The myth of the liberal international order

By Niall Ferguson Source:Global Times Published: 2018/1/11 20:28:39

Illustration: Liu Rui/GT

The phrase international order reminds me of the phrase Western civilization. As Indian independence icon Mahatma Gandhi wittily replied when asked about Western civilization, "It would be a good idea." The notion that international order exists or has ever existed seems highly questionable to me. The notion of a liberal international order is even more questionable because it is neither liberal, nor international, nor very orderly.

It is often claimed by political scientists that the liberal international order came into existence in 1945. The argument goes that American and British statesmen, having learned from the terrible mistakes of the 1930s and 1940s, decided to make the world anew by creating a series of remarkable international institutions: the United Nations, the International Monetary Fund and later the World Bank. According to this narrative, Donald Trump's election as US president in 2016 was a wrecking ball directed at the liberal international order created by the generation of 1945.

Yet this is a fairy tale. For one thing, there was nothing very liberal about the economic order that was established in 1945. It was devised by people - notably John Maynard Keynes - who had repudiated classical liberal economics and believed that international trade should be limited and capital movements controlled.

It was also not a truly international order. After 1945, it very quickly became a bipolar order that divided the world. There was nothing international about the Cold War. It was a battle between two empires and two ideologies, and the rest of the world's nations had to choose sides.

In short, the notion of a liberal international order, born in 1945, is a historical fantasy. The reality is that it was only in 1991 when the Soviet Union collapsed and the Cold War ended that it was possible to create a liberal international order. The era of truly free trade, truly free capital flows and large-scale migration across borders did not begin until the 1990s.

This age of globalization had two distinctive features. First, it was hugely beneficial to China. Second, the US bore most of the cost of underwriting the liberal international order in military and naval terms.

To understand this much more recent liberal international order, it is important to see that two things are indispensable to it. First, the most important relationship of that period, from 1990 to 2008, was the harmonious relationship between China and America - "Chimerica," as I called it in 2007.

The second indispensable foundation was what I and others called the American Empire. Although Americans are allergic to the notion that they run an empire, that is what they do. They just do it rather badly, at least by comparison with their British counterparts.

Neither Chimerica nor the American Empire was very stable foundations for a liberal international order.

What ended the liberal international order was not Trump; it was the financial crisis in 2008, the biggest financial crisis since the one that had begun in 1929. The financial crisis in 2008 did not end in depression like in the 1930s for two reasons: the extraordinary creative efforts of Western central banks and the huge economic stimulus program run by the Chinese government. Without those, the 2010s might well have been like the 1930s.

Yet these measures did not suffice to preserve the liberal international order. During Barack Obama's presidency, American voters became increasingly skeptical about the benefits of free trade, free capital markets and free migration. That was a process underway even before Trump became a presidential candidate. However, Trump knew better than any other would-be president to articulate popular disillusionment with globalization.

Trump's campaign in 2016 was an all-out assault on Chimerica - he repeatedly blamed China for the US-Chinese trade deficit - as well as, more generally, free trade.

In response to this American volte face, China has set out an alternative vision of international order, most obviously when President Xi Jinping made the case for globalization at the 2017 World Economic Forum at Davos.

What comes next? There are two possible scenarios. In one, China and the US collide over both commercial and geopolitical issues and fall into the "Thucydides Trap" about which Graham Allison has written in his book Destined for War.

The much preferable alternative is that China and the US recognize their common interests as great powers facing multiple threats, such as Islamic terrorism, nuclear proliferation, cyber warfare and climate change. But they will not be able to do so as a team of two. They will need the support of the other great powers represented as permanent members of the UN Security Council: Britain, France and Russia. A key issue for the next 10 years is whether Russia can be persuaded to work collaboratively with the other great powers.

The author is the Milbank Family Senior Fellow at the Hoover Institution, Stanford University, and a visiting professor at Tsinghua University. The article is an excerpt of his speech at Peking University.

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