The Second World
How Emerging Powers Are Redefining
Global Competition in the Twenty-first Century
by Parag Khanna
Randomhouse Trade Paperbacks,
EU expansion is a gamble more expensive than America's war in
Iraq - but one that is actually paying off. "We purposely
make the EU poorer each time we expand," a sprightly Eurocrat
from Lithuania" explained in a Brussels pub crowded with
multilingual Europhiles. "But the stability we spread can
hardly be measured."
EU Commission official
We don't admit it, but [EU] expansion
stabilizes our population decline while increasing the labor pool.
Because Latin America's resources have always served the developed
world, its own underdevelopment was integral to the rise of world
Peace cannot be had until the civilized
nations have expanded in some shape over the barbarous nations.
None of the forty governments America has overthrown in Latin
America since 1898 became democratic - quite simply because the
plan was to implant democracy in form only. In the tension between
opening markets and spreading democracy, imperialism always won.
John Foster Dulles
Do nothing to offend the dictators [in
Latin America]. They are the only people we can depend on.
Within its population of close to two hundred million, Brazil
maintains the Southern Hemisphere's melting pot. It is at once
the largest African country after Nigeria (with African descendants
centered in coastal Bahia), the largest Lebanese country after
Lebanon, the largest Italian country after Italy, and the largest
Japanese country after Japan.
China portrays African states as its partners, not as mercy cases,
and many Arab and African governments enthusiastically speak of
a "China model" of closed regimes with open economies...
China's comprehensive packages of assistance, investment, professional
training, and doctors dispatched throughout Africa demonstrate
a fraternal spirit of "doing what it can," as opposed
to the Western-style economic "shock therapy." China
has canceled most African nations' debts, provided soft loans,
and increased imports from Africa by a factor often, moves that
compete with and undermine Western aid policies that are increasingly
perceived as ineffective. Billions of dollars in Western aid have
failed to build a railway network in Nigeria or power grids in
the Horn of Africa as quickly as China did. When Western agencies
pulled out of the Horn of Africa during the Eritrea-Ethiopia war
in the 1990s, China built Ethiopia's Takazee Dam on the headwaters
of the Blue Nile; it now generates hydropower for the region.
By 2005, Israel had quietly become China's second-largest provider
of weapons behind Russia, including antiradar drones and air-to-air
missiles- - even though China in turn sells missiles to Iran,
ironically boosting their target range to include Israel. China,
in return, is investing in expanding Israel's ports to become
its hub for export across the Mediterranean into Europe.
Tiny Qatar, which controls a nearly eternal supply of natural
gas, serves as the forward headquarters of America's Central Command
(CENTCOM) and has even abolished its own military forces to emphasize
its reliance on the United States. The longest military runway
outside the United States points directly at Iran.
The minuscule island monarchy of Bahrain ... now hosts America's
Thousands of burly ex-military security contractors ... patrol
[Persian] Gulf installations like a network of praetorian guards.
Their exorbitant fees are, for the sheikhs at least, merely incidental.
If the United States were to want to depose any of its new micro-allies,
it would ironically have to pay off these Americans first to get
Both Europe and China have quietly moved into the [Persian] Gulf
through energy markets and investment deals. Europe has established
a free trade area with the Gulf Cooperation Council, while Arabs
increasingly deposit their oil wealth in European banks (and price
it in Euros), list their companies in London instead of New York,
and buy Airbus aircraft for top-rated airlines such as Emirates
and Gulf Air.
Asians consume far more Gulf oil (which meets 70 percent of their
demand) than North Americans.
Saudi Arabia, Bahrain, and Qatar together account for close to
70 percent of OPEC oil production.
WTO rules on money laundering are conveniently neglected to keep
the [Dubai] real estate market soaring with cash from Russia,
Iran, and the Afghan drug trade. More recently, it has also become
a transit zone for antiquities stolen from Lebanon and Iraq.
