The Post-American World - Fareed Zakaria [15]
The Problems of Plenty
For the last two decades, we have spent much time, energy, and attention worrying about crises and breakdown in the global economy and terrorism, nuclear blackmail, and war in geopolitics. This is natural—preparing for the worst can help avert it. And we have indeed had bad news—from wars in the Balkans and Africa, to terrorism around the world, to economic crises in East Asia, Russia, and—most dramatically—the United States. But focusing on the breakdowns has also left us unprepared for many of the largest problems we face: which are the product not of failure but of success. The fact that we have experienced decades of synchronous global growth is good news, but it has also raised a series of complex and potentially lethal dilemmas.
Consider oil prices. It’s only a dim memory now, but in 2008 the cost of a barrel climbed upward at a dizzying rate. After years of hovering in the $25–$50 range, oil hit nearly $150 in mid-2008, and a Goldman Sachs analyst predicted it would reach $200 the following year. The oil shock of the naughts was different from previous ones. In the past, prices rose because oil producers—OPEC—artificially restricted supply and thus forced up the cost of gasoline. By contrast, prices rose in 2008 because of demand from China, India, and other emerging markets, as well as the continuing, massive demand in the developed world. If prices are rising because economies are growing, it means that economies have the vigor and flexibility to handle increased costs by improving productivity (and, to a lesser extent, by passing them on to consumers). As a result, the price hikes of the naughts were far more easily digested than, say, those of the 1970s. Had we asked our fortune-teller in 2001 to assess the effect of a quadrupling in oil prices, he would have surely predicted a massive global recession.
It wasn’t just oil that became more expensive. Commodity prices reached a 200-year high in 2008. Agricultural produce grew so expensive that developing countries faced a political problem of how to respond to food inflation. UN Secretary-General Ban Ki-moon issued a plea in the Washington Post for “an effective and urgent response” to the emergency. Raw materials of all kinds became dear. The cost of construction exploded from New York to Dubai to Shanghai. Even the humble gas helium, which is used not merely in party balloons but also in MRI machines and microchip factories, was in short supply globally—and it’s the second-most-abundant element in the universe.
When the financial crisis struck later that year, prices quickly deflated. If the 2008 commodity boom had been a one-off event—a by-product of speculation, say—we might be able to leave it aside for the study of historians. But it wasn’t. Rather, it was the result of the long, inexorable rise of the billions who inhabit China, India, and other emerging powers. How can we be sure? When global growth returned in 2010, commodity prices resumed their upward march. Coffee, cocoa, and wheat prices all saw double-digit increases that year. The price of cotton more than doubled.
Because of this, certain countries—those endowed with natural resources, especially petroleum and natural gas—get free rides. They are surfing the waves of global growth, getting rich without having to play by most of the rules that govern the global economy. This phenomenon is the strange but inevitable outgrowth of the success of everyone else. These countries are the nonmarket parasites on a market world.
Consider the principal political challenges to the United States and to Western ideas of international order. In the Middle East they come from Iran, in Latin America from Venezuela, and in Eurasia from Russia. All have newfound strength built on oil. Sudan’s ability to defy the world over Darfur would be difficult to imagine absent its oil reserves. Petroleum brings in eye-popping amounts of cash. Iran’s take from oil in 2006 amounted to $50 billion—enough to dispense patronage