Article

Who Fills the Global Power Vacuum?

Published

26th September 2011

The question of who will fill the global power vacuum has never before been felt as acutely as it is today – or in as many different arenas of politics and economics simultaneously. Last week, at the annual conference convened by the global advisory firm Oxford Analytica (where I serve as CEO), Robert Rubin joined Martin Wolf in a conversation about the perilous state of the global economy. Listening to the two wise men of global finance set out the steps necessary for Europe and the U.S. to escape the sovereign debt trap, there was a palpable sense of nostalgia for a time when concerted, timely, effective global leadership – in any sphere, by any one country or group of countries – was imaginable. There was also little doubt that the U.S. would not be returning to its pre-eminent leadership position any time soon – or that many countries would even welcome it.

Today, after a week’s geopolitical drama driven by the Palestinian bid for statehood at the UN, it is evident that the global power vacuum is not limited to economics and the Eurozone alone.  Rather, the world is facing a vacuum of leadership in each of the economic, diplomatic and strategic arenas – and what’s filling this vacuum is a mixture of the good, the bad, and the highly unpredictable.  Years from now, this may yet be seen as a period of global creative destruction – a transition away from a false and iniquitous stability towards a more sustainable, diversely founded equilibrium of global interests.  In the meantime, the process of filling the vacuum is likely to be volatile, dangerous, and deeply disorienting.

First, the vacuum in global economic leadership. The absence of concerted action is most acutely displayed in the Eurozone’s response to an economic crisis that as of the past few weeks is beginning to threaten a global contagion, with serious implications for emerging markets too. With each passing day, and every claim that Greece is not insolvent and that it – and the Eurozone – would not be better off long-term with a Greek default and exit, policymakers are running down their credibility on the far more consequential matter of whether they’ve properly understood the risks to the Italian and Spanish financial systems.  This is how contagion happens.

A widening chasm of credibility – between markets and policymakers, and between the politics of European unity and the economics of fiscal fragmentation – has its roots in part in the admirable German commitment to the European project as a political and economic enterprise. The problem, however, is that absent economic confidence-building measures of sufficient size to reassure markets, the vacuum is being filled by investors aggressively repricing assets for an ever-darker horizon.

Far more dangerous to global economic prospects is the risk of the current vacuum being filled by a backlash against globalization and free markets.  It remains a case of dog that didn’t bark – the absence of stronger populist movements in both creditor and debtor European countries during this deepening crisis. That doesn’t mean the dog will stay silent forever, and its bark may bring with it a spiral of currency wars, capital controls and tariffs that will only accelerate the current contraction through a wave of world-wide protectionism.

Second, the vacuum in global diplomatic leadership. The Palestinian decision to defy the U.S. and Israel and press ahead with its claim for statehood at the U.N. saw a key diplomatic vacuum being filled by a party more used to being observer than protagonist in one of the central geopolitical disputes in the world. A decades-long peace process owned by the United States – and supported, on U.S. terms, by the other members of the Quartet, the EU, Russia and the U.N. – was recognized as effectively dead for the past two years, giving the Palestinians a chance to step in with a direct claim to the international community. And it is just one measure of the bankruptcy of the old peace process that the U.S. and its allies over the coming weeks will be expending vast political (and, if history is any guide, financial capital) to prevent a key strategic aim, Palestinian statehood, from coming to pass at this juncture.

That the realization of the Palestinian aspirations for statehood requires more than a vote at the UN is obvious to all.  What is equally clear, however, is that a new dynamic has been launched with greater resonance and legitimacy both in the region and around the world.  Just ask yourself if the new Quartet announcement (however limited in impact) of a one-year time table for talks leading to a settlement would have happened absent Palestinian leader Abbas’s persistence in staking his claim.  Joining him in filling the vacuum have been three other forces: first, the Arab Awakening and its example of young Arabs seeking and winning the beginnings of legitimate and accountable government; second, a competent and responsible Palestinian leadership in the West Bank focused on economic growth and stability that no one credibly can claim is focused on prolonging the conflict; third, and far more troublingly, the rise of Hamas in Gaza.

Unsettling, uncertain, and vulnerable to excesses as this new dynamic may be, it’s what happens when vacuums are allowed to emerge. The U.S. and its allies have only themselves to thank for the unenviable task of now having to argue—even as they embrace the Arab Awakening transforming the region–that the Palestinians don’t deserve statehood. And yet this dynamic may provide the best chance for the U.S. and its allies to recognize a peaceful Palestinian neighbor reconciled to the existence of Israel within internationally recognized borders.  To be sure, in the short term, a Palestinian aspiration endorsed by newly free Arab countries and their empowered citizens will resonate more powerfully than one advanced by the likes of Iran, Hamas and Hezbollah.  In the longer-term, however, it holds out the opportunity for Israel to agree a peace of peoples, not just with the Palestinians, but also with the broader Arab neighborhood.

Third, the vacuum in global strategic leadership. At this year’s annual meetings of the UN and the World Bank and IMF, the atmosphere of dread on the part of Western policymakers about their economic prospects is matched only by their insistence that the emerging markets shouldn’t expect to escape contagion. While this increasingly appears to be the case, there is little appreciation – even in the face of this dire crisis for the West – for the fact that if the BRIC countries are to help bail out the richer countries, there needs to be a more fundamental reordering of power and influence on the global stage.

There is a reason Security Council seats are distributed as anachronistically as they are, and that voting power at the IMF and World Bank remains absurdly weighted towards European powers: they reflect the political and economic power of the founding era.  But if China, say, is to leverage its $3 trillion in FX reserves to support a wider global economic stabilization vehicle, it will naturally ask for commensurate influence.  To the call from World Bank President Robert Zoellick that China be a “responsible stakeholder,” the answer from China increasingly will be: sure, but in what? An international system designed sixty years ago for the perpetuation of a certain power balance and the advantage of a certain set of countries not including China? Not so much.  But a “responsible stakeholder” in a newly rebalanced set of institutions reflecting the burdens, the power, and capital of the 21st century – to that the Chinese are far more likely to respond positively.

