The Post Pandemic Economic Order - A View

 

If one thinks of the disruptions wrought by the pandemic which is still blowing across the world, the question of post pandemic recovery will raise itself in the minds of some people.

The world economic order as we know it will certainly undergo profound changes. The pandemic is still amongst us, and the disruptions are continuing. However, it has already become necessary to cast an eye on the post pandemic scenario as now, after a two years of forced hiatus, the world will be in a hurry to get back to normal.

The new normal, however, is going to be different. The US led world order will not last very long after this pandemic, at least not as the world has known it. America, since Trump has been talking about withdrawing from most multilateral treaties like Climate Change, the TPP (Trans Pacific Partnership). On the other hand China, which is now economically second to the US, has been trying to increase its outreach in world trade by starting the Belt and Road project.

The US as a world leader in trade and peace keeping, was beginning to falter. And China is very much trying to take its place.

However there is a fundamental difference between how the US was looked at and how China is perceived today. The US guaranteed that the world trade mechanisms worked smoothly. The IMF was almost wholly financed by the US. And most of the countries in the world benefitted from the free flow of goods and services.

Japan became a manufacturing hub after the end WWII because the US bankrolled its development. Europe also benefitted from American largesse provided for post-war reconstruction. Thus, world trade saw its best growth phase in the post war world. Freedom was an underlying ‘mantra’ of this smooth growth. America stood for freedom and democracy and promoted those ideas across the world, mostly through its soft power, and occasionally, hard power.

Some of its actions of interfering in some country’s internal affairs to restore democracy can be overlooked as over-enthusiasm to promote its ideas. But by and large, the world supply chains worked reliably for many decades after the end of Second World War. It was stable because it was backed up by the US dollar which became the currency for world trade.

This picture will change in the coming few years. China may not replace the US as the numero uno in world trade, also, it cannot replace the US in terms of the trust that the countries of the world have in the US led system. China’s answer to the existing system was the Belt and Road project which has benefitted no country till date, and is being increasingly viewed as a debt trap for poor countries. China’s claim over the waters of South China Sea has eroded whatever trust China enjoyed globally and especially among the countries in this region.  

The new world order which will emerge after the pandemic will still be led by the US, the current situation in Afghanistan notwithstanding, and which has led many to predict the demise of the America as a world leader.  America may have lost the political will to fight other people’s battles, but its industry is in no mood to relinquish its technological and financial leadership.

Even in Afghanistan contrary to popular perception, American industry is the real winner. The politicians and their governments made a mess of the war, but the American defense industry has profited immensely from this twenty year war. 

America has always been an isolationist country. It did not pursue any territorial ambitions like other world powers before it. America became a super power without occupying any new lands. It was a reluctant participant in both the world wars. It carried the mantle of world leadership due to its military power and economic heft.

So, it is the industry of America which will keep it going when perhaps its politicians have few cards left to play. However, new players will emerge which will keep the supply chains of the world going. At the moment China does not look like it will be one of those players. Its current behavior has not won it any trust around the world.

Countries on which the mantle will fall could be India, Vietnam Mexico, Brazil, Bangladesh, etc. More could join the club. These countries could, along with the US, jointly ensure the smooth operation of the global supply chains.

During the pandemic the world realized that it was too dependent on one country for all its needs. From hairpins to medicines. When Chinese industries closed due to the pandemic, the world suffered as supply chains were disrupted.

As a result, the manufacturers of the world have begun to disperse their supply chains across the world to avoid bottlenecks and disruptions. Many production hubs will emerge as a result. The above mentioned countries are only the starting point.

The way forward would be a multipolar world order still dominated by America. No one country will be able to dominate the supply chains as it has happened in the recent past. The world has learnt it lessons. China will not be the workshop of the world. Many countries will be linked in the new supply chains.

Products will be assembled at different places and then shipped to their final destination. Technology will become redundant at a rapid pace and hence, innovation will be the key. The countries which are able to innovate the most will be the economic powerhouses.

