Europe Comes to a Crossroads

The fundamental question of the next decade – for both individual countries and the international system as a whole – will revolve around the United States. The question, increasingly, will be this: How can other countries limit American power and control American behavior?

Decade

United States

Over the course of the next century, the United States will enjoy extraordinary advantages over other nations. It is the only great power that dominates an entire continent and remains politically united. The European Union occupies a good portion of a continent, but it is hardly united. Japan is united, but it does not control a continent. The landmass that the United States controls provides extraordinary advantages.&nbsp;First, it is relatively underpopulated. The population density of the United States, in comparison to that of Europe or Asia, is extraordinarily low. The U.S. population has room for dramatic growth if economic conditions deem it necessary. The continent has enormous natural resources. Location and military force make the United States impervious to invasion. Finally, as the only great power bordering both the Atlantic and Pacific, the United States is, by the nature of its placement, the only logical global power. In our mind, the 21st century will undoubtedly be the American century.&nbsp;Perhaps most important, America dominates world culture. We do not mean Coca-Cola or CNN. Rather, we are referring to the most quintessential innovation of the United States: the computer. Other countries will adopt the computer, but none as easily as the United States. In the United States, the computer has come to dominate business, leisure and commerce, penetrating every aspect of life with an ease that will not be emulated in other countries as readily. The rise of the computer is not only a matter of America&#39;s technological lead. More important is the fact that the computer arises from American culture and fits perfectly with American sensibilities.&nbsp;Indeed, the computer clearly has become the foundation of American economic and military power. The expansion in the late 1990s, violating the historical rules of economic growth, depended heavily on the computer. Whether we date this expansion from 1982 or only from 1992, the fact is that long after one might have expected a recession, worker productivity is actually growing. That simple, astonishing fact results largely from the computer&#39;s revolutionary effect on production. Thus, where normally we would be expecting a decline in productivity, as industrial capacity is being over-utilized in the face of overheated demand, we are experiencing rises in productivity.Economics: 2000 to 2005In economic terms, the United States has experienced a massive surge in capital formation since the 1980s. Most important, the qualitative nature of this capital is dramatically different than before. Capital increases worker productivity. But not all capital increases worker productivity at the same rate. It is more and more obvious that we have not only seen a quantitative increase in capital formation, but a qualitative shift in capital&#39;s productivity. This is why the expansion, almost a generation old when viewed in terms of productivity figures, interest rates, inflation or other traditional measures, continues to appear to be relatively young and vigorous.&nbsp;STRATFOR has been extremely bullish on the American economy since 1995. To our amazement, we continue to be bullish. This is particularly troubling since, as our readers know, we tend to be extremely traditional in our view. We believe in cycles, not extrapolation. Nevertheless, we see little reason to expect the expansion to end over the next five years, although a downturn on the order of 1987 or 1991 certainly cannot be ruled out as a possibility. But the main trend remains extremely positive for at least the first half of the decade.&nbsp;Consider the apparently irrational boom in Internet stocks, in which equity values are completely unrelated to revenues. On the surface, this would appear to be a bubble akin to the Tokyo real estate price surge in the1980s. But look at the Internet this way: in less than a decade, an entirely new communication medium has emerged, with implications for every dimension of economic life. It is certainly going to have a social impact equal to that of the automobile or telephone. It is such a dramatically new part of the social and economic infrastructure, that its technology model has outstripped its business model.&nbsp;Investors, acting on the expectation that revenue will in due course catch up, are quite rational in establishing equity values independent of revenue. Certainly there will be massive shakeouts and consolidations, which will be painful, as was the case earlier in the century in the auto or airline industries. But betting on the Internet is about as irrational as some of the valuations given to railroads in the 19th century, where revenue lagged far behind valuation. The people who bet on the railroads were far more rational than the &ldquo;conservative&rdquo; investors waiting for revenue to catch up. Therefore, we do not see either the market as a whole or the technology sector as representing an irrational bubble in the American economy.&nbsp;Our expectation is that the massive growth spurt will continue for the first half of the decade. Though it would not surprise to see a sudden, very frightening downturn in the markets or a short, sharp recession, not dissimilar to 1987, the basic upturn will continue until at least 2005 and probably for several years thereafter.Economics: 2005 to 2010We do, however, see serious problems developing after 2005 and intensifying toward the end of the decade. The key problem is demographic. As we argued in our last decade forecast, one of the engines driving the American economy during the last 20 years has been the maturation of the baby boomers. A huge age cohort entered its most productive years during the 1980s. This cohort entered a period of intense capital formation during the 1990s, when boomers in their 40s and 50s shifted from net debtors to net creditors.&nbsp;One of the great engines driving the stock markets is the 401(k) plan. People in their 40s and 50s are pouring huge amounts of money into their retirement plans. Most important, consumers cannot easily withdraw this money, because to do so results in severe tax penalties. Therefore, the growth in the stock market has created a vast pool of stable money that supports the markets, helps provide capital for investment, places a ceiling on interest rates and creates major growths in net worth independent of savings rates. This, coupled with either stable or rising home prices, has generated substantial private wealth for a large social stratum. It certainly does not encompass all Americans, but it does encompass a great many, creating the expectation &mdash; among large segments of the professional and managerial classes &mdash; that they can look forward to an extremely prosperous retirement.&nbsp;That expectation poses a serious mid-decade danger. At each stage in the lives of baby boomers, they have reshaped a different aspect of American society. Toward the end of the decade, many of these boomers will be heading toward full or partial retirement. Given their net worth, they have an expectation that they will be in a position to reduce their productivity as they approach 60 years of age.&nbsp;Money will stop pouring into 401(k)s and into the stock market. Withdrawals will begin. Houses will be sold. A fairly sudden, massive downward pressure on both equity and housing prices will be experienced. A massive shift in psychology will, we think, also take place. As equity and real estate prices begin to slip, boomers see their net worth at risk. There will be a tendency to liquidate vulnerable holdings and lock in value. The ingredients for an intense panic, with extended consequences will be very much present.Presidential Politics in the Next Ten YearsA United States as powerful politically and militarily as it is now is a problem for the world, but not a particularly dangerous one. Prosperity tends to make people less concerned with politics, and less worried about the rest of the world.&nbsp;It is startling to note, when we compare the 2000 elections to those in 1980, for example, how little controversy there is over issues and ideologies. Except for marginal candidates like Pat Buchanan, the differences among candidates have more to do with personality and character than with principle or issues. This is certainly the case when we compare the situation with the Reagan-Carter election. It is also startling to realize how little interest there is in the outcome of the election. In good times, politics appears uninteresting and marginal.&nbsp;Pat Buchanan&#39;s presidential campaign intrigues us, not because he is going to win, but because he reminds us of Barry Goldwater in 1964. Despite the fact that few ideological similarities exist between the two, they are both precursors. Goldwater had no chance of winning in 1964, but he was a precursor for Reagan&#39;s conservatism. Just as Goldwater represented an emerging trend in 1964, we think that Buchanan represents an emerging trend in 2000.&nbsp;Goldwater posed the first systematic attack on liberal orthodoxy in 1964. Buchanan is posing the first systematic attack on the twin orthodoxies of free trade and U.S. global responsibility. Buchanan&#39;s arguments will appeal only to a small segment of Americans during the boom times of 2000. However, during the economic difficulties we predict for later in the decade, anti-free trade sentiment will have a much broader audience, along with a general resentment against the world as a whole. Fast forward to 2008 and assume that we are right in our forecasts. American military power will still be paramount, if not quite as absolute as it is today. But as economic troubles arrive, the easy consensus will unravel. Politics will once again be important and the election of 2008 will matter. The issues will also be dramatically redefined.&nbsp;As was visible in the late 1980s, economic constraints generate protectionist sentiments in the United States. Part of this derives from a culture that feels the rest of the world is taking advantage of the United States. Part of it comes from rational economic reality. Asian exports are far more tolerable in boom times than in bad times. During economic downturns, there is a general tendency toward protectionism. This is particularly the case when, regardless of magnitude, the downturn generates insecurity among pivotal sectors. By 2008, we would expect large sectors of the public to resonate to protectionist and isolationist doctrines.

Can America's New Golden Age Be Sustained?

