HUG Magazine 2018 EN - Issue 2. (№10) by PAIGEO - Pallas Athene Innovation and Geopolitical Foundation

2018

HUNGARIA N G EOPOLITICS

HUG 10.

HUNGARIAN GEOPOLITICS

Move Europe East. Central Europe has great potential. At present, it demonstrates the highest economic growth on the continent, with rigorous monetary stability, the rate of government debt is the lowest here, unemployment is continually decreasing, while competitiveness is being enhanced. Central Europe has always been an important part of Europe, and it always will be one; and a strong Europe is in the interest of the Visegrad countries.

2018 2

2018 / II.

ISSN 2498-647X

THE NEW WORLD ORDER CONFERENCE MULTI-POLAR WORLD ORDER THE WORLD IN 2035 CHINAâ&#x20AC;&#x2122;S ROLE IN INTERNATIONAL ORDER ONE BELT, ONE ROAD FROM A EUROPEAN PERSPECTIVE THE IMPACT OF AIIB GEOPOLITICAL CONSEQUENCES OF A MONETARY POLICY DECISION THE ESSENCE OF CIVILISATION

FOREWORD

INTRODUCTION The piece of advice given by David A. Jones, Professor of the Institute of the Americas and Europe at the University of Warsaw, in his keynote address to PAIGEO’s conference was: ‘Move Europe East’. Central Europe has great potential and the region is different from what it was like a decade ago. At present, it demonstrates the highest economic growth on the continent, with rigorous monetary stability, the rate of government debt is the lowest here, unemployment is continually decreasing, while competitiveness is being enhanced. Central Europe has always been an important part of Europe, and it always will be one; and a strong Europe is in the interest of the Visegrad countries. We live in a new world order, and globalisation has entered a new era, the era of technology and knowledge. We are witnessing the rise of geography and geopolitical processes are being replaced by geoeconomic ones, and there is a competition for markets in lieu of territorial expansion. This is the age of networks and fusions; a complex approach is becoming the most important in an interconnected world. The pole of world economy is shifting towards east again. While the 19th century was the century of the British Empire, and the 20th century was the century of the United States, the 21st century is obviously the century of Asia. We can witness the rise of the Eurasian continent, with China playing a leading role, and Central and Eastern Europe, dubbed as a buffer zone until now, can become a bridgehead region. The goal of China’s long-term development plan, “One Belt, One Road” is to regain Eurasia’s former historical, cultural, economic and commercial significance by building the New Silk Road. The New Silk Road comprises railway lines, the development of sea and inland ports and logistics hubs, cultural, financial, educational cooperation and knowledge networks, realised through economic corridors. The main nodes of these unfolding networks are reshaping the significance of specific regions, and new hubs appear. To date, 64 countries has joined the initiative and China assigns an important role to Hungary: three Silk Road networks meet in our country simultaneously.

The visible outcomes of the New Silk Road include a total of 3,673 trains running between 38 Chinese cities and 36 European ones, and the investment has created more than 180,000 new jobs. Piraeus Port can shorten the length of shipping by 20 days, and the Xian–Duisburg railway line reaches its destination in 24 days – this journey used to take 42 days. A new development axis has been evolving, connecting Piraeus to Northern European ports (Rotterdam and Hamburg), running through Central-Eastern Europe. This is another reason why the cooperation of China and 16 European countries is so important: while Budapest can operate as the hub of financial services, cultural and scientific cooperation, Warsaw is receiving special attention in the field of transport and logistics. Maps are looked at from a different angle in China. In their world map, America can be found east of Asia, and Europe and Asia are featured as one single continent, with the western gate, the zone of Central and Eastern European member states, being a special region.

Yours faithfully,

Norbert Csizmadia Pallas Athéné Innovation and Geopolitical Foundation Chairman of the Board of Trustees HUG Editor-in-Chief

TABLE OF CONTENTS

The New World Order Conference

Move Europe East

Multipolar or Fragmented World

New World Order and Old-Fashioned UN: Is It Sustainable?

42 54 72 80 90

The World in 2035: A Geopolitical Forecast

Tango or Tangle: Let Us Leave Southernization to India China's Role in the International Order The Evolution of Chinese Geopolitics What European Foreign Policy to Address Today's and Tomorrow's Geopolitical Challenges?

“One Belt One Road” from the Perspective of the European Union: Challenge or Opportunity

104

Europe’s Views on the One Belt, One Road Initiative

126

ASEAN 50 + EU 60 = 40 Years of Cooperation

134

The Effects of the AIIB on the Multilateral Development Banks’ System

146

The Geopolitical Consequence of a Monetary Policy Decision

158

The 4th Industrial Revolution in Africa – Opportunities and Challenges

170

GeoDebates on the Impact of the Fourth Industrial Revolution

174

The Essence of Civilisation

192

Book Recommendations

194

Everything Under the Heavens – How the Past Helps Shape China’s Push for Global Power by Howard W. French – A Book Review

New world order

The New World Order Conference The conference organized by PAGEO on 29 November coincided with the Chinese Premier’s visit to Budapest at the occasion of the 16+1 Summit. In parallel with this world event, the conference welcomed nearly 150 participants to answer the following questions: can we still speak about a unipolar world? Can we be in the forefront of a new bipolar world order with new participants, or can we see the emergence of a multipolar world order? Will the emerging countries accept the existing structures, or will it be necessary to reform the system entirely? The presenters sought the answer to these questions in their presentations.

ties of China and Central and Eastern Europe as well as their positive influences on our region. He compared the economic cooperation initiated with the 16 CEE countries to China’s Marshall Plan, which might strengthen the Central and Eastern European Region’s position within Europe. He stressed that China has sent an invitation to our region and it is only up to us whether we exploit this opportunity. Jones supposes it is essential that the youngsters get involved in the building of relations, and he highlighted the importance of knowing intercultural communication, which is the pledge of establishing good relations. Therefore, education and exchange programs are of key significance.

THE INTERNATIONAL INSTITUTIONS SESSION (moderated by Anton Bendarzsevszkij, Director of Pallas Athéné Geopolitical Foundation). First Oleg Buklemisev (Associate Professor in the Department of Economics at Moscow State University) held his presentation entitled Multipolar or Fragmented World: An Economist's View. The speaker pointed out that the world has become fragmented rather than multipolar. The changes taking place are slow and circumstantial rather than fast and sustainable. The acceptance and significance of international institutions has largely decreased. In his opinion leadership problems are primarily caused by the lack of actual global leadership instead of the false steps, which are rather consequences. Oleg Buklemisev

The conference consisted of three main sessions: the role of international institutions, the panel on China and the rise of Asia, as well as the role of the European Union in the changing world order.

Norbert Csizmadia

The event was opened by President of Pallas Athéné Geopolitical Foundation Norbert Csizmadia. In his opening speech, Csizmadia presented the significant results achieved by the Foundation so far and the commitments of PAGEO in the Sino-Euro scientific and economic relations. The speaker highlighted that we are at the dawn of a new geopolitical era, and the winners and losers of the new age will be determined in this geomoment. He raised important questions that extend the structure of the forthcoming new age and stated that in this new age it is connection points, connectivity and complexity that play the most important role. The structures of the new system are now taking shape in the form of smart cities, knowledge ports, HUBs and so on. Nevertheless, Csizmadia pointed out that the drawing of new outlines requires not only a good map and a compass but a good pen as well to redraw the picture of the emerging new world. The 16+1 initiative offers a big dose of ink for this pen, which helped us organize this conference that we were waiting for with keen interest. The first speaker, David A. Jones (Professor at the American Studies Center, University of Warsaw) held a keynote speech entitled Move Europe East: Seizing an Opportunity to Make Central and Eastern Europe’s Economic Wealth Equal or Surpass that of Western Europe, introducing China’s geopolitical and geoeconomic strategies to the audience. In his presentation, the speaker emphasized the cooperation opportuni-

David A. Jones

Su Changhe Following this, Su Changhe (Executive Dean at the School of International Relations and Public Affairs of Fudan University) delivered his presentation entitled The Coming of a New Era of International Relations and its Theoretical Implications. The speaker discussed and analysed the phenomena, problems and contradictions (e.g. open global economic system vs. protectionism) induced by globalisation in the world, using 10 questions as a guideline, and he also studied the potential national and international responses to these questions. In our world order one of the key issues is that the gap between the rich and the poor is getting deeper rather than decreasing, and there is no global responsibility. The Professor mentioned mutual interests instead of universal interests.

The second presentation was Power projection in today’s international arena: the role of international organizations by Dávid Szabó (Director for Foreign Affairs at Századvég Foundation). The speaker emphasized the importance of international institutions, but he also highlighted the deficiencies of the institutions. He underlined the need of reforming the UNO. Following this, the presentation entitled New world order and Old Fashioned UN: Is it Sustainable? by Dusan Prorokovic (Director of the Center for Strategic Alternatives, Serbia) examined the changes of the previous decades that affect the current geopolitical situation. In his presentation the speaker pointed out that the changes in world politics are still determined by the great powers; however, the power relations are slowly being rearranged, and this is not reflected in the organisations of the UNO. Suggestions for solutions exist, but they violate fundamental American political interests. Everyone wants to find a solution, but the organisation is still far from it.

The New World Order Conference

the future of humanity and able to create an open, inclusive, clear and fair world that enjoys the fruits of lasting peace, entire safety and common growth. The BRI and the 16+1 Initiatives definitely support this theory.

Viktor Eszterhai

Oleg Buklemisev, Dávid Szabó, Dusan Prorokovic, Diána Szőke

The next speaker, Diána Szőke (Senior Analyst at the Institute of Foreign Affairs and Trade) started her presentation The World in 2035: A geopolitical forecast with an eloquent quotation made by Niels Bohr in 1922 (“Prediction is very difficult, especially if it’s about the future.”). This citation suggests how complex the present world political situation is. Nevertheless, we should be able to outline some kind of a potential prospect through analyses, along certain topics so that we can get ready for the challenges. In relation to this, “The World in 2035” project provides a forecast on the changes taking place in the world. Accordingly, the three most debated topics – with the most obscure future depicted – are populism, Russia and economic cooperation, as well as the “Black swan” events, considering which there is hardly any information but they might exert a significant effect on the world in the future. The final statement is that the research definitely shows a power shift towards Asia and confirms the emergence of a multipolar world order. In addition to that, the forecast is pessimistic about the political changes but optimistic about economic development.

CHINA AND THE RISE OF ASIA SESSION (moderated by Tamás Baranyi, Leading Researcher of Antall József Knowledge Centre)

Kong Tianping

The first speaker of the session was Kong Tianping (Senior Researcher of the Institute of European Studies at the Chinese Academy of Social Sciences) with his presentation China's role in changing international order. He provided useful indications about China’s peaceful rise and future role in the establishment of the new world order. According to the speaker, the Eastern Asian great power primarily aims to build a community that is dedicated to

The next presentation was What is the interest of the EU within the BRI? by Viktor Eszterhai (Deputy Director of Research and China Senior Analyst at Pallas Athéné Geopolitical Foundation). The world order led by the USA has provided a favourable environment for the USA for several decades. This presentation sought the answer to the question whether the Chinese alternative to the changing world order, the “One Belt, One Road” initiative offers cooperation opportunities to the EU. The current world order is definitely based upon the USA and the EU, which China would like to change in the long term. The Chinese ambitions are well served by the BRICS cooperation, which might considerably overshadow the Euro-Atlantic forcelines concerning both its economic weight and its population in the future. However, the BRI is the most significant initiative for both parties in economic terms. At the same time, this cooperation also holds out a carrot with it, facilitating China’s further economic consolidation in the long term; however, the aim is still to erode the EU’s international importance. Ágnes Szunomár

In her extremely topical presentation Belt & Road – Implications for the CEE region, Ágnes Szunomár (Research Fellow at Institute of World Economics, Head of the Research Group on Development Economics) provided information on the economic relations of the People’s Republic of China and Central and Eastern Europe, supporting the significance of the 16+1 Summit in Budapest. The region is highly important to China thanks to the considerable economic potential hidden in these countries, which the BRI and the 16+1 initiative takes really seriously. It is a key region and an entry point for the spreading towards the western part of Europe, it has cheap and highly qualified workforce and it is less sensitive to political and economic issues than the western part of the continent. Similarly, the CEE Region deems cooperation with China as an opportunity in terms of investment, trading and diversification. Nevertheless, besides the benefits of cooperation, negative impacts such as the changes in the CEE-EU and the China-EU relations also come to the foreground. The former is overshadowed by disappointment and the latter by the status of human rights and Tibet.

Ramachandra Byrappa The last speaker of the section, Ramachandra Byrappa (Associate Professor at the Department of Modern and Recent History, Eötvös Loránd University) delivered a brief and concise presentation entitled Tango or tangle: Let us leave southernization to India. He discussed the special situation and future world political opportunities of China and India. He outlined the theory of the northern and southern system, with the natural sphere of interests arising from the geographical location of the two countries. Also, he specified the different ideological bases of the two countries. THE ROLE OF THE EUROPEAN UNION IN THE CHANGING WORLD ORDER (moderated by László Vasa, Deputy Director for Operations at the Institute for Foreign Affairs and trade).

The New World Order Conference

The first presentation What European foreign policy to address today's and tomorrow's geopolitical challenges? of the Section was delivered by David Criekemans (Associate Professor in International Relations at the University of Antwerp). According to the speaker, the foreign political processes related to the European Union influence the establishment of the common solution mechanisms for the community. The internal problems prevent the EU from taking significant roles in world politics. However, the new foreign political doctrine of the USA imposes serious challenges on Europe, although in certain cases the interests of the world powers have not coincided (e.g. Eurasia). The European Union did not recognize how serious geopolitical consequences the Ukrainian events might have against Russia. However, no decision has been passed on the way of settling the damaged relationship. China’s obvious rise needs the adaptation of the Balance of Power Policy from the EU, too. Nevertheless, the provision of internal stability should be the primary purpose.

esting to note that despite the disagreements with the European Union the image of the community is rather good than bad. When assessing the functioning of the EU, women and men respondents did not differ significantly; however, women’s attitude to Europe was a little more positive. The questionnaire also touched upon the image of Asia and the future of the world.

Márton Péti This hot topic was followed by István Perger’s (Deputy Head of Representation of the European Commission in Hungary) presentation entitled The Future of Europe – Possible Scenarios. The need to solve the problems affecting the future of the EU are more and more pressing, since the political and economic situation of the world is continuously changing and the forecasts are rather negative for the EU. The presentation discussed the 5+1 potential scenarios outlined by Juncker, as well as their positive and negative influences. The speaker also touched upon the schedule for passing the political decisions of the Union.

The New World Order Conference was an exciting and hot geopolitical event with lively debates at the impressive and legendary venue of Gerbaud Confectionery.

Anton Bendarzsevszkij

David Criekemans

In his presentation Changing potentials of European development bringing cohesion and diversity Márton Péti (Head of Institute, Institute of Geostrategy at the University of Corvinus) analysed the EU’s inner problems in depth. Owing to the economic crisis the significance of global politics has been pushed into the background since the early 2000s. The global economic role of the European Union is decreasing, while the weight of Asia is increasing. By 2050 the situation will have become even worse with respect to the USA and Europe. Unsolved, internal economic and cultural differences mean a considerable disadvantage. The different foreign economic orientation and the macro regional differences predict a difficult future.

István Perger

The last presentation of the conference was Attitudes and interests of Hungarian population towards global foreign policy, USA, EU and China by Anton Bendarzsevszkij (Director of Pallas Athéné Geopolitical Foundation). The speaker presented the findings of a representative questionnaire conducted by PAGEO on the current attitude and interests of the Hungarian population concerning the actors in world politics. The research reveals that TV still has the most significant information mediating role (58.6 %), nearly three times the online media (22.9 %). It turned out that in Hungary one of the least known European leader is Emmanuel Macron, while Vladimir Putin is the most influential politician according to the respondents. It is also inter-

Move Europe East Author: David A. Jones

As an initiative, China’s “One Belt, One Road” or “OBOR” is innovative with Strengths and Opportunities that seem to outweigh Weaknesses and Threats. It carves out what has been called a “Blue Ocean” strategy to enable China to harvest and transport raw materials as well as to distribute and market products it manufactures or assembles across countries and regions that are only beginning to develop. In the background lurk potential debt burdens with which the people of China and of countries through which OBOR passes stand to become saddled, probably neither equally nor equitably. As in the opening lines of Charles Dickens book, A Tale of Two Cities, one may forecast that OBOR will be viewed historically as: “It was the best of times, it was the worst of times.” Some OBOR beneficiaries are likely to reap the best of times with it. Others including China itself may face growing challenges, financial constraints particularly stemming from this burgeoning debt together with the risks associated therewith.

INTRODUCTION This article evolved from the author’s Keynote Address to the “New Global Order” Conference sponsored by Pallas Athene Geopolitical Foundation (PAGEO) in cooperation with Hungarian National Bank delivered at Budapest, Hungary, on 29 November 2017, in which my plan was to approach China’s “One Belt, One Road” or “OBOR” initiative much as if it were a tall building such as Hong Kong’s International Finance Centre (IFC2) turned on its side! In other words, as a “skyscraper” turned into a “landscraper” if we can accept that metaphorical imagery at the present moment, because tall buildings and OBOR have core virtues and core risks in common, and in both the virtues outnumber the risks, provided the risks are controlled. Unfortunately, not all risks have been controlled, not all risks can be controlled. As Huang Jing, Chinese-born American who was a professor at Singapore National University before he was expelled therefrom on 07 August 2017 for alleg-

lenders once it is open to occupancy. In this context, China is the “general contractor” of OBOR, countries along the way will become possessors of its “apartment” units, some as owners, others as tenants. “As some Western countries move backwards by erecting 'walls', China is contriving to build bridges, both literal and metaphorical,” Xinhua said recently in a jab aimed primarily at the United States, especially its President, Donald J. Trump. According to recently-promoted Asia chair of the Swiss Partners Group, Dr. Kevin Liu: Bridges are key to China's strategy. The superpower status the US has achieved is to a great extent grounded on the security blanket it offered to its allies. Geopolitically, China decided a long time ago that security was too expensive an offer to make. Instead, this new superpower may offer connectivity. Bridges do offer connectivity, provided they do not buckle then break, or become blocked one way or another such as politically or by natural or manmade disaster. In any of those situations, the connectivity relied upon becomes a liability. We shudder to envision OBOR ending up similar to the bridge the Soviet Union commenced to construct across the Yangtze River at Wuhan in 1955, then withdrew from completing following a political disagreement in 1956, leaving China to finish “connectivity” in 1957. If OBOR becomes only partially complete, that will invite intervention by other countries, the Russian Federation, Turkey, India coming to mind, across Eurasia. Already, tensions have emerged along the ChinaPakistan economic corridor, vehemently opposed

David A. Jones

edly being a foreign agent, forecasted ominously back in 2016, “In other words, if everyone is economically in the same boat, then if China goes up everybody goes up and if China goes down then everybody goes down. That’s the nature of the idea.” That is the danger of the OBOR initiative, so many eggs in one gigantic basket, long as it is across Eurasia. It is “insurable” so to speak, much in the way a tall building is insured by the general contractor during its construction, and by bank

“Bridges are key to China's strategy. Geopolitically, China may offer connectivity for the new superpower.” by India’s prime minister Narendra Modi. Amidst allegations that China is planning to play its own 21 st century version of the “Great Game” Britain and Russia played a century ago, China’s Xinhua news agency retorted that its “New Silk Road” is “not and will never be neocolonialism by stealth” just as it is not an opportunity for China to introduce a new hegemony, merely its chance to bring an end to an old hegemony. As it is difficult to imagine the United States as the “hegemon” of Eurasia, apparently this means that China aims to stop any new “Great Game” from transpiring across Eurasia by other powers. Does this mean that at least tacitly China is targeting the Russian Federation or Turkey as existing or potentially “new” hegemons across Eurasia, intending to head them off at the pass figuratively if not literally in the Urals if not in the Himalayas. An accurate forecast of where China is currently planning its OBOR to go is available at Xinhua Belt and Road Directory.

