Intelligence

Rising Powers:  The Changing
Geopolitical Landscape

The likely emergence of China and India as new major global players-similar to the rise of Germany in the 19^th century and the United States in the early 20^th century-will transform the geopolitical landscape, with impacts potentially as dramatic as those of the previous two centuries.  In the same way that commentators refer to the 1900s as the "American Century," the early 21^st century may be seen as the time when some in the developing world, led by China and India, come into their own.  

• The population of the region that served as the locus for most 20^th-century history-Europe and Russia-will decline dramatically in relative terms; almost all population growth will occur in developing nations that until recently have occupied places on the fringes of the global economy (see graphic on page 48). [6]



• The "arriviste" powers-China, India, and perhaps others such as Brazil and Indonesia-could usher in a new set of international alignments, potentially marking a definitive break with some of the post-World War II institutions and practices.



• Only an abrupt reversal of the process of globalization or a major upheaval in these countries would prevent their rise.  Yet how China and India exercise their growing power and whether they relate cooperatively or competitively to other powers in the international system are key uncertainties.

A combination of sustained high economic growth, expanding military capabilities, active promotion of high technologies, and large populations will be at the root of the expected rapid rise in economic and political power for both countries.  

• Because of the sheer size of China's and India's populations-projected by the US Census Bureau to be 1.4 billion and almost 1.3 billion respectively by 2020-their standard of living need not approach Western levels for these countries to become important economic powers.



• China, for example, is now the third largest producer of manufactured goods, its share having risen from four to 12 percent in the past decade.  It should easily surpass Japan in a few years, not only in share of manufacturing but also of the world's exports.  Competition from "the China price" already powerfully restrains manufactures prices worldwide.



• India currently lags behind China (see box on page 53) on most economic measures, but most economists believe it also will sustain high levels of economic growth.

At the same time, other changes are likely to shape the new landscape.  These include the possible economic rise of other states-such as Brazil, South Africa, Indonesia, and even Russia-which may reinforce the growing role of China and India even though by themselves these other countries would have more limited geopolitical impact.  Finally, we do not discount the possibility of a stronger, more united Europe and a more internationally activist Japan, although Europe, Japan, and Russia will be hard pressed to deal with aging populations.  

The growing demand for energy will drive many of these likely changes on the geopolitical landscape.  China's and India's perceived need to secure access to energy supplies will propel these countries to become more global rather than just regional powers, while Europe and Russia's co-dependency is likely to be strengthened.

Rising Asia
China's desire to gain "great power" status on the world stage will be reflected in its greater economic leverage over countries in the region and elsewhere as well as its steps to strengthen its military.  East Asian states are adapting to the advent of a more powerful China by forging closer economic and political ties with Beijing, potentially accommodating themselves to its preferences, particularly on sensitive issues like Taiwan.  

• Japan, Taiwan, and various Southeast Asian nations, however, also may try to appeal to each other and the United States to counterbalance China's growing influence.

China will continue to strengthen its military through developing and acquiring modern weapons, including advanced fighter aircraft, sophisticated submarines, and increasing numbers of ballistic missiles.  China will overtake Russia and others as the second largest defense spender after the United States over the next two decades and will be, by any measure, a first-rate military power.

Economic setbacks and crises of confidence could slow China's emergence as a full-scale great power, however.  Beijing's failure to maintain its economic growth would itself have a global impact.  

• Chinese Government failure to satisfy popular needs for job creation could trigger political unrest.



• Faced with a rapidly aging society beginning in the 2020s, China may be hard pressed to deal with all the issues linked to such serious demographic problems.  It is unlikely to have developed by then the same coping mechanisms-such as sophisticated pension and health-care systems-characteristic of Western societies.



• If China's economy takes a downward turn, regional security would weaken, resulting in heightened prospects for political instability, crime, narcotics trafficking, and illegal migration.

The rise of India also will present strategic complications for the region.  Like China, India will be an economic magnet for the region, and its rise will have an impact not only in Asia but also to the north-Central Asia, Iran, and other countries of the Middle East.  India seeks to bolster regional cooperation both for strategic reasons and because of its desire to increase its leverage with the West, including in such organizations as the World Trade Organization (WTO).  