Europe has been the international system&#39;s center of gravity for about 500 years. Atlantic Europe - Portugal, Spain, England, France and the Netherlands - conquered most of the world, creating the first single system of international relations. Until the European conquest, the world had consisted of sequestered, fragmented systems. Aztecs had nothing to do with the Chinese, who had nothing to do with Mali. The European conquest of the world not only created a single international system, but made Europe both the crossroads and arbiter of that system.&nbsp;The single most important event in the past century, in our view, was the collapse of the European imperial system. The victim of its own interminable internal warfare, European civilization tore itself apart in the first half of the 20th century during its two wars. It emerged from those wars with neither the means nor the will to control its empire. The struggle for a world empire passed from their hands to two semi-European nations, the United States and the Soviet Union. The defeat of the Soviet Union by the United States in the Cold War, left the United States as the center of gravity of the international system. The United States was geographically at the center of the system, as both an Atlantic and Pacific power in an age in which trans-Pacific trade equaled trans-Atlantic trade. Militarily, economically and politically, the United States became the center of the international system as well.&nbsp;Europe faces two questions in the next decade, and actually the next century. What will be its relationship to the overwhelming power of the United States? What will be the relationship of Europe to itself and to its immediate environment? Europe will grapple with both of these questions, which derive from a fundamental issue of how Europe ultimately responds to its loss of empire.&nbsp;Germany as the KeystoneEurope confronted its loss in two stages. During the Cold War, it was effectively occupied by the United States and Soviet Union. Under the aegis of the occupying powers, both parts of Europe were pushed into multinational economic, political and military groupings, partly formal and partly informal. The Western bloc, the European Union, proved remarkably successful. The Eastern bloc, Comecon, proved amazingly unsuccessful. The collapse of the Soviet Union left Western Europe in a relatively prosperous and cohesive position. The fragmented regions of the Soviet empire were left in shambles. &nbsp; One of the consequences of the Soviet Union&#39;s collapse was the reunification of Germany. German unification, at least for the past century, has signaled a coming war. In 1871, 1914 and 1939, wars broke out because of the geopolitical implications of a united Germany. A united Germany is an inherently fragile entity. Anchored in the south by the Alps and in the north by the North and Baltic seas, Germany is extremely vulnerable on an East-West axis. As soon as Germany united, it confronted the following fact: If a Western power, such as France, and an Eastern power, like Russia, were to simultaneously attack, Germany would find itself in an untenable situation.&nbsp;This is not a problem when Germany is divided and vulnerable. Then, Germany lacks options. However, once Germany is united, this problem presents itself. Since it cannot survive a two-front war launched simultaneously, it adopts a diplomatic stratagem designed to keep the Western and Eastern powers apart. However, the very dynamism of a united Germany creates tremendous insecurity, in the end triggering the threat and even implementation of a multi-lateral coalition. Then, Germany has only two choices. The first is to fight a war, chosen by its enemies, that it cannot win. The second is to initiate war at a time of its choosing, in the hopes of decisively defeating one of its enemies and then intimidating or defeating the other.&nbsp;The strategy worked in 1871 when Germany defeated France. It failed in 1914 when it could not defeat France or Russia and was forced into a two-front war. It failed in 1939 when it defeated France and then chose to attack the Soviet Union. The failure of these strategies does not necessarily mean they won&#39;t be tried again. It is important to bear in mind that German geography has a great deal to do with its strategy. Now, with Germany once again united, the fundamental question is whether German reunification will lead to another German war.&nbsp;The first function of NATO and the EU was to strengthen Europe militarily and economically so that it could resist an attack or subversion from the East. Now these institutions have taken on a new role. After the Soviet Union&#39;s collapse and German unification, the fundamental mission of the EU and NATO is to create a system of prosperity and security in which German insecurity does not cause it to behave as it did previously. NATO&#39;s contemporary mission is to eliminate German fear of a war on two fronts.&nbsp;NATO does this in two ways. First, by making France and the UK part of NATO, they become German allies. This eliminates the core of German insecurity. Second, in addition to geopolitical security, the EU is designed to increase European economic well-being. In particular, if it increases German well-being above what would be possible without the EU, Germany is given a second powerful motivation for cooperating with the rest of Europe, eliminating the major cause of European wars in the last century.&nbsp;Thus, we are in a situation in which the defeats in World War I and World War II exhausted Europe and caused it to give up its empire. This eliminated the imperial competition that generated massive friction and competition during the 19th century, particularly outside of Europe. The end of the Cold War eliminated the threat of a confrontation between the United States and the Soviet Union on European soil. The continuation of NATO and the growth of the EU increase Germany&#39;s motivation to remain inside multilateral relationships. Therefore, it appears, on the surface at least, that the underlying causes of conflict have been eliminated in Europe.&nbsp;There are, however, some serious questions that must be confronted in the next decade. The first is the willingness of NATO and Germany&#39;s European allies to place themselves at risk in defending Germany from a resurgent Russia. The second is the question of whether the EU will continue to benefit all European nations equally, or whether a point might come in which some countries, including Germany, might find it in their best interests to leave the EU. We do not expect these issues to come to a head in the next decade. We do, however, expect them to begin posing some serious challenges.Europe&#39;s New Strategic EnvironmentLet us begin with the military question. It is our view that in Chechnya, Russia has drawn a line in the sand. It will not allow the disintegration of the Russian Federation no matter what the price. This is the first policy in years that has generated general popularity among Russians and indicates a widespread weariness with the loss of Russia&#39;s status in the world. Now, Chechnya cannot be defended solely in Chechnya. It requires Russian domination in Georgia.&nbsp;The frontier in the Caucasus between Russia and Turkey was not arbitrarily drawn. It represented a logical demarcation between the two countries along the Caucasus Mountains. The same logical demarcation applies to the old Soviet Union&#39;s borders in general. These borders were rational and, after decades of integration, very difficult to completely abolish even when the Union no longer existed. We expect, therefore, a process to continue in the next decade in which Russia returns in various ways to the old frontiers of the Soviet Union.&nbsp;This poses three issues for Europe. First, the Russian Army will return to the Polish frontier. Second, Russia will seek to reabsorb the Baltics. Finally, if Ukraine re-federates with Russia, then Russian forces will again be stationed along the Carpathians, facing NATO member Hungary as well as non-NATO countries in southeastern Europe. All of these events pose challenges for Germany, but the return of Russian troops to the Polish frontier is particularly frightening. Whatever Russia&#39;s intent, the Russian capability inevitably poses a threat to Germany. The Polish frontier is currently undefended and extremely difficult to defend. Apart from some rivers, the Polish and German plain is a traditional highway of invasion. Germany cannot ignore the Polish frontier because it is, in effect, Germany&#39;s eastern frontier.&nbsp;NATO has expanded without paying particular attention to military considerations. This is because it is now primarily a political system for maintaining European consensus and for allowing the United States to have an instrument for influencing and controlling European affairs. Very little attention has been paid to fundamental issues like: How does one defend Poland; how does one get troops to Hungary when Hungary is not connected to NATO and has no ports; and what do you do with non-NATO Slovakia that is a bayonet between Hungary and Poland? The general response has been to ignore these questions, because there has been no credible threat to warrant any thought about the matter.&nbsp;But if the Russians return to the frontiers, the matter will have to be addressed. Who will defend Poland? It is our expectation that the United States will be extremely reluctant to deploy massive forces in Poland. France may be willing to do so, but not in the quantities needed for adequate defense. That leaves Germany&#39;s Bundeswehr. A deployment in eastern Poland will require logistical facilities throughout the country. Apart from raising serious hackles in Poland, where memories of German troops are still a raw wound, Germany would not be able to forward deploy without a substantial increase in its military forces.&nbsp;This is where it gets interesting. France will not deploy sufficient forces to defend Poland nor will the UK. Neither has them, and the cost will be enormous, particularly for as distant a threat as the Russian threat to Poland. At the same time, regardless of German intent, they will be extremely uncomfortable with a massive German buildup of any sort.&nbsp;Apart from the general concern of European disequilibrium, the Anglo-French fear will be that a German buildup will trigger a Russian buildup, triggering an arms race and confrontation that neither wants. They will try to restrain Germany, and to some extent this will work. On the other hand, the eastern half of Germany remembers Russian occupation quite as much as Poland remembers German occupation. Even the distant threat of reoccupation will force a German preventive measure. This will create tensions within the alliance, as Germany demands more help than France and the UK will provide, as France and the UK call on Germany to restrain itself and as Russia responds to perceived German bellicosity.European De-synchronizationThere will be no war, but the fabric holding Germany within the European coalition will certainly be tested in the coming decade. In the same sense, the fabric of Europe will be tested economically. Our fundamental theme for the decade is one of economic de-synchronization. This applies at the national and the regional level. One of the extraordinary things to notice is the tremendous disparity in performance among various EU members. For instance, growth in Europe&#39;s core economies &mdash; France, Britain and Germany - have all slowed. France&#39;s estimated GDP growth for 1999 is 2.2 percent. British GDP growth is expected to be 1.4 percent. Germany&#39;s performance has been particularly sluggish. Estimated GDP growth in Germany for 1999 is estimated at 1.6 percent. Meanwhile, estimated GDP growth rates in periphery countries are also disparate, with Greece at 2.9 percent, Spain at 3.4 percent, Portugal at 3.1 percent and Norway at 1 percent.&nbsp;Now, the underlying premise of the EU, including especially the monetary union, is a high degree of synchronization among economies. Monetary policy, loose or tight, has very different effects on economies at different stages in the business cycle. As a free trade zone, the EU posed serious challenges in a range of weak industries, such as agriculture. But the European Monetary Union (EMU) radically concentrates the problem. The UK, in a period of intense capital formation similar to the United States, needs a very different monetary policy than Germany, fighting desperately to maintain aging and inefficient neolithic corporations. A single monetary policy designed to support an entrepreneurial boom in a developing country like Greece is impossible. One that would satisfy a former communist country like Poland is impossible.&nbsp; &nbsp; We did not expect the EMU to get off the ground. We were obviously wrong. Nevertheless, we regard the EMU as essentially unsupportable, and we do not expect it to survive the decade. The root of the problem is the global force that we have identified as de-synchronization, which does not only de-couple regions, but countries within regions. Consider the range of economic performance currently underway within the EU and in countries scheduled to join the EU. It ranges from euphoric booms to stagnation to outright depression.&nbsp;The EU is an institution with a central bureaucracy but no central state. When the United States experienced economic de-synchronization in the 1850s, the result was civil war as the south sought to disengage and define its own economic policies. The matter was settled militarily. But the United States was a federation with a central government able to raise an army, wage war and suppress an insurrection. The EU is not even a confederation. It has integrated its economic processes to the point of having a single currency, but has not integrated its political processes. That means that there is nothing to keep a nation in the EU if it determines that it is in its interest to withdraw.&nbsp; &nbsp; The EMU has therefore not been tested. The issue is not its worth against the dollar. Rather, it is the effect of the European Central Bank&#39;s monetary policy on the economic life of its constituent countries. A single monetary policy for an entity that is as de-synchronized as Europe is inconceivable. Some nations will be placed at a tremendous disadvantage. The political consequences within those countries will rapidly generate forces favoring withdrawal from the EMU. With no state apparatus to prevent secession and no tradition of loyalty to the EU&#39;s institutions, the only thing holding the entity together is national self-interest.&nbsp;An argument, controversial but respectable, can be made that everyone benefits from free trade. No one can rationally argue that everyone will benefit from the same monetary policy when economies are as out of synch as Europe&#39;s. The political consequences are clear. Some, and it is unpredictable as to who, will withdraw from the EMU. These will not necessarily be the smaller countries. The determining factor will be political, not economic: It will be the perception by the public as to whether the EMU benefits them or not. It will be in the interest of politicians, particularly in the government, to deflect blame for economic dysfunction from themselves to Brussels and Frankfurt. As a result, the structure of the EU creates a situation in which governments have an interest in undermining public confidence in the EMU and the EU in order to evade personal responsibility. This creates an inherent instability within the EU.&nbsp;It is an instability badly exacerbated by the EU. It is politically much easier to maintain a free trade zone than a monetary policy. But there is a backlash at work. The de-legitimization of the EMU will have ripple effects. Once it is clear that countries can withdraw from the EMU without the sky falling, other arrangements of the EU will come into question. Protectionist sentiment, already visible as fairly powerful forces in several countries, will be dramatically enhanced by victories over a unified currency. A unified currency without a unified polity creates power without unquestioned authority. The repudiation of the power in one area will call into question power in all areas.ForecastThus, there are two major forces at work in Europe that are potentially destabilizing. The growth of a Russian threat against Poland at a lower level than the mega-threat of the Cold War is one. The failure of European institutions to contain the centrifugal forces of Europe is another. These will not have catastrophic results during the coming decade. They will point toward serious dangers in the future.&nbsp;The fundamental question is nationalism, and the most important nationalism is German nationalism. German nationalism is now well contained by global, north Atlantic and European institutions. However, at the bottom, within each European country, serious nationalist, anti-European sentiment is present. At the top, among the corporate elites, economic shifts can trigger anti-European sentiment. The idea that the institutions are robust that contain traditional European strategic forces is, we think, illusory.&nbsp;Many of these illusions will be revealed during the coming decade. The growing withdrawal of the United States from risk taking, coupled with the re-emergence of Russia, will serve as a stabilizing influence. The degree to which the rest of Europe will take risks on behalf of German and Polish security is highly suspect. The willingness of some countries to endure double-digit inflation or unemployment or both while others prosper is even more suspect.&nbsp;We do not forecast calamity in Europe in this decade, nor even later. We do expect fraying and disintegration of apparently solid institutions. The fraying will be both deeper and faster than most observers expect. The culmination will be to force Germany to once again defend its own interests in a world that is indifferent or hostile to its needs. And that is a dark corridor that Europe does not want to walk down ever again. We are not sure they will be able to avoid it. The coming decade will be about Europe&#39;s attempt to evade its own history.