Turned on its side metaphorically by the author to depict a landscraper

Source: International Finance Centre (IFC) 2 Hong Kong. Fotothing.com

Move Europe East

Figure 1.

being that severance of the dam from the CPEC that is core to OBOR was a strategy by China to evidence to the world that it abides by global rules, curtailing improvements made to disputed territories. Even if no other problem existed, and many do exist, China’s OBOR initiative would be plagued by contentious relations that exist between China and a myriad of nations across which OBOR will span, even more problems by ever more contentions currently existing in relations between or among “neighbours of neighbours” that are likely to become exacerbated by OBOR. Such nations may not be neighbours of China, but of each other, sometimes far distant from China. Unlike in the game of “Checkers” in which “kings” may jump across checkerboard squares, goods being transported overland across OBOR must pass through one country to reach another, then through multiple other countries to reach an intended destination. Each country through which

As we were speaking at the conference, different viewpoints were emerging concerning the significance of Pakistan’s rejection of Chinese foreign aid intended to enable construction of the USD 14 Billion Diamer-Bhasha dam located in Pakistani occupied Kashmir, also claimed by India, that both the Asia Development Bank (ADP) and World Bank Group (WBG) refused to fund because of the territory’s disputed sovereignty. Pakistan requested that China remove dam construction from the USD 60 Billion China-Paki-

OBOR will pass poses an obstacle, “muddies” the road, some more than others. Moreover, within some countries and even within some regions of China itself, primarily its Xinjiang Province, local conflict poses ample threat to continuous cargo passage, turbulence forecasted to increase as OBOR grows and as China and its trading partners come to rely thereupon, potentially to their mutual detriment. Even within countries, also, risk of slow payment, default, debt renegotiation can be expected to vary across regions. In the case of collapse of a country’s central government, the entire nation will be at risk; otherwise risk may be less near a country’s capital city or core, more along its periphery, called “centreperiphery dissonance.” Some actual or prospective OBOR partner countries already have displayed their dissatisfaction by aborting or delaying activation of Chinese OBOR projects, notably hydroelectric facilities. Occasionally, countries such as Pakistan have re-

stan Economic Corridor (CPEC), required for the overland component of China’s OBOR, and permit Pakistan to construct the dam with its own funding, citing unreasonable tie-in requirements China had inserted into the dam component of the CPEC project. Another explanation is that cost structure of the Diamer-Bhasha dam nearly tripled from USD 5 Billion to USD 14 Billion, making it much more costly than anticipated, reflecting the heavy debt burden of OBOR to all participants including China itself. Another explanation

Move Europe East

sorted to what one might term “cherry picking,” endeavouring to save their involvement in overall OBOR whilst withdrawing from less palatable projects, such as the Daimer-Bhasha Dam that is key to the China-Pakistan Economic Corridor (CPEC), on the announced pretext that Chineseimposed financial conditions were against Pakistan’s interests. Less frequently mentioned is the fact, rather obvious, that if CPEC fails, OBOR is in jeopardy of lengthy delays. Alternative overland routes are other than abundant, those that exist are questionably viable on different accounts that range from the political to the military to the environmental. Risk of sabotage and other

casted to be repaid with loans, creating gargantuan debt burdens to be bourn initially at least by the states through which OBOR passes, as Figure 3 below evidences. That debt will become China’s own financial burden in the event of default, and default by one neighbour is likely to precipitate default by other countries in the neighbourhood, resembling nuclear fission. Some countries, notably India, fret that China might accept inappropriate debt payments such as from Pakistan in the form of allowing China to stockpile weaponry in violation of the Fissile Material Cutoff Treaty (FMCT) that Pakistan alone has refused to sign, in an effort by China and Pakistan working in col-

forms of terror exist.

laboration to encircle India. By doing this, China would transparently violate the FMCT, an unlikely risk for China to take that would besmirch its reputation as a good global partner generally and its OBOR image particularly. More than anything else, the key deterrent to Chinese participation in stockpiling of weaponry in violation of the FMCT or any other international agreement is China’s endeavour to reap the economic benefits of a “Blue Ocean” across Eurasia in the absence of most conventional competition. That opportunity could be short-circuited by international retaliation that likely would become the consequence of misbehaviour.

To consider OBOR in context from the utmost East to the utmost West, turn to Figure 2 below that depict the vast distance involved. Whether by land or by sea, obstacles abound, more by land, but by sea the potential bottleneck is the Suez Canal, the only maritime gateway between Asia and Europe besides the long voyage around the Cape of Good Hope, South Africa. If the stability of the Suez Canal is sustainable, undoubtedly one major reason for China’s increased naval presence in the region, then OBOR appears to be ensured more by its maritime than by its overland components. If Chinese investment continues to pour into Piraeus, the deep water port nearby Athens, Greece, then this will become a Chinese “Marshall Plan” in principle, rescuing Greece from poverty and raising the prosperity of Central and Eastern European Countries (CEEC) in the process, with up to USD 1.5 Trillion in goods projected to be offloaded at Piraeus, already Europe’s busiest port, en route to destinations across Europe. Will OBOR, overland or maritime, end up becoming a classical example of “imperial overstretch” as has been contended, in part because of China’s imbalanced Debt to Gross Domestic Product (GDP) Ratio that was 150 percent in 2008, since then has at least doubled to 300 percent, may reach 400 percent with “hidden” liabilities of the sort OBOR debt default might precipitate. Unfortunately for countries that are positioned along China’s OBOR, and potentially unfortunately for China itself as well with its debt rising rather rapidly, cost structure of OBOR is fore-

Figure 2. China’s OBOR, by Land & Sea, Constructed & Projected, December 2015.

SOURCE: Mercator Institute for Chinese Studies (MERICS). 2015. “Projects Subsumed under OBOR by Chinese Authorities. Dec.

Figure 3. Debt Locations That Will Bear the Burdens of Financing OBOR.

OBOR runs substantially parallel with China’s quest for supply chain management in minerals required for factory production particularly, as Figures 4 and 5 below depict using separate data bases some of which overlap. Part of this supply chain will replace existing supplies in Africa or elsewhere that are more distant and consequently more costly to transport. OBOR is intended to provide rail and road infrastructure required for delivery of Chinese-assembled goods to Europe, together with maritime infrastructure serving similar objectives. In addition, OBOR is intended to put countries along the OBOR path to work, supplying China with progressively more raw materials including energy that it requires in its own manufacturing, with countries located along OBOR gradually performing some of that manufacturing instead of China because of lower labour cost structure and China’s ambition to relocate some of its manufacturing pollution abroad in order to clean up its own domestic environment, consistent with its signature on the

Move Europe East

Figure 4. OBOR and China’s Global Supply Chain Management, 2016.

Paris Climate Agreement that leaves only Syria and the United States absent as signatories therefrom. “Move Poland West.” “Move Poland West” was the consensus Soviet Union Marshal Josef Stalin reached with British Prime Minister Winston Churchill, secretively at the Teheran Conference held from 28 November 1943 to 01 December 1943, with American President Franklin Delano Roosevelt abstaining at that time from discussion of Poland, fearful of negative repercussions in the 1944 Presidential election with six million Polish-Americans living in the United States. Following the 1944 election, Roosevelt supported the plan to “Move Poland West” and it was announced publicly at the Yalta Conference, 01 to 11 February 1945, shrinking Germany’s Eastern territory whilst capitulating to Stalin’s demand that never again can Poland function as “a corridor for an attack on Russia”. Instead, with the deep water port China is constructing at Piraeus, Greece, East- Central Eu-

rope generally and Poland particularly will become a corridor to facilitate distribution of goods made or assembled in Asia to markets across Europe, as well as a corridor through which to supply China with European raw materials. Goods from Asia including China projected to be offloaded at Piraeus upon port completion will be valued at between USD One Trillion and 1.5 Trillion, with some of that value projected to come from reductions of goods currently delivered from Asia to Europe at Western Europe’s busiest cargo ports by volume: Rotterdam, Antwerp, Hamburg and Amsterdam, with Western Europe’s first, second and fourth busiest cargo ports located in Netherlands, its third busiest in Germany, as Figure below evidences. If Piraeus rises from 20th place to 10th place, for example, coupled with the expected withdrawal of United Kingdom from the European Community (“Brexit”), in reality this means to “Move Europe East” in terms of “core” versus “periphery”, the only question being how much, how fast? That depends upon the driving variables. In 2015, 25 percent of cargo flowing into Rotterdam, Western Europe’s largest cargo port, was from Asia. It will make

Figure 5.

little sense for much of the cargo traffic coming to Europe from Asia to bypass Piraeus, only to have to return Eastward by highway or railway. Presumably, therefore, one could forecast accurately that at least one half of Rotterdam’s TEU container volume arriving from Asia would be diverted to Piraeus once that port reaches capacity. Once this paradigm materialises, in effect it will mean that the economic centre of Europe will move Eastward. Although that fact alone might not mean that Western Europe’s wealth relative to the rest of the world will dip, it will signify a rise in Eastern Europe’s wealth relative to that of Western Europe, that is a “zero sum” game. In turn, sooner rather than later, the CEEC bloc will gain more economic clout in Brussels, and almost certainly will attract much more FDI from the United States, from Asian giants such as China itself, Japan, South Korea. Functionally, this translates into “Moving Europe Eastward.” Figure 7 below illustrates the location of Europe’s largest cargo ports in 2015, clearly reflecting not only their proximity to each other, but the dis-

tance of each to various final destinations. Most of Europe’s major ports just three years ago were in Western Europe, considerably distant from final destinations in Central or Eastern Europe. That paradigm will change with OBOR generally, with expansion of Greece’s port at Piraeus especially. This map positions the location of each port to important inland waterways such as the River Danube that also will accommodate freight traffic offloaded at Piraeus. As ports in Central and Eastern Europe will grow, ports in Western Europe will shrink. This will help to “Move Europe East.” CONCLUSION An initiative such as OBOR probably will be a “win-win” situation for all participants, even if it does carry some economic and political risks with it. Almost certainly, it will be a “win-win” victory for CEEC bloc countries, although not necessarily equally. Very likely, the biggest winner will be Greece, with its Piraeus Port jumping from 20th in Europe to at or near the top position.

Move Europe East

Figure 6. Top 20 container ports in Europe, 2015 - on the basis of volume of 1,000 TEU containers handled [TEU=Twenty-foot Equivalent Units or 20 Foot ISO Container]

Figure 7. Main cargo ports in the reporting countries of Europe, 2015, by gross weight of goods handled.png

This rearranges the commercial architecture of Europe. Countries such as Hungary and Poland through which vast numbers of freight containers must flow, whether overland from South Asia by highway or railway, or by sea to Piraeus and then overland by highway, railway or inland waterway to their final destination, will witness their stocks soaring. Territories through which China’s OBOR will pass as well as final destination locations stand to become and to remain largely “Blue Ocean” environments, sustainable across the foreseeable future. In principle, this means that Europe’s wealth will move east, and with that wealth will move political influence, adumbrative of a “New World Order”.

Source: “Main cargo ports in the reporting countries 2015 by gross weight of goods handled.png,” Eurostat Statistics Explained. January 2017. http://ec.europa.eu/eurostat/statisticsexplained/index.php/Maritime_ports_freight_and_passenger_statistics

Multipolar or Fragmented World

Graph 1. Relative economic power (top 5 countries by GDP size, current prices)

In 2000

25,2%

“Multipolarity” has become a widely used term describing the current state of the world. Analysis of simple metrics such as distribution of global GDP and military expenditures, and reserve currencies’ role, was undertaken to demonstrate that despite China’s visible ascent the world is now hardly closer to multipolarity than in the beginning of XXI century. The reasons for delay in full-fledged multipolarity arrival include the often neglected difference between stocks and flows, institutional and psychological inertia, and partially reluctance of the new leaders to assume new responsibilities. It is stated that In the meantime as US power declines the world will become more fragmented rather than multilateral.

he article is based on the presentation made by the author T at the New World Order Conference in Budapest (November 29, 2017)

32,0%

Other

EU China

China 26,3%

United States

21,8%

6,6% 14,9%

Japan Other Source of data: IMF

Author: Oleg Buklemisev

24,7%

Japan 14,5%

An Economist’s View

Multipolarity of the world we live in is so often stated by academicians and politicians that it is already taken for granted. As the usual story goes, the post-World War II bipolar rule ceased to exist in 1991 after the Soviet Union’s material and ideological collapse – to be continued by the period of the US sheer dominance as an “indispensable nation”. Allegedly it has come to an end in the beginning of the new millennium when after rapid economic ascent China emerged as a contending power followed by India and Brazil, and the Russian leadership laid new claims to the Soviet Union’s untapped geopolitical heritage. In fact, on April 23rd, 1997, Russia and China signed the “Joint Declaration on a Multipolar World and the Establishment of a New International Order” and committed to promote the development of new balance and quality of international relations. “Multipolarity” has since mushroomed in

United States 30,4%

3,6%

introduction

In 2016

Oleg Buklemisev

inherently unstable setting. Classic past example

than two (or three – if tripolarity is a separate

of peace time multipolarity is represented by the “Concert of Europe” – the international setting during the period between the Napoleonic wars and Crimean war – when leading European powers acting together tried to control the global scene.

option) leading nation-states (or “civilizations”) enjoy comparable amounts of international economic, ideological, military and cultural influence. There could be several sectoral metrics of power distribution applied but economic ones should credibly attach maximum importance as other forms of trans-border influence are heavily dependent on nation’s economic capacity.

With all due respect to the received wisdom, one might want to choose a positive approach and verify to what extent the declared standing have materialized so far and whether the recent material change in the world corresponds to intense multipolarity talk. Otherwise flawed perceptions leading to erroneous decision-making in international politics could cause a lot of harm. This task is not simple because there is no universally established academic definition of different kinds of polarity. Usually this term describes such a distribution of global power when more

Multipolarity check The indicator of gross domestic product, despite its certain numerous flaws, still lack credible alternatives in its role as the main measure of national economic capacity. For reasons of measuring mainly the external financial potential instead of relative domestic purchasing power we choose for international comparisons nominal GDP rather than its PPP-adjusted value (see Graph 1).

GDP per capita growth between 2000-2015

the international vocabulary and even the top US politicians - from Madeleine Albright to Barack Obama - have chosen to use this cliché. Global financial crisis of 2007-2009 which mostly hit the Western countries and institutionalization of BRICS (Brazil, Russia, India, China and South Africa) in 2009-2011 vividly confirmed this trend. Some authors claim that multipolarity should be a normative approach to international relations and security as it gives the world stability and/or fairness lacking under bipolar/unipolar scenarios, others, on the contrary, insist that it’s

Source: World Bank – UNDP - New Economics Foundation, Peter Aldhouse, http://www.peteraldhous.com/fourways. html

Multipolar or Fragmented World – An Economist’s View

Graph 2. Military expenditures (top 5 countries, % of global volume)

In 2000

In 2016 US

Japan

China

39,8%

36,7%

46,5%

Graph 4. Representation of leading currencies in the international official reserves, %

36,0%

Saudi Arabia

China

India

13,0% 2,8% 4,1% 4,3%

Other

0,3%

1,4%

US dollar Euro

Russia

France

5,5% 2,8% 4,1% 4,3%

6,3% 2,8%

In 2016

US dollar Euro Chinese renminbi Pound sterling Japanese yen Canadian dollar Australian dollar

Pound sterling

18,8%

Japanese yen 70,5%

Other

1,8% 0,2% 2,5% 2,0% 4,2% 4,4% 1,1%

19,7%

64,0%

Swiss franc Other

Soruce of data: SIPRI Sources of data: IMF, ECB

700 600 500 200

400

150 100 50 0 1992

1997

2002 USA

China

Indeed, the share of world GDP controlled by the United States (and EU, too) decreased during the initial 15 years of XXI century but, in fact, it didn’t lead to emergence of any major “pole” (contender) of comparable economic scale. Whereas China’s share grew significantly, it was approximately compensated by Japan’s decline (basically, Japan and China swapped places in this “league table”). The main economic beneficiaries during the previous years were “the other” countries but the fact of “the North” economic leadership erosion evidently doesn’t bring about conceived multipolarity as such. But any measure of economic size taken in isolation doesn’t mean much per se. The factor of size can be (but is not necessarily) translated into power (or ‘leadership’) via several channels, including

Graph 5: Share of currency activity in domestic and foreign payments

800

2007 Russia

2012

Military expenditure in billions of US dollars

Graph 3. US, Chinese and Russian military expenditures, bn US dollars, current prices

Source: Sandler, T. and George, J. (2016)

• Trade and investment gravity; • Vast human capital pool; • Military expenditures; • Reserve currency issuance; • Leading role in the international organisations; • Soft power capabilities, etc. Some of these factors cannot be directly and accurately measured but natural ways to assess others are, fortunately, readily available. For instance, in terms of military expenditures the United States is still an unsurpassed force despite assertions that world power basis is no longer unipolar as it used to be. Graph 2 shows that currently as in the beginning of the millennium the US commands the biggest by far share of global military outlays.

Source: SWIFT (2018)

Regardless of recent considerable increase in financing of its armed forces by China and Russia, even if these expenses are combined (admittedly, a very big if from a strategic point of view) US corresponding disbursements (without taking into account joint NATO efforts) are still routinely measured at different axis (see Graph 3). Note that in this particular case “the other” rather decline and military concentration continues to hold pace though again, no evident sign of multipolarity is presented (though one has to take into account increased resolve and capacity by China and Russia to project military power in their near abroad). Another important measure of global influence by nations is embodied in the status of reserve currency. The national money widely used for

international trade and investment gives its issuer, using Charles De Gaulle’s formula, “an exorbitant privilege” which consists of removing currency risks and lowering transaction costs for domestic business entities, financial inflows and cheaper capital, boost to a national financial sector and seigniorage while corresponding costs of currency internationalization for major reserve currencies are considered to be of much lower magnitude. The annual benefit accrued to the US owing to the status of dollar as global currency is estimated to exceed 100bn USD (in other words, it can be roughly approximated by 1% US GDP). Recent studies confirm that it is closely linked to the geopolitical (especially military) standing (for instance, it was found that military alliances boost the share of a currency in the partner’s

Multipolar or Fragmented World – An Economist’s View

possible foes despite looks insurmountable current progress of the latter. The same line of argument can be applied to other material stockpiles being built up over time such as investment.

Graph 6. Currency activity share for international payments, %

• I nertia and status quo preference, “stickiness” by incumbents For instance, the current role of developing countries in the international organisations do not mirror their real weight. The IMF quotas saga demonstrates that institutional inertia and political resistance are important factors of delay. G20 agreed in 2010 that reform of the IMF voting power is needed to account for changes in the

Source: SWIFT (2018)

Graph 7. Market share of Chinese currency in international payments, % 3.0 2.5 2.0 1.5 1.0 0.5

2011

Despite IMF 2015 decision to include the Chinese currency into SDR basket and immense currency internationalization efforts by Beijing renminbi’s progress lately stalled and was even reversed (Graph 7). Indeed, lately developing countries led by China demonstrated impressive economic and social progress markedly increasing their share and influence in the global system. Nevertheless, the declaration that the world has turned multipolar on several metrics looks premature. Impediments for multipolar world

Source: The Economist (October 14th, 2017)

foreign reserve holdings by 30 percentage points). In that sense, the reserve currency status could be considered an integral measure of leadership, comprising the factors of economic size, financial markets breadth and width, and structural quality (macroeconomic policy, financial regulation, institutional characteristics). A look at the current reserve currencies’ standing as compared with 2000 (Graph 4) demonstrates that dollar dominance persists. The role of Chinese renminbi in domestic and cross-border payments is still lower than that of Japanese yen or British pound and of the same magnitude as Canadian and Australian dollars (see Graph 5) and is even less so when only international payments are considered (Graph 6).

It does take longer than expected for new contenders to claim their “ fair” share of global control. Several reasons can be drawn to explain why it happens so. • D ifference between “stocks” and “flows” Several measures used in international comparisons represent in economic parlance “ flows“ as compared to “stocks”. For instance, the hard power dominance of country A over country B could be achieved not when A’s current military budget (flow) becomes bigger than B’s but when the same relationship occurs in terms of “stocks”, i.e. the total military might, the result of annual flows’ accumulation. However big is the “discount factor” applied to annual flows of previous years, if this simple concept is taken into account, the overall military gap between America and its

global economy and greater role of the developing and emerging market countries. Nevertheless, it took five years to pass because of the position taken by Republicans in the U.S. Congress. Moreover, United States retained more than 15% of IMF quota effectively bringing it a right of veto, OECD countries control almost 2/3 of vote (their PPP share in the world economy is now less than 1/2), while several major developing countries, especially China, India and Indonesia, are still heavily underrepresented. Though quotas review has already become an accepted mode, further necessary reforms in the future could face similar delays. In its turn, the status of reserve currency is also based on usual routine and formal/informal business conventions which change extremely slowly. Historical experience teaches that it involves a significant dose of inertia; a significant exogenous shock is often required to move from one state of equilibrium to another. • N eophytes’ unwillingness or inability to exercise leadership The resistance to the new leading players’ ascent is partly due to a legitimate concern that they are not prepared or don’t want to exercise genuine leadership when at the helm. For the time being one can only guess what are the intentions of the new potential leaders (on top of their disagreement with the current rules) and how it will rearrange the international agenda. This is especially important in the epoch when the world is facing a “Kindleberger trap”, a vacuum of power when a lack of global leadership can lead to disastrous global consequences as a result of

US international disengagement under Trump administration. Indeed, there are strong voices in China itself against more active involvement in global affairs, representing it as a conspiracy to trap the country into messy regional troubles. China’s reluctance to assume new obligations was anything but evident in many spheres during the recent years. Conclusion US relative decline and partial retreat from global affairs could mean that unipolar world is close to an end. At the same time China’s rapid ascent creates domestic and international headwinds – and the global leadership status is thus eroding. Having analysed the material facts – global GDP distribution, relative military power and, lastly, international reserve currencies’ standing – we can conclude that multipolarity is not with us yet. Before it finally arrives (if at all) scholars keep on trying to describe our Brave New World in different ways. Samuel Huntington coined the term uni-multipolar balance of power; in other words, America now has to balance its dominance with other, lower-level power centres to achieve its ends. Alternatively, Richard Haass proclaimed the age of non-polarity when states, international organisations and non-state actors interact and compete in the world arena. Indeed, as Facebook and other global tech giants accumulate enormous amounts of valuable data they – along with the leading nations – could become big players of the future. But the vast differentiation of the interests of future major actors (even if we ignore mighty insurgent players like ISIS) will make it difficult for them to communicate and build productive alliances. It might reduce the shared agenda to the few most uncontroversial subjects which are usually not the very important ones. The U.S. National Intelligence Council in 2008 forecasted the emergence of a "global multipolar system" within two decades. It remains to be seen whether this forecast proves correct but in spite of numerous acute global problems pending but in any event in the meantime the world is likely to become more fragmented rather than multipolar.

