25 May 2018

What the Iran Nuclear Deal and Franz Ferdinand Have in Common

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The improbable turn of events that led to World War I may not have been so consequential were it not for the shifts simultaneously underway in the global order. Today, the dizzying pace of technological advancement and the rapid rate of economic growth in Asia signal another transition in the global order. These factors could amplify the effects of the U.S. withdrawal from the Iran nuclear deal, perhaps paving the way for another international conflict. 

May 8 began for me like any other Tuesday. I drove to work, parked my car and walked from the distant lot toward the middle of the university campus where I teach. Yet something felt odd. Everywhere I looked, there were the normal knots of 20-somethings with earbuds stuffed in their ears, but that morning, they seemed strangely preoccupied.

Then everything became clear. Outside one of the campus cafes, a much larger group of students had congregated, listening in solemn silence to a TV blaring at full volume inside the shop. It was the unmistakable voice of President Donald Trump, announcing the United States' withdrawal from the Joint Comprehensive Plan of Action (JCPOA), signed in 2015 to put the brakes on Iran's development of nuclear weapons. It immediately occurred to me that if we replaced the shorts and T-shirts of the gathered students with dark suits and starched collars, the scene would look exactly like the black-and-white photos, common to so many history books, of earnest young men crowding around newspapers in the summer of 1914, dreading what they might read but unable to stay away.

Of course, 2018 is not 1914. But until quite late in the game, 1914 wasn't 1914 either. For three weeks after Gavrilo Princip murdered Archduke Franz Ferdinand and Duchess Sophie of Hohenberg on June 28 in Sarajevo, investors remained sufficiently confident the latest crisis would blow over that French, German, Russian and British government bonds were still trading at the same prices they had sold at the previous January. Only around Aug. 1 did confidence and prices collapse, and three days later, these countries were at war. By Christmas, a million of the serious young Europeans immortalized in photographs would be dead. 

The investors who remained calm through July weren't fools, though. It took an astonishing amount of bad luck to turn Princip's almost bungled assassination into World War I. Edwardian audiences gobbled up spy stories like Erskine Childers' The Riddle of the Sands, in which the derring-do of plucky Englishmen thwarts a German surprise attack, but not even Childers could have dreamed up a plot line quite as fantastic as the chain of events that led from Sarajevo to the trenches. A secret society called the Black Hand? Mustachioed aristocrats gambling with the fates of nations to distract from their scandalous love lives? Shady Balkan terrorists in league with the deep state? Ridiculous. And yet the decisions of such men had left between 15 million and 20 million people dead by 1918, plus several million more (no one knows exactly how many) in the five years of revolutions and civil wars that followed.

It took an astonishing amount of bad luck to turn an almost bungled assassination into World War I.

The Black Swan

The year 1914 was a quintessential "black swan," a term the academic Nassim Nicholas Taleb defines, in his book of the same name, as "an event, positive or negative, that is deemed improbable yet causes massive consequences." Black swan events are, by definition, hard to predict. As I suggested last year in a column marking the quincentenary of Martin Luther's equally black swannish protest against the Catholic church, however, black swans are made, not born. Strategic forecasters rarely can predict what any individual will do, but they can identify the kinds of conditions that make black swans possible. Luther's decision to nail up his 95 Theses, for instance, would not have produced the Protestant Reformation had 1517 not been a moment when nation-states were forming just as the Roman Catholic Church's role in multinational empires was crumbling. Similarly, Princip's decision to shoot Franz Ferdinand would not have set off the Battle of the Marne had 1914 not been a moment when Germany was emerging as a great power while the 19th century Concert of Europe and the United Kingdom's financial and naval dominance were tottering. But what about 2018? Is this year a similar moment?

There are certainly reasons to believe so. To some forecasters, it seems that the post-Cold War order is falling apart around us. International institutions such as NATO, the European Union and the Treaty on the Non-Proliferation of Nuclear Weapons are in disarray. The World Trade Organization seems to be stalled, and multilateral trade deals are in retreat. Revisionist powers such as Russia and China are emboldened. Some of the United States' staunchest friends are even asking whether it remains a reliable partner. And whatever the lawyers might say about Washington's right to walk away from the JCPOA, the U.S. withdrawal does look like yet another milestone on the road to instability.
Underlying Shifts

I like to use my Stratfor columns to try to make sense of current events through the lens of long-term history. In this case, I suspect that — just as in the early 16th and early 20th centuries — the surface disturbances are all in fact products of deeper tectonic shifts.

Two main sets of subterranean plates seem to be grinding against each other to generate the geopolitical earthquakes we are seeing. The first is an astonishing shift in power and wealth from West to East. Fifty years ago, the United States was the world's largest economy and China was just the seventh-largest, barely ahead of Italy. Western nations occupied five of the six spots above it; Japan, in third place, was the only other non-Western giant. Though the U.S. economy has grown 7.5-fold in the past half century, China's economy has grown 47.5-fold. In terms of purchasing power parity, China has now knocked the United States from the top spot. Japan still holds on to third place, while India has moved into fourth. Three of the world's four richest countries today are in Asia.