Future Centers on China and Japan

Asia&#39;s explosive economic growth lasted for several decades and embraced most of east and southeast Asia. The universality of growth profoundly impacted the region&#39;s psychology, particularly at a time when the United States was in decline. It seemed that a lasting change of the guard was underway. Not only was there a sense that Asia was surpassing the United States as the center of international economic life, but there was a deeper belief that the very nature of international power was changing.&nbsp;For the United States, power rests on the three pillars of economics, politics and the military. In recent times, Asia, and particularly Japan, has rested its power almost exclusively on economic growth. Prior to the economic crisis in 1997, Asia appeared to be surpassing the United States economically and seemed to be redefining the meaning of international power by rendering traditional, politico-military considerations obsolete.&nbsp;Asia&#39;s rapid economic growth overshadowed the need for military competition. Moreover, the United States provided for the military defense of much of Asia. The U.S. Navy served to protect the region&#39;s strategic interests, including shipping lanes, while keeping in check potential regional powers, like China and Russia.&nbsp;With intra-regional disputes muted by the shared economic focus, Asia did not have a great politico-military power. Nevertheless, the theory went, Asia&#39;s economic vibrancy rendered American military power moot. Indeed, American expenditures on military power had undermined its own economic competitiveness.&nbsp;After The Asian Economic CrisisThe Asian economic crisis shattered the region&#39;s self-image. Asia would no longer be the vibrant center of the global economy. A new consensus emerged with the view that Asia had sown the seeds of its own disaster. Far from being miraculous, Asian economic growth was the problem. The economy that had fueled Asian growth had also undermined capital structure. After all, any economy can grow if it is indifferent to profit. It can compete on price and it can afford investments that would appear irrational in an economy that measures success by rates of return on capital.&nbsp;Much said about Asia prior to 1997 was, in retrospect, overblown nonsense. After all, if the Asian savings rate, work ethic and discipline were all dedicated to a fundamentally flawed project then Asian excellence was itself flawed. This realization has been psychologically shattering. Lacking any politico-military power, Asians had to confront the illusion that they were at the dynamic center of the global economy. The burning issue in Asia, particularly in Japan, was a project in self redefinition that highlighted unique excellence.&nbsp;Asia will emerge from the current economic crisis in a markedly changed condition, but it will remain an influential and potentially dangerous region. East Asian and Pacific nations comprised 29.4 percent of the world&#39;s GDP in 1997. This unbalanced over-dependence on the economy as a measure of power will give way to a more balanced reality, in which economic power by itself will be supplemented by political and military power.&nbsp;China exemplifies this tendency. In the face of serious economic, China has sought to stabilize itself by resorting to other types of power. It has tried to revive an ideological defense of its government. It has used military and political forces to suppress opposition. And it has projected a more complex profile beyond its borders, moving from a country primarily interested in economic relations to a nation interested in great power status. Beijing has made it known that it expects to exercise international political power based not only on its economic strength, but on its military power.&nbsp;Thus, one major consequence of Asia&#39;s economic crisis is the return of Asia to a more normal, balanced status in the world. China has already returned to a self-image in which power rests on military and political power as well as economics. We expect that the rest of Asia will return to this more traditional understanding. In particular, Japan, the second largest economy in the world, is likely to abandon its reliance on economic growth in favor of a more balanced approach, adding politico-military power with the purely economic.&nbsp;The future of Asia depends on the future of China, the largest country, and Japan, the largest economy. This view is quite traditional. Of course, these countries are vastly different, but they share two things in common. First, both of their economic experiments have encountered profound difficulties. Second, each will face serious domestic political consequences, which will have severe repercussions for the world.&nbsp;The Turmoil in ChinaChina has managed, at least publicly, to minimize its economic problems. All Asian economies lack transparency, which means that they are able to falsify many of the statistics about themselves and therefore appear healthier than they are.&nbsp;China has three advantages in this. First, it is so vast, with many of its regions so backward, that the sheer collection and collation of economic statistics is impossible. Second, China is a communist country. This means that it has a bias in measuring economic activity in terms of output rather than profitability. One can go bankrupt on high output. In addition, as a communist country, it regards economic statistics as political property and therefore tends to falsify those statistics. Finally, it maintains an Asian banking system with accounting rules that do not assure high levels of fiduciary responsibility. Particularly when trouble arises, Asian banks have the ability to manufacture more satisfactory realities than would otherwise be the case.&nbsp;While no one, not even the Beijing government, has a clear idea of what is happening in the Chinese economy, it is clear that the economy is much worse than China had hoped after the 1997 crisis. It is also clear that Beijing is extremely concerned about the social and political consequences of economic failure. Under Deng, China abandoned its ideological justification for its government in favor of a functional justification. Say what you might, the economy worked. Following 1997, it is difficult to ignore the fact that it is not working. Returning to Maoism is hardly the solution. Thus, the government has been using direct measures to maintain control, from suppressing Xinjiang separatists to crushing Falun Gong.&nbsp;It is important to understand the extraordinary domestic transformation China has undergone since 1995. The government responded to the economic crisis by imposing powerful social, political and security controls on the population. Clearly, Beijing has been worried, and with good reason. Under Deng&#39;s redefinition of socialism, the government&#39;s legitimacy depended on its economic performance. Now, the economy is doing poorly, with little reason to expect improvement. So support for the government needs to be gathered through means other than economic.&nbsp;A tremendous tension underlies China. Coastal China continues to look to the exterior for economic relations that enable growth, while inland China sees, in this region, the seeds of destruction for a united China. In the 1990s, China&#39;s coastal region performed extraordinarily well, but Chinese leaders are wary of foreign forces. Now the government is increasingly depending on inland China to serve as its foundation.&nbsp;This is a very old story in China. Over the century, it has vacillated between an isolationist peasant-based economy and an open, merchant-based economy. In the former model, China is poor but virtuous and the emperor is secure. In the latter, some Chinese are rich, others are poor and the emperor is vulnerable to the plots of the coastal merchant&#39;s foreign friends. Mao chose the former peasant-based course and closed off China from the imperialists. Deng tried to control the open model and have the best of both worlds. While the economy surged, all sins were forgiven. Now that the economy is weak, no sin can be overlooked.&nbsp;Beijing cannot simply seal off the coastal cities. They can throw out foreign telecommunications companies. But the government and its officials are themselves so deeply enmeshed in trade with the West that enclosing China is a difficult option, short of a massive governmental purge and a reign of terror like the Cultural Revolution. The government has neither the stomach nor the legitimacy for such an undertaking. Therefore, in spite of China&#39;s weakened economic condition, official and unofficial ties with foreign businesses will continue, resulting in an intensifying disparity between coastal entrepreneurs and the rest of the country. Beijing will try to tax the entrepreneurs to placate the countryside. The entrepreneurs will resist, and tensions will rise.&nbsp;Can the tensions be contained? Can China resist the manipulation of foreign business interests and their Chinese allies without triggering a massive reaction form the interior? Beijing&#39;s policy under Jiang has been to attempt to balance these forces, to maintain a massive if lessened degree of commerce with the West while using the interior to control the coastal officials. It is a balancing act that is difficult to maintain and in Chinese history, one which usually tilts to one side. Mao was no fool. He took an extreme course because he knew he would lose control if he tried both.&nbsp;We therefore expect a massive shift in China in the coming decade. On the whole, the greatest probability is for a serious fragmentation of China&#39;s national fabric. Toward the end of the decade, China will resemble China of the 1920s more than China of the 1990s. Another possibility is a massive return to the anti-Westernism of the 1950s and 1960s. Beijing can maintain its national integrity by following the Maoist road. However, given government corruption, and the deep involvement of senior party official&#39;s families in foreign trade, it is an unlikely outcome short of a Maoist rebellion. Our forecast is for a deeply troubled China, increasingly torn by domestic strife, with a government, in the face of it, alternating between brutal repression and helplessness. In short, as with Russia, one should not confuse China&#39;s façade with its reality.&nbsp;The Rise of JapanWith China in turmoil, the nation likely to take a leading role in Asia is Japan, even though it is not a role that Japan relishes. We should, however, bear in mind two important facts. The World War II generation responsible for Japan&#39;s defeat has died and the post-war generation that made peace with being a purely economic country has been discredited by the country&#39;s decade of economic failures. Thus, the new generation regards the war as ancient history and is deeply suspicious of Japan&#39;s economic road to greatness.&nbsp;This is the generation that will define Japanese politics in next decade. Members of this generation understand that Japan&#39;s decade-long depression cannot end by the traditional solution of an export surge into the United States. They also understand they cannot force a Japanese recovery without a massive overhaul of the country&#39;s financial system. Understanding this difficulty, they realize that they must export, but not simply to the United States. They are therefore looking to Asia, and experimenting with ideas such as Asian Monetary Funds, Asian Common Markets and other Asian solutions to Asian economic problems.&nbsp;This new generation also understands that to make this happen, an Asian political framework must be created. With Europe as a model, they see that such a framework is not wholly incompatible with a close security relationship with the United States. The new generation is also aware that European countries, even with bad memories of World War II Germany, nonetheless accept German leadership if not primacy. By analogy, they know that a similar scenario can be tried in Japan.&nbsp;The Rest of AsiaAs China&#39;s internal pressures intensify and Japan becomes more assertive, the Korean Peninsula will become the epicenter of tensions in Northeast Asia. The Korean Peninsula is both a remnant of the Cold War and a traditional focal point of conflict between China and Japan. In addition, both North Korea and South Korea have recently accelerated moves to break out of U.S-imposed constraints. The North is pursuing a diplomatic offensive and the South is seeking to limit its reliance on the U.S. military.&nbsp;In Southeast Asia, Indonesia will continue to be the center of attention as it struggles to maintaining unity and redefine its role among its neighbors. Strategically, Indonesia attracts the attention of China, Japan, and the United States as it lies astride major Asian shipping lanes. As well, the separatist struggles in Indonesia may well redefine relations among Southeast Asian nations as they struggle with the concept of non-interference over the fear of a separatist domino effect should Indonesia disintegrate.&nbsp;For the rest of Asia, domestic affairs will be conditioned by the growing influence of Japan and the increasing resistance by the United States to Japanese influence and power. It will be a time when there are opportunities for playing the two powers against one another.There will be times when lesser nations are trapped between them. Indeed, it is our view that the next decade will be marked by countries &mdash; from South Korea to Singapore &mdash; trying to calculate their best interests between the opportunities of Asian economic, political and military structures dominated by Japan and their relations with the United States. It will not be a simple or easy time for any of them.