Dubai represents the union of the first and third worlds at their
geographical meeting point: the knowledge and technology of Europe
combined with the limitless labor pool of Asia. With virtually
free labor, billions of dollars of fresh and recycled money, and
unclaimed desert spaces, Dubai is set to triple in size by 2015.
A half million citizens of Dubai live at arm's length from the
rest, with intermarriage with foreign nationals considered taboo;
hundreds of thousands of expatriate professionals from Ireland
to India are law-abiding residents; and over a million guest workers
are a case study in postmodern slavery for the globalization era.
America has ruled the waves since its seizure of the Philippines
from Spain a century ago, and its Pacific Command (PACOM) is by
far its largest military force, greater than all of the others
combined and capable of sinking all the rest of the world's navies
Asia has the oldest cultures, the most people, and, by certain
measures, the most money of any region in the world. Asia is shaping
the world's destiny - and exposing the flaws of the grand narrative
of Western civilization in the process.
East Asians' cultural proclivities called for high savings rates
and good education. Their ability to protect domestic sectors
with export-led growth created enormous wealth and provided an
alternative style of capitalism that appealed to the next wave
of Asian dynamos, including China, Malaysia, and Vietnam... Previously
denigrated as tantamount to Marxism, government interference in
the economy is viewed as an important counterpoint to laissez-faire
economics in East Asia. Since the 1997-98 financial crisis, the
Asians' explicit goal has been to shun the IMF, whose onerous
conditionality made it a tool of the U.S. Treasury." After
the crisis, Asians rebounded by adopting fiscal discipline and
global market standards-but without sacrificing the centrality
of government. While in the West government is seen as stifling
innovation, East Asian governments today are heavily reinvesting
their massive capital liquidity in innovation.
China and Japan, often viewed as eternal antagonists, are in fact
East Asia's economic co-pilots. Together with Singapore and South
Korea, they hold over two-thirds of the world's foreign-exchange
reserves, valued at over $2 trillion (held mostly in U.S. dollars).
Since the 1950s, Tokyo, Taipei, Seoul, and Shanghai have also
become global cities, annually channeling billions of dollars
of investment inward into their respective countries and around
the region. Each is so powerful that they are better understood
as "region-states," cities that operate like business
units, as connected to the global economy as their own countries,
while increasingly linked into a growing Asian network of economic
nodes irrespective of political and cultural distinctions.
The "Asian values" of unified leadership, consensus,
and social harmony could hardly be more discredited than American
democracy, capitalism, and individualism today, multiplying the
alternate models that exist for the rest of the second world.
China is so confident in America's lack of appeal that U.S. presidential
elections are televised live, perhaps for entertainment. An American
Idol-style program for Chinese youth rewards know edge of English
idioms with miniature Statue-of-Liberty torches-without even a
hint of irony. China doesn't bother to release political prisoners
to appease the United States anymore. "We see how materialism
has led to overconsumption and the erosion of American democracy,"
a Chinese student leader of a Party youth organization argued.
"What we want is governance by consent and the rule of law."
The West's democratization efforts have hit a wall even higher
in East Asia than they have in the Arab world. Western scholars
predict that economic openness will lead to democratization, but
not only do Asian governments collude with elites to prevent any
challenge to their control over public goods and the law, but
democracy is even less in demand because many Asian countries
actually have good leaders who do not want to become the prince
of a Confucian maxim who is wrong but not contradicted, thus bringing
ruin to his country.