The second shift is technological. One aspect is the ongoing energy revolution. Hydraulic fracturing and other new methods for extracting fossil fuels have created profound problems for countries that have long relied on oil revenue for their survival, and the renewables revolution promises to be even more disruptive. Manufacturing, meanwhile, is going through upheaval of its own, as 3D printing in rich consumer countries threatens to pull away the ladder that allowed the "Asian Tiger" economies to steadily climb up the value chain for some 60 years. Most important, perhaps, are the linked revolutions in genetics, nanotechnology and robotics, which are forging entirely new areas of intellectual and economic activity (not to mention entirely new ways to fight wars). Self-driving cars, functional telepathy, average lifespans of over 100 years, cures for blindness, designer babies — each of these innovations is moving out of the realm of science fiction and into that of science fact. What it means to be human may change more in the next 100 years than it did in the previous 100,000.
An Uneasy Transition

In the past, living through tectonic shifts has been a traumatic experience, typically causing people to question everything they thought they knew. Our own age is no exception, as the anguished debates now raging all across the West over identity, mobility, prosperity, security and sovereignty demonstrate.

It would be an overstatement to say that the world's white men have had things all their own way for the last 200 years — but not a massive one. Europeans and their former colonists in North America have dominated the planet in a way that no one ever had before. They had their internal rivalries, of course, which generated two world wars and a Cold War, but they faced no serious external threats. The West enjoyed a virtuous cycle of sustained economic growth, high employment, rising mass education, and falling economic and political inequality. Expectations of continued ease and effortless growth were so strong that we might well call them utopian.

What it means to be human may change more in the next 100 years than it did in the previous 100,000.

In a pattern that has repeated often through history, however, the very forces that produced this Western golden age — cheap fossil-fuel energy, low transportation costs, expanding industrialization, constant innovation — eventually began to undermine it. Supply-side pressures to find new markets encouraged many Westerners to draw the rest of the world's consumers into their economic system and to help them become rich enough to buy Western goods. At the same time, demand-side desire for Western levels of wealth encouraged many non-Westerners to rush to enter these markets. Beginning with Japan in the 1880s, non-Westerners showed that fossil fuels, cheap transport, industrialization and innovation are color-blind. Anyone could be a capitalist, and becoming one made the tectonic plates move faster.

The globalization of East Asia — and, increasingly, South Asia, Latin America and sub-Saharan Africa — has transformed the world. More than a billion people, mostly Asians, have risen out of extreme poverty since 1970. But within the privileged West, growth rates and average living standards have stagnated. New elites have emerged, masters of today's borderless, digitized world who identify more with the super-rich in Singapore or Beijing than with their poorer neighbors in New York or London. In wealthy nations, the 20th century decline of both economic and geographical inequality has now reversed. Arguments over gender equality have become more visible than ever before, racism has taken on virulent new forms, and immigration is now perhaps the hottest issue in Western politics.

Western voters have shown themselves willing to trust politicians promising to restore the status quo on all these issues. The U.S. president, who has been particularly successful at getting this message across, has linked it to a more transactional approach to international relations. Some critics have concluded that Trump's election, the United Kingdom's vote to leave the European Union and the election of strongmen to governments from Poland to the Philippines show that democracy itself is degenerating. Whatever our personal politics, though, it's hard to deny that in withdrawing from the JCPOA and Paris climate accords, Trump is simply honoring his promise to put what he sees as America's interests ahead of those of long-standing allies, no matter how venerable their connection. Even before Trump came to office, in fact, some of these allies had been worried enough about Washington's reliability to begin looking for new friends, above all in Beijing. The deep, tectonic shifts are breaking through to the surface.
Looking for a Pattern
When all is said and done, we simply don't know whether 2018 will be another 1914 or 1517, whether the JCPOA will be another Sarajevo or Wittenberg. The young men in the 1914 photos had no way to tell whether that summer's bizarre events would be the ones to set off a magnitude 9.0 earthquake. Plenty of crises had erupted before — over the headwaters of the Nile in 1898, over Morocco in 1905 and again in 1911, over the Balkans in 1912 and 1913 — and diplomacy had headed them all off. There was every reason to think that the same would be true this time, too.

What should have been obvious in 1914, though, was that the crises were coming more and more often: Then, as now, the architecture of the international order was crumbling, revisionist powers were pushing their luck, technology was transforming societies with bewildering speed, social conflict seemed to be rising, and wealth and power were shifting from one continent to another. Then, as now, the world was rolling the dice and the odds were getting worse. The cafe was right to turn the TV up May 8.

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