In Russia, the Pendulum of Democracy Swings Away From the West

It is important to understand that Russia literally turned itself inside out during the last decade. It is not simply a matter of learning from the West. For a time, Russian decision-makers gave more credibility to a Harvard economics professor than to all the Russian economists. Russians sought to adopt Western party politics, in spite of the fact that Russia had not been genuinely democratic in its history. Russia abandoned an empire that had taken centuries to build, including the spoils of a world war in which it lost tens of millions of Russians, expecting in return Western-style prosperity and integration into Western civilization. The list is endless.The results are not. Russia achieved, in return, less than nothing. Where in 1980 it was a poor but feared superpower, in 2000 it is substantially poorer, weaker and internationally marginalized. The question of why this happened is entirely academic at this point. We expect scholars to debate for centuries why Westernization failed and who was responsible. For us, it is sufficient to note that the latest Westernization experimentation has failed, and that this failure is in keeping with what happened in all previous Westernizing experiments. They always fail. The more extreme the embrace of the West, the more extreme the later rejection of the West, and the harsher the fate of Russian Westernizers. The issue now is to try to map the consequences of this failure.Gorbachev attempted to initiate a massive reform intended to save the Communist Party system. He and those Soviets familiar with the evolution of technology in the West, particularly those charged with this within the KGB, were painfully aware that the Soviet Union was slipping hopelessly behind. They also understood that in order to reverse the situation, the Soviet Union needed a massive influx of technology from the West.Gorbachev knew two things. First, while the Cold War raged, investment and technology transfer were unlikely. Second, unless there was major reform in Soviet institutions, no amount of capital or technology could be absorbed. Gorbachev therefore needed to end the Cold War, convince the West that fundamental reforms were underway that would prevent the resurrection of the Cold War and reform Soviet institutions so that the Soviet Union could take advantage of investment and technology.Neither Gorbachev nor the relatively sophisticated bureaucrats who gravitated to him intended to dismantle communism or the party apparatus. Certainly none of them expected to be forced to withdraw from Eastern Europe. The thought of the Soviet Union disintegrating was the farthest thing from their minds. They badly underestimated the weakness of their own system. They failed to understand that liberalization of an ossified system creates uncontrollable forces. By 1989, the situation had spun out of control, and both the party and the empire collapsed.Still, there was no revolution - a critical fact missed by most Western observers. The Soviet Union disintegrated into its constituent republics with the loss of only the highest tier of officials. The old guard retained control of the Russian government and the perestroika economy, and even held the leash of the extreme pro-Western reformers. With the old system intact, there could be no sweeping change. Without a revolution, the &quot;new&quot; Russia was doomed from the start.The collapse of the Soviet Union and its institutions opened the door not so much for reform as for theft. In a country that had no system of private property, no system of legal documentation for ownership, no impartial judiciary for adjudicating disputes, property was suddenly &quot;privatized,&quot; whatever that meant. Opportunists seized control. Some were political opportunists, like Boris Yeltsin. Others were economic opportunists like Boris Berezovsky. Ultimately, the two classes of opportunists merged into one. The result was catastrophic.Westerners completely missed the situation. Most had no idea whatsoever what was going on, focusing on grand theories of liberalization based on a foundation of air. Others participated in the systematic looting of both the Russian economy and Western investment. In Russia, the distinction between liberalization and theft became difficult to define, as was the difference between liberal and thief.The opposition to all of this was an unimaginative coalition of Brezhnevites, Stalinists and fascists. An advantage of incompetent democracy is that the opposition is as ineffective as the government. Lacking his own political currency, President Yeltsin approached Russia&#39;s problems on a tactical level, appointing a series of disposable prime ministers appropriate to the crisis of the moment, as Russia sank deeper and deeper into the morass. The basic outlines of the opposition remained intact. However, over time, a new governing ideology emerged to replace the discredited liberalism.The first representative of that new ideology was Prime Minister Yevgeny Primakov, appointed to mollify the communist and nationalist opposition in the wake of the failure of Sergei Kiriyenko&#39;s economic reforms. Primakov turned against the oligarchs, backing a series of investigations and indicting two of the most prominent oligarchs for economic crimes, and he stiffened Russia&#39;s opposition to Western politico-military pressure. Primakov&#39;s political offensive was premature, and he fell victim to the powerful oligarchs and to Yeltsin&#39;s need to secure further IMF financing.Primakov&#39;s successor, Prime Minister Sergei Stepashin, was the last gasp of the Yeltsin Kremlin. The decision to sell out Russian interests in Yugoslavia just to continue juggling IMF debt drew a cry of &quot;Enough!&quot; from the Russian security apparatus. When future histories of Russia are written, the Russian army&#39;s dash to Pristina will mark the beginning of the new order - when nationalists in the Russian military and intelligence community seized control of the Russian foreign, and eventually domestic, agenda. The sea change was complete when Stepashin, unwilling to take appropriate steps to defend Russian territorial integrity in Dagestan, was replaced by Federal Security Service Director and KGB veteran Vladimir Putin.Prime Minister Putin was tasked with one immediate mission: to stabilize the Russian government and prevent its complete collapse. Appointed in the wake of Russian humiliation in Kosovo, Putin understood that two issues remained on the table. The first, obviously, was the economy. The second was Russian national security, or to put it more precisely, Russian patriotism. Putin understood that he could do little about the economy, primarily because the Yeltsin regime was so intimately tied to the Russian economic oligarchs. Any attempt at cleaning house would quickly bring him down. He therefore concentrated on the single area where he had a degree of control: patriotism.He launched a war in Chechnya that was designed to do two things. First, it would draw a line in the sand, showing that Russian disintegration would stop, no matter what the cost. Second, he would move Russia into a more confrontational position with the West, knowing that this strategy would increase his popularity in a country tired of being treated with contempt. He therefore created a situation in which he tried to co-opt Russian nationalism for Yeltsin&#39;s regime, building popularity and thereby evading the economic questions he could not answer.Like Gorbachev before him, Putin tried to find a solution that would stave off complete collapse without requiring fundamental changes. In doing this, he has, like Gorbachev, unleashed forces that he will not be able to control. The extraordinary popularity of the war in Chechnya led his faction to a much greater victory than expected in recent elections. But in unleashing Russian nationalism, he triggered a process that took on a life of its own.Russians are far more open to conspiracy theories than the complex economic and social explanations that might be expected. This is particularly true, because part of the explanation of events in Russia can be traced to a conspiracy: the conspiracy of Russian oligarchs working with Western banks and other institutions. The theory that Russia lacked the preparation for capitalism does not resonate nearly as well as the not completely untrue explanation that foreign elements and their Russian agents combined to weaken, rob and humiliate Russia. Throw more than a little anti-Semitism into your explanation and you have a theory that is both satisfying and, to some extent, true.Putin, by tapping into Russian nationalism, is trying to stabilize the political foundations of the regime. But in legitimizing Russian nationalism at the level of the prime minister&#39;s office, he generates not only a desire to end the disintegration of Russia, but an inevitable backlash against the West, a backlash aided by Western moralizing on Chechnya. Now, if the justification for retaining Chechnya is that it is integral to Russia and is being subverted by outsiders - with a broad hint that the outsiders are not just Georgians, but the Georgian&#39;s American masters - then a number of things follow.First, it follows that if Georgia is the root of the infection, something should be done about Georgia. Second, if Georgia is merely the puppet of Washington, then something ought to be done about Washington. Finally, if Moscow is doing something about Washington in Chechnya, then Moscow should be doing something about Washington wherever it is acting against Russian interests. That obviously includes the other areas of the former Soviet Union where Western influence is generating threats to Moscow. And it involves those inside of Russia who have sold themselves to their Western masters.In other words, we feel that Russia is primed for another round of anti-Western frenzy. It is not clear that this could have been avoided under any circumstances. But Putin&#39;s attempt to co-opt nationalism on behalf of the Yeltsin reformist government both speeds up the process and guarantees that it will boomerang on him. Gorbachev tried to save the Soviet Union with internationalism and lost the Soviet Union. Putin is trying to save the reform government of Russia with nationalism and will lose that too.The issue is whether the current constitution will be able to preside over the witch-hunt that is brewing in Russia over who sold Russia to the West. We rather doubt it. The constitution has as much legitimacy as Yeltsin: very little. Moreover, Westerners confuse the holding of elections with democracy. Russians feel completely powerless. In the countryside, outside of Moscow and St. Petersburg, they feel completely alienated from the government, which is regarded as, at best, irrelevant and at worst, harmful.The institutional question is, however, irrelevant. Putin or someone else, under this constitution or some other administrative form, will have to pay for what was done to Russia. In no other country could everything have gone to pieces as catastrophically, without a day of reckoning. The idea that the regime, which presided over this catastrophe, will continue to govern indefinitely is preposterous. Now, it is possible that Putin, with his roots in the KGB and his relations with the military, will be able to preside over the complete reorientation of the Russian state. But personalities notwithstanding, the reorientation is underway.We expect the reorientation to include a terror. Not only is this fairly traditional in Russian recoils from the West, but there is an institutional requirement in this case. Wealth and power is in the hands of the oligarchs and the Mafia. No new regime can emerge that does not liquidate these entities. Such liquidation is impossible through legal means. Russia does not have the institutions needed to arrest, try and expropriate the Mafia. Indeed, the Mafia may turn out to be an extremely dangerous opponent. Although, like all criminal groups they have the weakness of being easily split by a brutal enemy. But a brutal enemy is the only thing that will break the oligarchs and Mafia. Therefore, there will be a terror that will focus on criminals, and then, in grand Russian style, will sweep on to ensnare entire classes.Putin, the Gorbachevite, is unlikely to preside over a terror. He is more likely to engage in a series of partial, stabilizing measures. The name is unknown of the man who will use Russian nationalism and xenophobia to unite Russia and crush Westernizers of all sorts. But he is out there and he will, fairly early in the decade, make himself known. The complete failure of liberalism in Russia, its very real victimizations at the hands of Western schemers and dreamers, makes a massive house cleaning inevitable.Along with this house-cleaning, of course, will come a new foreign policy. The frontiers of Russia are irrational. Apart from pure military geography, a century of empire has created economic dependencies that were torn apart when the Soviet Union collapsed. There was a rationale to the old Soviet borders. Now, there is no doubt there is deep antipathy toward Moscow in many of the former republics, and deep nationalism supporting a desire for independence. But there are substantial, if minority, forces in these countries that want reunification. The remnants of the Russian security apparatus remain active enough in these countries that with a powerful, even ferocious, government in Moscow, resistance can be overcome, in many cases on a voluntary basis.We do not think this will happen quickly. We expect Moscow to spend most of the next generation simply trying to rebuild its empire to the borders of the former Soviet Union. The task will be difficult and in some cases bloody. Moscow will not become a superpower for several decades, if by superpower one means the ability to project forces globally. It will be hard enough to project forces into the Baltics, Caucasus, Ukraine or Central Asia.But this campaign holds out economic hope as well. Defense expenditures can kick-start an economy. Germany went from a deep depression to an expanding economy in five years between 1933 and 1938. Massive expenditures on defense had a great deal to do with it. Defense spending, like all public works projects, can increase economic activity. But defense spending, with its particular emphasis on advanced technologies, can have sustaining effects on the economy. At any rate, the Russian economy really has few other options. Therefore, increased defense spending will probably have a greater impact on Russia&#39;s economy than any other single cause.Russia&#39;s attempt to reconstruct itself will inevitably face opposition from the United States. A recreated Soviet Union, however organized, is not in the American interest. The economic interests pursued by United States in the post-Soviet power vacuum in both the Caucasus and Central Asia have shown little financial promise, but great strategic significance. The region&#39;s oil promise may not be panning out, but the desire for Western investment is serving to keep several countries in the region oriented away from both Russia and Iran. However, the United States has relatively few options in the region, particularly if the Russians were to attempt to use direct force - as they have in Chechnya.Nevertheless, American hostility to Russian aspirations, while it may be useful in generating political support in Russia, poses a problem that Russia will find difficult to deal with alone. The process of building equilibrium in the international system is of particular interest to the Russians, who will seek to build a coalition to limit American power. The central player in that coalition is China. China is, of course, somewhat more cautious in allying with Russia, simply because it sees the threat of alliance as useful in extracting concessions from the Americans. Nevertheless, we foresee a serious attempt by the Russians to work with the Chinese, an attempt that we think will be successful. China has a particular interest in securing Xinjiang from Islamic influences based in neighboring former Soviet Republics. It is therefore quite interested in seeing increased Russian presence in the region.We can see clearly that Russia is utterly de-synchronized economically from the rest of the world. It is also deeply involved in coalition-building designed to limit U.S. strategic power. But the most fascinating dimension of the next decade about Russia will be watching it wrestle with its internal demons. The pendulum is hurtling away from its love affair with the West. We expect the other swing of the pendulum fairly early in the next decade. The only question in our minds is how deep and how bloody the house-cleaning will be.