The "Asian compact" features
open societies but closed polities, restoring democracy to its
place as a means to an end - not the highest virtue, but just
one agenda item among many. It is ironic that the West's great
rival should come from a Confucian-based meritocracy of elites,
since this idea is firmly rooted in Plato's Republic, which calls
for rule by wise philosopher kings. Singapore and Malaysia's liberalizing
quasi-democracy is the preferred East Asian model today. There
are opposition parties and elections, but not for the highest
office. Succession proceeds by selection, not election. This collective
egocentrism prevents the state from being hijacked by majority
ethnic group interests, which would lead to the unraveling of
multiethnic states like Malaysia. Single-party leadership has
made the governments of Malaysia and Singapore far more accountable
and responsive to their people than that of the Philippines, where
each week brings fresh coup rumors against the democratically
elected but illiberal government. From Thailand to Taiwan, democracy
has resulted in winner-take-all systems with constant extralegal
maneuvering, impeachments, and coups. Thailand's democracy is
like its boxing, in which fists, feet, knees, and elbows are all
fair game, and democratic Indonesia's political instability and
corruption hardly make its system admirable to others. "Western
democracy is a waste of our time," spat a Malaysian diplomat.
East Asian communitarian traditions also
challenge American notions of human rights by prioritizing social
and economic rights over civic and political rights, justifying
the denial of constitutional protections of individual liberty
and free speech. The early Confucian, scholar Mencius argued that
violating the right to food and material well-being is a greater
crime than denying political rights. Humility, and compassion
... not flamboyance and egoism, are the cherished virtues. In
Confucian cultures, the family name comes first, then the given
name. Filial piety is a cherished and legally enforced principle
in numerous East Asian countries, and many believe that the ideal
society is structured like a family rather than based on individuals."'
Children are much more a center of family attention as well. "Because
of the one-child policy in China, the child is synonymous with
hope for the future," explained a Beijing intellectual, highlighting
the effort he puts into managing well-rounded social, musical,
and athletic activities for his only son. Like Europeans, East
Asians focus more on subsistence and economic equality, rights
that are far more enshrined in the European legal tradition than
in the American. The German constitution, with provisions for
health care and education, was the template for Korea. Lifetime
employment is still taken very seriously and is cherished across
East Asia; for the region's migrant workers, employment is far
more important than citizenship. State-sponsored poverty eradication
funds demonstrate a commitment to the redistribution of wealth.
Asians want to use globalization to build a middle class, not
to erode it, as is happening in the United States. They board
the globalization plane, but with their seatbelts on. And on that
plane, they often practice tai chi stretches together, hundreds
of hands moving in synchronization all through the cabin, sharing
the joys of flying.
Asian values too have their flaws. "In
some countries, the progress of the few has been used immaturely
to mask inadequate improvements in the quality of life for many
more," conceded the Malay-Chinese academic. Confucianism
has certainly not proved to be a bulwark against Maoism and Marxism
either, which from China to Cambodia to Vietnam claimed close
to a hundred million lives in the past fifty years alone. Organized
criminals operating in China, Taiwan, and Japan are hardly modest:
Their ruthlessly efficient drug, weapon, and money-laundering
operations make American gangs seem amateurish. And paternalistic
privilege in the Asian state-business nexus is widely abused,
with rather loose interpretations of the Confucian duty to help
family and friends by personal-not professional-means. Yet even
these flaws have inspired more confidence in Asians' own process
of trial and error. "Now that we have economic growth and
social stability, there is no more excuse to not have responsible
leaders, police forces, and business executives," he continued.
But guided by the Confucian idea of reciprocity between rulers
and the ruled, even Western-educated elites in Malaysia, Singapore,
and China remain loyal to this hierarchical system, which preserves
both stability and their personal interests.
Except for a few segregated twenty-first-century oases of development,
India is almost completely third-world, most of its billion-plus
people living in poverty.
India's bonanza of IPOs, impressive corporate profits, and billionaires
galore show the dynamic potential of its private sector, but its
growth will remain spectacularly uneven until the government catches
up-perhaps over the next two decades-with its promises of infrastructure
development. India's continued high population growth ensures
that even with high economic growth it will remain the poorest
large country in the world for decades to come. Though agriculture
constitutes only 30 percent of the economy, seven hundred million
people depend on seasonal monsoons and harvests-yet India's groundwater
is depleting rapidly. Unable to pay their debts, many farmers
have committed suicide, while indentured servitude continues in
many backward areas.
