Hegemonic cycle 2019

 

We have frequently reported that we are in a period of “hegemonic shift”, as the current hegemony of the U.S. is challenged by the rise of China. In 2019, we saw this hegemonic conflict intensifying, most obviously in the escalating trade war between the U.S. and China,but also in regional power shifts resulting from this great power competition. Furthermore, a new vector of hegemonic battle is opening, in which countries are trying to establish cybersovereignty in the digital space, and superpowers are building their own Stacks.

1. On the planetary network, sovereignty trumps economy – for now

In the past year, we have seen governments around the world taking measures to establish their sovereignty within the digital space. In some cases, these attempts to establish sovereignty take precedence over immediate economic concerns. An Indian Stack is emergingbased on Indian principles of innovation and India is trying to develop its own data governance model to protect its emerging tech industries. Led by an ambitious new European Commission, Europe is also trying to infuse the Stack with European values. Russia is developing a highly centralized Stack with an internet infrastructure that can disconnect from the rest of the world. An African Stack is also slowly emerging, inspired by the rise of pan-Africanism and the new African trade area that is set to become the world’s largest, whichwill benefit emerging hubs such as Ethiopia. Meanwhile, cities are also trying to establish their sovereignty in the digital space. In all of these cases, attempts to establish sovereignty clash directly with immediate economic interests (e.g. India, Africa and Russia all having ties to both U.S. and Chinese tech firms).

Looking ahead, as many countries will increasingly face challenges such as deglobalization, economic stagnation and depopulation, it remains to be seen whether they’ll be able to protect their sovereignty in the digital space without sacrificing too much economic opportunity by shutting out American and Chinese technology leaders. It is also likely that we will see different cultures ending up with different technological futures, while conflicts erupt over the overlapping of Stacks across political boundaries (e.g. TikTok being a potential vector ofChinese ideals).

2. Amid the heat of hegemonic conflict, China remains focused on the long term

For China, the conflict with the U.S. has attracted by far the most attention in global media, but China has stayed focused on important long-term risks and opportunities.

First, (Greater) China faces internal challenges. Although Western media have falsely painteda dilemma between violent intervention or losing control of Hong Kong, China has chosen to maintain the status quo by safeguarding the special status of Hong Kong. China has adopted a similar long-term-oriented strategy towards Taiwan, namely to pull the island into its orbit. Within mainland China, the Communist Party seems to have anticipated the need for greater political liberalization (e.g. based on new Chinese generations), as it’s experimenting with ways to put democracy into the hands of local officials.

Second, China’s long-term global ambitions reach far beyond what has grabbed global headlines (e.g. resolving the U.S. conflict, Belt and Road Initiative). We have also seen thatChinese finance is becoming an alternative to Western institutions, that China is investing in a new food strategy and could even become the global sustainability leader. Chinese digital platforms are becoming regional (if not, global) standards and China is pursuing a pragmatic relationship with the EU and eyeing key strategic assets for the future, such as Greenland.

3. Scenarios at the end of the fourth Hegemonic Cycle

We have seen in 2019 that we are nearing the end of what we have called the fourth Hegemonic Cycle. This idea is based on the history of financial hegemons from the Italian city-states, the United Provinces and the United Kingdom to the United States. In particular,we have seen that three scenarios for the future world order are still possible: a new alliance that protects the current world order, an alternative Asian system, and a long period of conflict.

Power-shifts within the Western world

As the EU takes on a global leadership role in areas from where the U.S. is pulling back, a new type of Western cooperation is taking shape, which could lead to a new type of Western alliance in the coming years, possibly more on EU terms. The U.S. is in a deep political transition whose next phase will focus on building a new economic order. Interestingly, theEuropean Union is not only trying to conjure up a new type of global leadership (especially with the European Green Deal), but there are also important power-shifts within the EU: most importantly, France is regaining its leadership role, whereas Germany desperately needs a new surge of innovation to prevent the country from falling behind. Meanwhile, Russia is quietly resurging and the crucial question is in what ways Russia will grow closer to which countries.

Asian alternatives

An alternative Asian system is emerging. Across the Indian Ocean, a new world system is emerging based on Asian principles of connectivity and multipolarity. Within this world system, the emboldened Indian PM Modi is trying to turn India into a superpower in the face of deep structural challenges, but the outlook for India remains positive in the long term. The system is also creating new types of economic models (e.g. the massive boom of remittancesthat is already more important than foreign direct investment and foreign aid). However, there will also be a greater likelihood of conflict, as East Asia has become the center of global geopolitical competition.

30-year conflict

However, based on the rise of mass protests, trade conflicts and hardened geopolitical strategies, which are fueled by destabilizing trends such as demographic transitions, economic stagnation, deglobalization and depopulation, it is also possible that we’re headed for a highly volatile period that scholars of hegemony Giovanni Arrighi and Immanuel Wallerstein characterized as the 30-year conflicts that recur whenever financial hegemons lose their dominant position.

4. Looking back to “Three Events We Are Not Expecting in 2019:

At the start of each year, we highlight a few events from our geopolitical forecasts that may surprise global media in the coming year. In 2019, we have seen that all three of our forecasts from the end of 2018 were accurate.

First, the global backlash against China that seemed to be taking shape has indeed faded. China, despite concerns around Huawei’s 5G infrastructure, is maintaining a highly pragmatic relationship with India, is mostly successfully pursuing a pragmatic relationship with the EUand southern Europe is increasingly growing closer to China.

Second, Arctic activity has indeed for the first time made global headlines. In August, President Trump made clear that the U.S. has important strategic interests in Greenland, which is becoming a coveted strategic asset, by tweeting that he wanted to buy the island. Afterwards, the U.S. announced that it would open a new consulate in Greenland.

Third, president Widodo in Indonesia and president Modi in India won their reelections this year, boosting reformist optimism across Asia. Moreover, including the Philippines, successful democratic transitions characterized Asia’s biggest growth engines. Widodo’s second term indicates the newfound political stability of Indonesia and Modi’s attempt to turn India into a superpower runs parallel to the reemergence of the Indian Ocean world system based on Asian principles of connectivity and multipolarity.

Click here to see the full Retroscope of 2019