In the post pandemic world there will be many economic mini superpowers. They will control a substantial part of the world trade and manufacturing. But competition will be fierce. For the last three decades China had a monopoly in manufacturing. No country could compete with China for scale. That is now past. In the future there will be many players which will take China’s place. Dispersed and distributed supply chains will be the norm, and world trade will that much smoother as a result.         

Afghanistan - Shift of Focus

Permit me to start this article with the same sentence as the earlier one.

The more things change, the more they remain the same. What has unfolded in Afghanistan is mind boggling. It has stunned the entire world.

The die was already cast when Obama had declared that America will withdraw its troops from Afghanistan. The return on investment did not justify America staying invested in Afghanistan politically.

The reason the US came into Afghanistan was to look for the perpetrators of 9/11. This however morphed into a bigger mission to bring some order to Afghanistan after the Russians left. The US hoped to establish a democratically elected government in the country so that Afghanistan stopped being a breeding ground for fundamentalists.

But like all the powers before it, the US underestimated the difficulties of bringing democracy to the clan led provinces. Western democratic ideas have never taken root in Afghanistan. The clan and tribal leaders guard their fiefdoms fiercely. There was an attempt to institute the Loya Jirga, meaning the council by the clan leaders, but it broke down due to bickering by the leaders themselves. 

The geography is also difficult. There is little communication between the government in Kabul and the isolated provinces in the mountain valleys.

Pakistan has played a role in the failure of western powers to have a semblance of a rule of law in Afghanistan. One of the reasons Pakistan is so obsessed with Afghanistan is because the military perceives Afghanistan as their own strategic backyard.

Pakistani military thinks that if ever they have to withdraw against the Indian army, Afghanistan will provide them with the strategic depth. ie. Territory into which they can pull back and consolidate. Pakistani establishment, read, the military, would like Afghanistan to stay politically unstable, all the time so that they can make deals with the indivisual clans and keep the eastern part of the country accessible.

A legitimate, elected government in Afghanistan will hardly allow a foreign army to use its territory as a strategic asset.  So Pakistan played a double game. After the Russian withdrew, the American came into Afghanistan to clean up the country and to establish some sort of a political system.

Pakistan was roped in as an ally in this mission. This suited Pakistan who fleeced the Americans of millions of dollars but always supported the Taliban clandestinely. Why the Americans persisted with their mission knowing the Pakistanis were playing them is a mystery. After Osama Bin Laden was killed in Abottabad, Pakistan, it was expected, the Americans will withdraw. But, that did not happen. The Trump administration started the draw down in Afghanistan and Biden completed it, albeit a bit hastily.

The Taliban have taken over the entire country. The speed with which they captured the provinces points to some kind of a collusion between the Ashraf Ghani government and the Taliban.

This time the Taliban have toned down their rhetoric and their behaviour. Most of the democratic countries have reached a initial understanding that they will isolate Afghanistan if the Taliban do not respect human rights and if they allow the country to be used as a base to threaten other countries.

This time the political analysts have a different take on the Taliban. They think the Taliban want political recognition from the world to rule Afghanistan legitimately. How this pans out will have to be seen.

All nations around Afghanistan are worried. China wants to strike deal with the Taliban as it wants to exploit the mineral resources in Afghanistan, but is worried that Taliban might take an exception to the way they are persecuting Uyighur Muslims in Xinjiang, and start fomenting trouble in the region.

One of the fallout of the Taliban takeover of Afghanistan that has been predicted, is Pakistan will now control the Taliban to some extent. They could have some influence in the way the Taliban run the country. But this time the Taliban are careful to keep their distance from Pakistan. They do not want to be seen to be controlled in any way by Pakistan and the ISI.

 This may suggest the fabled theory of the Pakistanis regarding Afghanistan being their ‘strategic depth’ against India goes out the door. While Pakistan played a double game in helping the Americans to fight their war on terror in Afghanistan, and helping the Taliban to survive the American onslaught at the same time, they siphoned off millions of dollars from the US in the name of being a ‘Frontline State against terror’

Whatever happens in the Af-Pak region will definitely affect India, however it seems the tactical importance that Pakistan enjoyed as a ’frontline state against terror’ the last several years may be on the wane.  The Americans are out and as of now, there does not seem to be anyone willing to take their place.

