguson has called it (see video above at Carnegie Council's Public Affairs program).

Thomas Friedman made this point this week in his op-ed "The Great Unraveling:"

But while capitalism has saved China, the end of communism seems to have slightly unhinged America. We lost our two biggest ideological competitors — Beijing and Moscow. Everyone needs a competitor. It keeps you disciplined. But once American capitalism no longer had to worry about communism, it seems to have gone crazy. Investment banks and hedge funds were leveraging themselves at crazy levels, paying themselves crazy salaries and, most of all, inventing financial instruments that completely disconnected the ultimate lenders from the original borrowers, and left no one accountable. “The collapse of communism pushed China to the center and [America] to the extreme,” said Ben Simpfendorfer, chief China economist at Royal Bank of Scotland.

Coincidentally, Friedman comes to the same conclusion that we found on our trip to Beijing: The United States and the world need an "ethical bailout:"

The Madoff affair is the cherry on top of a national breakdown in financial propriety, regulations and common sense. Which is why we don’t just need a financial bailout; we need an ethical bailout. We need to re-establish the core balance between our markets, ethics and regulations. I don’t want to kill the animal spirits that necessarily drive capitalism — but I don’t want to be eaten by them either.

We need a balance between ethics and regulations. Policy Innovations makes a similar point in our latest financial commentary, "Raising the Bar for Hedge Funds," by Stanley Goldstein and Frank Plantan. Check it out here.