Old worries, and some good news

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Old worries, and some good news
Anindya Bakrie | February 03, 2012

Logically, there is little reason to write a column on the New Year. Whether in economics, politics, peace, warfare, love or hatred, nothing changes so neatly from the end of one year to the start of the next that it merits media space.

However, what changes is the rhythm of the human mind. The New Year is a moment of renewal. In the Western calendar, it occurs in winter but looks ahead to spring that ripens into summer. Even in other cultures, where the start of a year might belong to another season, there is a sense that one annual cycle has ended and that a new one has begun.

That sense of time is very much present in Indonesia, where many of us celebrate the Western New Year in addition to observing our own start-of-the-year festivals. As an Indonesian, I look on the New Year as an internationalist.

This year, I do so with little desire for celebration. The global economy, which integrates Indonesia into wider patterns of trade and investment, is not in a festive mood, to say the least.

The eurozone crisis is bad enough. If it gets out of control and Europe’s monetary union breaks up, the entire world could go into a new Depression. Even those who suffered during the Asian Economic Crisis of 1997-98 – and Indonesians were among the worst affected – might not understand the true meaning of “depression.”

A depression is a recession on a global scale that is deeply structural and not cyclical. Demand and output fall steeply and for a prolonged period of time. Countries whose prosperity depended on the internationalization of trade and finance are forced to think of the needs of their own citizens as if the rest of the world does not exist.

Protectionist barriers go up one after the other.

No one is in control of the international system. There is no international system to control. Each country is out for itself.
When countries have little to gain by way of trade, they have little to lose by way of war. Economic protectionism brings latent political tensions to the fore. These tensions feed warlike nationalism.

The result during the Great Depression of the 1930s was World War II. Only one country had the capacity to use atomic weapons then: the United States. It dropped the atom bomb on Japan and brought the war to an end. Imagine what would have happened had imperial Japan or Nazi Germany possessed nuclear weapons.

Today, the great powers which guarantee global peace, and which so have the greatest power to destroy it, are nuclear-armed. Russia, China and India are all nuclear powers.  A major war is unlikely However, the good news is that war is all but impossible given the positions of the other great powers, the United States together with Britain and France, the two European nuclear powers. This is because, for all its economic problems, America’s military might remains unchallenged by either one powerful country or by a group of powerful countries.

And these economic problems, which have much to do with over-consumption and indebtedness, are not beyond the capacity of Americans to solve. After all, the United States is a single country, unlike the European Union. The US President and Congress possess executive and legislative powers that no institution enjoys in Europe.

Such powers will make all the difference in a real crisis. Europe’s executive and legislature have been struggling to deal with the eurozone crisis. That will not be the case in America.

What will also remain constant will be America’s entrepreneurial energies and strengths in research and development. These will enable it to move on to higher levels of economic activity, leaving lower levels and slower prospects behind. Other countries will compete with the US, as they already do, but America will learn from those very challenges. It has always done so.

My point, therefore, is that even a depression would be unlikely to spark off a conflict among the great powers that could bring down the entire global system, as occurred in the 1930s. And a depression is by no means guaranteed, although a recession seems unavoidable.

However, this does not mean that other sources of international instability cannot pose real threats to the world’s well-being. Certainly, an attack on Iran – a nuclear wannabe – by Israel – an undeclared nuclear power – and the United States would create havoc in the Gulf.

International navigation there would be affected badly; oil prices would skyrocket; the war would contribute to a depression instead of the other way around, as in the 1930s.This is possible.

Or, closer home, North Korea’s political system could fail its recent transition and fall apart, affecting the stability of South Korea and Japan. The closed communist system in Pyongyang is bad, but its sudden collapse would be worse for its neighbors

Combine a war with Iran and a Korean crisis, and the international situation will look bad. But even this crisis would not lead to world-scale conflict. That is because the United States and China (or Russia) will not go to war over Iran, whose nuclear ambitions threaten the entire Middle East; not only Israel but also many Arab states. North Korea has no one even thinking of going to war over it.

Notwithstanding this, the world needs a new basis of agreement among all the great powers, including those in Asia. The US, China and India have much in common. They are all great powers. Their interests do not coincide but they certainly do not collide.
These powers can make the world a safer place by working together. Indonesia could play its part in Southeast Asia, where it is the largest country and economy.

The spotlight will be on economics in the year ahead. Lurking in the shadows, however, will be geopolitics. We Indonesians must continue to work hard.

The rest of the world will have to work equally hard so that no one is faced with a nasty choice between war and peace.  

Anindya Novyan Bakrie is vice chairman of the Indonesian Chamber of Commerce and Industry (Kadin), CEO of Bakrie Telecom and chairman of Viva Media Group.