The Taliban will probably be unwilling to have an exclusive relation with any country. Their grip over Afghanistan is still tenuous as the former Vice President Amrullah Saleh and Ahmed Masood have put up a resistance movement from the Panjshir province.

If the Taliban, or whatever dispensation comes to power in Afghanistan can bring some stability to the region, India can then look at other regions which have been neglected all these years. The Indo-Pacific, lately, has been getting increasing attention of the MEA, however, India needs to do more in the region to counter China.

This shift of focus will be a first for the country. Since independence India has been completely engrossed in focusing on the Pakistan China Bangladesh axis. India now has mended its fences with Bangladesh. However, Pakistan, and an increasingly aggressive China, has prevented it from looking in any other direction for its security. This can change if Afghanistan becomes politically stable. Even the US could shift its focus to the Indo-Pacific once its washes its hands off Afghanistan.

Thus, we could a see a shift of focus from the Middle East and Af-Pak regions which have been the geo-strategic chess board for global powers since the end of WWII, to the Indo-Pacific where the great game could be played all over again.

Afghanistan - Back to Square One

 

It is uncanny how, the more things change, the more they remain the same. Case in point is the situation in Afghanistan.

Never the most stable of countries, Afghanistan has defied the stereotype country politically and in all other aspects. Historically the country has been a bit of a pariah. It could never be convincingly conquered by any of the big powers. Britain at the height of its power had a considerable presence in Afghanistan, but hey never could administer it say, like say India.

Afghanistan was always ruled by clans. These clans guarded their independence and their fiefdoms fiercely to say the least. None of the invading powers could convince the clans that their rule was better than what the domestic groups administered. The clans had their own private armies who were fiercely loyal to the leadership but often were bought by money.

Money was made by taxing people and selling agricultural produce. Drugs were also traded to supplement the income. In fact, most of the invaders were fought off by raising money this way.

After the British came the Russians. They too floundered in this country. The cold war was at its height.

Afghanistan has a lot of mineral resources which is part of the reason why the powers that be tried to invade it in the past. However, if the clan chiefs knew this fact, they probably were not interested. Exploiting the resources meant bringing in technology which only the big powers could provide. It was inevitable the powers would try to dictate the terms to the local chiefs. The chiefs did not want to relinquish their power. So, no foreign powers could ever enter Afghanistan.

When the Russians came into Afghanistan the American establishment typical of the cold war mentality, feared that country would become communist. As the Americans could not directly intervene in Afghanistan, a political via media was found. Pakistan was to act as a conduit for American help to the freedom fighters. This was the Taliban. The Americans wanted Afghanistan to be turned into the Russian Vietnam.

However, things seldom go according to plan, especially in clandestine campaigns. The Americans succeeded in ousting the Russians from Afghanistan but the Taliban and the Al Qaeda were left without an enemy. A political vacuum which nobody was willing to fill, not even the Americans. The result was chaos. Now the local commanders had money and weapons provided by the Americans through the Pakistanis.

Matters would not have come to a head if Saddam Hussain would not have invaded Kuwait. But he did and set a chain of events which would culminate in the US going into Afghanistan again. As American army poured into Saudi Arabia in response to the Iraqi invasion of Kuwait, one of their proteges did not like it, to say the least. This protégé was none other than Osama Bin Laden, He did not like the Americans stomping on the holy land of the Muslims. Bin Laden, a Saudi Arabian had fought against the Russians in Afghanistan with American help. Now he turned against the Americans. His revenge was 9/11.

The Americans came back to hunt for the September 11 perpetrators. The Pakistanis were supposed to help them.  The Al Qaeda and Taliban were hunted and made ineffective. However, the top Al Qaeda and Taliban leadership were now friends of the Pakistanis. Pakistan’s position was akin to ‘hunt with the hounds and hide with the hare’ as most of the Taliban leadership took refuge in Pakistan (where Bin Laden was later killed in a secret military operation). Some say that Bin Laden was given away by the Pakistanis to satisfy the American thirst for revenge.  

