The Old World Order
Singapore’s veteran diplomat, Kishore Mahbubani once remarked about being born under the “Old World Order”. As a young child in Singapore, his family didn’t have access to a flush toilet and he was placed under a special diet for malnourished children. He was born in 1948.
The “Old World Order” under which he was born was a world dominated by fading European empires and a few independent states. Under that order, Singapore was a British colony, and as a British colony, it had limited opportunities to take advantage of the global economy to make ordinary Singaporeans prosperous.
Nobody talks about an “Old World Order” unless it can be compared with a new order. The new order that replaced the order under which Kishmore was born was a product of the Second World War. The two major victors of that global war, the Soviet Union and the United States, insisted that European empires needed to get rid of their colonies – and the Europeans complied, the French being less reluctant to do so than the British. These demands, as well as changing global economics which made the possession of colonies increasingly unprofitable meant they had to comply.
Initially, this “New World Order” was dominated by two main camps; a US dominated capitalist camp and a Soviet dominated socialist camp. Because of the financial ruin faced by everyone else after the Second World War, the US dollar became the de facto global currency and Bretton Woods institutions like the World Bank and the International Monetary Fund dominated global financial governance almost unchallenged. The US Navy protected the global sea lanes, which meant that since the British, French, Japanese and Germans no longer had to fight each other for access to the sea, they could concentrate on building their economies.
On its part, the US was focused on containing a great power rival, the Soviet Union, so they were willing to grant concessions to key allies. For example, they opened their markets to manufactured goods from allied nations, not because they absolutely had to, but because they needed economically successful allies to help contain the Soviets. Western European nations that were devastated by the Second World War soon built their economies on exporting to North America, with Japan, also devastated by the war and the so-called “Asian Tigers” – Hong Kong, Singapore, South Korea and Taiwan – following shortly thereafter. Kishore’s Singapore took advantage of the benign post war geopolitical environment championed by the United States to grow its economy and prosper. Other former British possessions, like Nigeria, did not.
Unfortunately, this benign post war geopolitical context is unravelling and Donald Trump’s “America First” strategy points to a couple of difficult decades ahead for the Nigerian and global economies.
The conditions under which everyone from Germany to Singapore to China prospered no longer exist, and Nigeria, despite being the biggest economy on the African continent, remains a desperately poor country. So how did this benign geopolitical context unravel and what impact would its unravelling have on Nigeria?
A New World Order emerges
In 1989, the Berlin Wall, the quintessential symbol of the ideologically divided global paradigm, fell and in 1991, the Soviet Union itself followed suit – and the rationale for the post-Second World War era ended. President George H.W Bush thought deeply about this, so he promoted the idea of a “New World Order” to replace the post war settlement and act as a new framework for global governance. The realities of his unsuccessful re-election meant he d could not flesh out that new framework. The term “New World Order” was eventually hijacked by conspiracy theorists peddling far-fetched theories of a global concert of shadow elites with sinister designs of dominating humankind.
It was at this time that Francis Fukuyama’s “The End of History” and America’s ‘Unipolar Moment’ dominated elite thinking. Neo-liberal economics was having a field day. The consensus was that free trade, lower tariffs and the free movement of goods and services was the ordained path to a shared prosperous economic destiny for the world. This new paradigm, however meant that American factory workers could not compete with factory workers in low cost, mostly Asian economies, and they translated their economic anxieties as far back as the early 1990s into political action. Ross Perot’s third party challenges in 1992 and 1996 rode on the back these anxieties. The geopolitical context was already in motion. History was proving that it had a few more twists to offer.
Bush’s successors in the White House and America’s intellectual elite didn’t take the challenge of a dynamic geopolitical context seriously, and at the same time China began to liberalise economically. The problem with China is that it is more than a rounding error. Advanced Western economies can deal with low cost manufacturing from Bangladesh or Vietnam, but not with low cost manufacturing from a nation with 1.4 billion people. Manufacturing job losses in America further accelerated.
A series of events transformed the political landscape in the West. These include the impact of terrorism and the Iraq War, the Great Recession of 2008, large scale migration from the Middle East in the wake of the Arab Spring and a lingering dissatisfaction at job losses triggered by the relocation of manufacturing operations to China. The impact of all these events culminated in Brexit in the United Kingdom, the rise of populists across Europe and Donald Trump’s rise to the White House.
The rise of Donald Trump
Some background on Donald Trump is necessary at this point. First of all, Donald Trump has been remarkably consistent. As far back as the early 1980s, he called for measures against West Germany and Japan, because he believed they were “taking advantage” of access to the American market, without providing reciprocal access to their own markets. In other words, Trump outlined the key principles of “America First” a couple of decades before it became a fashionable political buzzword, but the problem is; whatever merits “America First” delivers to Americans, it risks destabilising the rest of the World.
The three main engines of the global economy remain the United States, Europe and Asia. The US has traditionally set the tone of the global economy by presiding over a benign “rules-based” order. Under Trump, that is no longer the case. Trump sees the world a lot differently than any post war US president. His view of the world is simple – for America to “win”, others must lose. In his world-view, relationships are seen as business transactions, if there are no immediate, obvious benefits, they should be discarded. Going by this understanding, Trump is not averse to imposing tariffs on used clothes exports to Rwanda or getting into a trade scuffle with South Africa – AGOA be damned.
Trump is out to get China for not providing American companies with reciprocal access to its markets. While this effort enjoys bipartisan support, large parts of the country’s political elite are aghast at his dim view of America’s Western allies where he has practically simplified a seventy-year-old alliance to a series of transactions; if you pay up, you are in America’s good books, if you don’t, there’s hell to pay. The danger with this approach to international politics is that it soon alienates your allies.