The Middle East, a Peaceful Backwater

For 50 years, any analysis of the Cold War turned on the Arab-Israeli conflict. As we have discussed in detail, the Cold War and the Arab-Israeli conflict were intimately connected. The Western strategy of containment depended heavily on maintaining a cordon around the Soviet Bloc on the line of Yugoslavia, Greece, Turkey and Iran. Unable to break this line, the Soviet Union countered by attempting to encircle the encirclement and brought Syria and Iraq under its influence. The Western countermove was to increase dependence on Israel, Jordan and the Arabian Peninsula.&nbsp;The end of the Cold War has brought an extraordinary moment to the Middle East. Now, at a rare instance in history, this crossroads of three continents is not in anyone&#39;s line of march nor critical to any empire&#39;s defense. Viewed from a global standpoint, the Middle East is, for now, non-strategic. Russia is struggling merely to hold on to its own periphery. Even oil -though higher in price than a year ago - is not in such short supply as to arouse concerns. Indeed, it is important to remember that the pivot of the entire region - the area from Cairo to Damascus - doesn&#39;t have much oil.&nbsp;The decline of great power rivalry has opened the door to what passes for peace in the region. Egypt and Israel have had a peace treaty for a generation. Jordan and Israel formalized their ongoing entente more recently. Syria and Israel are now seeing if they can formalize what has been in place for well over a decade. If the attempt fails, it is of little importance. Syria and Israel have too many common interests in Lebanon to allow too much friction to develop, especially when there is no great power audience to play for. Therefore, for the moment, the fate of the region is of far greater interest to inhabitants than to outsiders. This is a startling feeling to Israelis, Egyptians and Syrians, all of whom expect the world to care much more about what goes on there than is the case.&nbsp;The real question for the next decade, as a result, no longer turns on the Arab-Israeli relationship - but rather the Arab-Arab relationship, or to be more precise, the future dynamic of the Arab world. And if the most important issue for the region is the future of Arab self-conception, then the most important issue is what is called, inappropriately, Islamic fundamentalism. It is a misnomer simply because the real question in the region is the extent to which Islam in general, rather than in any fundamentalist sense, will dominate. This is a critical question because we are on the verge of a generational shift in Arab leadership. Jordan&#39;s King Hussein is dead. Syria&#39;s Hafez Assad is clearly ill. Egypt&#39;s Hosni Mubarak has been in office for a generation. Moammar Gadhafi has been in office for more than 30 years. Most of those now governing Arab states will not be around in 10 years. Therefore, the question of Islam intersects with this impending generational change.&nbsp;The Middle East: The Rise and Fall of NasserismTo understand the next 10 years, we must take a detour into history, and particularly into the history of the most dynamic movement in post-war Arab history: Nasserism.&nbsp;Today, the regimes of major Arab states that are not monarchies are descendants of the model pioneered in Egypt by Gamel Abdel Nasser. While Nasser and his brand of pan-Arab nationalism have long since passed from the scene, the regimes that emulated him continue. But everywhere they exist - from Iraq to Libya - these governments are in a state of decay and decline that is irreversible.&nbsp;In overthrowing the Egyptian monarchy in July, 1952 Nasser put into power a popular military government, more secular than Islamic. The model on which Nasser built his regime actually derived from the Turkish military revolutionary, Mustafa Kemal Ataturk. Ataturk overthrew the Ottoman Empire after its defeat in World War I. His goal was to create a modern state, by which he meant a secular, technologically developed regime ultimately modeled on the West and built around Turkish nationalism. Ataturk used the military, as the most modern, cohesive and technologically advanced element in Turkish society, to serve as the engine of revolution.&nbsp;The Ataturkian model of a secular, republican, anti-clerical regime based on a purely national sense of identity, did not confine itself to Turkey, though. It became the model on which the Pahlavi dynasty in Iran was founded. It also became the model that Nasser adopted, consciously or unconsciously. In overthrowing King Farouk, Nasser created a secular republic; while it was not as overtly anti-clerical as the Ataturk or Pahlavi models, Nasser&#39;s regime was still far from orthodox Islam. And like Ataturk and Pahlavi, Nasser was obsessed with national development. He saw himself and the army as revolutionary forces driving development and overthrowing outmoded traditions. Nasser adopted republicanism, rather than more traditional Arab monarchic traditions, as the basis for his rule. Indeed, Nasser was as socialist as he was Islamic.&nbsp;Nasser also understood that his regime needed to legitimize itself by offering more than just modernization. He seized on a trans-national concept: The idea of Pan-Arabism became the foundation of his political theory. The Arab nation, not Islam, was at the core of his plan was to create a united Arab state, incidentally Islamic, but more fundamentally committed to a national renaissance for the Arab people. Nasserism swept the Arab world. Military regimes, dedicated to modernization, overthrew monarchies in Syria, Iraq, Libya and elsewhere. The dream of turning the army into a modernizing engine swept the Arab world as military coups tried to trigger not only national revolutions but to build a United Arab Republic that encompassed the entire Arab world.&nbsp;Nasserism not only spawned national variations on his theme. It also spawned secular, revolutionary, anti-Israeli movements grouped around the Palestine Liberation Organization. Essentially secular, socialist and revolutionary organizations, these movements threatened Israel far less than they threatened the surviving Arab monarchies of the Saudi Peninsula. A profound struggle began between the conservative, Islamic monarchies and the radical, Nasserite regimes, with the Palestinian movement serving as a key weapon for destabilizing the conservative regime.&nbsp;For a while it appeared that secular Nasserism and its outriders would sweep the Arab world. The oil crisis of 1973 and the boom in oil prices that followed changed the balance of power dramatically, as financial power allowed the monarchies to stabilize their regimes and subvert their enemies. The decision by Anwar Sadat, Nasser&#39;s heir, to abandon the struggle against Israel further undermined the secular revolutionaries. They faded in the 1980s into old age, corruption and compromise. Arafat&#39;s Palestinian National Authority is what is left of them.&nbsp;Hafez AssadInstead, the Iranian revolution created an idea that drew adherents in the Arab world as well: the Islamic Republic, combining Islamic law with the European republican tradition. The Ayatollah Ruhollah Khomeini combined the revolutionary republican form that Nasser had created and linked it to very traditional Islamic law. This was an extraordinary development that redefined the dynamics of the Islamic world. Nasser had posed a choice between a secular republican government and traditional Islamic monarchies. Khomeini fused the two: republican government and traditional Islam.&nbsp;In retrospect, the Nasserite tradition both succeeded and failed. Outside of the Saudi Peninsula, Nasserite regimes and variants rule most Arab countries. Military regimes linked to republican administrative forms dominate Iraq, Syria, Libya and Egypt.&nbsp;But rather than serving as the springboard for Arab unity, these regimes have become vehicles for personalized rule. Men like Saddam Hussein, Gadhafi and Assad claim Arab republican and socialist traditions, but govern regimes that have failed either to modernize or satisfy the psychological needs of their people. The most profound failure has been the inability to destroy Israel. The core promise of socialist modernization was the idea that with modernization, Israel would be destroyed and the Palestinians returned to their rightful place. &nbsp; Instead, the radical Nasserites - and now Assad - have made peace with Israel. Making peace is not merely limited to formal treaties. Rather, Israel has been absorbed into the informal deal making that constitutes the region&#39;s diplomacy and business. The key event was not the Camp David accords. The key event was the informal, businesslike understanding over Lebanon achieved by Syria and Israel in the 1980s. The Camp David accords were public, American-style events, full of symbolism and formalism. The Israeli-Syrian accords were Middle-Eastern style: full of winks, nods, secret conversations and plausible deniability. They were as - or more - enduring than Camp David.