The threat of enfeebled great powers

Start with Europe: As with the 2010–2012 Eurozone crisis, the bloc’s fault line today runs through Italy. Drained over decades of dynamism and fiscally fragile, it is too big for Europe to save and too big to let fail. During the pandemic, Italians have felt abandoned by their European partners at a moment of existential crisis, creating fertile ground for populist politicians to exploit. The images of Bergamo’s Covid-19 victims being carried in body bags by military convoy to their anonymous, unaccompanied burials, will long remain etched in the Italian collective psyche.

Meanwhile, when addressing how to help pandemic-stricken member states, the European Union’s technocratic, ostrich-like elites lapse into the institutional alphabet soup — ECB, ESM, OMT, MFF, and PEPP — that has become their default language. The continent’s leaders have faltered and dithered, from European Central Bank President Christine Lagarde’s apparent gaffe in March — when she said that the ECB was “not here to close spreads” between member states’ borrowing costs — to the bickering over debt mutualisation and Covid-19 rescue funds and the reluctant, grudging incrementalism of the latest agreement.

Suppose, as seems likely, that the successful economies of the EU core recover from the crisis while those on the bloc’s periphery falter. No political integration project can survive a narrative featuring a permanent underclass of countries that do not share their neighbours’ prosperity in good times and are left to their own devices when calamity strikes.

The US’s decline, meanwhile, is over-predicted and under-believed. Even before the Covid-19 crisis, key American institutions signalled decay: The incontinent presidency of Donald Trump, a gerrymandered Congress, a politicised Supreme Court, fractured federalism, and captured regulatory institutions (with the US Federal Reserve being an outstanding exception).

Deep down, however, many of those Americans who see the decay reject the thesis of decline. They remain convinced that the country’s thick web of non-state institutions and underlying strengths — including its universities, media, entrepreneurial spirit, technological prowess as well as the global supremacy of the dollar — provide the resilience America needs to maintain its pre-eminence.

But so far, the world’s richest country has been by far the worst at coping with the pandemic. Although the US has less than 5% of the world’s population, it currently accounts for about 24% of total confirmed Covid-19 deaths and 32% of all cases.

In rapid succession, America’s credibility and global leadership have been buffeted by imperial overreach (the Iraq war), a rigged economic system (the global financial crisis), political dysfunction (the Trump presidency), and now staggering incompetence in tackling Covid-19. The cumulative blow is devastating, even if it is not yet fatal.

Many of these pathologies in turn stem from the deep and poisonous polarisation in US society. Indeed, Trump is now goading his supporters into insurrection. Come November, even the basic democratic criterion of holding free and fair elections could end up being flouted.

Of course, it would be alarmist and premature to see America’s far-reaching failures in the face of the Covid-19 crisis as threatening US democracy or nationhood. But clinging adamantly to American exceptionalism at such a time seems like dangerous denialism.

Finally, there is China. Since the time of Deng Xiaoping, the country has thrived on a simple, implicit agreement: Citizens remain politically quiescent, accepting curbs on freedom and liberties while the state — firmly under the control of the Communist Party of China — guarantees order and rising prosperity. But the Covid-19 crisis threatens that grand bargain in two ways.

First, the Chinese authorities’ terrible initial handling of the pandemic, and in particular their catastrophic suppression of the truth about the Covid-19 outbreak in Wuhan, has called the regime’s legitimacy and competence into question. After all, the social contract looks less attractive if the state cannot guarantee citizens’ basic well-being, including life itself. China’s true Covid-19 death toll — which is almost certainly higher than the authorities are admitting — will eventually come to light. So, too, will the stark contrast with the exemplary response to the pandemic by the freer societies of Taiwan and Hong Kong.

Second, the pandemic could lead to an external squeeze on trade, investment and finance. If the world deglobalises as a result of Covid-19, other countries will almost certainly look to reduce their reliance on China, thus shrinking the country’s trading opportunities. Similarly, more Chinese companies will be blocked from investing abroad, and not just on security grounds — as India has recently signalled, for example. Also, China’s Belt and Road Initiative — its laudable effort to boost its soft power by building trade and communications infrastructure from Asia to Europe – is at risk of unravelling as its pandemic-ravaged poorer participants start defaulting on onerous loans.

The Covid-19 crisis will probably hurt China’s long-term economic prospects. Widespread internal rumblings have begun, even if they are less evident externally. Domestic disorder is unlikely because President Xi Jinping could ratchet up repression even more ruthlessly and effectively than he already has. But the current social contract will seem increasingly Faustian to the average Chinese citizen.

Command of resources is a prerequisite for power. But, as international-relations theory reminds us, projecting power beyond one’s borders requires a modicum of cohesion and solidarity within them. Weak, fractured societies — no matter how rich — cannot wield strategic influence or provide international leadership, nor can societies that cease to remain models worthy of emulation.

We have been living for some time in a G-Minus-2 world of poor leadership by the US and China. Both have been providing global public “bads” such as trade wars and erosion of international institutions instead of public goods such as stability, open markets, and finance. By further weakening the internal cohesion of the world’s leading powers, the Covid-19 crisis threatens to leave the world even more rudderless, unstable, and conflict-prone. The sense of three endings in Europe, America and China is pregnant with such grim geopolitical possibilities. — © Project Syndicate

Arvind Subramanian, a former chief economic adviser to the government of India, is a non-resident senior fellow at the Peterson Institute for International Economics and a visiting lecturer at Harvard’s John F. Kennedy School of Government