As India's economy grows, governments in Southeast Asia-Malaysia, Singapore, Thailand, and other countries-may move closer to India to help build a potential geopolitical counterweight to China.  At the same time, India will seek to strengthen its ties with countries in the region without excluding China.  

• Chinese-Indian bilateral trade is expected to rise rapidly from its current small base of $7.6 billion, according to Goldman Sachs and other experts.

Just like China, India may stumble and experience political and economic volatility with pressure on resources-land, water, and energy supplies-intensifying as it modernizes.  For example, India will face stark choices as its population increases and its surface and ground water become even more polluted.  

Other Rising States?
Brazil, Indonesia, Russia, and South Africa also are poised to achieve economic growth, although they are unlikely to exercise the same political clout as China or India.  Their growth undoubtedly will benefit their neighbors, but they appear unlikely to become such economic engines that they will be able to alter the flow of economic power within and through their regions-a key element in Beijing and New Delhi's political and economic rise.

Experts acknowledge that Brazil is a pivotal state with a vibrant democracy, a diversified economy and an entrepreneurial population, a large national patrimony, and solid economic institutions.  Brazil's success or failure in balancing pro-growth economic measures with an ambitious social agenda that reduces poverty and income inequality will have a profound impact on region-wide economic performance and governance during the next 15 years.  Luring foreign direct investment and advancing regional stability and equitable integration-including trade and economic infrastructure-probably will remain axioms of Brazilian foreign policy.  Brazil is a natural partner both for the United States and Europe and for rising powers China and India and has the potential to enhance its leverage as a net exporter of oil.  

Experts assess that over the course of the next decade and a half Indonesia may revert to high growth of 6 to 7 percent, which along with its expected increase in its relatively large population from 226 to around 250 million would make it one of the largest developing economies.  Such high growth would presume an improved investment environment, including intellectual property rights protection and openness to foreign investment.  With slower growth its economy would be unable to absorb the unemployed or under-employed labor force, thus heightening the risk of greater political instability.  Indonesia is an amalgam of divergent ethnic and religious groups.  Although an Indonesian national identity has been forged in the five decades since independence, the government is still beset by stubborn secessionist movements.  

Russia's energy resources will give a boost to economic growth, but Russia faces a severe demographic challenge resulting from low birth rates, poor medical care, and a potentially explosive AIDS situation.  US Census Bureau projections show the working-age population likely to shrink dramatically by 2020.  Russia's present trajectory away from pluralism toward bureaucratic authoritarianism also decreases the chances it will be able to attract foreign investment outside the energy sector, limiting prospects for diversifying its economy.  The problems along its southern borders-including Islamic extremism, terrorism, weak states with poor governance, and conflict-are likely to get worse over the next 15 years.  Inside Russia, the autonomous republics in North Caucasus risk failure and will remain a source of endemic tension and conflict.  While these social and political factors limit the extent to which Russia can be a major global player, in the complex world of 2020 Russia could be an important, if troubled, partner both for the established powers, such as the United States and Europe, and the rising powers of China and India.  The potential also exists for Russia to enhance its leverage with others as a result of its position as a major oil and gas exporter.

South Africa will continue to be challenged by AIDS and widespread crime and poverty, but prospects for its economy-the largest in the region-look promising.  According to some forecasts, South Africa's economy is projected to grow over the next decade in the 4- to 5-percent range if reformist policies are implemented.  Experts disagree over whether South Africa can be an engine for more than southern Africa or will instead forge closer relationships with middling or up-and-coming powers on other continents.  South African experts adept at scenario-building and gaming see the country's future as lying with partnerships formed outside the region.

The "Aging" Powers
Japan's economic interests in Asia have shifted from Southeast Asia toward Northeast Asia-especially China and the China-Japan-Korea triangle-over the past two decades and experts believe the aging of Japan's work force will reinforce dependence on outbound investment and greater economic integration with Northeast Asia, especially China [7] .  At the same time, Japanese concerns regarding regional stability are likely to grow owing to the ongoing crisis over North Korea, continuing tensions between China and Taiwan and the challenge of integrating rising China and India without major disruption.  If anything, growing Chinese economic power is likely to spur increased activism by Japan on the world stage.

