An Era of Global Competition

Frederick Kempe in conversation with Łukasz Pawłowski · 5 June 2012
Frederick Kempe, CEO of the Atlantic Council, on the need of closer cooperation between the United States and Europe and the challenges of authoritarian capitalism.

Łukasz Pawłowski: What is happening to the Western democracy?

Frederick Kempe: Both Europe and the United States in quite different ways are in a soul searching mood because of economic challenges and political dysfunctions. We do not live in a cold war world any longer but it is not a post-cold war world either. We are in the midst of what I would call an era of global competition. And in the era of global competition it’s not the missiles that are your weapons but rather your innovative capability, your education structure, your technological, scientific and investment resources. In this new world the economic statecraft will become as important as arms control was in the past. We have to look at the world in a totally different way and realize that our system – although still the most dynamic – now have a big competitor which is called authoritarian capitalism. It is probably the major challenge we face right now, maybe even more important than al-Qaeda, because it seems harder to defeat.

What’s the main difference between Chinese authoritarian capitalism model and the Western one?

Companies trying to compete for a given contract in a given part of the world with Chinese companies are up against not only the power of those companies but of the Chinese state as well. And if the Chinese state has dictated that in a given country it wants to get a slice of the market it may well allow its companies to take a loss on commercial terms just to win it. American companies can’t do that and the U.S. government does not intervene in this way on their side. This issue is going to be more and more crucial in the forthcoming years as global giants start emerging out of China which can compete with global giants from Europe or the United States, but are working under more favorable conditions. They have the entire power of the state behind them and can make deals that don’t necessarily make commercial sense. Thus not everyone is playing according to the same rules.

It is often said however, that Chinese economic model is not sustainable mainly due to social changes and the growth of the middle class. As the Chinese get richer they will eventually begin to demand what the Europeans and Americans demanded back in the first half of the 20th century, i.e. social security, political freedoms and more accountable political elite.

All this may happen in the long run but before that a lot of western jobs could get lost and western companies could go under by not being able to compete on the global market. Before the authoritarian capitalism collapses it may considerably harm American and European economies.

What countermeasures do you expect western states to take?

Before we take any steps we have to agree on acting in concert. Together Europe and the United States would have quiet a big leverage in a conversation with China and other states which try to follow their style of doing politics. At this moment, however, instead of going together to the Chinese and saying “this is the issue, let’s discuss it” we go separately competing for the Chinese markets.

Under the new president the United States have introduced some changes to their foreign policy and now focus more on the Far East rather than on Europe or the Middle East. Many European leaders complain that Washington left Europe behind.

It is obvious that both Europe and the U.S. need to pay more attention to the Far East. However, the biggest mistake the Obama administration made in performing this pivot, is that it believed this can be done unilaterally. We need to realize that together the United States and Europe cover the biggest economic area in the world and we should make use of it.

Will the U.S. be able to act together with Europe in this regard?

For the foreseeable future this is going to be hard. The White House understands that Europe is in an existential crisis and will probably be for a little while. And when you experience an existential crisis in your family, you have to take care of it first before moving to the issues concerning your more distant cousins and friends. I therefore think that the great, ambitious projects of Europe and the U.S. acting together will probably have to wait. However, the least we can do now is to take down the trade and regulatory barriers so that we create more of the common American and European market. It may be difficult to do immediately, amidst the Euro crisis yet it may become possible early next year when, one hopes, that Europe has moved along a little bit further and the Americans will have passed their presidential election.

Will all these economic changes result in political ones as well? Is democracy as we know it going to stay alongside capitalism?

In my view these two do belong together. Even the Chinese have been trying to introduce more democratic elements to their system particularly on the local and municipal levels. I can see that Europe needs to get more democratic in terms of how it picks its leaders. There is a democratic deficit in Europe that is currently hurting its stability. In the United States, on the other hand, the political class is polarized more deeply than I have ever seen in my life. We have to adjust all these shortcomings, because a lot of economic problems we experience now have their roots in political weaknesses.

How can we reconcile the call for further democratization and closer cooperation between Europe and the United States? Many political theorists claim that the bigger political organizations you create, the less democratic they necessarily become, because it is more difficult for ordinary citizens to exert influence upon them.

I don’t agree with that. Current developments in technology and social networking – the instant ability to respond, vote and express opinions – all these make our societies more democratic, at least in some respects. Democracy still proves to be a better political system than authoritarianism. We all observe the difficulties of Putin in Russia, we see what has happened on Tahrir Square, in Tunisia etc. I agree that it is easier to disrupt the authoritarian system that to build a sustainable democracy, yet it is also true that authoritarian regimes are simply ill-adapted to our contemporary hyper-network world.