In the meantime, rising powers like Brazil and Turkey are casting off decades of weakness and stepping into strategic vacuums left by failed Western-led strategies  – in arenas as diverse as development, climate change and the Iranian nuclear challenge.  In this strategic no-man’s land – between a past U.S.-dominated playing field and something far messier and crowded – will their initiatives always succeed? Of course not.  These issues are hard – as the Copenhagen Climate talks and the Brazilian-Turkish initiative on the Tehran reactor demonstrated. Power is not only shifting East and South from the North Atlantic.  Increasingly, it is leaking out of the international system – with new actors and new technologies taking their own place in the vacuum, making solutions ever more elusive, and complex to negotiate.

The crisis of credibility afflicting established global institutions and powers has been exacerbated by what David Miliband has called a new transparency driven by technology that makes political hypocrisy – local and global – far harder to sustain. A bonfire of orthodoxies is under way – in every global arena from what stability in the Arab world means, to the price of prosperity in Europe, and to the sustainability of U.S. imperial commitments, at home and abroad.

Power, like nature, abhors a vacuum.  But a vacuum threatening to become a strategic void at a critical juncture in global economic and political affairs is not likely to last, or be filled in an orderly, peaceful manner.  A global race is on for concerted action, and everyone will lose if the vacuum is left to fill itself.

Overview

Strategic advantage in a volatile world

The Firm

Nader Mousavizadeh and David Claydon founded Macro Advisory Partners in 2013 to provide a global client base with a competitive advantage in a complex world. Driven by a belief in the value of independent, long-term strategic counsel, MAP's co-founders created a firm that delivers actionable macro strategies to decision-makers in business, finance and government.

A volatile and fragmenting global landscape requires an integrated understanding of the political and economic drivers of change. Drawing on MAP's unique network, the firm’s partners — including Mona Sutphen and John Sawers — create tailored and innovative macro solutions mapped to the specific exposures, risks and opportunities facing the firm’s clients.

MAP's London and New York-based team of partners, directors and associates is supported by a Global Advisory Board and a group of Senior Advisors drawn from leadership positions in the worlds of business, finance, politics, diplomacy and technology.

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Global Advisory Board
  • Kofi Annan

    Chairman, The Kofi Annan Foundation
    Kofi Annan was the seventh Secretary-General of the United Nations (1997 to 2006), and now serves as Chairman of The Kofi Annan Foundation.
  • William Burns

    President, Carnegie Endowment
    Ambassador Burns is President of the Carnegie Endowment for International Peace, and was the 17th United States Deputy Secretary of State.
  • Mala Gaonkar

    Co-portfolio Manager, Lone Pine Capital
    Mala Gaonkar is Co-portfolio Manager at Lone Pine Capital, and a former consultant at the World Bank.
  • Vikram Mehta

    Chairman, Brookings India
    Vikram Mehta is Executive Chairman of Brookings India and former Chairman of the Shell Group of Companies in India.
  • David Miliband

    President, IRC
    David Miliband is President and CEO of the International Rescue Committee, following a distinguished political career in the United Kingdom.
  • Vali Nasr

    Dean, SAIS
    Dr Vali Nasr is Dean of the Paul H. Nitze School of Advanced International Studies of Johns Hopkins University.

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Macro Advisory Partners provides corporate, investor and sovereign clients with the strategic insights to navigate the intersection of global markets, geopolitics and policy.

In a world defined by volatility and uncertainty — and an abundance of information, yet scarcity of insight — we identify the strategic implications for decision-makers tasked with maximising opportunity and minimising risk. The Archipelago World is characterised by fragmenting markets, populist politics, policy unpredictability, revolutionary technology, and weaponised arenas of finance, regulation and cyber.  The implications of this environment are dramatic and lasting. To help our clients anticipate and navigate these shifts in the macro landscape, we bring together deep on-the-ground analysis with long-term strategic judgement tailored to our clients' specific interests, exposures and concerns.

For today's global investor and business leader, macro is just as disruptive a factor as technology. Our advice — delivered by the firm's partners through trusted, personal, long-term and dynamic client engagements — is drawn from the policy expertise and connectivity of our global network, supported by advanced data analytics. The firm's Global Advisory Board and a team of Senior Advisors with backgrounds in diplomacy, macro intelligence, investment strategy, academia and industry, support our partners with the judgements that enable us to provide clients with relevant, actionable and investable macro solutions.

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A culture of partnership defines our firm — among the individuals we have attracted to our endeavour, and with the clients whose long-term interests we view as our own. Our team brings to our work a diverse range of global business, finance and government experiences that enable us not only to interpret a changing macro environment for our clients, but also to design specific solutions that enhance their performance and prospects.

The principles of independence, integrity and intelligence define our culture. Our clients include the world's leading technology, consumer, energy and financial services institutions. Our commitment to them — and to our people — is to deliver on our founding aim of building the world's leading macro advisory firm.

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    Middle East Market Expansion

    Facing a fragmenting market and changing regulation, a global financial services company uses MAP's advice to enhance its performance and footprint in the Middle East.
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    Managing a Complex Portfolio in a Volatile World

    MAP provides ongoing and ad-hoc advisory services to a significant investor client, which manages a complex portfolio of equity, credit, interest rate, commodity and foreign exchange exposures.
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    A global consumer goods company achieves success in China with support from MAP's distinctive macro insights.

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