It could be argued that China is a freer country than democratic
India: Literacy is far higher, the poverty rate far lower. Also,
it takes longer to start a business in India, one-third as many
Indians have Internet access, and only one-fifth as many have
cell phones. India's democracy may never have experienced a famine,
but over half of India's children are malnourished. Because most
Indians lack economic freedom, other freedoms are that much more
difficult to enjoy. The difference between India and China is
thus not just the time lag between the advents of their current
economic reform eras but also a fundamental matter of national
organizational ability. Even if India rises, it will be according
to Chinese rules.
Singapore, Malaysia, and Brunei as the wealthiest partners; Thailand,
Indonesia, and Vietnam as economic and strategic assets; and Burma,
Cambodia, Laos, and the Philippines as third-world clients. With
all of them, China is granting greater market access and sustaining
trade deficits (which have brought record profits to ASEAN businesses)
in exchange for raw materials, defense agreements, and diplomatic
pledges to lean its way.
Mahathir bin Mohamad and his advisers were convinced that globalization
was dangerous unless it was steered. During the Asian financial
crisis, they bucked the international strictures that ravaged
the Thai and Indonesian economies, instead imposing capital controls
to keep the Malay ringgit afloat. As second-world leaders increasingly
realize that globalization requires strong management to avoid
uncontrollably exacerbating existing disparities, they are more
likely to emulate Malaysia than Argentina.
Malaysian euphoria over Islamic revolution withered as Iran sank;
viewing the Islamic modernism of the Gulf as materialistic and
corrosive, they invented Islam Hadhari ("Civilizational Islam"),
which emphasizes social development, just leadership, moral integrity,
personal freedom, environmental protection, and scientific education.
Mahathir [bin Mohamed] never believed that democracy was worth
the price of destabilizing the country's fragile ethnic balance,
and most Malays agree, becoming more supportive of a strong state
even as they become wealthier.
Jakarta's armored ministries are the most visible symbol of a
military-government nexus that acts as a postcolonial colonizer
in its own country. For decades, the strongman Suharto and his
nonaligned "New Order" regime focused more on profiteering
than sovereignty, placing his children at the helm of numerous
military-commercial monopolies. With only 12 percent of the country's
budget derived from tax revenue, the military's for-profit ventures
(comprised of some fifteen hundred companies) operate with impunity
across Indonesia's semi-autonomous regions." Unlike in Thailand,
where military rule brought limited modernization and a strong
state, since Indonesia's independence the military has been so
preoccupied with maintaining its economic stakes that stable civilian
government has been an afterthought. It has been difficult enough
to remove the military from leadership; extracting it from the
country's real estate, timber, and mining industries, to name
a few, has proven impossible - not that it has really been tried.
Chinese front companies have raped the forests of Borneo and Kalimantan,
which have half-disappeared. Indonesia's very ecosystem is now
threatened, home to the highest number of endangered species following
Burma (renamed Myanmar by its reigning junta regime) has been
an isolated, antiquated, and underdeveloped society for decades,
but its location on the Bay of Bengal makes it a crucial strategic
littoral for China circumvent the Straits of Malacca. Since 1988,
the military-corporatist clique known as the State Law and Order
Restoration Council (SLORC) has turned the country's British and
then Japanese colonial order into the world's only militant Buddhist
state. In 1997, the junta renamed itself the State Peace and Development
Council; a decade later, it is hard to tell the difference. In
2007 it unveiled a new capital city halfway between Yangon and
Mandalay, allegedly to mark the establishment of its dynasty,
as past Burmese kings have done, and yet suffered crippling protests
by thousands of monks and citizens due to its absurd economic
policy. The SLORC sustains its rule by fueling perceptions of
an ongoing external threat, yet the principal threat to Burma's
autonomy comes from China, the power the regime welcomes most.