New world order and Old Fashioned UN: Is it Sustainable? Author: Prof. Dr. Dušan Proroković

Undoubtedly, international politics remains determined by great powers. Depending on their potentials of military, economic and political power, a uni-polar, bipolar or multi-polar structure of the World political system is formed. However, the important role played by international organisations should be highlighted. First of all, the United Nations. But, the role of international organisations should not be overestimated. The UN simply did not respond adequately or were blocked during the crises in Hungary and Czechoslovakia after Soviet intervention, as well as during numerous crises in Latin America, when the United States intervened.

Changing World: Share in World GDP PPP from 1989 to 2014 State USA China Japan Germany France Brazil UK Italy Russia India Canada Australia Spain Мexico South Korea Indonesia Тurkey Saudi Arabia Аrgentina South Africa

2014/1989 (A)/(R) – 6,14 (–27,56) +12,25 (+300,98) –4,39 (–49,94) –2,65 (–43,44) –1,75 (–42,27) –0,72 (–19,25) –1,29 (–35,34) –2,26 (–53,42) –0,17 (–4,89) +3,11 (+83,60) –0,60 (–28,84) –0,19 (–15,83) –0,78 (–34,98) –0,65 (–24,71) +0,45 (+37,50) +0,56 (+28,57) +0,01 (+0,72) +0,10 (+7,19) +0,01 (+1,15) –0,23 (–26,14)

2014 (%) 16,14 16,32 4,40 3,45 2,39 3,02 2,36 1,97 3,30 6,83 1,48 1,01 1,45 1,98 1,65 2,48 1,40 1,49 0,88 0,65

2009 (%) 16,98 13,71 4,90 3,72 2,65 3,18 2,53 2,36 3,44 6,09 1,54 1,04 1,70 2,03 1,67 2,27 1,34 1,38 0,89 0,68

2004 (%) 19,64 9,68 5,79 4,20 3,07 3,08 2,96 2,88 3,47 4,91 1,73 1,09 1,94 2,21 1,64 2,03 1,38 1,28 0,81 0,70

1989 (%) 22,28 4,07 8,79 6,10 4,14 3,74 3,65 4,23 3,72 2,08 1,20 2,23 2,63 1,20 1,96 1,39 1,39 0,87 0,88

(A) – absolute change; (R) – relative change

But the role of the UN should not be underestimated. Not only because they organized many successful missions. It is also because they can become even more significant player in the multi-polar world. Until now, the UN existed within the bipolar order, until the beginning of the 1990s and within the framework of a unipolar order, until 2008. Since 2008, there has been an obvious transformation of the structure of the World political system to multi-polar order. Interestingly, the key forces have anticipated these developments and supported the creation of the G-20. Instead of the G-8, we got a new multilateral configuration that includes the most important world countries. However, the G-20 will not replace the UN. Simply, the mechanism within the UN has been developed for more than 60 years, it is based on consensus and some worldwide accepted principles, the UN has created a rich legal heritage, and, which is also important – members of UN are regional powers and small states significant for regional security in different parts of the World. Great Powers are the most responsible for global security, but they are not, nor will they be, actors who can determine the regional security dynamics without the involvement of regional powers and small states. Therefore, the UN has no alternative. However, because of its internal structure, the UN, as it is, has no great future. Fundamental reforms and structural

changes are needed to make it more efficient, and to help the transformation of the structure of the world political system as calm as possible. First of all, this concerns the reforms within the UN Security Council. Today's structure reflects the outcome of the Second World War. The winning forces have created a system in which 5 states are permanent members and have veto power. Sure, it made sense. Nevertheless, one should bear in mind that the world we live in, no longer follows the dynamics of international relations created after the Second World War. The changes are huge – whether we talk about economic indicators, state's military power or demographic indicators. Five permanent members of the Security Council are now participating in the global GDP with 47.8%. In addition, the US and China are participating with 39.4%, while UK, France and Russia with 8.4%. Observing economic parameters, the question is, of course, why the permanent members are not Japan and Germany, for example. Also, five permanent members now encompass 26.3% of the world's population. Of this percent, 18.3% belongs to China, while the remaining 8% are in another four countries. Looking at this indicator, India should be a permanent member as well. India should be a permanent member also because of its military power. India is on its way to become the

try from this continent gets a permanent seat in the UN Security Council. If Nigeria became a permanent member of the UN Security Council, there would be significantly less chances of its disintegration or destabilization. Changes are necessary. This was pointed out in previous years. In 1993, the UN set up an Open-ended Working Group on the Equitable Representation on and Increase in Membership of the Security Council. However, after 25 years of the existence and work of this body, there are almost no results. In 2005, Secretary-General Kofi Annan called for an extension of the SB to 24 members. He presented two alternative suggestions on how this body can be transformed.

fourth nuclear power force, responsible not only for regional security in South Asia, but for global security as well. The country with rising military power is also Brazil, a country that is also an indispensable factor in the regional security of the entire Latin America. Brazil is candidate for a permanent member of the UN Security Council as well. Because of future events in Africa, it is important that a coun-

The first scenario – Model A – implies that the number of permanent members is increased by six states and the number of non-permanent by three. Thus, the number of states with veto power would rise to 11. The second scenario – Model B – is that permanent members with veto power remain five, increasing the number of present non-permanent members which are elected for two years by one, and introducing a new category – eight non-permanent states which are elected for four years. Also, Annan proposes the abolition of the existing

New world order and Old Fashioned UN: Is it Sustainable?

Countries that explicitly and openly support India for UNSC permanent seat

groups and the formation of new ones exclusively according to the principle of belonging to a particular continent. Kishore Mahbubani put forward a compromised proposal: Security Council would be expanded to 21 members divided into three groups: permanent members, semi-permanent members and non-permanent members. Each of these groups will be consisted by seven States. Permanent members would be: USA,

Uniting for Consensus (UfC)

China, Russia, India, Brazil and Nigeria. Another place will be allocated for the EU. Semi-permanent members would be elected on a regional basis. These seats would be reserved for regional powers. This would allow to some countries, such as Japan, Pakistan, Germany and Mexico – to become members every four years. This is very important, because, as Mahbubani noticed, India was not represented in Security Council for two decades, between 1992. and 2011.

Koffi Annan's Proposal Current Structure Model A Model B -

Permanent Seats Elected on 2 years Elected on 4 years

A model 11 13 -

B model 5 11 8

Kishor Mahbubani's Prorposal Status Permanent Semi-Permanent

Non-Permanent

∑ 7 7

Members (States) USA, China, Russia, India, Brazil, Nigeria and EU Asia-Pacific: Japan, West/East Europe: Pakistan, South Germany, France, Korea, Bangladesh, UK, Spain, Italy, Philippines, Iran, Turkey, Poland, Thailand, Vietnam, Canada Indonesia Latin America/ Africa: South Africa, Caribbean: Ethiopia, Kenya, Argentina, Mexico, Algeria, DR Congo, Colombia, Venezuela Tanzania, Egypt All other states (UN members)

∑ 7 28

It should be noted that the current permanent members officially support the reform of the United Nations, but unofficially, their attitude is different. Thanks to the "Wikileaks" the public received a correspondence between the American Ambassador to the UN Zalmay Khalilzad and Secretary of State Condoleezza Rice, which states: "the expansion of the Security Council in accordance with the models that are now being considered would decrease US influence in this body. The introduction of new permanent members with veto power would present an exponentially increased risk for American interests“. More States with veto power means the dissipation of power and consequently weakening of the existing five permanent member countries in the global political system. Most consistent in their demand for the reform of the UN are four states: Brazil, India, Japan and Germany. They formed within the UN, the so-called G-4, which actively lobby for change. In a number of arguments why this is necessary, Japan and Germany, in particular, point out the fact that they are among the countries which contribute mostly to the UN budget. The aspiration of India to become a permanent member was supported by 82 countries. Uniting for Consensus (UfC) is a movement created in the 1990s as an opposition to the possible expansion of permanent seats in the United Nations Security Council. This movement, under the leadership

of Italy, Canada, Mexico, Argentina, South Korea, and Pakistan came up with a more modest proposal – the number of seats in SC to be increased to 25, while the existing permanent members retained their veto power, 10 new members would be given the non-permanent status. These countries are not inclined to support the idea that G-4 should become permanent members of SC. They believe that the existing regional relations would be endangered if this should happen. Pakistan is against India getting a permanent seat in SC, South Korea is against Japan, Mexico and Argentina are against Brazil. China also has large reservations for the aspirations of Japan in this direction. The permanent seat of Germany, apparently, is undesirable in certain European countries, but also for the rest of the world, as they are already two countries from this region among the permanent members – Great Britain and France. As Paul Kennedy writes, "Everyone agrees that the present structure is flawed. But consensus on how to fix it remains out of reach." Despite all the shortcomings, the world needs the UN. This is and this will remain the only institution of collective security for a long time. Therefore, quick reforms are needed. The current structure does not reflect the real conditions in international relations.

158

The World in 2035

A Geopolitical Forecast 40

The World in 2035: A Geopolitical Forecast

Author: Diána Szőke

Based on a review of global geopolitical forecasts, this study summarizes the main political, economic and social trends that will likely shape international developments over the next two decades. On the economic front, much optimism surrounds global economic and demographic growth in emerging countries, particularly in the Asia-Pacific region. However, the political outlook is far gloomier: experts warn of a potentially conflict-ridden, multipolar world order where international institutions play a more limited role. Fast-paced developments in technology, the fight against anthropogenic climate change and the coming shift away from fossil fuels will serve as the backdrop to these changes. The article also highlights the most contested issues in the geopolitical forecast literature. These include the electoral outlook for populist parties in Western democracies, Russia’s future role in the international arena, along with the potential trend of economic isolationism and increased trade barriers.

Introduction

Methodological overview

By the 2010s, it has become apparent that the postbipolar word order that followed the end of the Cold War is undergoing a profound transformation. This has often been marked by surprising, at times tragic, turns of events, such as the Arab Spring, the civil war in Ukraine, Brexit, or the election of Donald Trump in the 2016 presidential vote in the United States. All these developments raise the question of how the world will change in the decades to come, and what potential yet unknown processes we must factor into our geopolitical forecasts. This article attempts to shed some light on these myriad issues based on an assessment of the major geopolitical predictions published over the past few years. It not only outlines the key political, economic and social trends that will likely shape the world order over the medium term, but also highlights certain topics about which there is much debate in the literature. Furthermore, it details how we should evaluate both known unknowns and unknown unknowns, such as so-called “black swan” events.

This study deals with the geopolitical dynamics of the coming decades, and the way the global world order could change during this period. First, it is of course necessary to conceptualize the term “world order” for the purposes of this analysis, since the expression does not carry a definitive, normative meaning. In the context of this article, the “world order” can be interpreted on three possible levels: 1) interstate relations (i.e. political and diplomatic ties between countries, economic competition, military conflict, etc.); 2) the interplay between the state and non-state actors (i.e. intergovernmental organisations, transnational companies, armed groups, etc.); and 3) the global environment within which these interactions unfold (i.e. the natural environment, prevalent ideologies, demographic trends, etc.).

This analysis was undertaken by the Institute for Foreign Affairs and Trade (IFAT) upon the request of the Hungarian Ministry of Foreign Affairs and Trade, during spring 2017. From a methodological viewpoint, it was predominantly deductive, meaning that its main findings were derived from the available literature. The project was based on an analysis of the geopolitical forecasts of some of the world’s leading think tanks, in order to answer the following questions: · Where is the world headed, if we assume the postCold War world order has ended? · What key factors will shape the future? · What major global political, economic and social trends can we expect? Author’s note: An extended version of this article was published by the Institute for Foreign Affairs and Trade (IFAT) in its Hungarian-language academic journal, Külügyi Szemle, under the title “The World Order in 2030. A Study of Global Political, Economic and Social Trends”. It was published in the 2017/4 issue of the journal, and co-written with Máté Szalai (research fellow, IFAT) and Nikolett Garai (project coordinator, IFAT).

· W hat are the most contested issues and the uncertain factors in the predictions? Given the vast literature at hand on this topic, the search was narrowed down based on the selection criteria below. We therefore searched for forecasts that were: · produced by a globally renowned think tank, government agency, international organisation or advisory body; · presented a medium or long-term outlook (i.e. up to 2030-2050, or potentially even 2010 in the cases of certain megatrends); · published over the past 5 years (2013-2017); and · attempting to provide a holistic approach to geopolitical developments. Geographic representation was not a major factor in our choices; as a result, the majority of the studied publications tend to originate in North America or Europe. (A complete list of the studied forecasts can be found in Annex 1.) A key question is of course whether it is even possible to predict the future in the first place. There are multiple factors affecting the global outlook, with a high probability for dramatic and unforeseen changes, or the ripple effects of certain events. Consequently, the main

The World in 2035: A Geopolitical Forecast

trends outlined in the strategies must be handled with a degree of caution. Nonetheless, the method of strategic thinking behind the formulation of these predictions can often prove more interesting than the forecasts themselves. We must also be aware of the potential psychological biases in our thinking: for instance, we tend to extrapolate existing trends as if they were to naturally continue, or lean toward overemphasizing current problems. Ideological preferences and personal convictions may also distort our predictions for the future. Major global geopolitical trends To summarize the general trends highlighted in the outlook to 2035, the forecasts tend to be pessimistic politically, but more optimistic in economic terms. The major findings of the predictions studied within the scope of this research project are presented along the lines of eight major aspects. The role of the state States will remain the dominant players in the international arena, but the so-called Westphalian global system of (theoretically) nation-based states will continue to erode. The decline of the Western state model stems from a variety of reasons, including the crisis of the wel-

fare system, the spread of post-capitalist ideologies, and oftentimes the weakened legitimacy of representative democracy. As the Western model struggles, alternative governance forms may become more attractive (such as the Chinese or Russian cases).

Figure 1. Change in primary energy demand, 2016-2040 (Mtoe, million tons of oil equivalent)

This erosion of the Westphalian system coincides with the further prominence of non-state actors, be that corporations, religious groups, international organisations, paramilitary forces, etc. Digitalization, innovations in IT technology and social media could have additional effects on politics and civil society too. For instance, new methods of communicating with politicians, of crossborder cooperation, and potential online referendums may come to the fore. Geopolitical balance The forecasts concerning the shifting geopolitical balance until 2035 are rather gloomy in their outlook. They essentially argue that the world must adjust to life without a hegemonic power. A multipolar world order is likely to emerge, with greater room for manoeuvre for regional powers (i.e. Russia, Brazil, India). This could potentially lead to more competition and inter-state conflict. The international security landscape will continue to undergo a profound transfor-

mation. In a more conflict-ridden global order, military and defense expenditures will probably rise. New security challenges are already emerging, such as energy security, the security-related aspects of climate change, migration, cyber security, or information warfare. These problems require fundamentally different approaches compared to a traditional, narrowly-focused military viewpoint. Most of the assessed publications believe the United States will remain a superpower, although its relative strength would somewhat diminish. China is likely to continue its global ascendancy, and could prove a game-changer in many respects. Its rise is already indisputable thanks to its steady economic growth and greater international diplomatic clout. It therefore comes as no surprise that the US-China relationship will be the key global bilateral partnership over the medium term. The majority of analysts are pessimistic about the global role of Europe, predicting a further weakening of the bloc. Certain signs of these internal fissures are already apparent, including the eurozone crisis, Brexit, or differences over how to manage mass migration. It looks to become a rather fragmented alliance of values and interests, although economic interdependence could increase over the coming years. The future role of Russia is highly contested in the literature (and shall be discussed in greater detail in later sections of this article). Overall, most predictions see

Russia as a regional player within Eurasia. South and East Asia are poised for substantial political and economic success. Meanwhile, the Middle East and SubSaharan Africa will likely continue to be riddled with conflicts, coinciding with both demographic growth and increasing environmental stress. Latin America will presumably continue to suffer from its dependence on the fluctuating prices of key commodity products in global markets.

â&#x20AC;&#x153;By the 2010s, it has become apparent that the postbipolar word order that followed the end of the Cold War is undergoing a profound transformation.â&#x20AC;? International institutions As for the outlook for global institutions and intergovernmental cooperation, there are echoes of the pessimism surrounding geopolitics in this regard as well. The forecasts contain much talk of the end of multilateralism, and the legitimacy crisis of the global institutions enshrined in the post-World War II period. This could ultimately lead to a weakening of international institutions and multilateral practices in general.

The World in 2035: A Geopolitical Forecast

Figure 2. Global population forecasts, 2015-2050

The United Nations (UN) is expected to have a narrower mandate in the coming decades, focusing more on â&#x20AC;&#x153;softerâ&#x20AC;? issues such as humanitarian assistance in conflict zones and sustainable development. The heated debate over the future composition and role of the UN Security Council will continue, with calls to include other powers (i.e. Japan, Germany, Brazil or India) among the permanent global decision-makers with veto rights. Global economic trends There is a clear consensus about global economic trends until 2035, and the literature is much more optimistic in its economic outlook. Developing countries will be the motors of medium-term international economic growth. The Asia-Pacific region in particular will emerge as the focal point of the global economy. In terms of size, China, India, the United States, Indonesia and Brazil are expected to be the top five economies by the mid-century. Despite the world economyâ&#x20AC;&#x2122;s centre of gravity shifting towards Asia, the West will retain

some of its existing global economic / financial structural advantages: for instance, the US dollar is likely to remain the dominant international currency. In the meantime, transnational corporations will continue to grow in terms of size and lobbying power, potentially limiting the room for manoeuvre of certain states. One of the ongoing debates in the forecasts is whether economic interdependence will deepen over the coming decades, or if protectionism and trade barriers are going to become more prominent. Ideologies and values Ideologies and ways of thinking about the world are incredibly hard to pin down in the present moment, let alone predict in advance. There is nonetheless a general view in the examined literature that the underlying values and practices of liberal multilateralism have suffered heavy blows in recent years. The international liberalism of the post-Cold War era may be on the decline, but there are few coherent alternatives on the table.

