Transcript
Transcript: Economic Security in an Era of Global Disruption: The Shifting Dynamics of Global Power – Presentations
[00:00:01 Text appears on screen: “Economic Security in an Era of Global Disruption Series – The Shifting Dynamics of Global Power: Presentations”]
Narration: On March 22nd, 2023, the Canada School of Public Service launched the Economic Security in an Era of Global Disruption event series. The inaugural event, titled “The Shifting Dynamics of Global Power,” explored how geopolitics, technology and climate change are shifting the balance of international economic power. The event was moderated by Malcolm Brown, former Deputy Minister, Public Safety Canada. Speakers Yves Tiberghien and Olivia Lazard spoke to how nation states are increasingly weaponizing trade, acquiring new technology and intellectual property, seeking dominance in the emerging green economy, and altering and eroding international governance structures.
[00:00:58 Text appears on screen: “Global Disruptions and its Impact on Economic Security”]
[00:01:00 The CSPS logo appears onscreen.]
[00:01:03 The screen fades to Malcolm Brown, Yves Tiberghien, and Olivia Lazard in separate video chat panels.]
Malcolm Brown (Moderator): We have two extraordinary speakers today. I'd like to start first with introducing Yves Tiberghien, Professor of Political Science and Konwakai Chair in Japanese Research at the University of British Columbia, UBC. He is also the Director Emeritus of the Institute of Asian Research and Director of the Center for Japanese Research. Our second panelist is Olivia Lazard, who's a Fellow at Carnegie Europe. Her research focuses on geopolitics, transition ushered in by climate change, and the risks of conflict and fragility associated with climate change and environmental collapse. I will now pass the floor to Yves, and then after Yves we'll turn to Olivia, and we'll have a Q&A after that. So, Yves, over to you.
Yves Tiberghien (University of British Columbia): Thank you, Malcolm. Good morning, good afternoon to all of you. Bonjour à tous et à toutes. C'est un plaisir d'être avec vous cet après-midi. I am joining you from the traditional ancestral and unceded territory of the Musqueam people here in Vancouver.
So, we are living through great change since 2008-2009, especially since 2016-17, we have entered a period of structural disruptions and major contestation for the future of the liberal international order, or the rules-based international order, as we like to call it in Canada. Several major changes or disruptions are occurring at the same time. The net result is that all actors in the global system are going through major adjustments and jockeying for influence. The future rules of the global order are up for grabs. For a country like Canada, it's essential to respond to those shocks. One of the key cognitive biases for humans is the assumption that tomorrow will be the same as today, and next year the same as last year. It's particularly important to overcome this bias in a period of powerful disruptions and intensified geopolitics. So, in my remarks, I will talk about four great changes and two implications, and I'll list them first. First, we face internal challenges within the liberal economic order. Indeed, political support for globalization has eroded in the face of rising inequality and dislocations. We see greater tensions between globalization and domestic politics, especially in the U.S. and Europe, but to some extent in Canada, too, and this has generated anger and supported new populist forms of governance. Second, systemic risks are accelerating due to increased connectivity, and we have less circuit breakers, increased climate change, technological advances that connect us more but also generate more risks, and as a result, we see things like accelerating weather shocks, biodiversity losses, fight over water, pandemics, financial risk. We are living through another financial crisis right now. Third, we are going through not one but two great industrial revolutions. The digital A.I. revolution and the green technology revolution. These two revolutions will change the economy fundamentally within the next two decades.
So, by the late 2030's, the future economic prosperity of nations, including Canada, and the ranking of countries, will change. It's basically up for grabs based on who does what in those two industrial revolutions. Industrial revolutions reset the economy, and reset the winners and losers. Fourth, at the same time, the years 2000 to 2020 have seen the greatest shift in economic power since the 1850's. We have seen a shift of 22% of global GDP going from advanced democracies to emerging economies, especially China, but not just China. Now, this isn't about economic power or GDP, and there is a great lag when it comes to technology, military and soft power, where China is lagging greatly. But nonetheless, economy shifts of this magnitude have great impact, and in particular, there's two accompanying changes. First accompanying the shift in economic power, we see growing pains around the integration of rising power China into the liberal international order as it turns more authoritarian inward and confrontational outward. And then second, this power shift and associated security dilemma that goes along with a power shift this big is feeding a dynamic of tit-for-tat securitization for parts of globalization and parts of the global order. This is the so-called weaponization of interdependence, and many actors are doing it at the same time and then they interact with each other.