Like Sudan and Uzbeldstanrurma's diplomatic
isolation makes it a willing Chinese client state. Drug production
and trafficking earn the SLORC hard currency to buy Chinese military
hardware, yet what Burma gets in return is not just Chinese diplomatic
support but also the Chinese themselves... The untracked seasonal
migrations of Chinese into northern Burma via the road, rail,
and river channels of the Irrawaddy Corridor have created a minority
(in many cases with historical family links) that will be able
to make legal claims to rights beyond residency. Intermarriage
and Chinese land acquisition have resulted in entire villages
in Burma's north becoming Chinese-populated, with all signs in
Chinese. In Mandalay, Chinese firms build large, bland hotels-not
to prepare for Burma's opening to the world, but for Chinese visitors,
whose numbers show no sign of ebbing.' Some already refer to Burma
as "Yunnan South" after the once restive southern Chinese
province on the Burmese border. Burma is an integral part of China's
strategy to help its third-world interior regions such as Yunnan
catch up with the booming coast. As part of this strategy, China
has virtually economically annexed its southern neighbor. China
has bought up most of Burma's timber and pillaged its forests,
purchased and plundered its gem deposits, and plans to acquire
6.5 trillion cubic feet of Burmese natural gas over the next thirty
years, much of it pumped via pipeline from Sitwe to Yunnan. The
border between China and Burma hasn't changed, and no shots have
been fired, but Burma has all but become a Chinese province.'
China has easily outmaneuvered ASEAN's
pressure on the junta in Burma, which is still a fellow member,
and thwarted U.S. and EU sanctions as well. China could potentially
suffer blowback in Burma, however. If China doesn't do more to
benefit the Burmese themselves, rising resentment could lead even
the heartless junta to construe China as a threat rather than
a lifeline. Always traveling in tandem,-drugs and disease also
flow in greater volumes from Afghanistan through China into the
Golden Triangle and back, spreading addiction and AIDS. Southeast
Asian youth are now hooked on yaba, a drug that keeps them perpetually
alert. The highest AIDS infection rates are also in Thailand,
Cambodia, and Burma, the same countries that export the most sex
workers to China and elsewhere. For organized smugglers, people
and drugs are equally lucrative commodities, and China is no more
capable of policing its vast borders than Europe or the United
States are. Finally, as if the region's dissipated civil wars
did not leave enough small arms, China makes sure there remain
enough weapons and ammunition for any criminal or insurgent cause
that should arise-guns and grenades that could eventually find
their way back onto Chinese streets.
As the source of both South and Southeast
Asia's major river systems, China has the luxury of damming the
mighty Mekong River for hydroelectric power generation while using
it to transport goods downstream to the five hundred million Southeast
Asians whose livelihoods depend on its flows. Though Chinese dams
dramatically affect the Mekong's and its tributaries' water levels
in Burma, Thailand, Laos, Cambodia, and Vietnam, China accepts
no criticism for its manipulation of the river.' What remains
of the Mekong when it reaches Laos allows for a small dam to generate
electricity, which is then sold to Thailand for cash. For the
people of Indochina's third-world nations like Burma, being downstream
from China doesn't make life any easier.
Thailand's former prime minister Thaksin Shinawatra
Democracy is just a tool ..... The goal
is to give people a good lifestyle, happiness, and national progress.
The United States' share of the world economy has fallen from
50 percent to 25 percent since World War II.
Not only are China and Japan the two largest holders of U.S. dollar
reserves, but for the first time in history, the world's main
reserve currency belongs to a debtor nation - and one indebted
to its rivals.
Though the world has several major currencies, there are three
whose value all are constantly watching: the U.S. dollar, the
Euro, and the Chinese renminbi. The more countries and investors
diversify to the Euro, the less the United States can finance
its deficits and costly military ventures.
Because America's debt payments already exceed the investment
it receives, it is living beyond the wealth saved for the next
generation, actually making the country poorer.