Bin Laden had become a powerless exile by the time he was killed. The mantle had already fallen on his next-in-line, Abu Musab Al Zarqawi.  Zarqawi wanted his own organization to fight the Americans in Iraq after Saddam Hussain’s death. He founded the ISIS or the Islamic State which Bin Laden had opposed earlier. So now the Al Qaeda had morphed into the Islamic State. The ISIS is mainly concentrated in the Iraq – Syria area, but American withdrawal from Afghanistan leaves the door wide open for them to spread their tentacles in this area and could make the American campaign in Iraq redundant.

The US withdrawal leaves the Afghan people in a bigger mess than they were in before the Russian invasion. With the ISIS in Syria and Iraq and the Taliban and Al Qaeda in Afghanistan, the whole of West Asian neighborhood could reap a grim harvest in the coming years.

Cyber Warfare - Issue on the Anvil

 

The recent news that the Mumbai electric grid shutdown in October 2020 was possibly an attack by Chinese state backed hackers was interesting and alarming at the same time. It has set alarm bells ringing because the incident shows that technology connected over any network can be easily rendered ineffective causing serious disruption. 

The US based company Recorded Future has reported that the cyber attack on the Mumbai electricity grid was possibly carried out by a hacker group, the Red Echo based on the Chinese mainland and were backed by the Chinese government, in other words the Chinese Communist Party. While this is not the first attack, it also will not be the last. As the internet becomes more powerful the threat of cyber warfare has gained currency among the national security establishments across the world. 

There are watchdogs around the globe. Private companies and organisations which continuously monitor the net for tell tale signs of cyber attacks. These entities keep a tab on who is doing what on the net. That China has a well funded cyber warfare program is known to all. It is not known how advanced or sophisticated their capabilities are. China has whole organisations controlled by the CCP or the military which are dedicated to enhancing the nation's capability in cyber warfare. Chinese state backed hackers have been stealing technology secrets from private companies as well as government agencies in a lot of countries. Even Russia was accused of running a misinformation campaign designed to help the Republicans in 2019 elections. Trump  allegedly was helped by this Russian interference in the American electoral process. Such sophisticated cyber attacks have now become common place.   

With the IOT (Internet of Things)- where things or devices talk and communicate with each other- expanding and coming more into use, the threat of cyber warfare is getting bigger by the day. Not only nations, but institutions, companies and indivisuals will also be facing this threat in the near future. One more report in the US in October 2020 had named a malware SlothfulMedia which was used by Chinese government hackers to spy on indivisuals and companies in India. Other Central Asian and Europesn countries were also targeted in this cyber attack.

It does not take too much guesswork to understand where things are headed. In case of a real war you can completely paralyse your enemy by attacking his Supply chain logistics, industrial production, transportation, financial system etc. In short a country can seriously destroy its enemy's ability to make war or even its ability to defend itself by disrupting its communication networks. Two can play the same game here. If your production and supplies are disrupted, all the soldiers and equipment on your borders are of no use as they cannot fight without support. The military forces of the world are heavy users of computers and electronics for communication. This is now proving to become their Achilles heel.  

For the foreseeable future cyber warfare is going to be a vital part of any nation's defence repertoire. Network centric warfare capability will be the key in gaining the upper hand in any conflict. Tanks and planes will still be important, but they will be controlled by intelligent networks.  This cat and mouse game of attacks and counter measures is just the beginning. It is not unlike the Big Game which was played between the Super Powers during the cold war. In the near future super intelligent college going teenagers would perhaps have more to do with this kind of a war than generals commanding large armies.    

Trump's Triumph

It has been  some time since the change of administration in the USA but Donald Trump is still in the headlines for one reason or the other. Not being a politician, the man is a political rarity. America's leadership has always been put under a microscope by other countries of the world for the simple reason that whatever happens on Capitol Hill and in the White House affects the whole world. 

