Martin Hutchinson
Martin Hutchinson was a merchant banker with more than 25 years’ experience before moving into financial journalism in 2000, from October 2000 writing “The Bear’s Lair,” a weekly financial and economic column. He earned his undergraduate degree in mathematics from Trinity College, Cambridge, and an MBA from Harvard University. Martin is the son of the late Brian Hutchinson, CMG, of GCHQ and the Foreign Office and of Jean Hutchinson. He was born in London, and brought up in Cheltenham, England, and has lived in Singapore, Croatia and, since 2011, in Poughkeepsie, N.Y., where he lives with his wife Anna and son Rumen, who designed the True Blue Will Never Stain site. After spells at the London merchant bank Hill Samuel, Citigroup and the Swedish investment bank Enskilda Securities, he became Senior Vice President in charge of Creditanstalt-Bankverein’s derivative operations. He later served as a director of Gestion Integral de Negocios, a Spanish private-equity firm, and as an advisor to the Korean conglomerate, Sunkyong Corp. As the U.S. Treasury Advisor to Croatia in 1996, he helped the country establish its own T-bill program, launch its first government bond issue, and start a forward currency market. He then set up the Corporate Finance Division for the Croatian bank Privredna banka Zagreb and advised the Republic of Macedonia, on restitution of savings for 800,000 Macedonian savers. In 2000 Martin moved into journalism, becoming Business and Economics Editor at United Press International. His “Bear’s Lair” column appeared at UPI in 2000-04 and on the Prudent Bear website from 2006-14. As well as that column, Hutchinson was from 2007 to 2014 emerging markets correspondent for the financial website Reuters BreakingViews (appearing frequently in the Wall Street Journal and the New York Times). From 2007-2013 he also wrote for the financial website Money Morning. He has appeared on television on the BBC, Fox News, Fox Business, TFN and RTV Slovenija, and has lectured at the Cato Institute, the Texas Workforce Conference, the Institute of Economic Affairs, the National Economists Club and Princeton University. Martin is the author of Great Conservatives, ©Academica Press, 2004 and with Professor Kevin Dowd, of Alchemists of Loss ©Wiley, 2010.
For a decade now, American foreign policy types have been bemoaning the loss of the "hegemony” that the country appeared to enjoy in the 1990s. They even regret the allegedly stable "bipolar world” of Manichean if "cold” struggle that preceded it. Instead we are now heading into a multi-polar planet. Foreign policy pessimists liken this to the pre-1914 "Diplomacy” board game, in which no one power can control the world, and so war is supposedly more likely. This is wrong: a unipolar world is unsustainable in the long run, and a bipolar world highly dangerous. Only in our mew multi-polar future may we be truly safe from cosmic annihilation by war.
A unipolar world would be stable if one power had more than 50% of the world’s GDP and population, since in those circumstances the dominant power would be truly unassailable. That has never happened. Instead, the two unipolar periods in the last two centuries have been fleeting.
Britain’s period as hegemon began with her victory over Napoleonic France in 1815, but her lead over other powers was always a slim one and dependent on sound policy being pursued. Although Britain’s hegemony arguably lasted for several decades, it had certainly ended by 1863-64, when Lord Palmerston as Prime Minister was able to do nothing about the Prussian invasion of Schleswig-Holstein. Rising protectionism worldwide, set against Britain’s self-defeating unilateral free trade, thereafter turned Britain into only the third or fourth most powerful country in Europe, let alone the world.
U.S. hegemony began somewhat before the 1991 fall of the Soviet Union, which had arguably ceased to be a serious rival after the first years of President Reagan’s defense buildup and the 1984 death of Yuri Andropov. It definitively ended around 2005, with the failure of the Iraq War campaign and the rise of rival powers Russia and China. President Bush’s appalling Wilsonian Second Inaugural marked the point at which hegemony turned into hubris, as this column pointed out at the time ("The costs of Wilsonism” – 1/24/2005).
In both cases, therefore, hegemony lasted only a few decades, and this is not a coincidence. Both hegemons lacked true economic and demographic dominance over the entire planet. Britain in 1815 lacked such dominance even with its empire (in terms of both GDP and population in 1815 India and China were both larger, and Britain did not yet have control of more than a portion of India). The 1990s United States also never came close to achieving global dominance (U.S. population was never more than about 5% of the world’s total, its GDP in 2000 was about 21% of the world’s total, down from a peak of 25% around 1950.)
Without such dominance, in order to maintain hegemonic status the hegemon has to pursue an exceptionally able policy, sensitive to the needs of other major powers, or it will see a coalition of rivals that dethrones it. Britain had such a policy for about a decade under Liverpool and Castlereagh, but after 1822 Canning’s showy support of the emergent Latin American republics dissipated Britain’s influence among the major Continental powers. As for the United States, its foreign policy was never especially noted for its sensitivity, and its loss of hegemonic status was accelerated by its ineptitude after 2000.
We have seen two examples of a bipolar world in recent centuries: the U.S./Soviet rivalry from 1945 until the 1980s and the British/French rivalry of 1688-1815. Both situations involved conflict, in the Anglo-French case more or less constant, in the U.S./Soviet case mostly "cold” and never total, although the world came close to total conflict on a number of occasions. This is unsurprising; a duopoly is of its nature a zero-sum game, gains for one party inevitably involving losses for the other. In 1778, for example, France could not resist taking advantage of Britain’s difficulties with its American colonies, even though war was to bankrupt the fiscally unsound French state and lead to the collapse of a French regime that had persisted for 1,000 years.