So, there are two major implications of those four shifts. First, the institutions of global management and global governance that have been put in place since 1945, some of which are more recent, like WTO, are all struggling, and necessary governance innovation in areas like digital governance, so A.I., is mostly failing at the moment. We do see progress in the environmental sphere and to some extent in the G20, but otherwise, the U.S.-China confrontation in particular, and the additional role of Russia as a troublemaker, are deeply entrenched at the heart of global governance, making progress more difficult. And second, the combination of all the parallel changes I've outlined makes the coming decade more disputed and volatile. In a way, this is the end of a stable, rules-based order, this is the end of linear thinking and predictable behaviour and institutions. The global order is partially up for grabs, and so we can expect that day after day, month after month, we will see major changes, major shocks, major crisis that will come at us faster than what we're used to. And that requires resetting our assumptions, and in the way, our models and institutions.
So, I'm going to take those five changes in order now and say a few more things. But first, I want to say something about the modern global order, what we call the global order. And there have been many types of global orders in the world over millennia. They have taken many forms, but the modern order that we have is actually a hybrid of several parts. The core pillar is the Westphalian state system, and we often forget that. But it goes back to the 1648 Treaty of Westphalia among a few European powers, and it solidified modern nation states and it established sovereign states as the owner of power and sovereignty. So, this is still with us. All sovereignty and all power lies with sovereign states. And then what we call international order, and the various components of that, is essentially a fragile superstructure that is never fully legitimate in a Westphalian system, because legitimacy ultimately is with the states, and Donald Trump reminding us of that, but it has been built over years by different framers and great founding people to basically help us coordinate things like trade, maintain peace, have a postal system that works globally, etc., but also maintain security and some norms.
So, we tend to expect a lot of the UN, but the UN's effectiveness is completely a function of the degree of agreement among the five veto powers of the UN Security Council. In other words, when the dominant states, what we call systemically important states, don't agree, global institutions can't work very well. So, that's the key thing to keep in mind. But what we call the rules-based international order has several dimensions, like an onion, different layers. First, we have a public good dimension and an agreed generic foundation around the UN, and that has maximal legitimacy because it's been signed, the charter has been signed by almost everybody on Earth. And so, there are functional needs for human survival and interchange that have to be taken care of, things like peace, caring for the planet, etc. And some elements there still function. We just had a very impressive biodiversity framework agreed last December in Montreal, hosted by Canada, but chaired by China. And this agreement is praised the world around by Europeans, by Africans, by South Americans. I've heard a lot about this. So, some functions around public goods are still there and China is still on board with this. Russia is not. So, Russia is different there. And the U.S. is onboard in spirit, but is also annoyed by the growing lack of control it has over the UN. So, there is always tug of war between the U.S., has the hegemony on the one hand and the UN.
Second component is the global economic order. That is not under the UN, and that was by design, mostly by the U.S. after '45, to keep more control over it. It was traditionally managed by the U.S. and its allies, initially the Quad and then G7, and it has organized international organizations like the IMF, the WTO, etc. The G7 basically managed most of the coordination required until the 2008 financial crisis, and then at that point it was not sufficient and there was a need to enlarge the core group to a G20. That's the global economic order component. The security order is different. It's not UN related, it's not, basically, global institutions related. It's a private good in some ways provided by the U.S. and its allies in the postwar period, through its hegemonic position and a hub and spoke alliance system. And of course, this is the component of the system that is most challenged by rapid changes in power, because if we don't have a hegemonic dominance anymore, that means security is contested. Fourth, we then have a liberal political dimension with two parts, the human right piece, which is embedded at the origin in the UN with the Human Right Declaration, and nominally you find copies of that UN Human Rights Declaration in China, even on university campuses. But the democracy promotion part was added in recent decades, and it's often, sometimes generates a dilemma, since promoting regime change to a democracy within great powers can mean global war because great powers sometimes fight back. So, this is why the framers of the UN initially avoided it. And we always have a struggle around this dimension. So, China accepts the UN legitimacy, accepts Westphalian sovereignty, in fact, they insist on it, and some of the economic institutions of the LIO, while trying to gain more voice in those institutions, or through economic statecraft tools that are, of course, not accepted by others. But China, as well known, refuses the democratic dimension of the liberal order, as well as some elements of the human rights regime, and is engaged in a security dilemma with the U.S..