The new reality
Then there is the fundamental economic reality of the US in the 21st Century. The US is now energy independent and it, along with Canada and Mexico (already an economic bloc with a gross domestic product larger than the European Union) can form a contiguous economic entity – and prosper – without doing much trade with the rest of the world. A US that is losing interest in Europe and the Middle East, will consider Nigeria to be less than strategically relevant. This is the brutal reality, and beating our chests and calling ourselves the “giant of Africa” will not alter this reality.
The next region of interest is Europe. To put it mildly, Europe is in a funk – it is dealing with the aftermath of the Great Recession, Brexit, a migration crisis and populism. The European Union as we know it, might not exist in a few decades. Russia’s Vladimir Putin is taking advantage of these stressors to sow political division and chaos in Europe – and he is largely succeeding.
Europe has been Africa’s biggest trading partner for the last six centuries. So a Europe bedevilled with systemic problems is not necessarily in Africa or Nigeria’s best interests. Europe’s economic engine is Germany, but Germany’s economy is dependent on exports, especially to the US and China. The economy of Eastern Europe is linked to the German economy, so if Germany’s exports fall, they fall with it too. Britain is on its way out of Europe, and can only survive through a trade deal with the US – and the total loss of its strategic autonomy. France is a lot less dependent on the US than either Germany or Britain, but if Europe collapses, France will be duly incentivised to revert to its traditional predatory ways in Africa – not that it completely relinquished this effort.
Nigerian leaders have traditionally leaned on Europe to help manage the country’s myriad problems (Europe being a leading contributor to development assistance for example), but a Europe that is overwhelmed with its own problems will not have the capacity to play this role – and considering that Nigerian leaders have not demonstrated a capacity for out-of-the-box, independent thinking, we are on the cusp of some serious and possibly unprecedented problems.
The West has traditionally dominated international trade with Africa, but that is probably set to change this century with the rise of Asia. Asia is too big and its rise too rapid for it not to have a seismic effect on Africa and Nigeria’s economic prospects. But while there is significant scope for growth in this relationship, there are also potential and significant pitfalls.
First of all, the fundamental economic logic for a relationship between Asia and Africa/Nigeria is simple;
- Asian nations produce low cost consumer goods; Africa has a large number of consumers with low purchasing power.
- Asia lacks arable land; Africa is home to the world’s most significant amount of efficiently used arable land.
- Asia is relatively resource poor; Africa is rich in mineral resources.
- With a rise in living standards and the growth of the service sector, many Asian companies are looking to offshore low cost manufacturing to Africa.
China is Asia’s biggest economy, and on careful examination of China’s activity in Africa over the past two decades, we can safely conclude that China’s strategic interests in Africa are encapsulated in the above bullet points. Thus, China’s “Belt and Road Initiative” as it applies to Africa is geared towards accomplishing the seamless integration of African economies with the Chinese supply chains. However, China – Africa relations are not without their problems. China is an unsentimental actor, primarily focused on its own interests. It is not a blank cheque “Father Christmas” like many African leaders tend to believe. China also has its own challenges – demographic decline, a trade war with the United States and a slowing economy. These challenges could impact Nigeria’s economy as China is one of our biggest trade partners.
India’s interests in Africa are driven by the same considerations as China. So while India’s style might be different, its strategic interests are not. It is instructive to note that both India and China lobbied for an African Continental Free Trade Agreement (AfCTA) – as both nations prioritise access to Africa’s 54 markets and a dismantling of many of the inefficient stumbling blocks stifling intra-African trade. In addition to India and China, there are a host of Asian nations, ranging from Gulf states to Turkey and Indonesia evolving their own African calculus. These economies are by no means insignificant; Indonesia is a trillion dollar economy almost as big as Spain’s and will soon exceed it.
So how should Nigeria respond to this changing geopolitical context?
The first step should be to realise that we are no longer (if we ever were) the “Giant of Africa”. Nigeria is a failing state, with a government struggling to impose its will on a variety of violent non-state actors. Put plainly,, we would not be a prime location for foreign investment – even if our economic policies were sound, and they are not. This state of affairs has to be fixed, a development which is unlikely with the present set of leaders buckling under the weight of our obsolete unitary system.
The next step is to conduct a careful assessment of what the world wants and what we can offer competitively. In the past, this was relatively easy; do the necessary work to be the next big location for IT outsourcing or low cost manufacturing to the US market, and FDI floods in. Unfortunately, that era has passed – Trump wants to bring more manufacturing back home and advances in artificial intelligence and robotics mean that he can make it happen. A lot of clever and innovative thinking will be required to pull this off. This will not be easy. Merely selling oil and gas to Asia, our current post-US coping mechanism will not cut it. We could leverage on our immense oil and gas resources and the AfCTA to be Africa’s petrochemicals hub, but this will involve painful reforms and will take time. Meeting China’s demand for soybeans and sorghum would require difficult land and agricultural reforms. Trade is logistics and logistics is infrastructure, but we lack the kind of world class infrastructure to take advantage of emerging trade opportunities. Infrastructure will have to be sustainably financed, but this will also require painfully necessary fiscal reforms.
In addition, we need to invest in a 21st Century workforce, but this will be an uphill task since serious policy thinking on human capital development has not occurred in this country since the 1980s.
The path may be clear but one is left will little room for optimism that Nigeria can rise to meet this challenge. Regardless, it is useful to outline the scale of the difficulties ahead of us. Like Singapore, it is better to know what you are up against than to be deluded by the seductive allure of the status quo.