Still Ours to Lead: America, Rising Powers, and the Tension between Rivalry and Restraint

Chapter Five: Shaping It, Not Breaking It: Economics, Energy, and Climate Change

chapter five shaping it, not breaking it Economics, Energy, and Climate Change 100 A different sea, and again the established and emerging powers encounter one another—in this case, with divergent interests and potential rivalry. During the cold war the Arctic was a zone of tense cold war rivalry. As the cold war receded, so too did the strategic significance of the Arctic.1 In recent years, though, new tensions arose. Rapidly melting Arctic ice has meant two things: new prospects for extracting energy resources from the Arctic waters and a new passageway for sea-borne trade.2 These changes have created a complex and, to some, a worrying political picture. Control of Arctic navigation confers important economic, energy, and military advantages. China is set on gaining access to the Arctic’s sea routes, as is India. There are also concerns that competition for energy reserves could become militarized. Russian saber rattling has aroused the greatest fears. In 2007 the Russian explorer Arthur Chilingarov led an expedition that planted a Russian flag on the Arctic seabed. Russia also has fired cruise missiles over the Arctic, resumed regular patrols of the region for the first time since the breakup of the USSR, and announced plans to augment its naval surface capabilities and submarine force for Arctic patrols. A Washington-based think tank, the Center for a New American Security, quips that “the only thing in the Arctic melting faster than the northern ice cap is the international comity.”3 In 2006 U.S. maritime strategy identified the potential for “competition and conflict for access and natural resources.”4 In 2008 the head of the Russian navy saw 05-2512-1 chap5.indd 100 1/8/14 3:51 PM Shaping It, Not Breaking It 101 the potential for a future “redistribution of power [in the Arctic], up to armed intervention.” Is the Arctic emblematic of the risks inherent in the interlinked topics of economic growth, the search for energy, and climate change—or are there other lessons here? Economic Growth, Interdependence, and the Rules of the Game Five years after the onset of the global financial crisis, there is a bewildering array of opinion about the state of economic play. Leading economists do not agree. These are differences of diagnosis, but there are also glass-half-full, glass-half-empty debates. The implication for our understanding of the role of American leadership in the world can already be discerned. Backdrop: The State of Economic Play No one disputes that there has been an important degree of recovery since the global financial crisis, but assessments diverge on the pace of that recovery.5 There are different assessments about the prospects for the emerging powers—especially the big three—to resume the fast-paced growth that characterized the past decade. Already Brazil’s growth has slowed dramatically, largely due to slowing imports from China, and new questions abound about the pace of Chinese growth over the next few years; and India is facing a serious slowdown.6 Economists also debate the pace at which the high-income economies will return to full health, especially as the eurozone crisis lingers.7 There is a glass-half-full, glass-half-empty debate, too, about the international financial reforms that have been put in place by the G-20 and its subsidiary bodies since the 2009 crisis. As noted in chapters 1 and 3, the major powers, the G-20, and international financial institutions did in fact perform well, and collectively, to stem the global financial crisis. Since then, the pace of performance has been slower, and however you look at the glass, it is pretty clear it is not full. Despite the range of debate among economists writing about the topic, all of them agree that there is a large amount of work to be done among the leading economies 05-2512-1 chap5.indd 101 1/8/14 3:51 PM 102 Of Rivalry and Restraint to coordinate or deconflict their macroeconomic strategies in the years ahead and to more deeply reform the financial sector to prevent another financial crisis.8 There is more consensus on the issues that relate directly to the topic of this book: the interaction between the rising powers and the established ones and the impact of those interactions on the future of the global economy. First, it is clear that, if anything, the global financial crisis resulted...