Now, turning to the current changes. The first big change is the peaking of globalization. We have seen an erosion of political support for globalization in advanced democracies, particularly the U.S. and many European countries. And this came in reaction to inequality, polarization, regional blight in major regions, and this is what propelled Donald Trump to power in 2016. With Donald Trump, we know that 10 million voters who had voted for Obama voted for Trump, mostly in former industrial states and in mostly a blue collar, white people, who had seen their living standards decline, and we then embraced the vision that Donald Trump projected, which was also fighting against immigration. Second change, in this period of peaking globalization, we see increased securitization of global trade in the context of system rivalry. Third, we see a broader weaponization of interdependence, and the exploitation of leverage and choke points that major powers have. And so, the most adept powers doing this are China with its trade leverage, Russia with energy, and the U.S. with its control of the financial system and the technology system of the world. And then EU and Japan are like struggling to see what they can do, and they have less tools, but the EU starts to come together to start also exploiting the leverage it has in this weaponization. China is exploiting gaps in trade rules and gray zones with crafted state policies and state tools, which have generated backlash. The U.S. is partially turning against the global economic order under Donald Trump and, as we know, has abandoned WTO rules and has blocked the adjudication mechanism of the WTO. However, what's interesting is the other countries have found a way around it. The MPIA, which is a large multilateral mediation agreement that everybody has joined, including Japan, this week actually, and China joined at the origin. And so, in practice, we still have a settlement of disputes, but it doesn't include the U.S.. The WTO remains paralyzed under Joe Biden. So, this is about globalization.
Second, we see an acceleration of systemic risks. And so, for that, I will just refer to the systematic annual survey by the World Economic Forum. They keep ranking those risks and the separate technology risk, social risks, environmental risks. And in recent years, we have seen (inaudible) economic risk in others, but in recent years, we see a tilt in those surveys toward environmental risk as being dominant and affecting the calculations of decision makers. Fourth, a major change is the structural power shift leading to strategic competition and the contestation of hegemony, and that matters greatly because our entire global order as defined by authors like John Ikenberry, was always a fused order. So, it's not really a rules-based order. It's never been. Rules-based order would mean a constitutional order with an adjudication mechanism, some kind of court. Well, the adjudication was through U.S. power. And so, that's what John Ikenberry says. It's basically a U.S. hegemonic system which has developed constitutional rules, norms and law, but it required the continual adhesion and support by the U.S.. And the U.S. was essentially the end force of last resort. So, that's why during the period of Donald Trump, there was a bit of a crisis there. But now, what's happening is this big shift in global economic GDP during, and especially the 20 years from 2000 to 2020, that we have called a great convergence. And we have seen 22% of global GDP in nominal terms, shifting hands from OECD countries to emerging countries.
So, the OECD share was 82% of the global economy in 2000, in nominal dollars, 60% in PPP term, and it's now 60% in 2021, that's the last data I had, and in PPP term, it's about 47%. And who got that? Well, China went up 15% from 4% to 19% in the period between 2000 and 2020. India has doubled its share, more than doubled from 1.7 to 3.8. ASEAN exactly the same, almost the same weight as India, Southeast Asia, right? From about 1.6 to 3.5. And they're both booming, so they're going to double again within a decade. Central Asia has been rising, Eastern Africa has been rising, part of South America during good times, not always. So, it's a general rise of Global South economies. And so, this has led to a mismatch between the new power structure and the international organization power, or voting rights, that are traditionally dominated by G7 countries. The G7 share has gone from 75% in 2000 to 49% in 2020. And so, that's why during the war here, the invasion of Russia, by Russia, of Ukraine, we have seen the G7 organizing sanctions. But most Global South countries not following them, and there was this rift. And part of the reason the Global South major countries did not follow is not because they liked what Russia did. They actually privately criticize it, but they don't accept a power structure that is still dominated by the G7 because they think so much power has shifted hands.
So, there is within that big power structure, of course, the big, big question is China. And we have major question around Chinese governance and Chinese geopolitical intentions, as well as question around the Chinese civilian control of the military, which is not always very clear, and we see odd, disruptive and non-strategic behaviour of China, with India for example, always the balloon. And so, if we have this major power becoming a major player and stakeholder in the global economy, and in strategic intentions become a question mark, or become offensive and aggressive to the order, we have a problem on hand, and that's part of what we face today. But we also see the rise of autonomous players like India, Turkey, Saudi Arabia, Indonesia, ASEAN, and they all now have a degree of strategic autonomy. They have intentions, they have a desire to affirm themselves, to have more voice in the system, etc. I'm struck when I talk to students from Africa, or from Southest Asia or from Central Asia, that those rising young elites from the Global South, they have powerful voice now and they want to regain voices, very proud in their ancient cultures, voices that were lost in the colonial era. They think the end, this is the end of a purely G7 club. They want to be part of the table. And it's crucial to pay attention to the new thinking and new behaviour of all those Global South elites beyond China. I actually think China is going to be a big problem for two or three decades, but beyond that, we are going to have many other major Global South players and we will also need to have a system that works with them.
