Like the sea ice, which breaks up into icebergs set on different courses, the Western Alliance seems to be coming apart. Since the end of the Second World War, this alliance formalised by the North Atlantic Treaty Organisation (Nato) provided the political superstructure containing the market economic process of the world. The glue that had held together the alliance was however not the principles of market economics, but the threat of communism. With the passing of the Soviet Union and the transition of China into the capitalist order, the glue is long gone.
What purpose does an alliance serve, except the over-riding one of countering the threat of a common enemy? But the enemy has long gone and the alliance well served. In the late-1980s, talk was rife of a multi-polar world succeeding to the Cold War, quite pre-mature as Gulf War I and its aftermath showed. Coincidentally the US economy that had been pronounced to be in decline, entered a period of economic boom and technological regeneration. The rising powerhouses of Japan and Germany in contrast entered a period of stagnation that is yet to end. The European Union (EU) and Japan had seemed poised to seize economic leadership of the world in a new multi-lateral era. One governed by rules evolved through consultation overseeing trade liberalisation and financial integration that offered prospects for rapid and efficient economic expansion. Which to a great extent it has, except that the predominant player was not the EU and Japan. Aside from the fact that parts of the globe did not benefit, some outcomes were not anticipated. Such as the huge current account deficit of the USA, the fact that the world economy is running virtually on one engine, namely, the American consumer and the persistence of major divergence on important issues of economic management.
The open acrimony, the harsh words, the media war between key Nato members, is only peripherally about Iraq. Surely the politicians of Europe have not become such renunciates that they would risk setting their own house on fire, just to bail out the obdurate and unappetising Saddam Hussein? It is surely otherwise; national interests are being served by the differentiation. Project Europe is in some jeopardy. The Franco-German enterprise, which was at the core of this experiment, could not have but seen how the expansion of the EU was threatening the project itself. New members and applicants from the East quite evidently saw their interest better served by allying with the power across the Atlantic, than with their neighbours. If there was any doubt, the signature campaign of the enterprising Mr Blair surely served to settle the matter. Mr Putin, Russia?s first competent leader in decades, has sprung a surprise. He appears to be a principal in the Franco-German alternative position, unlike conventional wisdom that saw him staying on the sidelines, but with the US.
Far too much is in flux and the course of events is yet uncertain ? unlike the war in Iraq, which is certain. Like a marriage gone sour, both sides suddenly find that they never ever liked each other and find cathartic relief in saying so aloud. Disaster seems attendant on every initiative – whether to re-start a dialogue or to undercut the other. A witch?s brew to which the North Koreans are bent on adding ? newts, nukes and all.
But some things are certain. Contention and competition is the human condition. The separative forces working on the alliance run deep. It signifies the true dawning of the 21st century, one where multi-lateral agreements might come into much sharper discord with national contention. But where the need for expanding economic intercourse will be even more powerful. In short a world where there is much to gain, as also to lose. Countries like India and China have a good chance of finding more space in the water. The first part to harvesting tomorrow?s promise is to survive the present. Being a nice chap is the next best thing to being the toughest guy. India has in the past followed this precept, but for a fatal flaw of a big mouth and a penchant for moralising. So we need to tread carefully, and keep vocalising down.
The author is economic advisor to ICRA (Investment Information and Credit Rating Agency)