The super-rich live in economic bubbles, contributing as much
to other countries' economies as their own, with the top 130,000
individuals earning as much as the bottom 40 percent of the entire
population of three hundred million.
America is ceasing to be a middle-class nation, becoming instead
a classic second-world combination of extremes. For three decades
now, America's working class has seen no increase in its wages
in real terms, its share of the economy dwindling even as its
One-fifth of America's children grow up in poverty, with the total
poor population close to forty million.
Richard G. Wilkinson, 'The Impact of Inequality: How to Make Sick
Societies that tolerate the injustices
of great inequality will almost inescapably suffer their social
consequences: they will be unfriendly and violent, recognized
more for their hostility than their hospitality.
America has the highest incarceration rate in the world with a
rising number of life sentences. America, not China, is the world's
largest penal colony. And together with Iran, Saudi Arabia, and
China, America's death penalty - odious to most of the developed
world - contributes to 80 percent of the world's executions.
American democracy appears to work better in theory than in practice.
As populist politicians from the South gained political clout
in Washington, they imported their aristocratic, dynastic, and
underhanded ways, in which name recognition matters above all
A two-party system based on coastal versus heartland geographic
loyalties ensures that / there is little effort at power-sharing
and coalitions; instead, political ' competition results in permanent
gridlock and gerrymandering. The parties are fund-raising shells
with a veneer of semantics, promoting candidates not as individuals
but as agents of their corporate interests, which have an invisible
role in writing pivotal laws related to tax, energy, food safety,
and other policies.
Like Russia's oligarchs, the financial scandals that have beset
corporate America reveal a system of monopolistic capitalism that
reduces distinctions between public and private.
America's Patriot Act violates five of the ten cherished amendments
of the Bill of Rights: freedom of speech and assembly, protection
from unreasonable search and seizure, due process, prompt public
trial, and protection from cruel and unusual punishment. Though
this act was passed by Congress, the executive branch's classification
of secrets demonstrates an evaporating desire to share information
with the legislative branch. Even if subsequent administrations
reverse these policies, the damage has already been done.
From the glorification of military power
to the gladiator culture in sport, what Polybius wrote of Rome
applies well to America: Great wealth and extravagance lead to
the worst of all governments, namely the mob rule of elites with
little motivation other than preventing others from gaining the
historian Arnold Toynbee
There is nothing to prevent our Western
civilization from following historical precedent, if it chooses,
by committing social suicide.
America's foreign policy elite is utterly divorced from citizens'
concerns as well. Leaders are keen for the United States to fight
more wars, push for free trade, and allow mass immigration, while
the majority of Americans want fewer military interventions, less
foreign aid, immigration restrictions, and some form of protectionism
for American jobs and industries.
America is a first-world country in need of a Marshall Plan...
Because Americans are so unfamiliar with the world beyond their
shores, however, they continue to believe that their way of life
is the de facto standard for the planet. Soon they may wake up
to realize that the standard they set is more appropriate for
the second world than for the first.
Having lost hundreds of thousands of manufacturing jobs to second-
and third-world competitors, America has not built the broader
technological base of the EU and Japan to retrain its workforce.
The most productive states across Europe and East Asia have rejected
the Anglo-Saxon values of individual rights and small government,
and by focusing more on high-value labor and technology rather
than low-skilled immigration, Europeans have been able to maintain
high wages while automating their economies. By contrast, American
companies are themselves going on the auction block, to be bought
up by Asians and other cash-rich foreign conglomerates.
historian Arnold Toynbee
It is a foregone conclusion that the world
is in any event going to be unified politically in the near future.
As America reconnects with Latin America in its search for low-cost,
competitive production centers and alternative energy, the EU
deepens its economic ties with the Arab world for its energy resources,
and China increasingly organizes the trade and diplomatic patterns
in the Far East, these pan-regions may harden into a planetary
competition among world-islands eerily similar to what Orwell
envisioned in 1984.