Next big change is the twin industrial revolutions as major disruptions. So, we have the acceleration of digital and A.I. revolution that is reshaping the global economy, and reshaping the winners and losers by 2030 and putting democracies under great strain. It's very hard to overestimate how fast the A.I. transformation is coming at us and how impactful it's going to be. The speed of change is exponential. ChatGPT just went from version 3.5 to 4.0 with major, major change. Within years, we are going to see a complete transformation of everything in the economy, society and even daily life of all of us. And the governance of that process is not existent. We don't even have good healthy governance within the U.S. because of fragmentation in Congress. So, this is urgent and there's a real mismatch between the pace of national and global governance of this change, and the pace of technological change. And of course, when you have a mismatch and you have the other things I just described, it creates a race, a race for dominance and a race for affirmation of major voice. The same is happening with the green technology. We used to worry about climate change happening and us falling behind, but actually, it's finally picking up speed. In 2022, we saw emissions only rise by 0.9%. We're getting close to a peaking and then very soon we're going to see a decline. So, that's the good news.
The bad news is this race for action on climate is not going to be a liberal story. It's increasingly state led, rife with industrial policy. China was the first mover with a vision to become a leader in the 2030's, a vision they outlined back in 2012. That's why they control the lithium production chain, that's why they control the solar power production chain. And the rest of us, we're not reacting fast enough initially, but now the U.S. has reacted, there is the IRA, Japan is moving very fast with a national economic security vision of this, Korea is moving in the same way, India now has a national economic security vision of green tech, Indonesia is moving there. The EU is struggling because it has a hard time having an industrial policy after spending 20 years dismantling it, but in other way, it's not just about climate change now. It's about controlling the new economy in the 2030's, about jobs and control of the supply of it. So, this is a major, major stories. I should mention, I have only 3 minutes left, that the shock of Russia's invasion of Ukraine is also massive. Russia is, for political economists like me, used to be downplayed because Russia is ten times smaller than China as an economy. It's only 1.7% of world GDP. It's a fast-declining actor; however, partly because it has so little time left, it chose to act as a spoiler of the global order and to break all modern rules of the global order. This brutal invasion of Ukraine, the worst violation of sovereignty in decades, has had major consequences. It has led to the tightening of G7 and Western alliances, including Korea and Australia, has led Japan to go through a historic transformation that none of us saw possible. Germany to a large extent, as well. But the invasion has lowered trust in global institutions and global order, has increased geopolitical risk, has made solving the global debt issue today with many countries difficult, and creating more failing states, as accelerating the securitization of supply chains that began with COVID and has increased risks and tensions around food and energy markets.
So, in conclusion, what are the implications? The current decade is an age of multiple cumulative uncertainties and volatility. It's a time for non-linear thinking. We see the combination of deep systemic shocks, institutional erosion, and deep, rapid power shifts. That has triggered a period of strategic interactions among systemic players, as well as balancing a hedging for medium players. It's a very fluid game. It's very unpredictable. There will be a very complicated sequence of events that nobody can predict. Different modes of interactions can happen in different issue areas at the same time, but there's great uncertainty, and around a competition for the future of the global economy and the future rules of the global order. There are questions of status and identity that are up for grabs, as well as question of future coordination. This means that strategic interests are now mediated by cognitive frameworks with deep historical cultural roots that are often misunderstood by others, triggering misperceptions that add to the battle of interests. What are the implications for Canada? Well, the rules-based order is under assault and partially eroding. That's very important to know. Canada must stop assuming that it can always rely on institutions of the rules-based international order, when large powers stop following the rules and they act strategically. Some sectors have become more strategic and some actors stopped assuming that they can rely on self-regulating markets. Things like critical minerals, lithium, semiconductors, digital and A.I., green tech, increasingly are not functioning like markets anymore. They become strategic sectors. The speed of conversion of various actor varies, but there is a wave of industrial policy tools being deployed. Canada and others have a stake in maintaining the stability of the system, but they must also identify areas that have become weaponized and learn to push back, as well as identify areas where industrial policy tools can secure a better position for Canada. The question becomes where to defend the order with like-minded partners and allies, and where to secure national interests to ensure a key position for Canada in the global value chain. Thank you. Merci à tous.
Malcolm Brown: Merci. Olivia, over to you.