The World in 2035: A Geopolitical Forecast

List of consulted geopolitical forecasts · Atlantic Council · Brookings Institute · Bruegel Institute · Center for Global Security Research · Centre for International Governance Innovation · Center for Strategic and International Studies · Council on Foreign Relations · ESADE Business and Law School · European Parliamentary Research Service · European Strategy and Policy Analysis System · EY · Foreign Affairs · International Energy Agency · International Peace Institute · Millennium Project · NATO · Oxford Institute for Energy Studies · PricewaterhouseCoopers · Rand Corporation · Stockholm International Peace Research Institute · Stratfor · The Economist · US National Intelligence Council · World Bank · World Economic Forum In terms of ideologies, we are not talking merely of a political shift. In fact, the 2008 global financial crisis has had philosophical repercussions, and the idea of laissezfaire capitalism has been somewhat discredited. As for party politics, experts predict that domestic politics in Western countries will surpass traditional divisions between the left-wing and the right-wing parties in the coming decades. One possible alternative division in the ideological spectrum may be between proglobalisation and anti-globalisation parties. Technology and innovation There is an almost unanimous consensus in the literature that the period until 2035 will see ongoing revolutionary progress in technological development. The key sectors where most growth is expected are big data, biotechnology, nanotechnology and robotics. In many respects, this rapid technological progress is a double-edged sword. On the one hand, innovation may

potentially bring about huge gains in human development, medicine, education, living standards, etc. On the other hand, certain scientific advances could carry inherent dangers as well. The nature of these risks may be ethical (i.e. artificial intelligence), security-related (i.e. cyber attacks on critical infrastructure), or socioeconomic (i.e. automatization’s implications for jobs). Furthermore, the benefits of technological development will continue to spread unevenly between different regions of the world. A pivotal aspect of technological progress relates to the global energy industry. Patterns in aggregated macroeconomic energy demand are expected to follow the trends in global economic prospects. Primary energy demand will probably grow fastest in China, India and Southeast Asia (thanks to their dynamic economic growth), along with Sub-Saharan Africa (due to its demographic boom). However, the global energy landscape will continue to change. The so-called “oil era” is expected to end slowly, with a whimper rather than a bang. Natural gas and renewables will play a growing role at the expense of coal and crude oil. By 2040, most experts predict that world’s energy mix shall be roughly divided into four quarters: crude oil, coal, natural gas and fossil fuels. Other major trends will include the spread of electric vehicles and self-driving cars, the growing importance of liquefied natural gas (LNG), together with a focus on energy efficiency and smart city infrastructure. Demography Future population sizes are relatively easy to predict based on global statistical databases as well as trends in health care, pandemics, urbanization, etc. World population will probably hit 9 billion by the mid-century. There is a stark contrast between the demographic outlook for developing and developed countries. Emerging countries will experience a demographic boom, leading to the expansion of the global middle class. Meanwhile, the developed world will be plagued by the social and economic implications of ageing. In relative terms, the largest population growth is expected in Sub-Saharan Africa, with the Democratic Republic of Congo, Ethiopia and Nigeria as the largest contributors. India is likely to surpass China in terms of population size in the coming decades. As for the long-term outlook, some predictions suggest that the global population could continue increasing throughout the 21st century, with projected highs in

excess of 11 billion. Other forecasters take a more nuanced view, envisioning the demographic boom to level off from the 2050s onwards. Urbanization will be another key trend. By the midcentury, the majority of the Earth’s population will live in cities. This will present new challenges in itself, considering transport, health services, air quality or public utilities.

access to natural resources, or the mass exodus of so-called “climate refugees”. Developing countries will be most vulnerable to these changes in general. Sub-Saharan African countries are at great risk, while the Middle East may suffer from acute water shortages. Certain small island developing countries will continue to face climate change and rising sea levels as existential threats.

The natural environment On a planetary scale, anthropogenic climate change will be an ongoing, pressing issue dominating the global diplomatic agenda in the decades to come. We are already experiencing signs of this, such as rising sea levels, the melting of the Arctic ice caps, and largescale desertification. The frequency of extreme weather events (i.e. hurricanes, landslides, droughts, etc.) will increase over the medium-term. Efforts to curb global warming to meet the Paris targets must be stepped up. As a consequence of climate change, the natural environment will be increasingly interconnected with security, even on a micro level. Access to natural resources could be a persistent source of grievances by 2035. Its potential effects include famines, a lack of arable land and drinking water, armed conflict over

Uncertainties and contested predictions The previous section dealt with the major global geopolitical dynamics regarding which there seems to be a general consensus in the examined literature. However, there are some recurring debates in the forecasts as well, which may also be worth highlighting. These are the questions that are interpreted in many different ways within the predictions, leaving much room for argument. The first contested prediction relates to the outlook for populist politics in the West: will this trend prove longstanding, or will it fizzle out over time? The difficulties in forecasting the future for populism lie partly in the fact that the term itself is quite difficult to define. As a gen-

The World in 2035: A Geopolitical Forecast

eral rule, populist parties and politicians cannot usually be placed along the traditional ideological divisions of left-wing and right-wing parties; instead, they usually tend to take an anti-elite or anti-status quo position. Populist tendencies in turn may be fuelled by a variety of voters’ concerns, such as over globalisation, job security, changing cultural identity, etc. As a result, it would be very difficult to gage whether populist tendencies will remain a mainstay of global politics. It is much more logical to assume they may have several different iterations, depending on the most pressing economic and cultural topics dominating the agenda at a given time and place.

probably safe to assume that globalisation will continue to bring countries and economies ever closer together, but the political reaction to this will likely remain mixed.

The second debated issue in the forecasts is the role of Russia within the international system over the coming decades. This has generated much discussion in part because its foreign activities have dominated global headlines over the past few years – whether it is the wars in Georgia or Ukraine, or even the alleged meddling in the 2016 US presidential election. The key question is whether Russia will accept the global status quo and adhere to international norms (such as the sanctity of borders, or the principles of nonaggression/non-interference). This ultimately ties in to the debate over what role Russia will play within Central Asia, Eastern Europe and the Caucasus. Over time, the developments of Russian foreign policy will be strongly influenced by economic factors too, such as the effects of relatively low global energy prices on its fossil fuel exports.

unpredictable and unforeseen occurrences, often with extreme consequences, that render other forecasts and expectations invalid. In this sense, “black swans” delineate the limitations of the validity of our predictions. Examples of such potential “black swans” in the studied forecasts include a democratic transformation in China, the acceleration of climate change, outright nuclear war, a sudden collapse of the eurozone, or the outbreak of a global pandemic. In short: there are many known unknowns… and perhaps even more unknown unknowns.

The third topic on which there is much discussion is the outlook for global economic relations. Will the following years bring further economic interdependence, or shall we witness a new wave of isolationism and trade barriers? This is again a topic that has come to the fore in light of recent events, such as US President Donald Trump’s anti-globalist stance. The influence of populism in Western countries can also be felt in this regard. It is

Black swans As the Danish physicist, Niels Bohr is rumoured to have once said: “Prediction is very difficult, especially if it is about the future”. Any forecast that aims to pinpoint the major geopolitical trends shaping the world order in 2035 will be faced with a very high degree of uncertainty. Not only is it impossible to take all possible factors into account, but there is also a potential for so-called “black swan” events. “Black swans” can be defined as

Conclusion Overall, most geopolitical forecasts are pessimistic about political developments, but optimistic about economic growth. In the political realm, they envision a multipolar, conflict-ridden world, one with a limited role for international institutions. From the perspective of economics and demography, developing countries (especially in the Asia-Pacific region) will be the main drivers until at least the 2030s. Fast-paced scientific and technological advances, and the fight against climate change will continue to serve as the backdrop to these processes. However, there are many debates over these questions in the literature, and we must not discount the impacts of so-called “black swan” events either.

Tango or Tangle

let us leave Southernization to India 52

Tango or Tangle: let us leave Southernization to India

Author: Dr. Ramachandra Byrappa

The art of Tango is about creating order out of chaos, it is about coordinating individuality and coexistence, about movement and balance. Tango in short is about occupying space and territory without stepping on a partner’s feet, moving cooperation to a higher level of art and symbiosis. These are the very capacities and qualities that India and China will need to put Asia at the very centre of the New World Order in the coming years and decades. Both have to learn from the past to build the future.

Before the European incursions into Asia, China managed a big part of eastern Eurasia and India for its part managed the rim lands and the southern system. Together they produced balance, harmony and prosperity, and made Asia the envy of the world. The time has come, it seems, for them to re-unite and create a peaceful world order based on openness, mutual respect for creeds and cultures and an equitable access to the resources of our world. But although history can serve as a lesson it cannot be a standard for the future. India and China have to use extreme caution and responsibility to bring about a peaceful transition to the hoped-for New World Order. There are a lot of positive things about the Western World Order but it has created misery and false hope on an unprecedented scale, brought the humanity to an irrecoverable environmental calamity. The West was not able to wholeheartedly engage itself to building cultural and racial bridges, on the contrary, there is a rise in hatred of all kinds. The white communities all over the world are increasingly feeling that their status in the world and their privilege to the world’s resources is in danger. A New world order in this perspective means a radical change in perceptions and attitudes. Cooperation between India and China could be the first and foremost change that could act as a catalyser for a New World Order.

“I do what I am good at and you do what you are good at and we will weave things in” method of doing things. In many respects the world’s elites are unified more than one can imagine. And although these elites are unified and interconnected, the sheer complexity of their conflicting interests and affinities needs to be managed on an unparalleled level, here great experience in non-conflictual consensus building is needed backed up with economic clout and money power, a tailor made opportunity for Indian and China. Foreshadowing this phenomenon is the other factor that needs to be taken into account, the world’s masses are increasingly unified by globalisation in many

ways of governance will be needed and new forms of world order need to be created, in comparison to the current one, where the lack of legitimacy seems to be one of the biggest issues. Combined, what we realise is that we need overarching systems of integration of diverse elites, and the integration of pluralistic minded individuals and groups. Empires, like the Ottoman Empire or the Russian empire were very good at maintaining an integrative system for brief periods, but as their successive collapse proved their ability was limited, although the Russian Empire was more substantive in its cultural prevalence. To be more appropriate and encompassing, the present situation probably requires the return of civilisations; especially the re-

aspects of their everyday life, especially the fear of the future and the fear of each other. This means new

turn of the Indian and Chinese civilisations to regulate world order for the benefit of everyone.

Ramachandra Byrappa

Introduction A true order of things is when one allows the elements, in their natural propensity, to fall into place without compulsion, tension and violence of any kind. An order where there is no hierarchy in the way we think and live. The New World Order will become optimal and efficient when each one can do what he or she is best at. Like this, a crippling dysfunctionality and dislocation of the world order could be avoided. Ideally, in a multipolar world led by a consensus of major powers there will be more cohesion, but I feel that this should not be an ultimate goal in itself. A multipolar system could and should mean a distribution of specialisation, there will be centres of specialisation.

Tango or Tangle: let us leave Southernization to India

Return to the Civilizational Edge At this juncture the Asiatic model of civilisation comes into play. Indeed both the Indian and Chinese civilisations, in their own respective spheres, were able to build and maintain systems of order, built upon confidence and mutual respect, giving priorities to those mechanisms that eliminated conflict by focusing on cooperation. Currently however, India and China are not exactly in a strong position to undertake this civilizational mission. And quite rightly not all believe in such a peaceful settlement, there are regular reminders to the opposite: “The decline of the west is juxtaposed with the rise of the east, notably China. (It is hard to

der current polarizing political atmosphere and might take more adjusting and tough reforms to be planned and implemented, all of which will take time. When one digs deeper, one gets the impression that by all this what these two countries are doing is entrenching the structural violence of the Western system and not at all preparing their countries for a period fundamental change in the nature of how things are done domestically and internationally. The energies of almost three billion people are wasted because the elites of both countries refuse to take a step back and put their actions into context. If they had done and do this in the future, they will realise that they are doing exactly what the West wants them to do: play a petty game of

A Modern Asian nationalism, is the result of western educated or western oriented elite like Nehru, Gandhi, the Kuomintang and even the Communist Party of China. The idea was that the west managed to pull down Asia because they were strong nation-states and therefore let Asia become like them to beat them at their own game – a growing mountain of false assumptions and equally false conclusions. It is not only about sizing down great civilisations to the pettiness of nationalism, it is about expressing one set of particularistic values out of a rich mosaic of shared values; civilisation does not put people against people, to divide and rule. The great tragedy of today’s Asia and that of the world order (world balance) is that

alternative. Under these circumstances the best way forward for India and China, and for everyone else, would be to learn from history and put forward models that have worked very well in the past. Of course, times and contexts have changed but parts of this civilizational heritage are still viable.

tell whether Russia is rising or falling; either way, it is disturbing.) Fitting a rising power into a decaying international system has rarely occurred peacefully. Perhaps superior Western and Chinese statesmanship will avert a major war; but this, in historical terms, would be a bonus.” Unfortunately there are solid reasons to believe in such an eventuality because the modus operandi of the major Asian powers is not Asian but works by borrowed concepts from the West. And according to these scales, China has made strides of progress and seems to be in the scope of preparedness but I think this is only hypothetical; it is one thing when the tide is high and another when it is low. As for India, it is un-

nationalist divisions and destruction. As Jerry H. Bentley once wrote: “The power of myths to promote tendentious or distorted understandings of the past and even to inspire the production of historical fabrications is all too evident in both popular and professional historical accounts of all lands and peoples without exception. Yet the production of parallel mythistories that stroke the collective psyches of national, ethnic, racial, religious, and other groups, while also nourishing their memories of supposed past injustices and encouraging hatred of their perceived oppressors, is a formula for disaster in a world oversupplied with appallingly effective technologies of destruction.”

one gets the view that both India and China, rather than revitalise civilisations, are forcefully forging ahead with particularistic agendas. While China is enhancing with Han Chinese domination inside China, in India the Fringe Mesopotamians (North-western Indians) are openly questioning and turning upside the very principles of toleration that formed the bedrock of the Chinese and Indian civilisations. This leads us inevitably to two things: domestically, no one will feel safe because the particularistic nature of decision-making and the socio-economic consequence of these decisions. Worldwide, this intolerance at the domestic level shows the world population that this Asian twins can be a danger to their own socio-economically (relatively) harmonised systems. The rise of China and Asia would be thus interpreted as an imminent danger.

at current torrid rates of growth, it will take the average Asian 77 years to reach the income of the average American. The Chinese need 47 years. For Indians, the figure is 123 years. And Asia's combined military budget won't equal that of the United States for 72 years.” I do not in any way mean that Asia has to grab the reins of power because it has such a level of material wealth that it can somehow buy itself the cockpit of the world governance. What I mean is that the West, with its unidirectional model of world order, has sucked the world of all its vital resources by establishing a world order of privileges, a sort of racial entitlements. As one well attuned observer put it in a nutshell: “The white people of South Africa regard themselves as the upholders of Western civilisation but the truth is that no civilisation had ever been established in the land. Instead, a way of life evolved, dominated by patterns of greed and opportunism, so brutal in their effects, so lacking in basic human courtesies, that long after their demise as a dominant power in South Africa, they will be remembered like a nightmare.” This statement may be considered provocative by some but it describes well the actual condition of many parts of the world. And this process has left behind a tired planet, unable to replenish itself to give stable livelihood to its inhabitants. My argument therefore is that Asia has to legitimise its claim to world leadership not because of its material success but because of the efficacy and salience of its civilizational model. In no way should either China or India strengthen ‘nationalist’ outlays for Asia and work to reinforce a non-civilizational model.

In this way the two countries are not only destroying or levelling down their civilisations, they are also incessantly destroying the only alternatives that there may be for the yearning masses of our planet. India and China should stop this mission of ‘self-destruction’ not for some glorious motives of reviving thousand-year-old civilisations, they have to do it because the imperatives of survival of the whole world system dictates so. Han Chinese nationalism in China and the Fringe Mesopotamian nationalism in India are forces of friction, division, discrimination, arbitrary application of government and tyrannical violence. The world of today has enough of these dangerous commodities, the result of the Western order. In haphazard of climate-change and in an increasingly resource-restricted situation, what the world needs is the comfort of healing and sharing above anything else – if India and China continue in their current path they will be unable to provide the world with a legitimate

When we talk about a model for the new world order we are of course not talking about economic development or material prosperity. This is the whole point of it, although economic prosperity is very important, structurally it should not have a direct impact on the way we conduct relations with each other. In material terms Asia is nowhere. As one expert put it: “Even

Building your future on borrowed concepts is never the right thing to do because this means someone else is designating how you think and live. As explained earlier, the root of Western ethics and rise to

Tango or Tangle: let us leave Southernization to India

power has been banditry followed by newer forms of elaborated banditry in all its disguises. The answer cannot be the democratisation of banditry and neither is the normalisation of it. What is necessary and appropriate is that the leaders of India and China take a step back from the precipice and sweep the dust, the western narratives, off their civilisations and take inspiration from the ‘deep heritage’. As Walter D. Mignolo correctly described: “Today, through visiting monuments as tourists, through archaeological and anthropological work, by researching contemporary codices and reports by European conquistadores and missionaries, and by observing modern international relations and the inequality

to the basics, going back to the alphabet of humanity, in short back to civilisation. When the dust is cleared, the world of today is in reality a choice between three or possibly four civilizational options: the Indian civilisation, the Chinese civilisation, the Slavo-Tatar civilisation and the Christian-Humanist civilisation. This vision of things might look incompatible with a Universalist vision of the world order, but it is not. The whole idea of the new world order is the reflection of this civilizational mosaic and its inter-play. Up to now everyone was under the illusion of the West bringing about a Universalist world revolution in the world order. Everyone realised that it was nothing else than the “British-Museum”

of world order, we can imagine how the world was before 1500. And above all, the living memories of non-Western people who have begun to assert that their own histories, civilizations, ways of life, and structures of thought are not as bad, demonic, traditional, mythic, false, or strange as the non-European world appears in Western narratives. We have to unlearn what is taught from canonized narratives, sacred or secular. Exploring the meaning, today, of "Global South" is part of this process.” There is a clear call and need to going back to the roots, back

syndrome or logic: “we pillaged the world over so we are a world civilisation”, where stealing the Greek marbles is seen as a quick way to having access to the Greek civilisation. This narrative no longer has legitimacy except in a few renegade circles of ‘white supremacists’. The new narrative is that of genuine cooperation between genuine civilisations. First among this has to be the cooperation between the Chinese and the Slavo-Tatar civilisations, more preciously between China and Russia who constitute the Northern System along with the Turkic-Tatar belt of countries.

China-Russia and the Northern System The paradox of today’s context is that everyone is startled or moved by the hypothetical possibility that China will become the dominant power, and equally hypothetical suggestion that it will impose its own order. The question that comes to one’s mind is: Why would China want to change a system that offered it the current status on a golden plate? What is the leitmotif for it to pull the rug from under its feet? Is it because it is an order that is contested? In all this, the underlying question is how is China going to integrate the world order, in step-by-step formula or by a sudden systemic change? Some see the arrival of President Trump at the helm of the United States as a sudden collapse of the American power, paving the way for an impatient Mr. Xi to flex his muscle in a world in limbo. However, overconfidence should not lead to self-deception, China would be wise to heed to its own historic perspective. Currently China thinks it’s throwing a loose steel net (OBOR) over the globe that it can progressively tighten to its own advantage. Maybe China can leverage its position in a disoriented world but at the same time certain geopolitical structures of ‘longue durée’ could hinder the process of Chinese hegemonic positioning. Two of the major such risks are that China is overlooking the structural dynamics of the Northern System and the Southern System, it is underestimating the dangers that are disturbing these two systems. Although some fear the rise of China, the author of this essay is more fearful of China’s failure and a total dysfunctionality that might result from this. There is a clear need to pause and ponder on the reality of the situation. Mobility was always the key component of the “Eurasian” world order. If through OBOR China proposes to enhance mobility then there are chances that the order it creates in the process will be enduring. However, if it tries to pave or canalise mobility then the proposed order of things would be rejected or would lead to upheaval: “As the Asian states drew lines across the steppe, they also controlled the movement of populations: refugees, nomads, tribes, traders, soldiers, and other highly mobile groups. Not only did the states need to constrain movement, but they also needed new classification systems to define who lived inside and who outside the new borders. Vaguely defined frontier zones gave way to clearly marked lines; fluid

ethnic identities were sharpened into more rigid definitions. Ethnographic atlases, like their later counterparts the cadastral survey, the census, and the imperial atlas, fixed peoples, lands, and identities in new ways. In seventeenth and eighteenth-century central Eurasia, boundaries and maps combined to restrict mobility.” The Northern System like the Southern System are comparable to a living organic systems where movement and mobility are two essential elements to almost everything. As Peter C. Perdue explains: “The closure of the steppe frontier meant the end of an age of fluidity…” Any curtailments will entail disorder, the whole system gets clogged and crumbles. The Northern System was quite often a harmonica system, marked by expansive and contracting motions and movements. At various periods in its history it was controlled by Chinese kingdoms, Mongol hordes and imperial Russia but the flow and movement never really changed in terms of geopolitical structure. The Northern System is a system of constant shifts and adjustments in power. Without being misinterpreted or misjudged one could say that it was almost a natural phenomenon, it was almost a process of civilizational affinity and adjustment. This does not mean that the members of the geostrategic ‘musical chairs’ all have the same method, the same results or the same socio-economic and cultural impact. Among these contenders only the perimeters of their action varies. Genghis Khan pushed the limits up to the eastern coasts of the Mediterranean, and from here Turkey took the queue and pushed the limits across North Africa and the Iberian Peninsula. Both retracted, progressively giving way to Russian Expansion. The Soviets maintained the Russian empire more or less intact. The Russian Federation under Yeltsin threw away many of its geo-strategic positions, and President Putin spent the best part of his tenure up to now in regaining a modicum of past influence. For how long will the harmonica remain in the current position is the main question? Even if Russia allows China to chip away at its perimeters, will Turkey the other key member of the Northern quartet allow China to stamper on the Turkic turf? But China seems to have out manoeuvred both by throwing the net as far as Central and Eastern Europe, the traditional playground for both Turkish and Russian interests. The big question is: Is the combination of OBOR and 16+1 construct the beginning of the harmonica in motion again? And to whose advantage will it work?