Opinion polls indicate growing public support for Japan becoming a more "normal" country with a proactive foreign policy.  Experts see various trajectories that Japan could follow depending on such factors as the extent of China's growing strength, a resurgence or lack of continued vitality in Japan's economy, the level of US influence in the region and how developments in Korea and Taiwan play out.  At some point, for example, Japan may have to choose between "balancing" against or "bandwagoning" with China.  

By most measures-market size, single currency, highly skilled work force, stable democratic governments, unified trade bloc, and GDP-an enlarged Europe will have the ability to increase its weight on the international scene.  Its crossroads location and the growing diversity of its population-particularly in pulling in new members-provides it with a unique ability to forge strong bonds both to the south with the Muslim world and Africa and to the east with Russia and Eurasia.  

The extent to which Europe enhances its clout on the world stage depends on its ability to achieve greater political cohesion.  In the short term, taking in ten new east European members probably will be a "drag" on the deepening of European Union (EU) institutions necessary for the development of a cohesive and shared "strategic vision" for the EU's foreign and security policy.  

• Unlike the expansion when Ireland, Spain, Portugal and Greece joined the Common Market in the 1970s and early 1980s, Brussels has a fraction of the structural funds available for quickly bringing up the Central Europeans to the economic levels of the rest of the EU.



• Possible Turkish membership presents both challenges-because of Turkey's size and religious and cultural differences-as well as opportunities, provided that mutual acceptance and agreement can be achieved.  In working through the problems, a path might be found that can help Europe to accommodate and integrate its growing Muslim population.

Defense spending by individual European countries, including the UK, France, and Germany is likely to fall further behind China and other countries over the next 15 years.  Collectively these countries will outspend all others except the US and possibly China [8] .  EU member states historically have had difficulties in coordinating and rationalizing defense spending in such a way as to boost capabilities despite progress on a greater EU security and defense role.  Whether the EU will develop an army is an open question, in part because its creation could duplicate or displace NATO forces.  

While its military forces have little capacity for power projection, Europe's strength may be in providing, through its commitment to multilateralism, a model of global and regional governance to the rising powers, particularly if they are searching for a "Western" alternative to strong reliance on the United States.  For example, an EU-China alliance, though still unlikely, is no longer unthinkable.  

Aging populations and shrinking work forces in most countries will have an important impact on the continent, creating a serious but not insurmountable economic and political challenge.  Europe's total fertility rate is about 1.4-well below the 2.1 replacement level.  Over the next 15 years, West European economies will need to find several million workers to fill positions vacated by retiring workers.  Either European countries adapt their work forces, reform their social welfare, education, and tax systems, and accommodate growing immigrant populations (chiefly from Muslim countries) or they face a period of protracted economic stasis that could threaten the huge successes made in creating a more United Europe.  

Growing Demands for Energy
Growing demands for energy-especially by the rising powers-through 2020 will have substantial impacts on geopolitical relations.  The single most important factor affecting the demand for energy will be global economic growth, particularly that of China and India.  

• Despite the trend toward more efficient energy use, total energy consumed probably will rise by about 50 percent in the next two decades compared to a 34 percent expansion from 1980-2000, with an increasing share provided by petroleum.



• Renewable energy sources such as hydrogen, solar, and wind energy probably will account for only about 8 percent of the energy supply in 2020.  While Russia, China, and India all plan expansions of their nuclear power sector, nuclear power probably will decline globally in absolute terms in the next decade.

The International Energy Agency assesses that with substantial investment in new capacity, overall energy supplies will be sufficient to meet growing global demand.  Continued limited access of the international oil companies to major fields could restrain this investment, however, and many of the areas-the Caspian Sea, Venezuela, West Africa and South China Sea-that are being counted on to provide increased output involve substantial political or economic risk.  Traditional suppliers in the Middle East are also increasingly unstable.  Thus sharper demand-driven competition for resources, perhaps accompanied by a major disruption of oil supplies, is among the key uncertainties.