Olivia Lazard (Carnegie Europe): Thank you very much, Malcolm. It's always a pleasure speaking after you, Yves, and I'm always learning a lot. So, the comments that I will add essentially follow the same storyline that you've started planting for us. What I will add is probably something that relates, that brings a bit more attention to this twin transition, the digital and the green, and the ways in which climate change plays into that, and also sort of bring a bit more of a focus on what's happening in countries in the Global South. So, there is something, Yves, that you mentioned which I find quite interesting, particularly to, with regards to the role that Russia played. It's the fairly small economy in terms of its GDP metric, but it is managing essentially to create a lot of havoc and disruptions around the world that rejig essentially the way in which security is conceptualized and how interdependencies are now being weaponized, or at least there is light being shed on the fact that they have been weaponized for a long time. But we're reaching a different dimension. The reason why I'm picking up on that is because one of the difficulties at the moment about analyzing systems rivalry is that we're at a moment of history where metrics of power, evaluation of risks and evaluation of costs are changing. Each and every actor is constantly trying, testing different approaches. Some are more structured than others, but they're also learning as they go and they learn from each other's response.
So that means that the analysis is constantly changing, and I think, Yves, you did a wonderful job trying to really bring it back down to structures of analysis that are really important. So, the thing is that there are structures that we can rely upon in terms of analysis, but there are new parameters to the competition, some of which are very, very new because we've never been faced with them before in the history of geopolitics, and this is the exponential rise of technological disruptions coupled with ecological breakdown, climate change that then leads to this green transition. And the interesting thing, and this is really important as well, technological change corresponds to an expansion of power and innovation, which carries great opportunity for leading in terms of innovation, economic growth and control opportunities to assert hegemony over global political economy. On the other hand, we have a completely different driver of insecurity, which is climate change, because climate change is a constraining factor that challenges the sovereignty of states because it provokes shocks that dampen economic activity and may create shortages in terms of resource-driven bases that support civilizational developments. So, we're facing two different trends that are structural and which are essentially driving in opposite directions.
The technological innovation still follows a logic of geopolitical expansion and power expansion that we've been following for centuries in terms of geopolitical behaviour, and then all of a sudden, we have essentially a planet which has suffered the brunt of constant technological, energy and material consumption expansion, which is now trying to constrain back the agency around civilizational development. So, the pull towards expansion creates new fundamental vectors of planetary risks, and a pull towards either resource accumulation and or cooperative agreements, which is also what you were saying, Yves. There are different things playing at the same time and we haven't yet fully understood where the systems rivalry is going to land us. I don't think, for that matter, that the main actors within the systems rivalry are themselves fully conscious of where their logic of competition is leading. The notion of systems rivalry within this sort of planetary and international picture being planted in that way, is nested and it's complex. There is an arc pitting China against the United States. These are the two most important energy intensive economies in the world, and they are the ones leading this expansionary logic of competition. But under this arc, or within it, there is a complex constellation of actor, as Yves was saying. Old alliances remain. Transatlanticism is one of them, for example, Transatlantic relationships between Europe, Canada, the U.S., the U.K., and more largely, like another set of different allies, still prove to be strong and vibrant economies, and they are supported by a set of educational research, industrial, commercial and political interlinkages.
But there are indeed differences that are lurking in the background as well, as Yves was saying, in terms of industrial competition. To give but one example, we're looking at the moment at the effects of the Inflation Reduction Act in Europe, in Canada, in Japan, in Australia, in the OECD space in general. And if I refer to my sort of home base in Europe, there is indeed a tension that is lurking in the background, particularly at the time of the war in Ukraine, which is that the U.S. has always wanted and has insisted that Europe, for example, stepped up its contributions to NATO and stand on their own two feet in terms of a defence perspective. But Europe can only do so today by reinvesting into an industrial base. But at the same time, the IRA isn't, it's siphoning away a lot of different investments that would create this strong industrial base within Europe and therefore eventually be able to propel Europe into a different era of its defence. So, it creates an uneasy paradox where the U.S. is, it shows that the U.S. is tired essentially of policing the world, a world that it has been policing to support its own resource-based economy, and yet it is creating difficulties for its allies in order to stand on their own two feet, and support themselves and deliver on their own security means.
So, the model of interdependency is not just being weaponised within systems rivals, it's also being weapon, not that, it's being weakened, not weaponized, within old alliances as a result of the systems rivalry, which is pushing in different directions. And the difficulty in that is obviously that the system's rivals, particularly in that case we're talking about Russia and China, are intent on making sure that they press on the fragilities inside of all the alliances that have supported the rules-based order at international levels. And they're trying to essentially weaken this arc of alliances that, in their view, constrain their power, their forms of political and economic organizations, and the way in which they organize themselves in terms of societies. So, they tap into disruptions that pre-exist in terms of fragilities at home, but they also try to sow the seeds of more and more fragility. And they are intent in doing so, on showing how hollow open societies and democracies are, even if it means that they're essentially using this information and disinformation to try and sow a lot of doubt about the credibility, the integrity and the legitimacy of democratic systems, transparent and accountable systems. But something to understand as well, to look at this sort of systems rivalry composition, is that as much as there are fragilities that exist within old alliances such as the Transatlantic group, there are also fragilities within these relationships that tie the system's challenges together. If we look, for example, at Russia and China, they are currently showing an image of being profound, ideologically aligned partners, etc., etc., but it's actually a partnership of convenience.