Tango or Tangle: let us leave Southernization to India

The impression one gets is that the vacuum progressively ceded by the western order is filled in, seamlessly, by the Chinese order; and if possible without conflict. The idea is to leave India out of any future arrangement between the West and China, and make Russia believe that its sphere will be kept unviolated. On the other hand it could also be interpreted as the Northern System, cooperation between China and Russia, being fully established and working in full swing. But at the same time it could be seen as China jumping on a historic opportunity to create a position for itself as never before. For this extent China has developed a wide variety of institutional structures to interfere without notice. For example the 16+1 forum

that had spiralled down during the 1997-98 financial crisis. And once the economy had stabilised he tried to give a coherent patriotic orientation to it. The success of these policies can be measured in the almost doubling of the Russian middle-classes, and the giving of a realistic backbone to the Russian democratic system. The negative portrayals in the Western media of the domestic situation is no doubt politically motivated, but even the most critical of these will accept that Russia has made huge strides of progress since the collapse of the Soviet system. Having made this progress on the domestic front the Russian President tried his uttermost to build a civilizational bridge between the Russian Sphere on the one side and the

to be a member of NATO itself, but this request was squarely rejected. The fact was that, the West had eaten-up Eastern Europe and was now on the verge of taking a bite that would hurt Russia in more than one way; paving the way forward for the Ukraine to become a full member of the European Union. Russia felt cheated and its efforts to build confidence and stable relations with the West had come to nothing, it felt that the sacrifices made had been one sided. The Brits had a lot to answer for the fractious relations with Russia since Thatcher pushed for a rapid expansion of the EU into Eastern Europe.

was, it seems, invented to erode power from both the Slavic civilisation and the Western sphere in one go. This could be a turning point and a historic moment in the evolution of world order. Which proves beyond doubt that President Putin saw it long before.

West and Turkey on the other. On the far eastern front he made a rational assessment of China’s economic rise and went about defusing all potential contentions and conflicts. Applying the same rationality, and wanting to woo the Russian Bear before making its move into Central Asia, China was ready to agree upon a status quo in Sino-Russian relations. On top of this, Russia made serious overtures of friendship to both the United States and reinforced its long-time friendship with the Indian Subcontinent. Between the 2000 and 2009 one really got the view that, although a waning super power, Russia had successfully converted itself to the status of the wise-man of the world, offering help of mediation here and cooperation there. From academics to ordinary citizen around the world, felt a relief to see a mature world power step into the world arena in contrast to the west’s impulsive and invasive tendencies. Russia was a stabiliser and equaliser.

its core sphere but at the same time President Putin was very realistic in his approach and strived to build coherence and realised that a peaceful and rule-based Eurasia was the solution. This was probably one of the most honest and open-minded proposal that a world leader has put forward in the whole of the 20th century. He always accompanied his words with deeds. In a very revealing interview with the BBC’s David Frost, President Putin had the follow vision of things:

When Putin became the President of the Russian Federation in 2000, he saw the need to reinforce the Slavo-Tatar civilisation. Being one of the biggest realists of our times, in the literary sense of the word, he saw that Eastern Europe and the Balkans had been virtually disconnected from the civilizational orbit of Russia and were progressively being aligned economically to Germany and in a wider sense to the orbit of the European Union and NATO. Given the negative Soviet experience of the cold-war period and the evident economic weakness of the Russian Federation that followed, it was almost impossible for President Putin to imagine a positive and peaceful reunification of the Slavic section with that of the Tatar. On top of this, for the Tatar section, there were two traditional contenders – Turkey and China. In the late 19th century a great deal of ink was spilt on the Anglo-Russian competition in Central Asia. But this was only temporary because the real contenders, Turkey and China, were both temporarily undergoing structural turmoil. After almost one hundred years of absence, these regionally rooted players are back and increasingly flexing their muscles. Put it simply, the President of the Russian Federation had three serious and ambitious contenders on his doorstep, all waiting to dig deep into Russia’s sphere of influence: Turkey, EUNATO and China. President Putin’s reply to these threats of erosion of influence was both domestic and global in nature. On the domestic front he tried to stabilise the economy

In a wide contrast, the West grossly miscalculated, it thought Russia’s soft and selective approach as a sign of weakness. The West, especially the European-NATO twin construction, adopted new policy instruments like the Eastern Neighbourhood policy which structurally meant a territorial expansion of the West and its influence. Similar policy structures were adopted for countries sitting on the southern and eastern rim of the Mediterranean. None of these envisaged a role for Russia and it was not even consulted. What was worse, at the height of the subprime crisis of 20092010, which hit Russia exceptionally hard, the West was airing the possibility of including the Ukraine and Georgia into NATO. A move that sent alarm bells ringing in the power corridors of Moscow, where this was considered as a gross violation of confidence. Russia swallowed its anger and went as far as proposing

me to visualise NATO as an enemy. I think even posing the question this way will not do any good to Russia or the world. The very question is capable of causing damage. Russia strives for equitable and candid relations with its partners. The main problem here lies in attempts to discard previously agreed common instruments – mainly in resolving issues of international security. We are open to equitable co-operation, to partnership. We believe we can talk about more profound integration with NATO but only if Russia is regarded an equal partner. You are aware we have been constantly voicing our opposition to NATO's eastward expansion.

So it was that Russia decided to take back control of

“The art of Tango is about creating order out of chaos, it is about coordinating individuality and coexistence, about movement and balance.” The BBC’s David Frost’s interview with Vladimir Putin: DAVID FROST: Tell me about your views on NATO if you would. Do you see NATO as a potential partner, or a rival or an enemy? PUTIN: Russia is part of the European culture. And I cannot imagine my own country in isolation from Europe and what we often call the civilised world. So it is hard for

DAVID FROST: Is it possible Russia could join NATO? PUTIN: I don't see why not. I would not rule out such a possibility - but I repeat - if and when Russia's views are taken into account as those of an equal partner. I want to stress this again and again. The above extract of the interview shows several things about the situation he was confronted with and his solution to the realities on the ground – Russia alone could no longer operate the Northern System. Ideally, he thought, no other power should dominate the system, it was preferable to establish a structure where by a rule-based system would be operated to avoid the risk of conflict associated with structural adjustments. Russia always had to balance its two halves, the Slavic half and the Tatar half. President Putin felt, after assessing economic and cultural affinities, that it was his priority to start the process on his western neighbourhood and progressively spread it to the east, including Japan. If he had started the process in the East the Western countries would have accused him of building an anti-West alliance. And given the fact there was a wide consensus and genuine friendship between him and President Chirac and Chancellor Schroder, President Putin thought it appropriate to complete the integration with West before taking the process to an ever powerful China in the east. With the initiation of the Shanghai Cooperation Organisation and much later the pre-negotiation on the creation of the BRICS organisation/forum, President Putin seemed, on parallel, to prepare the second part of the plan for a peaceful Eurasian transition. But the process was disrupted by an Anglo-American diabolic campaign against Russia and President Putin in

Tango or Tangle: let us leave Southernization to India

particular for obvious reasons – a continental consolidation that involves Russia was deemed dangerous to their interests, because it would seriously dent one of the main pillars of the Western strength – confusion, chaos and disorientation in Eurasia. As a result successful attempts were made to create chaos on the perimeter of the Russian Federation in Eastern Europe and Central Asia. This led to a very disappointed Russia to change gear and speed up the second section of the Eurasian strategy, a reaction to the realisation that friendship with the West had become a minefield of false promises, deceptions and imminent security threat. Between

the USA but also, Japan, Taiwan and Vietnam to take care of. It was in need of a stable and accommodating North System in its backyard. Russia could be of immeasurable help in more than one way to China in its quest for global recognition and acceptance. The first one would be a Slavo-Tatar civilizational grammar that China does not understand but is very much in need of, a difference between a closed and open systems. China talks of Roads and Belts criss-crossing the globe and of free trade but none can deny that China itself is a very closed and insulated system that is activated or closed at want. If every country on earth would be as closed and selective as China is, all would grind to a halt. The Northern System under

2010 and 2015 Russia built a solid partnership with China who was only longing and willing for such a vital geopolitical asset. It too was in need of a peaceful and pacified front because developments in its Pacific rim were not all to its advantage, it was not only

Russia’s influence is an open system, despite the negative media coverage and political statements to this effect in the West. Russia and the Northern System could bridge that towards the Turkic domain and the Slavic civilizational sphere. The danger is that China

The main geopolitical regions of the Eurasian super-continent according to the Russian geopolitical strategies

“Tango in short is about occupying space and territory without stepping on a partner’s feet and moving cooperation to a higher level.” might stifle this flexibility and openness by wanting to turn everything to its advantage. As President Putin laid out in his interview with the BBC’s David Frost: “…if and when Russia's views are taken into account as those of an equal partner. I want to stress this again and again.” This means that Putin would want to maintain equality in relations with NATO backed Western countries but also with China. China will fail in its ambitions if it misinterprets the Russian civilizational calculus as the West did. Due to the tragedy brought upon Russia by the Trotskyists and Bolsheviks, many get the false impression that Russia and the Northern System are a closed system. The reality is quite different, as Marlene Laruelle rightly points out in her (chapter) Russia as an antiliberal European civilisation: “Moreover, Putin has continued his strong advocacy for a Eurasian Union with free movement of member-state citizens (and therefore of labour migrants), despite clear expressions of xenophobia in the Russian population.” What is more interesting in Marlene Laruelle’s proposition is that there exists what she calls “Russia’s triple civilizational grammar: Europe, the West, and the rest.” Measured in terms of western concepts and terminology Russian identity is deemed fluid, as Laruelle explains: “In the Russian view, there is a triple choice of identity: being a European country that follows the Western path of development; being a European country that follows a non-Western path of development; or being a non-European country. Defining Russia as belonging to a ‘civilisation’ is always made in relation to Europe as the yardstick, never to Asia.” Affinity to Asia and Eurasianism do not come naturally to the Russian elite but as the European Union and NATO encroach into the Slavic part of the Russian

sphere and demands exclusivity, the Russian elite was faced with a predominantly Asian Identity. Unwilling to accept any partial expression of this identity, President Putin is in the process of making the Northern System increasing open by calling it the Eurasian Union. Rather than display the exuberance of Western type of nationalism, President Putin has returned to what was always at the heart of Russia – Patriotism. By definition patriotism has no borders and can never be confused with the heresy of a xenophobic nationalism. This could make Chinese penetration into Central Asia and a step from there into Europe much easier, anti-Chinese sentiment will not be on the Russian agenda. On the other hand, if China were to collude with the West to maintain the current dysfunctional system or enhance its ways by using Western “choreography” of world resources extraction, Russia will not hesitate to reassert its civilizational pre-eminence over much of Eurasia, whatever its economic state might be and whatever it might cost, as it has shown many times in the past. China should not forget, however attractive places like Britain might be for her, that structurally it cannot build a solid partnership with these countries. British foreign policy was always riddled with duplicity and backpeddling. An European diplomat said the following to the Independent Newspaper: ‘There is also a degree of scepticism about the British Foreign Secretary’s pronouncements. The ambassador of one West European state said: “Just one example: this is a man who led a Brexit campaign which claimed, falsely, that 100 million Turks can come to Britain if Britain stays in the EU. Then after Brexit he went to Turkey and said that Britain will do its best to ensure that Turkey joins the EU.’ Boris Johnson, in all honesty, is not doing anything different from most of his predecessors. What China forgets is that civilisation came late to the West compared India and China. And at various periods of its history, the West went through points of no return, as it looked death and horror in the throat. Same bouts of death and villainy can return, and it would be inappropriate to underestimate the civilizational risks when one is dealing with the West. It would be wise not to forget the fact that the West purchased eminence and respectability through pillage and organised banditry right up to the end of the 19th, and China, along with India was one of the biggest victim of it. The system of international order is fortuitous to the West because it was meant to be. Under the cloak of extreme material development,

Tango or Tangle: let us leave Southernization to India

the West has put into place a highly intricate and elaborate “system of world’s resource appropriation”. Nothing, in reality, distinguishes this from the confederacy of noble gentlemen that pillaged Rome and burnt it down in the 5th century. The West always tries to reach civilisation but it always slips back into barbarism. As a civilisation with a capital “C” the primary function of a civilisation is about building bridges between different cultures and communities. Deception and pillage of one form or the other cannot be equated to civilisation. China should invest more into building the Northern System with more open focus and less distraction in the outlay of its foreign policy, in this way it would strengthen the civilisational linkages inside the Northern System. For example one such distraction was China’s foray into the Southern System. The Belt and Road project for many looked harmless on the drawing table. But as it comes to the ground there is a sharp contrast between the promised land of hope and friendship, and the cruelty of a realisation that it was a oneway strategy, benefiting China only. Not long ago the South China Morning Post ran a detailed article of how it turned out to be a nightmare for Pakistan, one of the first countries on whom the ‘One Belt, One Road’ was administered: “The similarities are growing more apparent by the day. In Pakistan, for example, politicians are increasingly critical of the exploitative nature of the so-called China-Pakistan Economic Corridor, which obliges Islamabad to borrow heavily from China to fund Chinese state companies to buy Chinese materials to build infrastructure that mostly benefits China, while loading Pakistan with debts that threaten to crush local economic activity.” Those of who pay close attention to how things work in Pakistan know how all this will end up as the South China Morning Post reminds us: “Inevitably, if Beijing attempts to pursue projects at a pace and in a number sufficient to make a dent in its excess capacity, it will end up building white elephants, wasting money, and encouraging corruption on a scale never before seen.” As for the cost-benefit analysis, the Asia Times online has this to say: “The US$56 billion China-Pakistan Economic Corridor (CPEC) – a part of China’s “One Belt, One Road” vision – has yet to translate into the game-changer envisioned by its sponsors. Worse than that, the unparalleled tax breaks and mounting security costs involved have already saddled Islamabad’s exchequer with a hole in its finances of more than US$2.5 billion.” The situation in Pakistan is turning

ugly by the day and the end of this downward spiral is not yet in sight. Within the last few months Pakistan, Nepal and Myanmar have all openly rejected further Chinese OBOR projects as the Voice of America reported: “In the short space of just a few weeks, Pakistan, Nepal and Myanmar have cancelled or sidelined three major hydroelectricity projects planned by Chinese companies. The rejection of the three projects, worth nearly $20 billion, comes as a serious jolt to China’s ambitious trade-linking project, the Belt and Road Initiative (BRI).” All these statistics pale as one reads the statement made by Muzammil Hussain, chairman of Water and Power Development Authority (Wapda) in Pakistan told the Public Accounts Committee (PAC): “Chinese conditions for financing the Diamer-Bhasha Dam were not doable and against our interests.” This is a big blow to China’s prestige and credibility as a foreign investor in a country that is supposedly the first and best friend of China the world over. The problems do not curtail themselves to the economics of the OBOR project. Indeed, due to the level of corruption directly or indirectly provoked by this project, political communities here and there are sucked into the same turbulence. Not so long ago the Australian Prime Minister accused China of ‘covert’ operations on the Australian soil: “Media reports have suggested that the Chinese Communist Party has been working to covertly interfere with our media, our universities and even the decisions of elected representatives right here in this building (Parliament). We take these reports very seriously.” There is a sense of exasperation from politicians to people, from Australia to Africa, that wanting to impose its will on the world in a very short period, China is forgetting the key element: the interest of the local people. Of course China is not alone in facing such criticism or situations but given the ambition of the OBOR project and China’s wish to stride the globe like a colossus, a failure in implementation could have long lasting effects on the geostrategic position of Asia, and its ability to regaining its strength. If for some reason China blunts its appetite for international venture, as it did several times in its history, then consolidation of order within and the emergence of Asia as the leading continent in global politics will be postponed for several decades. To avoid such an eventuality, China should revert to the teachings of its civilisation and not espouse Western instruments of domination with “Chinese characteristics”. The epitomy of Chinese civilisation was under the Ming Dynasty and the pil-

lars of its success were ‘openness’ and ‘harmony’ with other Asian powers. It did not build and operate an Asian order (at that time the world order) by itself. It engaged where it was opportune and let other do the same when the situation asked for. Today the time has come for Asian powers, including Russia, to cooperate. In short, the lessons from history are clear, help Russia re-establish its pre-eminence in the Northern System and let India assert its pre-eminence over the Southern System and Southernization, otherwise it will be ‘barbarians at the gates’ again. India and the Southern System (Southernisation) The inefficiency of the current system is in great measure to do with inequity of the flow of economic resources. The flows are controlled so that resources appropriated can be shared by only designated countries or primary actors in the system. The liberal order was never liberal and never an order. It was a highway system of resources control and selective application of liberality. Creating a few liberal zones here and there does not create a world system but a system of disequilibrium and impending disorder, if not a permanent chaos. Thus it is that the Western system would

never bring the world order to an equilibrium. Today China wants to build physical highways across continents where it can control the flows and selectively apply liberalism where it deems appropriate and communism where it deems necessary. As soon as movement becomes selective, world order becomes partial or even ceases to exist. China is building super structures for its goods to reach every corner of the planet. The question is whether China will be willing to use these super structures to take in those people who have lost their jobs because of its economic intrusion? It is no secret that China will literally need tens of millions people because of the Chinese demographic deficit. Last autumn the China Daily online reported: “The working-age population of between 15 to 59 years old peaked at 925 million in 2011 and has fallen every year since then, with 3.45 million fall in 2012, 2.44 million in 2013, 3.71 million in 2014 and 4.87 million drop in 2015.” And this number will keep rising. To counter balance this trend, has China allowed more immigrants? According to the International Organisation for Migration (a United Nations agency) China allows only several thousands and most of them North Korean or ethnic Chinese from South East Asia. Isn’t it a historical fact that at regular intervals millions emigrated from China to other regions of the world,

Tango or Tangle: let us leave Southernization to India

escaping one hardship or the other? Those systems that opened their arms to impoverished Chinese migrants were open systems. Of course there were cultural differences but coexistence was possible. Why does China worry so much about cultural integration as a nation-state does? Can a real civilisation be fearful of mothering diverse cultures and customs? The CPEC is up and running in Pakistan, will China accept millions of young Pakistanis to go to China to man its factories? Or does the friendship with the Pakistani elite not descend down and reach out to the people of Pakistan? There is a legitimate fear in many corners of the globe that China’s super structures will only enhance the world resource appropriation in China’s favour. Leaving others to pick up the bill for the devastation caused as a consequence, both economic and environmental. On top of this there is a rightful suspicion that China is encouraging closed systems in client countries, wanting to preserve its economic primacy in these countries. The fear is that this attitude will cajole local regimes into more oppressive and arbitrary methods of governance. The new Chinese order boils down to closed systems, open only to itself and governed by oppressive regimes ready to obey its commands in the likes of Sudan and Zimbabwe, to mention a couple. If this were true it would be worse than the dysfunctional Western order. The world, especially the younger generation are tired of the current state of affairs and are desperately in search of a fairer and freer system of coexistence. A system that existed and still exists in bits and pieces; a bit rusty and neglected but the core remains strong to this day. The first and the most efficient world system was created and operated by South Asia, especially by the Southern Peninsula. The system probably started taking shape before 500 CE. The socio-economic system along with the political system was largely influenced by then reigning religion of South Asia – Shaivism. It was a religion that did not believe in forceful and collectivist religious masses, rather it believed in individual attainment of spiritual salvation, a community of thinkers that were ready to use peaceful dialogue than use a sword to attain the all-encompassing order. Conflict at all levels was instantly dissipated, unlike the feudal system that plagued the West for centuries. In the same manner no overbearing political ‘leviathan’ was needed. The whole system was organised into small independent and interconnected

communities and yet self-contained. “Economic conditions of rural prosperity, urban growth, political consolidation, and expanding trade networks contributed to the institutional organization of the Buddhist sangha (community/assembly), which emerged in an environment of material prosperity rather than hardship.” The system was so harmonised and peaceful that Emperor Ashoka planted some 80000 pillars and Stupas enunciating basic laws of coexistence and self-government; precipitately abdicating his throne and dissolving all central (hegemonic) authority. Further analysis of the edicts of Ashoka show us that the valiant Emperor was only, with his actions, trying to re-establish order that was disturbed by the influx

that are, to a strong degree, permanent or continuous with one another. Spatial-territorially, a system covers a specific geographical area, but to specify set regional and territorial boundaries in absolute terms in the conceptualization of a world political system will obscure the reality of the political realm. The regional boundaries tend to be flexible, with political entities at the periphery at times being incorporated in the system, and at times being absent from the system. System’s classification, then, does not specifically rely on establishing absolute regional boundaries, but rather considering the political contacts, interactions, and power configurations of systemwide hegemons that function within the region that

of organised bands or groups from Mesopotamian confines – a new breed of Brahmins. As one expert in Ashoka’s edicts puts it “… these new special administrators were empowered and directed to readjust the innumerable group dhammas to the needs of society as a whole in order to reduce the state’s drastic use of force and punishment in the Arthasastra’s system of administration…” Brahmins had taken to the ‘business’ of government in a tyrannical and parasitical manner, and their power had to be quartered. The State had too much power over the individual and was the biggest infringement to the good function of the society and the advancement of economic well-being. It was rightly deemed that individual freedoms were the best guarantor of everything, since blind belief was playing into the dark schemes of the Mesopotamian Brahmins. Emperor Ashoka, with the inscription on the pillars, was asking his people to think and not be entrapped to Brahmin charlatanism. Ashoka and Buddhism had managed to re-establish ethical order that a wounded Shaivism could no longer give in the northern parts of South Asia. The auto-regulation of the socio-economic system was re-adorned and tyranny of all kinds kept at a distance.

the given system encompasses.” In essence the post Ashokan period was a dynamic and flexible system of pan-regional integration where mobility was continuous and unhindered. There were no physical boundaries or limits, rather there was a juxta positioning of …“socio-cultural region composed of smaller units of villages, towns, and cities.” This way people, products and prosperity could spread without blocking or creating systemic disturbances. Jason Neelis describes the efficiency of system through its trade routes: “The designations applied to routes used by merchants and religious travellers refer not only to their itineraries, but also to geographical regions with flexible boundaries and polyvalent socio-religious connotations. Encounters, contacts, and exchanges along these overland and maritime routes contributed to changing definitions of insiders and outsiders, demarcating norms of purity and pollution, and contrasting Buddhist and orthodox Brahminical xenologies. Patterns of religious mobility can be retraced by mapping trade networks and surveying commercial nodes.” The centre of all attention therefore was mobility.