Thus only the threat of total destruction through all-out nuclear war prevents constant conflict in a duopoly situation; the level of rivalry is screwed higher and higher by the zero-sum nature of the relationship. Even a quarter century after the end of the Cold War, Russia’s Vladimir Putin bitterly resents the U.S. victory therein, and is determined to seek revenge against the victor, however great his country’s geopolitical, demographic and economic disadvantages. In the event, 16 years of misguided and feeble U.S. policy have given Putin opportunities he could never have dreamed of in 2000, and Russia is again a "player” on the world stage.
The multi-polar world we have now entered has a number of advantages over both the unipolar and bipolar worlds. At first glance, this assertion appears contradicted by the notorious outcome of the world of "Diplomacy,” which ended in the catastrophe of World War I. However, I would suggest that the multipolar world of Diplomacy in fact survived peacefully for several decades, from about 1860 until 1910 or so. It only broke down through the disastrous decision by Britain to join the Franco-Russian alliance against Germany and Austria (themselves natural allies after 1870) thus converting the multipolar world into a very dangerous bipolar one, in which the paranoia of Kaiser Wilhelm II and the German General Staff about "encirclement” was massively reinforced.
After 1905, every petty dispute became a Manichean struggle between the two great alliance groups, and the mutual hatred engendered by the bipolar system escalated until war became inevitable. If Gavrilo Princip had been thwarted in his attempt to assassinate the Archduke Franz Ferdinand, something else would have precipitated war unless the bipolar alliance system had been dissolved.
It is thus essential that we not allow the emerging multi-polar world to become a bipolar one. The United States should make every effort to ensure that the world does not divide into "pro-American” and "anti-American” powers, for example by Russia and China combining in an anti-American alliance, forcing the world again into bipolarity. The U.S. should welcome or at least not oppose initiatives such as Russia’s foray into Syria, using Iranian bases from which to fly missions against ISIS and its allies.
By such missions, Russia achieves two things, both of which would be welcomed by enlightened U.S. policymakers. They prop up Syrian president Bashir Assad, the only available alternative to ISIS, the destabilizing of whom in 2011 by supplying arms to the "moderate rebels” was a huge U.S. policy blunder. They also give Iran a non-Moslem ally, which the Iranian regime can feel will protect the country against the "Great Satan” United States. In a unipolar world, smaller countries that have offended the global hegemon in a fundamental way are faced with an existential struggle for their beliefs and independence, which may lead them to desperate actions that in today’s world can be hugely damaging. With powerful Russia as an ally, Iran’s existence is no longer in danger; it can therefore turn to developing its economy while remaining secure in its independence and in its religious and social beliefs.
The same applies to North Korea. The North Korean regime doubtless regards the United States and its client South Korea as irreconcilable enemies; this belief will have been exacerbated both by the fall of Communism elsewhere and by President Bush’s amazingly foolish "axis of evil” speech in 2002, linking North Korea with terrorist powers with which it had nothing in common. However, with the immense power of China as a quasi-ally, the North Korean regime can feel reasonably secure, lessening the chance of it undertaking some suicidally aggressive nuclear attack.
With a multi-polar world, a power that engages in more than minor unjustified aggression risks bringing on itself the wrath of the other major powers. While any power is comparable in strength to any other single power, it is unable to face down a combination of powers, and hence deterrence is achieved. It appears that Vladimir Putin understands this; he is the enemy of Europe and the U.S. in Ukraine, where he is undertaking only "salami-slice” aggression, but the friend of Europe and the U.S. in Syria. There are two main dangers. First, a weak or naïve President could tempt Putin to an over-aggressive foray, for example into the Baltic states. Second, an over-aggressive President could turn Putin into a permanent enemy, perhaps pushing him to ally with China in an anti-American coalition and recreate a bipolar world.
As Palmerston said in 1848, each power should have "no eternal allies, and no perpetual enemies. Our interests are eternal and perpetual, and those interests it is our duty to follow.” Long-term alliances like the Triple Entente of 1907 should thus be regarded as illegitimate, since they run the risk of turning a stable multi-polar world into a highly unstable and belligerent bipolar one.
The new multi-polar world will require skill to navigate; its nature must be recognized and the end of U.S. hegemony must be accepted. Some actions such as drone strikes that may appear an acceptable way of preserving an otherwise shaky hegemony may become illegitimate in a world in which there are several contenders for influence. There will be no "Axis of Evil,” just other powers with which U.S. interests clash in certain areas.
Once it has settled into a stable form, the new multi-polar world is likely to provide us with a much longer and more stable period of general peace than we have previously seen. Small powers will no longer be threatened by an apparently hostile hegemon, because they can ally themselves with one of its rivals. Hence they too will develop an interest in the existing world order and will attempt to put down rather than nurture terrorist groups that appear within their borders.
Moderate conflicts will occur in areas where the interests of two or more powers clash, but aggression that sets off a major conflagration will be too dangerous to contemplate, because it will bring the aggressor up against a coalition of other powers outraged at the world’s peace being disturbed.
Hegemony might be tolerable by the non-hegemons in a world of infinitely wise Platonic rulers. In the world we inhabit, where most leaders are elected by highly fallible democratic systems, we are much better off if the multi-polar system’s checks and balances provide curbs on those leaders’ foolishness.
-0-
(The Bear’s Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of "sell” recommendations put out by Wall Street houses remains far below that of "buy” recommendations. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.)