&nbsp;All of this left the Arab revolutionary movement bereft of support as first Egypt and then Syria slowly withdrew assistance. Arafat was left with no one but the Iraqis, whom he supported in the 1991 war - a massive miscalculation. Syria and Egypt, as a result, distrusted Arafat even more. The collapse of the secular, socialist, revolutionary movement created a massive vacuum in the Arab world. No one spoke for either the revolutionary republican tradition or for the assertive Islamic tradition.&nbsp;There were only exhausted Nasserite regimes and conservative monarchies, increasingly down on their luck as oil prices sagged.&nbsp;The Middle East: The Islamic Republican AlternativeThroughout the Arab world the result has been the same: an Islamic Republican movement drawing its inspiration from Iran and from its own, indigenous religious traditions. This movement must not be confused with the radical movements of the 1960s and 1970s. They are different ideologically and socially. They combine revolutionary republicanism with Islamic tradition. But for all the differences, they are similar in that they threaten the stability of all varieties of existing Arab societies. They are also stronger than the old radicals, because they draw on the anti-establishment energies of the universities and the young, the traditionalist sensibilities of the merchant and peasant classes, and the sense of powerlessness of broad sectors of society. &nbsp; The Nasserite regimes have been quite successful at suppressing Islamic fundamentalists. From the Syrian massacre at Hama to the Egyptian crackdown on the Muslim Brotherhood, there has been general success in crushing the immediate threat.&nbsp; &nbsp; But now is not the moment of greatest threat. Three events are coming in the next decade that will tend to magnify Islamic power. First, the leaders of key Arab countries are old and will pass from the scene. Second, in many of these countries, the succession process is not only unclear; it is unknown. There has been no succession in decades. No one understands how to conduct it. The danger of instability as the result of palace coups and countercoups is substantial. We expect to see many of these. The Arab monarchies will also see succession, the most important of which will be in Saudi Arabia.&nbsp;Saudi Arabia, for example, is conservative in terms of Islamic doctrine, but has managed to suppress the more aggressive politics that could follow from conservative interpretations of the law. Saudi Wahhabi Islam has as one of its followers Osama bin Laden. Bin Laden is not the largest object in the picture. Instead, it is Wahhabi conservatism and a move toward greater activism that can take place in a succession crisis.&nbsp;Finally, there is the inability of moderates in Iran to gain complete control of the regime. While the regime of President Mohammad Khatami is not weak, it has also not been strong enough to protect key allies from judicial prosecution by conservatives. The struggle in Iran is far from settled. Significantly, Former President Hashemi Rafsanjani has abandoned his moderating role and is now campaigning on the moderates&#39; platform. The demonstrations of the summer terrified the clerics but had to have been encouraging to Khatami. A stalemate is emerging, in which Khatami has popular support but Ayatollah Ali Khamenei&#39;s supporters can regularly single out and imprison prominent moderates.&nbsp;Hanging in the balance is Iran&#39;s relationship to the rest of the region. Iran and Saudi Arabia have clearly, although tentatively, explored some sort of regional security cooperation with the goal of limiting U.S. influence. The relationship is creeping forward at a glacial pace, but it is creeping forward. A moderate Iran may succeed in poking holes in U.S. influence in the region. A revival of a full-blown conservative clerical regime will alarm Arab regimes.&nbsp;The convergence of these three forces - the decline of the current leadership of Arab nations, the clearly unstable succession periods that will follow and the Iranian variable - indicates a real possibility of a resurgent and powerful fundamentalist movement sweeping the Islamic world during the next decade. With the death of the great leaders of the secular republic Arab movement and potential shifts in the Saudi monarchy, the forces that contain Islamic fundamentalism are likely to weaken and lose their grip on the situation. With Iran remaining very much an Islamic Republic, a non-Arab emblem of the viability of Islamic Republicanism, the possibilities are substantial.&nbsp;Men like Assad are moving to try to protect the future of their regimes after their deaths. That is why Assad is prepared to deal with Israel and why he is more than happy to see Israel attacking Hezbollah forces while negotiating with Syria. In an odd way, just as Israel has become the guarantor of the Hashemite throne in Jordan, Israel could become a bulwark against Islamic fundamentalism.&nbsp;Nevertheless, there are severe limits on Israeli power. Even Israel and Turkey together, both sworn enemies of Islamic Republicanism, would be unable to contain general instability in the Arab world. Besides, we expect Turkey&#39;s vision to be riveted northward, watching what the Russians are doing, with little time left to meddle in Arab affairs. In our view, the institutions bequeathed by Nasserism are so bankrupt that it is difficult to imagine how they will survive their charismatic leaders. It is difficult to see what other powers are present to prevent at least some nations from succumbing to Islamic Republicanism.&nbsp;That will pose an interesting geopolitical problem. According at least to doctrine, Israel is even more anathema to the Islamic forces than it was to the Nasserites. However, when the Nasserites faced Israel, it was during the Cold War, and the confrontation had global significance, and superpowers to underwrite all sides. Today, as we have argued, the global action has shifted north of Turkey. Russia will not be a serious player in the Middle East until it reabsorbs the Caucasus and Central Asia. And that will take a generation.&nbsp; &nbsp; Therefore, this time, both sides in the Middle East will be on their own. This reduces the global danger substantially. It also reduces the threat to Israel. Unlike the Nasserites at the peak of their power, Islamic republicans have shown themselves able to work, Middle Eastern style, with winks and nods. It is no secret that Iran continues to work with Israel against Iraq and on other issues of mutual strategic interest. Islam is an ancient religion and its traditional practitioners, like those of other ancient religions, understand the complexity of politics, the virtue of patience and the intimate connection between good and evil. They know how and when to do business, and how and when to do it in public.&nbsp;As in Lebanon, all is not as it seems when Israelis confront the Islamic movement. Wheels whir within wheels. So long as outside powers don&#39;t covet the region - and we forecast that for the next decade at least, the region will be a backwater - the ability of Arabs and Israelis to maintain working relationships, albeit with healthy mistrust and a dollop of violence, will remain intact.&nbsp;Thus, we think that Arab history will take another turn in the next decade. The last vestiges of the Nasserite movement will be overthrown, and new, interesting Arab experiments with Islamic fundamentalism will take place. In countries like Egypt, with the deep-rooted cosmopolitanism of the Cairene to block it, the situation will be difficult and complex. In other countries, where most institutions have been discredited, the traditions will be stronger.One of the oddities of all of this is that the United States, as the global power, is operating in a foreign policy mode that is fairly disconnected from the region&#39;s issues. The war against Iraq no longer has much meaning and it will undoubtedly be dismantled by the next administration. U.S. policy toward Iran will also be redefined. But the reason that there is no urgency about this is that the U.S. does not, for now at least, have any strategic interests in the region. So long as the United States has Venezuela, the status of Persian Gulf oil is a European and Japanese concern. Therefore, our forecast is for a naturally unstable Middle East, but one that will see the relatively uneasy peace and bizarre diplomacy continue. It will see very new political movements, many of which appear frightening. In fact, though, they will be fairly manageable and in the end, not incompatible with the idea of an ongoing, somewhat unhealthy, peace in the region.