On the long-term, if you look at documents of Russian national security strategy, for example, or if you listen, certainly, to the way that Xi Jinping, for example, is talking about the war in Ukraine, they, Russia and China don't see eye-to-eye on the long-term. Russia uses the structural swell movement that China has started as a way to sort of ride a wave, but the Kremlin has an ideological bias against the way in which the CCP organizes itself. It also doesn't see itself as a vessel of any other power. And yet, this is exactly what China wants to make out of Russia. It wants access to its resources in terms of energy, in terms of minerals, in terms of agricultural power. It wants access to the Arctic as well in terms of commercial route. It potentially wants to utilize the rogue power of Russia as a security actor, but it cares very little about Russia's imperialistic fantasies, for that matter. So, the notion of partnership between Russia and China is instrumentalist, purpose-driven, but it is not ideologically motivated and it is not something where essentially they have the same understanding of what authoritarianism looks like. Even within their own political economies, there are fundamental differences, that are easy to spot and which therefore create fragilities that need to be shed light upon in order to compete also into a larger geopolitical competition, which includes competition over political narratives, and perceptions, and access or sort of narratives of information.
Now, let's move towards the Global South. Actors in the Global South, as Yves was saying, are now the agents of change. They are the agents of change because they are the arbiters of systems rivalry and transition issues. They do not align with any sense of ideology. The notion of democracy versus authoritarianism does not resonate at all. They pursue their own self empowerment on their own terms. This is about acknowledging, essentially, that we are now in an era of polycentric distribution of power, which is interestingly something that Russia has very well identified in its national documents already ten years ago, and that it wants to generate, it wants to generate tensions that are the polycentric distribution of power. But the key part about actors in the Global South, which are incredibly diverse, is that they're not norms takers anymore. They are norms challengers in their own right, to the extent that norms have failed their own interests in terms of economic development, in terms of stabilization, in terms of breaking free from debt burdens and trying, well, essentially sort of reaping the costs of an international rules-based order that has been filled with inconsistencies that have built up over time. And this is very, very important because as they are the arbiters of global change of power, they are also the space for competition. And this competition indeed plays out in different ways. It plays out over the means that sustain the economic enterprise to generate more power. We're talking about natural resources, water, agricultural soil, even biodiversity for that matter, we're talking about minerals, we're talking about fossils, various forms of energy, we're talking about different forms of geographical positioning, which will form the geography of the future commercial routes, etc., etc. And they are also, at the moment, the locus of intense propositions to lock in the dependencies of the future. The competition also plays out over the minds, the talents, and over issues around labor acquisition. And this is the part of the global narrative around systems rivalry, which is also very important, because this is about storytelling, it's about political and economic constructions of power, and it's the combination of the two, acquisition of the means to generate power physically, and construction of a story that generates the social adherence to forms of power and its reproduction, are the poles of the systems rivalry, means and so-called objectives or so-called stories of conquest of power. And each geopolitical heavyweight has its own formula of approaching these things. Some are more convincing than others on the long-term, like China, some are less, but they're still dangerous, like Russia, as we were pointing out before.
With China, we see a clear architectural strategy which has been decades in the making. They capitalize on natural resource endowment. One of the key ways in which China has risen up the ladder of power is tapping into its deposit in terms of rare earths, which are instrumental to a number of economies and sectors between the digital, the military, the green technologies, etc., etc. They have turned this natural endowment into a vertical integration of supply chains by controlling more means in terms of extraction capacity, then processing capacity, assembly capacity for different types of technologies, and therefore afterwards, export and innovation. And this is something that contributes essentially to the green economy. They have done that by also attracting foreign direct investment with effective local content laws, and by inviting a mix of private and public sector coordinated directions in terms of policies. And of course, as we all know, the incubation of intellectual and industrial property has been quite instrumental, essentially, to the way in which they generate the basis of their innovation.