From this perspective, South Asia was a fertile soil where the grains of a perfect world society could be sown, where peaceful coexistence was the name of the game. Nerses Kopalyan, of the University of Nevada gives a concise description of what he calls the Indic-system: “A system primarily refers to the political interactions, inter and intra civilizational relations, and competition for system-wide hegemonic status between political units/entities/actors within the region that the given world political system encompasses. This fundamentally presupposes a group of political units/entities/actors having relations

The responsibility of the state therefore was not the protection of the borders as in the modern NationState, rather it was the maintenance of the arteries of mobility. As Neelis describes: “The epigraphic evidence of Aśoka’s inscriptions clearly indicates that roads were maintained in order to facilitate longdistance travel, both by his administrative agents and armies, but also probably by merchants and Buddhist monks who circulated between urban centers and religious sites associated with the Buddha’s life and significant early monasteries.” The maintenance did not involve only the physical condition of the trade routes but also the ethical upholding of principles of fairness and the weeding out of corrupt officials or ad

hoc Mesopotamian Brahmins that constantly filtered through the system. From the 7th century the system came under attack and occupation in North India by the Arab invaders but the Peninsula, which constituted the heart of the system, was almost untouched until the 16th century when European fortune seekers started to enter the Southern System. Even then everything worked unharmed because everyone saw the salience of the system. The Portuguese, when they conquered a few, strategically placed Indian Ocean islands thought that they were conquering the Indian System and accordingly called their new conquest ‘Estado da India’. As Leonard Y. Andaya says: “Much has been written of the heyday in the sixteenth century of the Estado da India, or the 'State of India', an all-embracing administrative term for the Portuguese empire east of the Cape of Good Hope.” This further goes to showing that the then unbeatable Portuguese maritime power was into expanding and deepening the structures of the Indic System at another level. They physically controlled a minuscule part of the Indic-System but gloriously believed, boasted abroad and at home, that they controlled the whole system. But what did it mean that they were in control of the system? As Sar Desai explains that anyone could designate himself as a potentate but in reality everyone had to build consensus at several levels: “…an examination of early Portuguese contacts with Muslim potentates in Africa and South and Southeast Asia would bear out a generalization that the Portuguese sought alliances among indigenous rulers, irrespective of their religious persuasion. Thus, Diogo Lopes de Sequeira, who was sent by the Portuguese King to Malacca, was specifically instructed to make the establishment of mutual trust with the native rulers, so as to ensure a profitable and reciprocal trade, the "mainspring of all your action".” None could survive if controls on the whole state apparatus was imposed. As a noted scholar reminds us: …"the state was deeply enmeshed in the local social forces, and that the 'office' itself was quite incapable of serving as an earnest instrument of the imposition of imperial will on local customs and practices". Mobility and common interest were the two guiding principles: “Most contemporary accounts allude to Malacca as the richest city in the world. This may be wrong; but it was undoubtedly the most convenient meeting place for traders from Arabia, Persia, India, Pegu, Java and China. Since the founding of the Kingdom of Malacca in 1403 the Malaccan rulers had

Tangó vagy béklyó: hagyjuk a déliesítést Indiára!1

striven to maintain the cosmopolitan character of Malacca's trade and population.” This goes to show that race, nationalism and any other discrimination for that matter was promptly weeded out, something pertaining to the anti-systemic domain, and therefore avoided at all costs and by everyone. Whoever came into the Indic System was forced to convert to its cultural, economic and socio-political set-up. Whenever this principle was abandoned the system became “unfaithful” to the pretender because it somehow turned him into a predator. “…without actually using the word, the method for surviving in the tropics, or anywhere else, was adaptation to local air, local plants, local customs, and local languages. This is, in fact, what the Portuguese had already been doing, in fits and starts, partially and un-self-consciously both in Asia and in Brazil.” It was probably this insight that made the Portuguese hate all the other European incursions into the Southern System, polluting by prejudices brought from particularistic European background: “In the diplomatic and military sphere, peace was (correctly) seen as essential. In Europe, Pedro refused to join France in an alliance against Holland, while in the Indian Ocean the Estado strove to avoid alienating the various Indian states on its borders.” The system was so well integrated that none could be neglected, neither the foreign trader nor the local producer or intermediary: “The Mughal foreign trade was the product of a larger economic environment and its fortunes were tied to the system of production and exchange in the rural hinterlands, local markets and urban entrepots.” The same system of mosaic integration extended from the hinterlands of the southern peninsula of South Asia to the shores of Africa and to the straits of Malacca and beyond: “The Bania high-seas merchants of Surat even maintained an extensive network of agents and correspondents (mostly again Banias) all over the Persian Gulf and the Red Sea region who lived in the region for extended periods of time. But perhaps an even more critical role the Bania merchants played in Indian maritime trade was as facilitators per forming the role of being suppliers of export goods to ship owners and other merchants actively engaged in coastal and overseas trade and generally acting as their agents and brokers.” The system was open and with complex layers of checks and balances, and a well interwoven fabric of socio-economic interests. In this way, it still

represents the ideal model for world integration and order. China should take note and understand the essence of this system. Conclusion China has taken the wrong Road. With the OBOR and its affiliate programs China is paving the way for a domination of the system in the same manner as the United States did after the Second World War, namely through the billions of debt that other countries had contracted with it. It was a huge leverage to twist arms and impose the United Nations and a US dollar denominated system. China, with the OBOR project, is proposing to use its surplus trillions to do exactly the same. When we read the strategy between the lines and look deeper into the experience of Sri Lanka and Pakistan with the OBOR project, we realise that the primary objective of the whole process is the creation of “indebtedness” at many levels of the term. And then follow this up to appropriate sovereignty of a local country in exchange for the debt. One hundred years lease on ports and facilities does not only mean the control of infrastructures but the future financial, and thus the economic and the political process in a given country. In this sense China is not original and is not likely to create a new world order that the population of the world is desperately looking for, China is strengthening the Western system of domination with a made in China tag – New World Order with Chinese Characteristics, meaning that there will be even less transparency than before. Creating order means confronting the chaotic nature of the world, not circumventing it. With all its deficiencies and short comings, India has deeper knowledge of how to operate in a system in a chaotic environment. It is true that even India is moving away from the civilizational model of order but there is still time for reorientation. Both India and China have to recognise that they are civilisations and not nation-states. Civilisations by nature are mothers to nations, nurtured under the guiding principle of openness. For this reason, China should not rush, it should help to consolidate the Northern and Southern systems before further world integration. Build roads by all means but do not forget to add brides; retract from destroying the green fields around otherwise you risk making everything barren. China was a great civilisation and no one can stop it becoming one again, for the benefit of the whole world.

China's Role in International Order

China's Role in International Order Author: Kong Tianping

In the last three decades, we have witnessed historic events of milestone that had tremendous impacts on the evolution of world order. The end of communism in Eastern Europe, fall of Berlin War, Unification of Germany and disintegration of the Soviet Union marked the collapse of the bi-polar order and the end of the Cold War. NATO’s military intervention in former Yugoslavia and NATO enlargement in Central and Eastern Europe strengthened America’s predominance in Europe. The signing of Maastricht Treaty, establishment of the European Union, creation of single European currency and three rounds of EU enlargement made the European Union a big player in international arena.

9/11 attack led America into war in Afghanistan and Iraq. Global financial crisis in 2008 resulted in global economic downturn, eurozone debt crisis had undermined European economy, jeopardized the existence of the euro for a time. As China started to introduce economic reform and openness in 1978, market-oriented reform has born fruits, China has maintained highest economic growth rate in the world, become the one of the global economic powerhouses. The tectonic change is underway in the world, the global order is evolving and remaking. How to characterize current world order is a great intellectual challenge in academic community. Different scholars have different opinions over the issue. Some scholars think that there is world disorder rather than world order, while some observers still believe that we live in a unipolar world, some scholars assume that we live in a multi-polar world, Simon Tisdall states what has emerged is “a tri-polar world, dominated by the US, a resurgent Russia, and China.” Some scholars prefer to call the current world order as the post-Cold War world order, there is no doubt that the Cold War ended in Europe in early 1990s, however, in Asia, especially in the Korean Peninsula, the Cold War is far from

Kong Tianping over, the DPRK nuclear crisis has been the thorny issue that affects the security of Northeast Asia. There are various descriptions of the world order, for example, G2 (naming America and China), G3 (naming America, China and Europe or Russia) while Ian Bremmer illustrated the world after 2008 financial crisis with G-Zero, the world without global leadership, economist Joseph Stiglitz had similar view, he deemed that we have moved from a world dominated by two superpowers to one dominated by one, and now to a leaderless, multipolar world, the new world of G-0. One China’s former senior diplomat stated that the world order led by the United States has begun to change, with

the 2008 global financial crisis possibly being the turning point and the year of 2017 signalling a new beginning.

for challenging American power, influence, and interests. It is expected that America still committed to maintain global hegemony.

Henry Kissinger points out that no truly global “world order” has ever existed, his insight is based on different concepts of world order in different historical periods by different civilizations, for example Europe, China and Islam. He assumes that the mystery to be overcome is how divergent historical experiences and values can be shaped into a common order. In today’s world, all countries live in some kind of world order, whether a country likes or not like it. The world order is changing over time,

The European Union with 28 member states as a super-national organisation is viewed as a civilian or normative power. It has strong economic power, but limited military power. It emphasizes soft power over hard power. It likes multilateralism rather than unilateralism. The EU as largest trade bloc in the world has influence over global economy, Eurozone as monetary union with 19 member states has global ramifications. The EU’s foreign and security policy is at initial stage, de-

distribution of power capabilities in international system and interaction of great powers can lead to the incremental or radical change of the world order.

fence cooperation is the topic for discussion. The EU takes a leading role in globally fighting climate change. After the big bang enlargement in 2004, the EU has experienced multiple crises, from constitutional crisis to Euro debt crisis, from Ukraine crisis to security crisis, from migration crisis to Brexit crisis. The dispute between EU and Poland and Hungary over democracy, rule of law and the way of EU functioning exposed the rift within the EU. These crises undermine the EU as a credible actor in international arena. When the EU is confronted with the uncertainty of Trump presidency to commitment to international order, the EU finds out chance to rethink about its role in international system. In spite of different perceptions about the world order and occasional frictions between Europe and America, there are more common interests than differences in the defence of the world order dominated by the West. It is not rational to blow out of proportion of the differences between the EU and America.

The world order is moving from uni-polarity towards multi-polarity. The main players of world politics are the United States, China, the European Union and Russia. Although America’s relative weight has declined, it is still the sole superpower, it has strong alliance both in Europe and in Asia. It has well-functioning market economy and largest economy in the world, it accounts for 24.3% of the world GDP in 2015. It has dynamic financial system, American dollar remains the largest international reserve currency. It has strongest military strength and largest military expenditure, its military spending in 2016 was ranked first in the world with $611 billion, which is 36 percent of the global total and over three times the amount spent by second-placed China. America takes the lead in cutting-edge technology and innovation, it was ranked as second in Global Competitiveness Report 2017-2018. The Trump administration pursued policy of “America First” in world affairs, pulled out Trans-Pacific Partnership, renegotiated NAFTA, withdrew from Paris climate agreement, pressured NATO allies to increase military spending, these actions surprised some observers who considered President Trump upended the world order. These actions maybe perceived as an approach of reculer pour mieux sauter. On the other hand, the Trump administration took a hawkish stance towards China and Russia, described China and Russia as “rivals” in its new national security strategy, castigated them

Russia remains a major player in Eurasian continent as successor state of the Soviet Union and Tsarist Russia. Because of the disintegration of the Soviet Union, Russia ceased to be an empire. Russia has not recovered from the loss of empire as President Putin refereed the breakup of the Soviet Union as the greatest geopolitical tragedy in 20 th century. After Putin came into power, Russia has started to pursue confrontational approach towards the West, oppose NATO enlargement, restore its influence in the space of former Soviet Union, reclaimed great power status in the world. Russia initiated Eurasian Union to bind the former Soviet republics together to counteract the influence of the EU. Russia regards the former Soviet space as

China's Role in International Order

order. Sustainable economic growth makes China to increase military spending possible, China has made stride in modernization of armed forces. China has narrowed down its distance in sciences and technology, its ranking in Global Innovation Index moved from 29 th in 2011 to 22 nd in 2017. China has its high-tech companies, for example, Alibaba, Tencent, Huawei, Baidu, etc. China’s development in last four decades has impact on global reconfiguration of power.

its sphere of influence, makes use of every opportunity to retake lost ground. Russia is not hesitant to use of force to defend its interests, one of the example is Russia sized the opportunity of Ukraine political crisis to annex Crimea, make Eastern Ukraine become the zone of frozen conflict. Russia is very critical of the world order dominated by the West, it does not hide its intention to see the end the world order and formation of the post-West world order. The relationship between Russia and the West is not limited in geopolitical rivalry, the accused Russian intervention in election in the United States and other West countries demonstrates the complicacy of the relations. Russia has strong military power, but its economy is heavily depended on export of oil and natural gas. Russia economy suffers as long as the commodities have lower price. Russia economic growth has been sluggish after 2008, stalled structural reform and Western sanction constitute impediments for economic growth. China’s peaceful rise is one of the factors in shifting the global balance of power. Since China introduced market-oriented economic reform in 1978, China has transformed its economic system from centrally planned economy to market economy, achieved remarkable record of economic growth

in the last four decades. Economic reform has contributed to the improvement of people’s wellbeing, lifted more than 800 million people out of poverty. China’s GDP surpassed Japan in 2009, became the second largest economy in the world. Based on the relative faster growth rate than the US, it is matter of time to overtake America to become the largest economy in the world. China plays an important in the global economy, it has been the largest contributor of the world growth after 2008. China’s average annual contribution to the global growth from 2012-2016 reached 30.2%, while America’s contribution was17.8% the contribution of Eurozone and Japan was 5.3% and 3.8% respectively. After accession of WTO in 2001, China’s foreign trade has grown rapidly, China overtook the US to become the largest trading nation in 2012. China’s outward foreign direct investment (OFDI) increased substantially after mid-2000s, OFDI flow grew from $ 20 billion in 2006 to almost 200 billion in 2016, China has become main global source of FDI. At the same time, China’s outbound M&A activity surged in the past decade. China’s companies have strengthened position in world economy, the number of companies listed in Fortune 500 increased from 9 in 2000 to 54 in 2010, it reached 115 in 2017. China’s economic rise has important impact on international

The world order is evolving, fall of the developed West and the rise of developing countries will result in the changes in relative strength. Brexit and Trump’s presidency did surprised the world, but these events do not spell of the end of the so-called liberal order, president Trump’s protectionist conviction and isolationist inclination does hurt the liberal order. The rise of trade protectionism, economic nationalism, populism and ethnic nationalism in the West has led to the West countries not able to cope with political, economic and social challenges effectively. The struggle between Forces for de-globalisation and forces for globalisation is far from over. When the US retreated in global economy, China has become the proponent of open globalisation and free trade. China and other emerging powers still focus on economic development, make use of comparative advantages to develop in order to catch up with

the developed West. The rise of emerging powers and change of relations among great powers will dramatically alter the balance of power and shape the international order. China’s role in international order In the post-Cold War era, China has to adapt to the changing international order, find out its place in international order. In recent years, China’s role in international order has become a hot topic, whether in Munich Security Conference or in Valdai Forum. It is true that China officially rarely use the term “world order”, “international order” (alternatively international system) is widely used in official documents and speeches, as Madam Fu Yin pointed out in her address in Munich Security Conference two years ago. China draws distinction between world order and international order, as the world order always equals to the US-led world order. Madam Fu assumed that the US-led world order rests on three pillars: first, the American value system, which is also accepted as the western values; second, the U.S. military alignment system, which is claimed to be the security foundation for US leadership; third, the international institutions including the UN system. In china’s opinion, the international order is the UN based system including the international institutions and norms. Fu Yin emphasized that China has a strong sense of

China's Role in International Order

“China’s peaceful rise is one of the factors in shifting the global balance of power.”

belonging to this order, as China is one of its founders and is a beneficiary, a contributor, as well as part of its reform efforts. President Xi Jinping explained China’s role in his speech in Seattle in 2015 in this way, “as far as the existing international system is concerned, China has been a participant, builder and contributor. We stand firmly for the international order and system that is based on the purposes and principles of the UN Charter”. He stated “a great number of countries, especially developing countries, want to see a more just and equitable international system, but it doesn't mean they want to unravel the entire system or start all over again. Rather, what they want is to reform and improve the system to keep up with the times. This would serve the common interests of all countries and mankind as a whole”. What China envisions the international order is not fully compatible with the America-dominated world order. China does not fully embrace the USdominated world order. One the one hand, China is a contributor of current international order, on the other hand, China is a reformer of current international order. The collapse of the current international order is not in the interests of China,

therefore, China seeks to defend current international order find out its place. In this sense, Mr. Xi Jinping highlighted in his address in 19 th party congress last year that China will be a staunch upholder of the international order. China’s vision over the world order demonstrates in the conception of building a community with a shared future for mankind. President Xi put forward the idea of building a community with a shared future for mankind, the conception is the continuation of the previous ideas in post-Cold War era, for example, building new political and economic order, pursuing the path of peaceful development and building harmonious world. Mr. Xi Jinping elaborated China’s vision in 19 th Congress of CPC, he stated that “We call on the people of all countries to work together to build a community with a shared future for mankind, to build an open, inclusive, clean, and beautiful world that enjoys lasting peace, universal security, and common prosperity”. To large extent, the ruling party’s evaluation of the international situation determines the orientation of foreign policies. Mr. Xi Jinping deemed “The world is undergoing major developments, transformation, and adjustment,

but peace and development remain the call of our day. The trends of global multi-polarity, economic globalisation, IT application, and cultural diversity are surging forward; changes in the global governance system and the international order are speeding up; countries are becoming increasingly interconnected and interdependent; relative international forces are becoming more balanced; and peace and development remain irreversible trends”. Based on the vision of building community of shared future for humankind and judgement about international situation, Mr. Xi Jinping sent the message to the world what kind of role China will play in international order. The message is quite clear, China will be an architect of world peace, China will be a stalwart of global development, China will be a staunch upholder of the international order. As for the way of diplomacy, China seeks communication rather than confrontation, China seeks partnership rather than alliance. China pursues independent and peaceful foreign policies, defends its legitimate interests, dedicates to construct stable and balanced framework for relations with great powers. After 18 th National Congress of CPC, China has introduced proactive foreign policy away from the policy of "keeping a low profile and never taking the lead" set by Deng Xiaoping in the early 1990s. China’s emergence as the economic powerhouse is a shock for global economic order based on Bretton Woods system, the idea of new Bretton Woods system never has the chance to be tried. China realized that the current global economic order does not fit well for itself, the transition of global economic order should accommodate its needs. China’s notion of global governance is based on the principle of achieving shared growth through discussion and collaboration in engaging in global governance. China pledged to play its part in global governance, take an active part in reforming and developing the global governance

system, and keep contributing Chinese wisdom and strength to global governance. One of the most important policy initiatives is the One Belt and One Road Initiative (Belt and Road Initiative, in short, BRI). This is regarded as the public goods that China provides for the world. The BRI is a comprehensive initiative, including political communication, policy coordination, infrastructure building, connectivity, trade and investment, financial integration and people-to-people exchange. The BRI is a geoeconomic conception rather than a geo-political strategy. The BRI is not based on geopolitical rivalry, rather than it is based on economic cooperation, mutual trust and mutual benefit. If we examine the official discourse and narrative, geopolitics is beyond consideration. As one senior decision-maker for foreign policy pointed out in Boao Forum in 2014, “Chinese leaders have made it clear that in implementing the initiatives, China will uphold the spirit of ‘amity, sincerity, mutual benefit and inclusiveness’, which guide China's diplomacy regarding its neighbours, and China will not interfere in other countries' internal affairs or seek dominance over regional affairs or sphere of influence. The Belt and Road initiative is for open cooperation, with economic and cultural cooperation being the focus. They are not aimed at creating exclusive blocks or compromising existing multilateral mechanisms” The BRI is not intended to undermine and destabilize current global economic order. China as one of the beneficiaries of the globalisation, strongly supports the globalisation process, opposes different kinds of protectionism. President Xi’s speech at World Economic Forum last year showed that China is a strong supporter of free trade and economic globalisation. In essence, the BRI is the continuation of opening policy. The BRI may be regarded as China’s regional integration initiative with wide-ranging countries. The BRI is a loose, flexible arrangement, it contrasts sharply with the usually treaty-based or rule-based integration model. The AIIB and the Silk Road Fund are complementary to the global and regional multilateral development bank rather than substitutes. The new financial institutions established by China, for example, AIIB and Silk Road Fund operate under current global economic and financial order. The BRI is one of the most important initiative in the last 3 decades, if it is implemented adequately, it will shape the global economic order.