The Latin American Pressure Cooker

Latin America has been shaped in the 1990s by three forces, all in some way related to the collapse of the Soviet Union. The first, and most important, has been the opening of Latin America to market forces within countries, within the region and between the region and the rest of the world. The second has been the collapse of the left as a defining, continent-wide, powerful force standing in opposition to existing regimes. The third, which actually predated the second, has been the withdrawal of the military from the region&#39;s political life and a general trend toward constitutional government.&nbsp;The effect of market forces on relatively closed economies can be enormous and devastating. We see the most extreme case in the former Soviet Union, where the introduction of a market economy has led to massive social disruption, growing inequality and economic chaos. The Soviet experience and that of Latin America&#39;s are similar. Latin America historically limited the free market in various formal and informal ways. Most countries controlled the flow of foreign capital and used informal political and social arrangements to limit competition.&nbsp;As in the rest of the world, the movement toward market economies swept through Latin America, and with it came substantial political and social problems. The shift toward market economies created competitive pressures on state entities and private companies controlled by oligarchs. It increased efficiency, but also increased unwelcome pressure on entities that were not used to challenges. On the other side, the application of market forces to previously managed environments has created substantial social dislocation in order to restructure the economy more efficiently. This includes geographical dislocation of populations, increased inequality as the capital formation process gets underway, the collapse of traditional businesses and the massive disruption of stable social relations.&nbsp;Market economies tend to create two types of opposition. The first comes from the elite who see competition as threatening to their social position and economic advantage. The second is from the lower classes, who see their lives disrupted as the market re-engineers society. Since the pay-off from market disciplines is far from immediate, they frequently experience massive social disruption and increased work-place rigors without experiencing the benefits.&nbsp;In Latin America we are seeing the beginning of the inevitable backlash against the free market. The attack is coming from three directions. The first is from those sectors of the elite that see themselves as losing out relative to other sectors. This is particularly intense among the elite who have failed to establish strong relations internationally in Europe and the United States. Second, there is a backlash among the middle classes, and particularly among managers who work for established, state-controlled or protected enterprises that are under new competitive pressure. For them, the free market has created both job security and lifestyle issues. Finally, there is a backlash from labor, which sees itself experiencing increased productivity pressures without equivalent improvements in pay.&nbsp;This is a broad coalition, yet it is not yet a deep coalition, because economic growth over the course of the last decade has smoothed out many of the tensions. But over the past year or two, the growth surge has become both uneven and in some cases reversed. As the inevitable business cycle generates recession while structural problems limit growth, the cushioning effect of growth will disappear, while the negative effects intensify. We are at an early stage in this process. The question is, of course, how long and deep this process will run.The Latin American Left Re-emergesOne of the benchmarks of this process is the status of the Latin American left among its intellectuals. As in Europe, Latin American universities are historical centers of left-wing activity. During the 1990s, this sector was fragmented, marginalized and relatively unimportant. The collapse of the Soviet Union and the triumph of the United States and market economics was a severe blow to them. As important, the fact that Castro&#39;s Cuba was thrown onto the defensive for most of the 1990s meant that the Latin American left was isolated from its intellectual and, to some extent, organizational center. Throughout Latin America, the left ceased to be relevant to the real issues facing the continent.&nbsp;The left is now beginning to re-emerge. Its main target is the market system, which it calls &ldquo;neo-liberalism.&rdquo; Its opposition to neo-liberalism differs from traditional Marxism in several ways. First, it focuses on environmental issues in ways that Marxists never did. Second, it raises the question of the &ldquo;fourth-world&rdquo; of indigenous people more aggressively than Marxists did. But the most important change is the elevation of nationalism to center stage.&nbsp;The left in Latin America has always been anti-American. That is not the same as being nationalist. Today&#39;s left attacks neo-liberalism not only for what it does to the poor, but also for what it does to the nation. Attacks on the World Trade Organization or the International Monetary Fund, as examples, focus on the impact on the poor, the effect of international organizations on national autonomy, and the ability of the nation to determine its own fate.&nbsp;This redefinition of the left, frequently undertaken by older, Marxist intellectuals, brings the left into coalition with the other sectors that oppose market reforms. It creates a broad-based coalition reacting to the internationalization of the national economy, the loss of power by the national government, and the social costs of the market compared to the deferred benefits. This makes for a heady populist mixture.&nbsp;New Coalition Forming in VenezuelaThis mixture is already at work is in Venezuela, where Hugo Chavez, former army colonel and leader of a failed coup earlier in the decade, has been elected President. In Venezuela, a coalition has formed between elements of the military who support Chavez, broad masses of the lower classes and even some segments of the elite. Chavez&#39;s platform includes opposition to continued privatization, social support for the poor, creation of reserved areas for the indigenous, increased autonomy for the military, but without any attempt at large-scale expropriation from the wealthy.&nbsp;The complexity of his social program, like the ambiguity of a left-wing colonel, is not, as some observers have argued, confusion on Chavez&#39;s part. Rather it represents the first step in a coherent coalition that is forming throughout Latin America. The coalition does not resemble what went before and in many ways neither the label &ldquo;leftist&rdquo; nor &ldquo;populist&rdquo; really succeeds in describing the reality. It is much more complex than either, both socially and intellectually.&nbsp;Chavez&#39;s problem also points to the other side of the equation. For all of his rhetoric, Chavez remains as dependent on the international financial markets as his predecessor. As a developing country, even one with massive petroleum resources in a market with rising prices, Venezuela must have access to the global capital markets in order to maintain development.&nbsp;That puts Chavez into a serious trap. His coalition is nationalist, egalitarian and consumption oriented. He has risen to power by promising Venezuelan control over Venezuelan wealth and by promising to increase the standard of living for the poor. He cannot deliver the latter without either cutting dramatically into investment for development or by borrowing in the international markets. If he genuinely implements all of his policies, the foreign markets will close off to him. He will then be forced to turn oil revenues toward consumption, creating economic crises a few years down the road.&nbsp;The Latin American EconomyChavez&#39;s problem is paradigmatic for all of Latin America. Latin America confronts contradictory desires. On the one hand, it is increasingly uneasy with the internationalization of its economy. On the other hand, it is dependent on foreign capital and trade for development. Chavez, like the rest of Latin America, can finesse this problem so long as there is economic growth. For Chavez, that means higher oil prices. For the rest of Latin America, if that growth ends, then the contradiction can no longer be contained and a massive crisis will ensue. We continue to have a positive economic outlook for Latin America. There are three reasons for this:&nbsp;Primary commodity prices appear to have bottomed out after a generation of decline. Although it will take a while for this to ripple through the region&#39;s economies, this will certainly stimulate the region&#39;s economic growth. Investments made during the 1990s are beginning to pay off. The long run is beginning to happen.&nbsp;Demographics favor Latin America. As the advanced, industrial world faces an aging population and stable or contracting work force, Latin America possesses a valuable resource in increasingly short supply: labor.Thus, it appears to us that the next decade will be promising economically, if the social and political consequences can be staved off. In other words, if the forces that are gearing up to block market reform can be restrained or restrain themselves, then Latin America appears to be set for a major surge.&nbsp;That is a huge &ldquo;if.&rdquo; The problem is that the political and economic clocks run on different time scales. Economic development on a continental scale measures time in generations. A generation is a substantial part of an individual&#39;s life. Capital formation can require a generation (or several) to make intense sacrifices that include not only deferred consumption but radical transformation in traditional relationships and patterns of life. This personal dimension sets the political clock. When the political clock meets the economic clock, the political frequently trumps the economic.&nbsp;The question posed by Latin America is whether the market liberalization of the last generation can be sustained. One dimension of the answer is to be found in the rapidity with which sustainable, distributable economic benefits can be generated. Another, very different, aspect that must be considered is the geopolitics of the region.&nbsp;In general, Latin America has had the most stable borders of any single region of the world, save North America. Not only have borders remained formally stable for a good part of a century, but cross-border conflicts have been relatively few. Usually, when they have occurred, they have been short, sub-critical conflicts in which the survival of either nation is not at stake. This has not always been the case. Quite the contrary, earlier this century and in the 19th century, Latin America experienced some of the most brutal wars of its time.&nbsp;Colombia&#39;s Civil WarThis brings us to Colombia, which is experiencing an intense civil war in which it is far from clear that the government is winning. Arrayed against the government, indeed, frequently penetrating the government, are the drug lords and Marxist guerrillas &mdash; among the few that continue to function in Latin America. The drug lords have a geopolitical problem. They grow and manufacture narcotics in the Andean countries. They need to transport it to their markets in the United States. The United States has deployed military resources to block that transport. This has resulted in an increased advantage enjoyed by Mexican drug lords with easier access to markets, and has weakened the Colombians. &nbsp;The Colombian drug lords must achieve two things. The first is maintaining security for their operations in Colombia. This means weakening those elements of the Colombian government that would seek to block them. Regardless of their view of Marxism, that means they have a joint interest with the guerrillas. Second, while they fight to maintain their autonomy, they must find shipping routes for getting their drugs into the United States. They have two options. One is to ship northward, into Panama and then northward. The second is to ship through Venezuela and up through the Caribbean islands. &nbsp; In either event, it is clear that the pressure on the Colombian drug lords compels them to increase the scope of their theater of operations to try to secure a route for their product. Given intense U.S. pressure on the northern route, it is clear that their remaining option is through Venezuela. This makes things interesting indeed. Venezuela is the major exporter of oil to the United States. It is also increasingly a focus of the drug war. It is also the country that is most deeply into an experiment against economic liberalization.Forecast for the RegionThus, Venezuela is a pressure cooker for all of the forces roiling Latin America. Indeed, along with Venezuela, we might include in this region, Colombia, Panama, Ecuador and Peru &mdash; the northern tier. In this region, dependent primarily on the export of commodities, including oil, natural gas and cocaine, the economic prospects are relatively bright, given the rising price of commodities.&nbsp;But the political aspects are the most unsettling, particularly where internal political forces intersect with the national security interests of the United States. Drugs and oil make a heady mixture. Add a Marxist insurgency and the limited ability of the United States to resist increased involvement in the region. We see a serious danger of a regional conflict in which the United States becomes increasingly involved. As Colombia&#39;s troubles spill across its borders and drug logistics intersect with U.S. oil supplies and the Panama Canal, the ability of the United States to ignore the problems is limited. Indeed, as global great power rivalries increase, the willingness of other great powers to use these conflicts as a means for containing the United States cannot be discounted. The northern tier of Latin America is more dangerous than it appears.&nbsp;The rest of Latin America, particularly Chile, Argentina and Brazil, remains economically promising but politically doubtful. The key is the ability of these countries to maintain an intense and smooth growth rate. We believe that, on average, the growth rate will be intense, but that it will not be smooth. There will be short, very sharp business cycles. Two years of intense growth followed by a year of intense contraction is, on average, sustainable. But politics does not survive on the &ldquo;average.&rdquo; We have serious doubts about the ability of Latin America to maintain political equanimity in the face of economic adversity. The anti-market coalition will, we now feel, ultimately limit economic growth in favor of stability. This is not to say that there won&#39;t be growth, but simply that the wide-open, free markets anticipated a few years ago will give way to more sedate, regulated, traditional Latin American markets.&nbsp;We are not much more hopeful about Central America and Mexico. Mexico in particular is troubling, particularly as the intensifying power of the drug cartels begins to effect the functioning of the rest of the economy. Mexico&#39;s ability to maintain its stability, while caught between American pressure and the drug cartels, is extremely dubious. As opposition to market reforms converges with antipathy toward American interference in Mexican internal affairs, the anti-market coalition in Mexico might, ultimately, be more intense than in the rest of Latin America.&nbsp;In all of this, we must not forget the role of Castro&#39;s Cuba. The Cuban economy is a disaster saved only by the American embargo. Castro can explain his abysmal economic performance by blaming the embargo. Of course, since Castro has unlimited access to financial resources in Europe or Canada, as well as markets for what goods he has to sell, his explanation doesn&#39;t hold up to scrutiny. But it doesn&#39;t have to. It justifies his failures to those who want it to be justified.&nbsp;And those are precisely the forces that are being revitalized in Latin America. For the generation of older leftists, Castro and Cuba represent an ideal to emulate. For the rest, Castro&#39;s survival symbolizes that it is possible to survive without capitulating to international financial disciplines. The fact that he has just barely survived is explained by the embargo, and enhances the myth of his resistance.&nbsp;Castro is more than a symbol, of course. He is a geopolitical challenge to the United States in two ways. First, he remains a base 90 miles from the United States for whoever wants to use it. Russian electronic listening posts are still in Cuba, and we would expect more Russian and Chinese facilities to show up as the their rivalry with the United States intensifies. Second, while Castro has scarce resources available, only a fraction available to Mexican or Colombian drug lords, he does have the ability to foment political movements as Latin America turns into more fertile ground. We do not expect communism to fall while Castro is alive and he seems to be in good health. Therefore, Castro will flourish in the new environment.&nbsp; &nbsp; We are not predicting a radical turn for Latin America. Rather, we are saying that the radical turn, a turn to untrammeled market capitalism, may not be quite as radical as might have been anticipated. We see the evolution of a limiting coalition. That coalition might not be able to simply block market reforms, but it will be able to limit them and shape them. We see this backlash compounded by growing instability in northern Latin America. Colombia is already in chaos. We see tremendous pressure growing on Venezuela from various sides. Venezuela is important to the United States for oil and to Colombian drug lords for logistics. It is in the midst of a massive social experiment. This is an explosive and dangerous mixture.&nbsp;Therefore, Latin America will continue in the next decade to behave as it did during much of the last century. Buffeted by contradictory social, political and economic forces, Latin America will not move on a straight line. Its economic promise will encounter its political limitations, and it will continue to muddle through, rather than, as was hoped, to break through.