This has been combined with very long-term policies and views in terms of how research and development should develop, how education should be invested into, how technological innovation has been made into a strong base at home that, essentially, be, that lead China to be in a vast comparative advantage compared to OECD's base economies, which were themselves looking at very conventional measures of power. And in fact, they were looking at how to, at sort of strengthening their own strategy along pricing strategies to generate profit for producers and low cost of living for consumers. That is the basis, essentially, of the social contracts in a number of different countries, and in Canada, in the European Union, in the U.S., etc., etc. And what's interesting about this, and it tells you something about the long-term view of China and its ability to stomach costs, is that it has been able to turn what the West considered as economic externalities in terms of social, environmental and economic costs, it has been able to stomach those for decades until it could turn the tables around and instrumentalize the West's blind spots. It was able to take in sunken costs in terms of its own political economy. When you look, for example, at the fundamental damage, ecological damages where rare earths have been extracted, it shows you essentially that China is able to accept a fairly strong level of disruption or costs in order to rise to power. So, this willingness to accept sunken costs on the way to the generation of power and the reproduction of power is a pattern at the heart of how China projects its own political form of power.
As it grew to power, the interesting thing about China, following the template of a lot of different expansion of power, it started looking elsewhere for resources, and at the same time it's packaged the fact that it was looking for resources elsewhere to sustain its own energy consumption, material consumption and its rise to economic power, with a global narrative that could reinforce its global position as a paradigmatic shift leader. That's how the Belt and Road Initiative was born, that's how the concept of ecological civilization was born. It started tapping into the failings generated by the Bretton Woods era, and particularly the long shadows of structural adjustments which took place in the 70's, and which some countries in the Global South still suffer from, and from that it started developing essentially some tactics and strategies along the debt trap policies. By doing so, again, it had a purpose of trying to gain access to more materials, to more forms of energy, to more strategic locations, particularly around ports and fluvial routes, which allow it to essentially shape the future of trade, the future of energy dependencies, and the future of material fluxes. In the meantime, and this again adds another layer of power to China, it has been able to essentially invest into its own ability to lead in terms of the paradigmatic shifts itself.
So, China now leads in, this is what ASPI, the Australian Strategic Policy Institute, I believe, tells us in one of its latest reports, which I would recommend everybody reads, I'll send you the link afterwards, China leads for the moment in about 44 types of technological innovations around industrial development, which the U.S. and the European Union, we're trying to catch up to, including in Canada, as well. The industrial developments placed China ahead of the pack, places China ahead of the pack in terms of the industrial revolution. It also leads in artificial intelligence, it leads in energy technologies, and particularly on that point, it is very, very strong on clean tech development which connects its interests to gain and acquire more critical raw materials, its ability to tap into economic growth as a result of its processing capacity. And it joins this essentially with a soft diplomacy approach around climate mitigation, specifically to demonstrate how it is leading the pack in terms of mitigation efforts at home, how it will also be able to deliver to climate-vulnerable countries in terms of global public goods and how it is able, as a result, to demonstrate that the U.S., the European Union and OECD countries are actually not fulfilling their promise. So, therefore aiming to compete with the U.S. and Europe on the provision of global goods, which is again trying to sort of create this global narrative. And the thing is that, and we need to be very, very conscious of that, it's not just a hollow global narrative, it is indeed very effective. China is definitely the one global power which is extremely rapid in terms of development and deployment of clean tech on its own territory. But it is also using this as a way to deliver to other countries. But as I said before, and this is the part where there needs to be also some light shed on China in that respect, it is also still trying to stack up on energy sources to grow its economic base and compete with the U.S.. That means that it contributes heavily to not just current emissions, but to the future of emissions and to locking in a number of investments within Global South countries, and that it is essentially pushing us very quickly above the 1.5 degrees Celsius target. And therefore, one of the things which is quite dangerous about the current competition around China and the U.S. is that these are two countries which are heavily investing into geoengineering technologies, which will eventually modify, essentially, the way in which we manage the planet. And we don't know what kind of security future this is going to create for us.
In comparison, I'd like to focus very quickly on how Russia behaves, because this is particularly important. Russia has a narrative around civilizational ruptures. It has a narrative over the way in which the West has been declining, particularly in the last decades, and how it is particularly generating instability for the rest of the world, and in order for the West, essentially, to regain power, to stabilize it, it is trying to scramble for resources all around. In reality, what Russia wants is to seize the opportunity that instability creates in order to rise up again as a geopolitical powerbroker, if not a geopolitical heavyweight, which essentially is able to have the same type of military projection and political economic power projection as the U.S. or as China. But it is not able to do so because it doesn't have the means to do so at the moment. So, it is tapping into a number of different other strategies. One of them is trying to tap into its ability to use nuclear power within the global race for green technologies and to reach out to a number of different countries in the Global South, as well in its own neighbourhood, in order to create unhealthy dependencies on the basis of technological development. It is serving a purpose to China in that sense, which has a fairly low level of development around nuclear technologies. So, the partnerships also combine in that way. Russia is also using securitization diplomacy. It is using mercenary companies such as Wagner to send to different countries around the world and to try and assert essentially presidential guards protection to a number of African leaders. It is able to distill information and narratives within African context that try to distill this narrative around civilizational ruptures, that allow, essentially, Russia to play in the competition in terms of access to resources with the U.S., with Canada, with the U.K., with the European Union, with Japan, South Korea, Australia.