Trump's 'America First' policy went directly against China's carefully controlled economic aggression on the world. He believed more in a quid pro quo approach. Unilateral concessions from the US were made conditional on the US getting access to markets it wanted. The signal was that the US was not a benefactor for all the sundry. The country most affected by this change in rules was China. China had extracted the most concessions from the US over the years and was flouting America's trade rules. This was stopped by Trump.  China was forced to negotiate a trade deal which would correct the balance of payments which were hither to in favour of China.  

Even on the foreign policy front Trump managed to rein in Chinese aggression. China was told very bluntly that its aggression in the South China Sea would not be tolerated. The Quad was backed by the US. This was a major achievement of Trump. The Quad (comprises USA, India, Japan, Australia) is becoming a potent force against any power which would want to compromise freedom of navigation in the South China Sea. 

China's  entry into Eastern Europe was stopped by the US trade retaliation. CEE (Central and Eastern European) countries like Latvia, Lithuania, Croatia, Poland and others along with the EU were given an offer by China wherein China would invest in these countries to increase trade with them. In fact a big group - named 17 + 1 i.e. 17 European countries and the plus one (China) - was created sometime in 2012-13. The project was later brought under the Belt and Road Initiative. However, like all Chinese big ticket projects this too was big on promises but was lacking in actual investments. The real spanner in the works was put by America, led by Trump. Trump began to impose tariffs on Chinese goods which disrupted all Chinese calculations. With its trade disrupted badly due to the pandemic and the US actions, China began to renege on its promises and paid lip service to their commitments to the 17 + 1 Group. Today many of the CEE countries have decided not to participate in this venture. The reason for China's failure are Trump's quid pro quo trade policies. 

After giving Greece millions in loans, China had pressurised her to stop an anti China resolution in the European Parliament regarding the Chinese actions in Hong Kong. This shows that China had an ulterior motive in striking a trade deal with the European Union. Trump's China centric trade policies brought into focus the way China was flouting international trade rules globally. 

Washington think tanks had already identified China as America's biggest challenge in the coming years. Trump's 'America First' policy sent a clear signal to the Chinese leadership that their blatant expansionism will not go unchallenged. 

Political commentators generally agree that Trump was a disaster for the US. Trump never observed the subtle nuances in his dealings as a leader of a country is expected to. He went after his objectives with hammer and tongs. His praises and admonishments on twitter were embarrassing to say the least. A career politician would not have been so brazen in his dealings with friend and foe and probably not as effective either. 

The one area of US foreign policy where Trump made all the right moves was its dealings with  China. The Biden administration has signaled that it will follow many of those policies. 

A mention has to be made of the one more change we have seen during the Trump period. The Abraham Accords that has brought Israel into the Middle eastern mainstream. These accords will have a far reaching effects in the years to come. 

The way Trump dealt with China and the rest of the world may not have been in accordance with the established protocols of maintaining international relations, but it has provided a possible road map to handle some of the problems of the Free world.  

 

Climate Change - Action now

 

The climate change issue has come back on center stage even as the corona vaccination drives roll out in the world and man's preoccupation with the pandemic reduces. The daily bread and butter issues facing the world have begun to rear their heads again.

Why has this issue cropped up lately? Since the early seventies it was known that mankind is polluting the planet with his industries and his automobiles. The matter was taken up but it was assumed that we have a lot of time on our hands to mitigate our wrongdoings since the industrial revolution. But in recent years it has become clear that man does not have much time to correct the problems facing the environment. Forest fires, unseasonal rains causing floods, a shift of the seasons and bouts of unpredictable weather has brought it home to humans that we may be already too late to take any concerted and effective action on climate change.

Some of the changes predicted by climate scientists in the last century are now coming true. Rising sea levels due to melting of polar ice. Loss of sea plankton due to rising water temperatures, frequent forest fires, unpredictable heat and cold waves and flooding due to excessive rains. The IPCC (The Intergovernmental Panel on Climate Change) predicts that the impact of temperature change of even two degrees will be considerable. Even if some areas benefit temporarily from rising temperatures, the overall impact of the change will be not be beneficial. 