More of the Same, and Worse in Africa

Africa&#39;s overarching problem is the fundamental immaturity of its political systems. Few African countries have managed to implement a system of popularly elected, representative government. On a simpler but far more important level, they have failed to develop peaceful, reliable systems of political succession. This, like many of Africa&#39;s problems, is a legacy of European colonization and sudden and relatively recent independence. Ancient kingdoms and borderless tribal systems were amalgamated almost at random, ruled by outsiders for decades, then cast loose and expected to adopt European political models and to accept their colonial borders.&nbsp;What has emerged are two main political patterns: regimes of long duration, frequently directed by the leaders of the countries&#39; independence movements, protracted civil wars or repeated coups d&#39;etat. Frequently, there has been a bit of both. With neither representative government nor a peaceful mechanism with which to attain it, coups and civil wars have been the source of political transition across Africa. Rarely, however, have they represented a transition to anything but another authoritarian regime.&nbsp;Aging Regimes and InstabilityThe recent coup in Cote d&#39;Ivoire is a poignant example of a continent-wide problem. Prior to the coup, Cote d&#39;Ivoire was considered by many to be a bastion of stability and prosperity in turbulent West Africa. Yet that stability was grounded in nearly 40 years of rigid authoritarian rule by one man, one party and one faction. With the current president - only the second since independence - blocking any honest democratic transition of power, a coup was all but inevitable.&nbsp;Felix Houphouet-Boigny ruled Cote d&#39;Ivoire as a one-party state from independence in 1960 until 1990, when he won yet another five-year term in office in the country&#39;s first multi-party elections, taking some 90 percent of the vote. Upon his death in 1993, Houphouet-Boigny was succeeded by his deputy and fellow Democratic Party member, Henri Konan Bedie, who was then re-elected in his own right in 1995.&nbsp;Bedie, a Christian of the Baoule ethnic group, followed in his predecessor&#39;s autocratic footsteps, forcing the Muslim prime minister - and leader of the opposition Republican Rally Party - Alassane Dramane Ouattara out of office. Recent demonstrations over Bedie&#39;s decision to ban Ouattara from running in next year&#39;s presidential elections led to the arrest of several Republican Rally Party officials while Ouattara fled the country. The Dec. 24 coup ended four decades of one-party dominance of Cote d&#39;Ivoire, and coup leader Gen. Robert Guei has promised to soon hold democratic elections.&nbsp;However, the future is far from clear, let alone bright. Unseating one regime does not make a political transition. The struggle for power in Cote d&#39;Ivoire is in fact only beginning, with two political models to guide it - authoritarianism and coup d&#39;etat. And in a pattern that has already manifested itself elsewhere in Africa, the collapse of Cote d&#39;Ivoire&#39;s long-standing regime has caused sectarian rifts to open in the post-coup power struggle. In this case, a contest appears to be shaping up between Muslims and Christians.&nbsp;Cote d&#39;Ivoire is paradigmatic of Africa&#39;s problems on several counts. First, the country is one of many whose post-colonial politics have been dominated by one man or one party. Second, in the absence of democratic means to break the ruling faction&#39;s hold on power, Cote d&#39;Ivoire experienced a coup d&#39;etat. Third, though the post-coup power struggle is only in its early stages, it is already playing on religious divisions inside the country.&nbsp;The list of African countries dominated by a single individual, party, or clique since independence or for many years is overwhelming. Robert Mugabe in Zimbabwe and Jose Eduardo dos Santos in Angola have ruled their respective countries since independence, as have Sam Nujoma in Namibia and Isaias Afwerki in Eritrea, though for a much shorter period. Kenya&#39;s Daniel arap Moi is only his country&#39;s second president, taking the reins of his party and the country in 1978 following the death of post-independence leader Jomo Kenyatta. From major nations to small ones, the list of nations yet to emerge from the influence of the independence legacy - now decades old - is long. At least 20 African nations have political systems that to a large extent have been shaped by a pattern of coups.&nbsp;Indeed, a powerful relationship between the aging nature of these regimes and instability and warfare is taking shape. The Democratic Republic of Congo (DRC), formerly Zaire, is a good example. A military coup brought long-ruling and kleptocratic Mobutu Sese Seko to power in 1965. Mobutu was driven from power in 1997 in an armed insurrection led by Laurent Kabila and backed by other countries in the region in 1997. Several of the factions that backed Kabila turned against him almost immediately after he took power, and he has been locked in a civil war ever since.&nbsp;Africa&#39;s Web of WarThe ongoing civil war in the DRC is the prime example of yet another other factor conspiring against African peace and stability - the unbroken web of the region&#39;s conflicts. Prior to the still very tenuous peace accord, Kabila received active military support from Zimbabwe, Angola and Namibia, as well as more tacit support from the Republic of Congo, Libya, Chad, Sudan and the Central African Republic. The anti-Kabila faction has been backed by Uganda, Rwanda and Angola&#39;s UNITA rebels; evidence suggests it has received the quiet support of South Africa. This multi-national participation involvement in the DRC conflict has tied that war tightly to several of Africa&#39;s other conflicts.&nbsp;Angola&#39;s involvement in the DRC stems from its attempt to control UNITA, which supports the anti-Kabila forces and uses the DRC as a rear area for its war against Luanda. For the same reason, Angola has also been involved in the Republic of Congo. Namibia, which is facing a growing problem with UNITA along its border with Angola and in the breakaway Caprivi Strip, also contributed forces to the war in the DRC. Caprivi separatists reportedly receive aid not only from UNITA, but also from Botswana and Zambia.&nbsp; &nbsp; Not only are the wars in Angola, Namibia and the DRC deeply linked. The fact that regional powers, South Africa and Zimbabwe, are on different sides in the wars has rendered the South African Development Community (SADC) incapable of addressing either problem. UNITA has reportedly received South African arms, shipped to Mozambique and flown on South African aircraft to Angola by way of Zambia. &nbsp;To the north, Uganda and Sudan have been involved in the DRC conflict in efforts to outflank each other; each supports rebel armies in the other&#39;s country. Sudan&#39;s separatist rebels have also received support from Eritrea, Ethiopia, Egypt and the United States. Meanwhile, Eritrea and Ethiopia are at war, and Eritrea&#39;s attempt to outflank the deadlocked front lines by supporting Ethiopian rebels based in Somalia has spread the conflict to that already war-torn country as well.&nbsp;What emerges is a seamless web of conflict stretching from the Horn of Africa to the Caprivi Strip, with filaments reaching out to Tripoli, Harare, and beyond. Only the relatively uncontested military of Nigeria has served as a bulwark between the central and western African conflicts, and Nigeria is now facing its own growing internal ethnic conflict. With such widespread connections, solving any one conflict becomes extremely difficult, if not impossible.&nbsp;The Ethnic and Religious SpilloverFueling and fueled by the struggle for power in Africa are deep and frequently trans-border ethnic and religious divisions. The colonial powers drew the map of Africa without concern for preexisting divisions, and the international commitment to maintenance of these colonial borders has left a number of pressure cookers on the continent.&nbsp; &nbsp; Prominent among these is Nigeria, home to an estimated 250 to 400 distinct ethnic groups, with the major groups being the Yoruba in the southwest, the Ibo in the southeast, and the Hausa-Fulani in the north. Ibo military officers led the country after a coup in 1966, though other ethnic groups responded by massacring Ibos living in the north. Eastern groups tried to form the secessionist state of Biafra in 1967, a move that sparked a three-year civil war.&nbsp;The Hausa have dominated recent military governments, though new President Olusegun Obasanjo is a Yoruba. Since Obasanjo was backed by a faction of Hausa military officers, he is not trusted by the predominantly Christian Yoruba, yet since he is a Yoruba, he is not trusted by the predominantly Muslim Hausas. The ensuing tension has already resulted in riots, and some of the northern Hausa states have begun implementing Islamic Sharia law, posing a challenge to central government in the country.&nbsp; &nbsp; The legacy of ethnic political machinations on the part of European colonial powers in Rwanda and Burundi has in the 1990s finally expressed itself in genocidal war between the countries&#39; Hutu and Tutsi ethnic groups. Sudan&#39;s civil war is being waged between the Muslim government and the predominantly Christian opposition in the south. Additionally, Muslim fundamentalists continue to challenge the governments of Egypt, Libya and Algeria.&nbsp;Ethnic and religious competition is a constant source of instability throughout Africa, but during political transitions, this contest can quickly grow in importance and hostility. The civil war that toppled Somalia&#39;s Mohamed Siad Barre in 1991 left a power vacuum that ignited feuds between the country&#39;s multiple clans. Since then the country has degenerated into a number of ill defined and perpetually feuding warlord dominated fiefdoms. Two of these, Somaliland and Puntland, have consolidated some semblance of borders and governments and may provide a model not only for the rest of Somalia but for other ethnically divided countries in Africa as well.&nbsp;The international community long held a policy of inviolability of borders in post-colonial Africa, but that is changing. Partly, this is due to waning interest on the part of the developed world for Africa and its politics. Partly, it is a conscious policy decision. No one blinked at Eritrea&#39;s secession from Ethiopia. Italy has appeared to promote segmentation as a solution to the Somali conflict, and the United States even appears to be backing secession for southern Sudan.&nbsp;Not Worth the Effort: International Neglect of AfricaFacilitating the unchecked strife in Africa has been the developed world&#39;s abandonment of the continent.&nbsp;While France, for one, continues to dabble in its former colonies, the other colonial powers and, significantly, the United States, have effectively washed their hands of the continent. The United States was burned in Somalia when the Somalis refused to play by Washington&#39;s rules. Though it continues to moralize, Washington has not found a good reason to return to the continent. The risks simply outweigh the rewards. Economically, there are richer pickings elsewhere, and with the end of the Cold War, Africa has lost most of its strategic significance. The geopolitical game against a resurgent Russia and increasingly assertive China is being played out in Central Asia and the Caucasus, not in Angola.&nbsp;What has emerged is a situation in which international bodies such as the United Nations, which could conceivably intervene in Africa, have the most powerful member, the United States, deeply disinterested in doing so. Add to this the fact that the UN&#39;s European members are more concerned with economically and politically critical regions such as Eastern Europe, the Balkans, the former Soviet Union and Asia. The result is that Africa gets ignored.&nbsp;Would-be regional power brokers such as South Africa, Libya and Nigeria are involved in a number of Africa&#39;s conflicts, but their own long-term stability is very much in question. Libya&#39;s Moammar Gadhafi, who rose to power in a coup in 1969, has no heir apparent. Nigeria&#39;s ethnic and religious rifts are deepening, despite and in part because of the democratic election of Obasanjo. And the short tenure of the African National Congress (ANC) at the helm of South Africa&#39;s government has seen a dramatic surge in crime and a deterioration of the country&#39;s infrastructure. After decades of apartheid, black South Africans are not soon about to tolerate the election of a white government, while the whites are not going to tolerate much more deterioration under the ANC. Neither is eager to give the Zulu Inkatha Freedom Party a chance. Unless the ANC can revitalize South Africa&#39;s economy and enforce domestic peace and stability, a day of reckoning is approaching.&nbsp;Africa&#39;s Future: Somebody&#39;s InterestedThere is, however, one set of external actors that may have a substantial impact on the future of Africa &mdash; multi-national corporations. Those companies involved in extracting Africa&#39;s rich natural resources have a vested interest in maintaining stability around their concessions. Examples abound of their cooperation with various competing factions. Shell Oil has a documented and widely criticized history of backing the military regimes in Nigeria.&nbsp;Jean-Raymond Boulle, chief shareholder of the mining firm American Mineral Fields, Inc., reportedly received a mining concession after he provided a company jet to then rebel leader Laurent Kabila during his battle to overthrow Mobutu Sese Seko in Zaire. And DeBeers recently publicized its official decision to cease purchasing diamonds from UNITA, purchases the rebels had used to finance their war in Angola. The pattern holds true in areas of instability outside Africa as well, for example in Colombia, where British Petroleum has been implicated in a scandal over funding a Colombian Army unit that was charged with human rights violations.&nbsp;Other companies throughout Africa hire what amount to private armies of security forces, and unrevealed instances of direct cooperation with warring parties are undoubtedly far more numerous than the documented examples. As struggles over political succession proliferate, corporations face the choice of sitting passively by as war consumes investment &mdash; or quietly backing one of the factions. The natural symbiosis between warring factions eager for financial support and corporations eager to protect their investments will inevitably lead to cooperation between the two &mdash; particularly in the context of broad neglect of the region on the part of the corporations&#39; European and American home governments.&nbsp;The future of Africa appears to be more of the same, and worse. International disinterest has left the continent to solve its own problems. Lacking the mechanisms to solve those problems by peaceful means, the continent is destined for further violent political transitions. This competition for power inevitably plays off of pre-existing ethnic and religious rifts in African countries, and as there is no longer an international commitment to the integrity of Africa&#39;s borders, the net result will be a widespread redrawing of those borders.&nbsp;Finally, as foreign companies struggle to protect their assets in Africa, the relationships they will build with the warring factions will, when the new borders and regimes ossify, ironically lead to a kind of corporate recolonization of Africa. Africa will evolve into smaller, more ethnically and religiously homogenous countries, many of which will be symbiotically tied to one or more foreign corporations. The best that can be expected is that the violence and disorder that will continue to dominate Africa over the next decade will rationalize some of the continent&#39;s colonial borders and bring new players to the political stage.

DECADE FORECAST: 2000-2010

Europe Comes to a Crossroads

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