And we're particularly seeing that also in terms of critical raw materials. If I had to give just the example of Madagascar, which is usually a country that doesn't receive a lot of attention and yet it's very strategic in terms of the commercial routes, it also, it's also very strategic in terms of access and wealth endowment in terms of critical minerals and other types of resources. Well, we've seen, essentially, Russian oligarchic activity at times of presidential elections. In 2018, for example, it has supported, I think it's about eight or nine different presidential candidates, including the former president and the current president, and in exchange for leveraging or sort of trying to support these candidates with huge amounts of money, they have gained access to chrome mines and chrome permits in the centre of the country for very, very little amounts of investments. And they have negotiated, for example, the production of the tonne of chrome at about $70 a tonne, at a moment when chrome was skyrocketing on international markets, and they would resell that to Chinese investors because Chrome is obviously very important for a number of different sectors in economic activity, including in the green tech environment. So, what's interesting about this model, which I wanted to highlight, is essentially how Russia is able to use fairly small amounts of money, which don't usually come from the Kremlin, so they are not traceable per se in terms of investments, but they reap great benefits in terms of reversing accountability, reversing political sequencing, hollowing out the notion of democratic institutions and using essentially the political business cycle as an opportunity to sow interference.
So, what we need to be careful of, to be careful about, is how Russia and in some circumstances China as well, either individually or in combination with one another, are trying to essentially target specific moments of elections and specific moments of political destabilization to try and gain access to those critical raw materials. But on the back of trying to gain access to different minerals, they are also using essentially their network intelligence, and their access to elites and their co-optation of elites, to try and, so disinformation and misinformation strategies to try and cement essentially a model which supports, or the rise of authoritarian leaders which don't have any ideological content, but essentially trying to lock in political economic distributions that work in the favor of the few at the expense of the many, which is technically what a lot of African civil societies, or for that matter, Latin American civil societies, Central Asian civil societies, civil societies in the Indo-Pacific, are exactly saying, “We want more democratic accountability, we want more transparency and political empowerment.” And they're turning away from the so-called system of the Western liberal order because they feel that that has not delivered. But at the same time, Russia and China are essentially projecting some kind of illusion that their system is going to work only by co-opting elites that have the right type of political marketing and political business, economic business attitude, which reverse, that give the impression that they support democracy, but in fact completely reverse it.
Malcolm Brown: Olivia?
Olivia Lazard: Yes?
Malcolm Brown: Can I ask you to wrap up so we can turn to the questions?
Olivia Lazard: Absolutely. The last comment that I will make on Russia and how it impacts essentially also countries of the Global South, and that we need to take care of, or that we need to pay close attention to, is a strategy of instrumentalizing scarcity induced by climate change. And we see that particularly over food. This is something that play out even more over the next two decades, where certain key commodities or natural capitals, particularly food and water, will take more and more hits, create more and more instability, particularly for countries in the Global South, which are climate-vulnerable, and that type of vulnerability will be instrumentalized. It will be instrumentalized within this notion of systems rivalry. So, this creates a picture, essentially, of how corruption, elite predation can be co-opted to create authoritarianism, and authoritarianism can be transformed and sold as a way to be effective against climate shocks. But it's actually a completely hollow narrative because in the case of Russia, what we're seeing is essentially that we have a country which is trying to gain access to different natural resources and acting as a saviour, if we see the effects of the war in Ukraine, trying to capture grain, but at the same time distribute it to the countries that it wants to create alliances with, but it's actually a bully. And these are the type of narratives that need to be, or the type of hypocrisies that need to be shed light upon. So, we need to sort of look at the ways in which to reinforce civil society bases, to reinforce industrial policies also in the Global South, to reinforce climate mitigation, and particularly climate adaptation in the Global South, as a systemic way and a systemic lever of action to try and propel empowerment for a truly polycentric distribution of power, which is going to defeat the purpose of systems rivalry and try to sort of de-escalate this geopolitical competition.
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