China’s role in international system is constrained by its relations with major players in the world, especially with the United States. The evolution of the relations between an emerging power and a hegemonic power in international politics is widely discussed, when an emerging power attempts to supplant a hegemonic power, the conflict follows, this scenario is called as “Thucydides Trap.” When president Xi Jinping came into power, how to deal with the relations with the United States has been a main challenge. President Xi proposed to build a new model of a major power relationship with the United States that features non-conflict, non-confrontation, mutual respect and win-win cooperation. When president Xi visited the United States in 2015, he stated there is no such thing as the so-called Thucydides trap in the world, but should major countries time and again make the mistakes of strategic miscalculation, they might create such traps for themselves. China’s former ambassador to France Wu Jianmin pointed out that China and the United States would not fall into “Thucydides Trap”. The trade dispute and geopolitical rivalry between China and the US under Trump administration could pose threats to the global stability, newly unveiled American national security strategy identified China as rival, accused China of attempting to erode American security and prosperity. How to prudently manage the differences and conflicts in the field of economy and security will be the test for decision-makers in Beijing and Washington. Except for the United States, major European countries expressed worry about China’s influence. German outgoing foreign minister Sigmar Gabriel accused China – alongside Russia - of “constantly trying to test and undermine the unity of the European Union”, seeking to influence individual states with “sticks and carrots” in Munich Security Conference. He slammed China’s Belt and Road Initiative, claiming that China has been using a huge amount of funds to promote a value system different from the West’s. German Chancellor Merkel recently warned European Union member states that participate in Chinese government-led infrastructure initiatives should

be aware of the risk of undermining the bloc’s common foreign policy stance toward China. European powers’ hostile attitude towards China has worsen the atmosphere between China and Europe. The rising tide of “China threat” rhetoric in the West has to be taken seriously. Building sound and stable relationship with the EU, major European powers and Russia could contribute to the smoothly transition of the international order. As a rising power, China has to learn how to live with established powers, how to protect the interests of emerging powers. China has not finished the tasks of reforms, China has no intention to export its development model and ideology. When we formulate foreign policies, we should always keep in mind that China is still in the primary stage of socialism, China is still the largest developing country. Global ambition has to be matched by national strength, China will bear international responsibility within its capacity. The role of China in international system is finally determined by domestic development, the great rejuvenation of the Chinese nation is still an unfinished enterprise. Madam Fu’s interesting comment on global order represents reflection on international order by some Chinese decision-makers. “we may go beyond the debate and create a new overarching concept, like ‘a global order.’ It should accommodate as much as possible global governance, world power coordination, regional cooperation, North-South dialogue, etc”. She thought a global order should provide a common roof for all. This common roof of global order should at least have three major institutional capabilities: to guarantee world peace; to ensure global sustainable development; and to ensure that all solutions to problems be found through cooperation. It should be constructed around three pillars: major country coordination, full role for multilateral frameworks and habits and norms of cooperation. In the multi-polar world, conflict among different visions of global order is inevitable, only through interaction among different visions of global order, new global order can be shaped.

THE EVOLUTION OF CHINESE GEOPOLITICS Author: Levente Horváth

While there is a growing emphasis on political-geographic and geopolitical thinking in Europe and America, the People’s Republic of China has launched the greatest geopolitical and geoeconomic programme of the 21 st century – this is the “One Belt, One Road“ project. By now, China has become one of the leading geopolitical countries of the world. We could mostly hear of or read about great European and American thinkers, but we have little information on the evolution of Chinese geopolitics, mainly because of lack of knowledge of the Chinese language. What happened in Asia, and, more particularly, in China during the evolvement and development of the Western way of geopolitical thinking? What was the attitude towards political-geographic and geopolitical thinking in China boasting a history of 5,000 years, one can ask. In my paper, in which I am presenting the evolution of Chinese geopolitics from ancient Chinese strategies and advisors and scholars of imperial dynasties to Chinese leaders of the modern age and present-day politicians, I am attempting to remedy these deficiencies in scientific policy, partly by processing reference literature written in Chinese. Furthermore, I also compare the Western and the Chinese ways of geopolitical thinking in my paper, to give a clearer picture of the Chinese geopolitical science and have a better understanding of the way of geopolitical thinking and actions of the government of the People’s Republic of China. THE WESTERN INTERPRETATION OF GEOPOLITICS The study of spatial and geographical characteristics of international relations, the relationships between politics, geography, the natural environment, demography and society organised by the state came to the forefront of scientific interest at the end of the 19th century. New branches of science were born: geopolitics and political geography, and these notions focussed on linking the approaches, methodological traditions and

research fields (Szilágyi I. 2013). The word ‘geopolitics’ was coined by Swedish professor of political science, Johann Rudolf Kjellén (1868-1922), who was the first to use this term in an article published in Ymer, a Swedish journal, in 1899. Political-geographic and geopolitical thinking, however, has deep historical roots. Even classical ancient Greek philosophers studied the relations between people, city states and the geographical environment.

and above-mentioned Swedish Johann Rudolf Kjellén (1864-1922) were the creators of modern political geography and geopolitics in the late 19th and early 20th century. Kjellén defined the notion of geopolitics as follows: ‘Geopolitics is the theory of the state as a geographical organisation and a spatial phenomenon; that is, it examines how the state as space (country), area, domination, or being significantly different from it, as empire, works. As a political science, it always focusses on the integrity of the state. Geopolitics is the science of the spatial manifestation of the state as a geographical organism’ (Szilágyi, 2013: 15). According to Ratzel’s theory, ‘geopolitics is the science of geographical conditions and characteristics, especially of the effects that large spaces exert on the life of states; examining the dependency of individuals and human societies on their living space; he claims that laws of geography are determining. It contributes to the necessity of defining political behaviour and governance in a geographical sense’ (Szilágyi, 2013:15) Early representatives of geo-

politics examined the effects of geographical location, topography and climate on the socio-economic development, international relations and world political weight of states. Subsequently, political-geographic and geopolitical thinking was changing more or less continuously, and was utilised in the decision-making processes of countries. It mainly had its golden age during World War I and II, but it has become a major instrument of diplomacy of the 21st century as well. In North America, the adoption of European theories began in the 19th century, and geographical political and geopolitical thinking started to gain strength. Initially, American geographer Ellen Churchill Semple (18631932), a student of Ratzel, promoted the way of thinking combining politics and geographical science. In her works, Semple endorsed Ratzel’s geographical determinism and approach to history. Admiral Alfred Thayer Mahan (1840-1914) also was an important figure of

The analysis and the geographical deterministic definition of interactions between processes taking place in political space originate in Politics by Aristotle (383322 BC). He defined ideal city states also from a geographical point of view: they must be connected to the mainland, the sea and the whole region. This first big phase of political geography and geopolitics was characterised by environmental determinism. Throughout history, there were several great philosophers after Aristotle who were engaged in the issues of political geography, such as Strabo (64 BC- AD24) from Greece, Arab historian Ibn Khaldún (1331-1406), Italian politician and thinker Machiavelli (1469-1527), French philosopher Montesquieu (1689-1755), and German philosopher Kant (1724-1804). Political geography and geopolitical thinking was continuously being formed and developing in Europe throughout the centuries, and eventually it made its debut in the world of academic science, political thinking and political decision-making in the late 19th and early 20th century. German Friedrich Ratzel (1844-1904)

THE EVOLUTION OF CHINESE GEOPOLITICS

a 18,000-km-long shore, while it is the Himalayas and the Tibetan Plateau in the West and the Gobi Desert in the North that protect the country from the outside world. – throughout history, China has always been more developed economically and politically than its neighbouring countries, consequently, the idea that China is the centre of the world has penetrated the Chinese public mindset. This thought is also reflected by the Chinese name for the country: Middle Kingdom.

American political geography and geopolitics, who examined the effects exerted on history by sea powers, winning the title of “geopolitical theorist of naval power”; furthermore, he is regarded as the founder of geostrategy. It can be clearly seen that the roots of political geography and geopolitics can be detected in ancient Greek times, and several European philosophers dealt with the relationship between politics and geography throughout history. Were there similar theories in China – which used to be far from Europe, but in today’s globalised, “shrunk” world, it is “in the near”– during this time, one can ask. Numerous world-renowned philosophers, strategists and wise men, also researched by the West, lived and worked in China’s 5,000-year-old culture. While in Europe it was Aristotle who began to reflect on the city states and their geographical locations, did similar thoughts also arise in China? CHINESE GEOPOLITICS In the 21st century, the People’s Republic of China has developed to be the second strongest economy of the world, and has pursued several successful geopolitical and geoeconomic strategies in recent years. The greatest and currently the most actual Chinese geopolitical

strategy is the “One belt, One Road” initiative. It is to be answered whether China adopted the Western political geographic and geopolitical ways of thinking of the 19th and 20th centuries, and utilised them in practice and refined them in the 21st century, or whether this kind of thought has been present in the Chinese mindset for long. When looking into China’s history, culture and the works of philosophers of the time, we can find the answers to the questions raised in the documents preserved and we can learn about the roots and evolution of Chinese political geography and geopolitics. Until the end of the 20th century, China projected the interpretation of geopolitics within the territory of present-day China and on the relationships between neighbouring countries, on a regional level, and, unlike the USA and Russia, did not have a geostrategy encompassing the whole world; it has begun placing geopolitical thought on a global level only from the 21st century. It has two reasons: – throughout its history, China mostly operated in an enclosed geographical space, most of his frontiers are natural geographical borders: the country faces the Bohai Gulf, the Yellow Sea and the East China Sea in the East, and the South China Sea in the South, that is,

Terms for political geography and geopolitics in China Currently there are two compound terms in China to talk about political geography or geopolitics. Geopolitics (地理政治) refers to the science of political geography widespread in Britain and America, while Geopolitik (地缘政治) refers to the German school of geopolitics. Although these two are not the same, these two terms are used with identical meaning in studies and researches in Chinese. The term ‘geopolitics’ is defined in Cihai, the Chinese encyclopaedic dictionary updated in every 10 years, as follows: ‘geopolitics, also known as geographical politics, is the combined effect of geographical and human factors on international political phenomena. It evolved in the late 19th and early 20th century, uses a holistic research methodology, collecting knowledge about areas, climates, resources, geographical locations, population distribution, culture, trade, etc., examines, explains and projects the strategic positions of the world and regional areas, as well as the political decisions of countries’ (Cihai, 1999: 1512). Roots of Chinese geopolitics China’s military strategies China was first united in 221 BC by Qin Shihuang. Before Emperor Qin’s reign Chinese history was about wars between several states, and the era before a united China was given the tell-tale name of the “Warring States period” (403-221 BC). Liu Tao (in English: Six Secret Teachings), a literary work of military science containing the first geopolitical ideas is dated to this early period. Chinese general Jiang Ziya (1156-1017 BC) presents his work supporting the kings of the evolving Western Zhou dynasty (1046-771 BC). Jiang Ziya’s main strategy is the geopolitics of benevolence and justice, and he explains that other states and clans should be treated fairly and benevolently, all countries look after their own interests, whatever we do, we should act fairly, and a win-win situation should be

sought for with neighbouring countries. Furthermore, he highlighted that nearby neighbouring countries should be treated with respect. In his work entitled Liu Tao he also regards the consideration of geographical features as important during wars, and he also makes important analyses in relation to the cross-border movement of the army. Guan Zhong (723-645 BC), a reformer politician, lived at the end of the “Spring and Autumn Period” (770476 BC). In his work, ‘Guanzi‘, he is analysing in a geopolitical context how smaller countries should relate to larger nations, and how large states should build relationships to avoid unexpected attacks that would throw them back among the weak ones. His main ideas include that nearby lands should be subjugated – not necessarily by military means – and remote ones should be threatened though respected. Interestingly, Guan Zhong dwells on theories similar to geoeconomics. The notion of geoeconomics is associated with the name of political scientist Edward Luttwak (1990), who defines geoeconomics in his works as follows: ‘geoeconomics is nothing but the continuation of an ancient armed rivalry between nations with new economic means. Therefore, economic conquests and competition replace war’ (Bernek, 2010: 34). In the 600s BC, Guan Zhong defeated several neighbouring countries as the grand master of trade wars. In Chapter 76 of his work he describes that the ruler should examine the main export products and the economic structures of neighbouring countries, how change of seasons affects crops and eventually, with “economicstatistical” calculations, he can subjugate neighbouring countries. And indeed, with Guan Zhong’s military control, his country took over several nations in a peaceful way with greater or smaller trade wars. World-renowned Sun Tzu (545-470 BC) lived 100 years later. His book, ‘The Art of War’ – also published in Hungarian – is a standard reference book of Chinese geopolitics. Sun Tzu’s teachings are still applied not only in China but in the whole world in military education, political strategies, and also in “trade wars”. In his teachings, Sun Tzu contributed great importance to geographical conditions both in battlefields and in respect of countries. Before making strategic decisions, he conducted comprehensive geographical research, considering all minute topographic details. Similar to Sun Tzu’s work, several other books on Chinese warfare were born in which the seeds of geopolitical thought can be found. The work entitled ‘The Methods of the Sima’ must be highlighted, which sum-

THE EVOLUTION OF CHINESE GEOPOLITICS

marises the actions of several great Chinese strategists. In this book, the authors do not dwell upon how wars should be fought, but whether wars are necessary, and for what goals one should go to war. If war is inevitable, all details about the relationships of the two countries and the possible outcome of the war must be studied. Furthermore, they make the following important statement: ‘Thus even though a state may be vast, those who love warfare will inevitably perish. Even though calm may prevail under Heaven, those who forget warfare will certainly be endangered.’ (Sun Tzu, 2006: 136)

Source: prepared by author

To sum it up, we can state that – thanks to the continuous development of Chinese culture, geographical

the state, according to a classic threefold distinction, and within that he emphasised the importance of the

Continuing the work of Chinese strategists and philosophers, Chinese geopolitical thinking developed further

features and historical events – several great military strategists were born within the territory of presentday China, who could combine a culture responsive to nature with warfare. As a result, Chinese strategists laid the fundamentals of Chinese geopolitical thinking as early as 600-700 BC.

land area. Su Qin (4th c.- 284 BC) has become the grand

in the 18th and 19th centuries. With the forced expansion of European countries – the Opium War in 1839-42 – and with the appearance of foreign military units and adventurers, the Western way of geopolitical thinking also arrived in China. From this era, two famous geopolitical thinkers are worth highlighting: Lin Zexu (1785-1850), a politician, philosopher and poet, and Sun Jat-sen (1866-1925), an internationally acknowledged Chinese revolutionist, represent the geopolitical stream of the Chinese modern age.

China’s great philosophers in a geopolitical context The roots of geopolitical thinking can be found in the teachings of China’s great philosophers. Without being exhaustive, two famous philosophers can be mentioned: one of them is Laozi (571-471 BC), the author of ‘The Book of the Way and its Virtue’, and the other is Confucius’s student, Mo Tzu (476-390 BC). Laozi is a teacher of peaceful geopolitical thinking. In his book, he emphasises trust, credibility and mutual respect. Countries should live in peace with each other, and they can develop if they help and support each other. War gives birth to bad and evil, and eventually results in chaos. He was against all wars; according to his teaching, it is “Tao” (or “way”) and not mankind that governs the world, therefore living life by the rules of Tao, peace and happiness can prevail on Earth. If people want to govern the world, however, it causes wars, sadness and harm. Mo Tzu’s teachings are also about peaceful co-existence. In the “Warring States period”, Mo Tzu and his students went around the states to dissuade them from the path of war with their agitation. He was an advocate of “peace without attack”; according to his teaching, wars do not serve the interests of either parties, but result in even more problems. When Mo Tzu found out that Chu state wanted to launch an attack against the Song clan, he immediately went to see the leader of Chu state, and successfully dissuaded him from fighting. According to

today’s Chinese leadership, even if only on the level of rhetoric. Current Chinese governance also places great emphasis on peaceful cooperation, as it was taught by Laozi and Mo Tzu. But the geoeconomic aspirations of the government also reveal the geoeconomic thought initiated by Guan Zhong, more specifically, economic expansion. In addition to what there had been and there was, Chinese philosophers and strategists also examined what there could and should have been, thus they did not dwell only upon the present, but also looked into the future ( Palotás, 1943).