China and India, which lack adequate domestic energy resources, will have to ensure continued access to outside suppliers; thus, the need for energy will be a major factor in shaping their foreign and defense policies, including expanding naval power.

• Experts believe China will need to boost its energy consumption by about 150 percent and India will need to nearly double its consumption by 2020 to maintain a steady rate of economic growth.



• Beijing's growing energy requirements are likely to prompt China to increase its activist role in the world—in the Middle East, Africa, Latin America, and Eurasia.  In trying to maximize and diversify its energy supplies, China worries about being vulnerable to pressure from the United States which Chinese officials see as having an aggressive energy policy that can be used against Beijing.



• For more than ten years Chinese officials have openly asserted that production from Chinese firms investing overseas is more secure than imports purchased on the international market.  Chinese firms are being directed to invest in projects in the Caspian region, Russia, the Middle East, and South America in order to secure more reliable access.

Europe's energy needs are unlikely to grow to the same extent as those of the developing world, in part because of Europe's expected lower economic growth and more efficient use of energy.  Europe's increasing preference for natural gas, combined with depleting reserves in the North Sea, will give an added boost to political efforts already under way to strengthen ties with Russia and North Africa, as gas requires a higher level of political commitment by both sides in designing and constructing the necessary infrastructure.  According to a study by the European Commission, the Union's share of energy from foreign sources will rise from about half in 2000 to two-thirds by 2020.  Gas use will increase most rapidly due to environmental concerns and the phasing out of much of the EU's nuclear energy capacity.

Deliveries from the Yamal-Europe pipeline and the Blue Stream pipeline will help Russia increase its gas sales to the EU and Turkey by more than 40 percent over 2000 levels in the first decade of the 21^st century; as a result, Russia's share of total European demand will rise from 27 percent in 2000 to 31 percent in 2010.  Russia, moreover, as the largest energy supplier outside of OPEC, will be well positioned to marshal its oil and gas reserves to support domestic and foreign policy objectives.  Algeria has the world's eighth largest gas reserves and also is seeking to increase its exports to Europe by 50 percent by the end of the decade.  

US Unipolarity-How Long Can It Last?
A world with a single superpower is unique in modern times.  Despite the rise in anti-Americanism, most major powers today believe countermeasures such as balancing are not likely to work in a situation in which the US controls so many of the levers of power.  Moreover, US policies are not perceived as sufficiently threatening to warrant such a step.

• Growing numbers of people around the world, especially in the Middle East and the broader Muslim world, believe the US is bent on regional domination-or direct political and economic domination of other states and their resources.  In the future, growing distrust could prompt governments to take a more hostile approach, including resistance to support for US interests in multinational forums and development of asymmetric military capabilities as a hedge against the US.

Most countries are likely to experiment with a variety of different tactics from various degrees of resistance to engagement in an effort to influence how US power is exercised.  We expect that countries will pursue strategies designed to exclude or isolate the US-perhaps temporarily-in order to force or cajole the US into playing by others' rules.  Many countries increasingly believe that the surest way to gain leverage over Washington is by threatening to withhold cooperation.  In other forms of bargaining, foreign governments will try to find ways to "bandwagon" or connect their policy agendas to those of the US-for example on the war on terrorism-and thereby fend off US opposition to other policies.  

Fictional Scenario: Pax Americana

The scenario portrayed below looks at how US predominance may survive radical changes to the global political landscape, with Washington remaining the central pivot for international politics.  It is depicted as the diary entry by a fictitious UN Secretary-General in 2020.  Under this scenario, key alliances and relationships with Europe and Asia undergo change.  US-European cooperation is renewed, including on the Middle East.  There are new security arrangements in Asia, but the United States still does the heavy lifting.  The scenario also suggests that Washington has to struggle to assert leadership in an increasingly diverse, complex, and fast-paced world.  At the end of the scenario, we identify lessons learned from how the scenario played out.