In the last one hundred years the average temperature on earth has increased by about two degrees Fahrenheit. This may not seem to be much but the life on earth is remarkably sensitive to minute temperature changes. The economic impact of this change in teperature is going to be enormous over the years. Some islands in the Pacific will go under the water completely. Agricultural production will suffer with consequences for world food supply. Also animal husbandry and the meat industry including fishing will also be affected adversely. All over the world some of the more sensitive flora and fauna will face extinction. The change in temperature is going to have a profound impact on mankind. It could also cause new diseases as different viruses and other harmful germs find the climatic change favourable for their growth and survival.

Scientists also say that the warming is actually an indication that an ice age is coming. There is no time table for this prediction however as data is not conclusive enough to predict a time frame. However fossilised evidence, tree rings and coral reef analysis has helped scientists put togehter a picture which shows that an ice age had indeed followed a warming up of the average earth temperature. Warming up of the average temperature also means that the frost free or growing season for crops in colder latitudes will be longer. But this reducing of the frost season scientists say could cause more frequent crop diseases. 

Climate experts still do not know if we have passed the point of no return for climate change. Whether we still have time to reverse at least some of the mistakes of the past. There is also a divide between the rich and the developing nations on who should shoulder the responsibility and the considerable expenses involved in addressing this problem. The industrial revolution happened in the last century and was the reason why pollution increased exponentially. The developing and the poor countries think that they were never a part of the revolution and they hardly received any benefits from it.  Therefore the rich countries who benefitted from the revolution should pay for the cleaning of the pollution that was caused then. This political thug-a-lug has been a major roadblock in climate negotiations. 

With America back in the reckoning the climate dialogue has become meaningful again. A focussed approach and sincerety of purpose is what is expected from all the member countries if the accord is to succeed in implemeting the measures reccommended.  It remains to be seen if the rich countries pull their own weight and some more.  The scientist have said that there is no time to loose and that we already may be late in starting. Failure, though not an option anymore, would be a big embarrasment, and the stakes are very high.

The Perpetual Pandemic

 

The corona pandemic is now more than a year old. The WHO has reported more than 2 million deaths worldwide. Regardless of how it started and how it spread the question some people are asking is when we will be completely rid of it. The way this scenario has unfolded is really mind boggling. It has actually become difficult to imagine life without the corona virus. Humans of course eventually can get used to anything and any situation. So are we going to live in the shadow of this pandemic forever? It has shown itself to be adept at circumventing measures that are taken for its destruction.

It has mutated significantly in the UK, South Africa and Brazil. Some of the vaccines developed in the world are finding it difficult to prove their efficacy against the new strains. While it will help the scientists to learn more about the origins of the virus, tackling the new strains is fast becoming a priority. Data from the earlier days of the pandemic is not forthcoming.  Scientists are of the opinion that this virus is going to stay with us for a long time. Lock downs have already become a norm. The on and off policy regarding lockdowns are just government reactions to the unpredictable behavior of the virus. The world has had pandemics before this one but there is no data to analyze and draw conclusions. We are still shooting in the dark on this one.

The vaccine roll out has begun and the efficacy of the various doses made by different companies is still being studied. One ray of hope offered by most leading epidemiologists is that eventually humans will develop immunity for the virus and it will stop being as destructive as it is today. But this is only a hope. Also the time frame for this is not known. There is no precedent for this, so the answer is going to be difficult to find.

One day everyone in the world will be inoculated against the virus, but whether this will stop the virus is not known. Scientists say that we may have to live with the Corona virus for a long time. More variants of the virus are expected on a regular basis. Every year some humans on earth will be infected by this virus like any common cold or flu viruses which have been infecting humans for ages. Corona infections will be a routine in the future. Humans have to be ready for this new norm. Today it is the corona, tomorrow it could be some other virus.  The face mask and the distancing will be a permanent fixture of our social behavior.  In fact some experts are saying that we will have to forget about the way we used to live in the pre-corona days. The new norms are the new normal.  The post corona normal times have started.