The historical base of Chinese vertical and horizontal geopolitics

his theory, an attack by a large country on a small one causes problems not only for the small country but is also dangerous for the large one. Furthermore, Mo Tzu also taught that countries should love each other, and live in cooperation and harmony. Expansion and war are caused by selfishness; they should treat other countries as their own nation, and resources should be shared; this way, they can live in peace. Similar to Ratzel’s ideas, Chinese philosophers conceived of states as living organisms, and they examined peaceful co-existence, which also affected people’s lives, on their level. In Chinese culture, the teachings of Lao Tzu and Confucius are very important; it is still compulsory for Chinese pupils to learn them by heart. Offshoots of Chinese geopolitics From the end of ancient times until the Chinese modern age The teachings laid down have been further developed by Chines philosophers and thinkers, thus geopolitical thinking has also undergone further development. Mencius (372-289 BC), advocating Confucian teachings, asserted that a country had three treasures: land, people and politics. He was the first one in the world to define

master of vertical geopolitics, while Zhang Yi (4th c.-309 BC) that of the horizontal one – in those times, seven countries were fighting against each other, and Su Qin tried to unite countries along a vertical, North-South axis, while Zhang Yi wanted to make three countries cooperate horizontally, along an East-West axis (Figure 1). According to Fan Sui (3rd c.-255 BC), a politician and strategist, friendly diplomatic relations must be built with distant countries, while nearby countries should be taken over by force. This kind of thought is based on continuous expansion: by taking over nearby countries, distant ones will sooner or later become neighbouring countries. Later, Fan Sui’s thought has been adopted by several philosophers and strategists, and the phrase (远交近攻) is currently used in everyday life as well. ‘The Book of Han Geographical Monograph’, the first political geography book, was published in 80 BC, in which exact borders, numbers of towns and villages, the data of their population, transport routes, etc. were described. Like this monograph, ‘The Map Book of Yuanhe Province’, written by Li Jifu (758-814), a politician and geographer of the Tang dynasty, gives an accurate description of the political-geographical situation of the province. Gu Yanwu (1613-1682), a famous politician, philosopher and geographer, lived at the end of the Ming dynasty. He studied the geographical location and features of the country, and he gives an account of resources, units of public administration, their sizes and economic situation in his book ‘Book on the benefits and illnesses of the country’, describing the geographical advantages and disadvantages of the country. Chinese modern age 2,700 years ago, sage men of China were already centring around the fundamentals of geopolitical thinking, several strategies of which have been adopted by

Lin Zexu was familiar with Chinese and international political events, he was studying China’s geographical features and the appearance of foreign military troops in the region during the Opium War. He called attention to two geopolitical dangers: he urged for hindering the British naval fleet in the South, because, he believed, if the British navy enters on the River Yangtze, it might bring about the end of the Chinese nation, therefore he identified the provinces along the sea shore and the River Yangtze as the bases for battles. In the North, the troops of the Russian tsar were threatening Chinese borders. As far as he could see, the troops of the tsar wanted to take over the Uyghur territories, which would have greatly weakened China’s power, therefore he urged for reinforcing the protection of northern borders as well. Lin Zexu was the first Chinese geopolitical thinker who examined geopolitical changes and dangers in the near and distant future, and provided for the protection of the country according to his ideas. Sun Jat-sen was not only the “father of the Chinese revolution“ but also a great philosopher of Chinese geopolitics. He studied China’s geographical features on the level of world politics, and in his works he asserted that although China mostly had land areas, the proportion

THE EVOLUTION OF CHINESE GEOPOLITICS

of its offshore and onshore borders could be defined as 5 to 2, due to its long coast. Therefore, he considered China’s isolation and ban on seafarer activities during history erroneous. Sun Yat-sen began the development of the navy in addition to land forces. He was the first one in China to advocate the importance of air force, as, according to his philosophy, the country could develop further peacefully if it could defend its borders on land, at sea and in the air as well against foreign aggressors. In the modern age, several young Chinese people had the chance to travel to Europe to pursue their studies. The returning geographers started to spread their Western geopolitical doctrines in China, an increasing number of people in China could get familiar with

the policy of “Leaning to One Side”. In the 1950s, the geopolitical question for China was which side to choose to gain greater security. Mao chose the Soviet alliance. In the 1960s, he put forward the theory of an “intermediate zone” lying between the United States and the Soviet Union, i.e. the two great factions. The “intermediate zone” can be divided into two halves according to their levels of economic development: Asian, African and South American, economically underdeveloped countries, and developed European countries. In 1973, during his meeting with Kissinger, Mao presented the geostrategic theory of “one united front”. By then, the relationship between China and the Soviet Union had deteriorated, and China was looking for allies in or-

Mackinder’s thoughts, and the translation of European and American books on geopolitics into Chinese began. In addition, a growing number of Chinese geographers, politicians and military officers published books on China’s problems from a geopolitical aspect.

der to fend off a potential Soviet aggression. According to the “one united front” theory, China, the USA, Japan, Pakistan, Iran, Turkey and Europe are countries lying on the same latitude, and with the collaboration of Asian, African and South American countries, the hegemonic attempt of the Soviet Union could be thwarted. In the 1970s, by further developing his previous geopolitical ideas, Mao did not divide the world along the opposition between capitalism and socialism, but by level of development. This is what one of Mao’s most famous geopolitical theory, “the differentiation of three worlds” is about. The first world consisted of superpowers, the United States and the Soviet Union; the second world consisted of developed countries, including Western European capitalist countries, Japan, and Central and Eastern European socialist countries. The term ‘third world’ covered developing countries, including African and Asian countries fighting for their independence as well as China (Vámos, 2006).

Contemporary history of Chinese geopolitics After the People’s Republic of China was established, geopolitics as an academic discipline was regarded as “a diabolic product of Western capitalism”, therefore no studies on geopolitics were conducted initially, but geopolitical thought was present. We can find several geopolitical strategists among the leaders of the People’s Republic of China, who demonstrated a geopolitical way of thinking in their works. Mao Zedong (1893-1976) Mao was a Chinese revolutionary, politician, strategist and poet, who placed great emphasis on utilising Chinese and foreign geographical knowledge in politics during the revolution and the foundation of the People’s Republic. He viewed topographical features as objective factors in political and other important strategic decisions. In his study, ‘Problems of Strategy in China's Revolutionary War’ Mao writes, ‘provided he is modest and willing to learn, an experienced military man will be able to familiarize himself with the character of his own forces (…), with the character of the enemy forces (…) and with all other conditions related to the war, such as politics, economics, geography and weather (…).’ (Mao Zedong, 1952: 348-349) Mao was continuously developing, modifying his geopolitical foreign policy during his 30-year-long term: initially, he divided the world into two parts, imperialists and socialists. During China’s history, he was approximating either one or the other. There is no third way, one of the two must be chosen, he believed – this was

Deng Xiaoping (1904-1997) Deng was a Chinese reformer, a Communist politician and also a great geopolitical strategist. In 1978, the People’s Republic of China launched the policy of “reform and opening”, initiated by Deng, which developed and helped Chinese geopolitical thinking. In his works, Deng put great emphasis of the diplomatic openness of the country, so that China could fulfil an increasingly important role on the international stage, and he also started to arrange the return of Hong Kong, Macau and Taiwan and the unification of the country. He formulated the policy of “one country, two systems” to this end. Thanks to the opening in foreign policy, the works by an increasing number of Westerns geopolitical thinkers were translated into Chinese and published in China’s book market, making academic life related to geopolitics prosper in China.

Author ZHOU Jieming CHEN Li ZHANG Wenkui WANG Zhengyi WANG Guoliang XIAO Xing ZHU Ning YE Zicheng LIU Congde XU Xiaojie CHENG Guangzhong

Major works by Chinese geopolitical researchers

Title China’s Political Geography Geographical Principle of Strategy Political Geography Modern Political Geography World Political Geography Fundamentals of Political Geography Which Will Be the Strongest in the Next Century – The Geopolitics and Strategic Outlines of Sino-American Competition in the Next 20 Years Geopolitics and Chinese Diplomacy Geopolitics: History, Method and World Structure The Geopolitics of Oil and Gas in the New Century Opportunities and Challenges Geostrategy

Year 1989 1990 1991 1993 1993 1995 1997 1998 1998 1998 1999

Source: Author’s own edition

In terms of geopolitics, Deng Xiaoping addressed two great issues: peace and development. On the basis of these two issues, he divided the world in two different ways. – The problem of peace is the east-west problem. The Soviet Union in the East and the USA in the West are contending for hegemony, constituting a menace to world peace. If the east-west problem is resolved, people of the world can live on in peace. – The problem of development is the north-south problem. The Northern hemisphere is more developed than the Southern one, the developed countries take advantage of the weaknesses of the developing ones. As a result, economic differences become larger and in terms of economy, the world cannot develop further properly. By resolving the north-south problem, also the problem of economic development would be resolved. Both problems are equally important, as peace is indispensable for economic development, and peace is impossible without economic development. In the modern age of Chinese geopolitics, Chinese leaders were not engaged in the geopolitical strategy of the country on a regional level, but studied it on a global one. The ancient way of thinking can be found in the geopolitical theories of leaders, for example Mao Zedong’s “one united front” strategy is similar to Zhang Yi’s strategy of “horizontal geopolitics”. Deng Xiaoping pursued a philosophy similar to that of Lao Tzu – peace and development. Chinese geopolitical science After the People’s Republic of China was established, geographers started to lay the foundations of a geopolitical science by researching the areas of geography

of population, urban geography, social geography, human geography, economic geography, climate geography, etc. Until the end of the 1970s, there was no science specifically focussing on geopolitical science (“a diabolic product of Western capitalism”), and they tried to catch up with Western researches by studying various areas of geography, creating several literary works of a geopolitical nature. After the policy of “reform and opening” (1978) Western geopolitical reference literature became available in China, and Chinese researchers could get familiar with the works of Alfred Thayer Mahan, Halford John Mackinder, Giulio Douhet, Nicholas John Spykman, Zbiegniew Brenzinski, Samuel P. Huntington, etc. From the 1980s, with the development of social geography and human geography, geopolitics has become an important area of research. In China, it was Li Xudan (1911-), a famous researcher of social geography who first wrote a monograph entitled ‘Political geography’ (Li Xudan, 1984: 208). In 1986 and 1988, Bao Juemin (1909-1994) wrote several essays on the science of Chinese political geography. With their research, Li and Bao laid down the fundamentals of Chinese political geography. In 1991, Zhang Wenkui wrote China’s first book entitled ‘Political geography’, presenting the beginnings and development of foreign and Chinese research on political geography. From 1989, the famous geopolitical researchers of our times started to publish their own analyses (Table 1); on the basis of the statistics of the National Library of China and the Library of Beijing University, 65 books were published on geopolitics until 2004. In 1998, in his book ‘Geopolitics and Chinese Diplomacy‘, Ye Zicheng wrote the following passage about

THE EVOLUTION OF CHINESE GEOPOLITICS

Chinese research on geopolitics, ‘in recent years, a sufficient number of Chinese geopolitical researches have not been conducted, the term “geopolitics” can be very rarely seen in journals and magazines, and we can meet more and more often with a geopolitical way of thinking only when international politics and diplomacy is presented.’ (Ye Zicheng, 1998: 5). Between 1990 and 1994, 124 monographs on the theme of geopolitics and 32 studies entitled ‘Geoeconomics’ were published in journals. The late 1990s saw a change in geopolitical research: Chinese geopolitical researchers conducted studies in relation to NATO’s eastern enlargement, and then on the USA’s expansion in the Middle East (2001, Afghanistan; 2003, Iraq). They quickly acquired the Western way of geopolitical thinking. In the 1990s, political geography was also launched in university education as an optional subject of the Faculty of Earth Sciences and the Faculty of International Politics. Between 2010 and 2013, the rate between geopolitical and geoeconomic studies was 392 vs 476. In China, ‘World Regional Studies’, ‘Human Geography’ and ‘Economic Geography’ have become flagship geopolitical journals in Chinese. In 2012, the Chinese Academy of Sciences established the World Geography and Resources Research Centre, several Chinese universities founded their own geopolitical research centres, and each year since 2012, the high-level forum, ‘Geography and China’s Globalisation Strategy’ has been organised. Although the education and study of political geography and geopolitics have made a slow start, by the early 2000s a robust group of well-educated geopolitical professionals had been trained, who take part in developing the geopolitical strategy of the country. ONFLICTS AND DIFFERENCES C BETWEEN CHINESE AND WESTERN GEOPOLITICS The systemised, Western science of geopolitics wielded enormous influence on Chinese researches, but there are theses with which Chinese researchers do not necessarily agree, such as: – Has geopolitical thinking developed in Europe? During Chinese history, it is clearly visible that Chinese strategist and philosophers documented their geostrategies before Western thinkers. In his book, ‘Geopolitics and Chinese Diplomacy’, Ye Zicheng, Chinese geopolitical researcher points out that Mackinder’s “heartland”

theory was written by Sun Tzu, using a different term, 2,300 years ago: ‘Ground which forms the key to three contiguous states, so that he who occupies it first has most of the Empire at his command, is a ground of intersecting highways.’ (Sun Tzu, 2006: 64) Chinese researchers acknowledge that geopolitics as a science appeared in the Western scientific world first but the fundamentals of geopolitical thought are in no case regarded to be a an invention of the Western world. – In Chinese culture, the country is still referred to as the “Middle Kingdom”. Throughout history both emperors and the Chinese people lived in the belief that China is the centre of the world. This is why they cannot accept Mackinder’s “heartland” theory, as for several

continuously expanding in the world, therefore geopolitical thinking was projected on the whole world. In China, however, geopolitical thinking encompassed only nearby countries, the adjacent region, throughout history; geopolitical thought was utilised in establishing relationships with neighbouring countries. Several geopolitical theories were related to the protection and security of borders and border management. In relation to neighbouring countries, there is an adequate geopolitical answer for every minor matter. These might seem trivial from a Western geopolitical perspective, but in China’s way of geopolitical thinking emphasis has always been placed on the political relations between countries.

with Aristotle, geopolitical thought started to evolve far from Europe, in China earlier. Thanks to Chinese history and geographical features, the evolution of geopolitical thinking started before the Western geopolitical foundation, and had several offshoots. When studying the works left by ancient Chinese strategists and philosophers, we can see that in China geopolitical thinking has multiple layers, its content and logic are different from Western geopolitical theories, they can be nearly called different geopolitical tendencies.

thousands of years, Chinese people have been thinking that • Who rules China1 commands the Heartland,

– In Western culture, the concept that “a neighbouring country is a potential enemy” has evolved; in China, however, building relationships with neighbouring countries is based on peaceful cooperation. The countries used to live in the age of expansion. They watched each other to see who would have a larger territory or a stronger empire during colonisation, rivalry was constant, and everyone saw an enemy in countries gaining area and strength. China, however, has not expand and the size of the country has hardly changed in the last 2,000 years – with the exception of the Mongol conquests –, and the majority of changes are not contributable to forced expansion, colonisation but are the results of peaceful mergers. – Opportunities for expansion were considered important by Western countries, while China placed emphasis on the protection of its borders and did not yearn for larger areas. Furthermore, while Western major powers supervised neighbouring countries, like the USA supervised South America and the Soviet Union supervised Eastern Europe, frequently intervening in the domestic policies of these countries, China sought partners for cooperation and friends among neighbouring countries, without intervening in their domestic policies. – One of the peculiarities of the Chinese type of geopolitics is that it places emphasis on geostrategy in geopolitical research. Within geostrategy, Chinese geopolitical researchers put geodiplomatic strategy and geowarfare strategy into first place (Ye Zicheng, 1998).

600s BC, well before Edward Luttwak’s works from 1990. Geopolitical thinking has been continuously present in Chinese culture and philosophy, Chinese leaders made their decisions accordingly on foreign and domestic policy matters concerning the country, initially within the territory of present-day China, then on regional level, and now, combining Western geopolitical ideas with Chinese one, also on a global level.

• who rules the Heartland commands the WorldIsland, • who rules the World-Island commands the world. As we could see, a Chinese way of geopolitical thinking has developed independently from a European one throughout the millennia. It has its own underlying rationale and viewpoint, which were mixed with the Western way of geopolitical thinking in the 19th and 20th centuries. Chinese researchers have adopted the methods and doctrines of Western geopolitical science, but also carried on with studying the Chinese type of geopolitical science. This is how a Chinese type of geopolitical science has evolved. A thorough knowledge of the Western geopolitical science is insufficient to understand it; it also requires the study of the works of ancient Chinese strategists and philosophers. The differences between the Chinese type of geopolitics and Western geopolitics are as follows: – While in Europe philosophers and researchers were engaged in geopolitical thought on a theoretical level, in ancient and imperial China Chinese strategists geopolitical thought was cultivated in practice. Consequently, Western geopolitics places emphasis on geographical factors (heartland, Lenaland, sea power, airspace, etc.), and the Chinese one considers political factors important. – We can talk about macro-geopolitics in the West and micro-geopolitics in China. In the West, scientific research into geopolitics started in the 19th and 20th centuries. During this period, Western countries were 1

ackinder’s “Heartland” theory emphasizes the importance M of Eastern Europe; according to the Chinese theory, however, China’s territory is important (edited by author).

SUMMARY Documents collected from secondary Chinese-language sources reveal that while universal geopolitical science associates the launch of geopolitics

The geoeconomic concept was not a novelty for the Chinese, either; Guang Zhong wrote on this topic in the

A Chinese way of geopolitical thinking has evolved independently from Western ideas throughout the millennia. In the 19th and 20th centuries, the trends, theses and results of Western geopolitical researches reached China, where these were combined with thousands-of-years-old Chinese geopolitics. As a result, a new, Chinese type of geopolitical approach has evolved, which cannot be understood by studying Western geopolitical researches, but also the works of Chinese strategists, philosophers must be acquired. Although there is less geopolitical research in China than in the West, in practice – as it could be seen during the evolution of Chinese geopolitical thinking – China has become a major geopolitical power by the 21st century. “One Belt, One Road” is also a carefully constructed geopolitical, geoeconomic and geostrategic initiative, in which the ways of ancient, modern and contemporary geopolitical thinking all can be found. The initiative is often attacked, as, according to the Western interpretation of geopolitics, it must have one single hidden goal: the intention of political-economic intervention, what the Chinese initiative is claimed to be by several Western analysts. By contrast, it is a peculiar, Chinese interpretation of geopolitics, and the rhetoric of the Chinese government emphasises the non-interventionist nature of the initiative.

What European foreign policy to address today's and tomorrow's geopolitical challenges? Author: Dr. David Criekemans

The world is currently undergoing rapid geopolitical changes. In this contribution, some thoughts are offered on these developments and how they affect the EU’s external action. What can geopolitics teach us about the moment in which we live, and the kind of European foreign policy one would need? Several major developments are addressed: Europe’s Anglo-Saxon allies are (temporarily) out of service, the need to review the relationship with Russia, the inevitable rise of China, structural instability in the Middle East and Northern Africa & internal instability as a means to bring the EU together. Introduction The world is currently undergoing rapid geopolitical changes. The European Union is being confronted with both internal and external shocks. For the EU to be effective, it needs a coherent and integrated European foreign policy to address today’s and tomorrow’s geopolitical challenges. In this contribution, some thoughts are offered on these developments and how they affect the EU’s external action. The EU is a strange superpower. It concentrates certain powers at the supranational level, but the member states keep having the main say in foreign policy matters. Integration in the foreign policy domain is done based upon the sharing of sovereignty. The EU tries to be a ‘normative actor’ and presses for ‘effective multilateralism’. The EU negotiates

as one in international trade negotiations, it leads in climate change policies, it has a neighbourhood policy, it integrates on energy matters, it promotes human rights, its external action stretches to areas such as justice and police matters, it leads globally in terms of development subsidies, it tries to develop an integrated political foreign policy, etc. Most of the challenges with which our European societies currently are being confronted are multidimensional: • First, the flip side of the energy crisis has an environmental dimension. The choices which European countries make with regard to their respective energy mixes has an impact on the environmental degradation or pollution of certain regions. We are moving towards a concept of ‘energy security’ which not only focuses on traditional concerns

such as foreign policy and defence or economic affordability, but also now includes environmental concerns. As a result of the Paris Agreement on climate change, this will become even more important in the future. The question is thus how to maintain developed societies in which energy is available and affordable, yet does not worsen the already precarious situation with regard to the warming of the planet, environmental degradation and the loss of biodiversity. • Second, our traditional approach to security used to be to external threats whereas recent challenges in terms of terrorism show that there is also an internal dimension (for instance, the radicalisation of young people) – the bulk heads between internal and external security thus seem to be evaporating. Whereas in the past security could be labelled an external problem, to be dealt with by a Ministry of Defence, the recent changes with regard to terrorism have opened our eyes. The rise of IS / Daesh was not limited to the Middle East. Radicalisation amongst young people of foreign origin, a domestic issue, became intermingled with external affairs. The attacks in cities such as Paris, Brussels, Barce-

lona, Berlin and many others have proven the European countries need more integrated approaches to security that defy the traditional distinction between ‘internal’ and ‘external’ security. • Third, the Ukraine crisis showed that attempts to create a geoeconomic partnership with countries of the former Soviet Union could also re-awaken important new geostrategic challenges and threats. The EU’s strategy to pursue an Association Agreement with the Ukraine in 2013 did not take into account the potential geostrategic consequences in the relations between the EU and the Russian federation. The EU tends to think of these domains as separate dimensions, whereas geoeconomics, geopolitics and geostrategy are clearly interlinked. • Fourth, the rise of IS / Daesh raises challenges how to balance ‘hard’ and ‘soft’ approaches to security; whether we should rather use hard military freedom from fear-policies or a more political freedom from want-approach which favours a global governance setting. If European countries only focus on hard security to battle against radi-

calisation and terrorism, they will not be able to eradicate the causes of these. In the past year and a half, the EU’s High Representative for Foreign Affairs Federica Mogherini has focused on developing also a more medium to long term strategy to stabilise the border regions of the European Union. Bringing more governance to this region will take more than a generation, but it will be necessary to really tackle the basic security challenges with which the EU is being confronted. • Fifth, “Brexit” challenges the geoeconomic and geopolitical relations of the United Kingdom and the continent at the same time. It is at the time of the writing of this article still unclear what the future relationship will be between the United Kingdom after Brexit and the EU-27. This will however rewrite the geopolitics of the region, and will also create new geopolitical dynamics within the EU which are still somewhat unclear.

Hence, current European geopolitics cannot be seen separate from the latest developments in the triangle between energy – environment – economy. During the past year, the European Union has nevertheless taken some interesting steps from an institutional point of view. “Brexit” and the election of the French president Macron created an impetus for an enhanced European defence policy, PESCO – Permanent Structured Cooperation. The aim is to jointly develop defence capabilities and make them available for EU military operations. In addition to the existing Berlin + agreement between NATO and the EU, there was an EU-NATO joint declaration in 2016, where both organizations agreed to step up their cooperation in areas including hybrid threats, capacity building, cyber defence and maritime security. The EU now starts with a Coordinated Annual Review on Defence (CARD) and launches a European Defence Fund (EDF) to foster research into developing new capabilities.

What European foreign policy to address today's and tomorrow's geopolitical challenges?

In October 2016, EU Foreign ministers decided on the most important strategic priorities for implementing the New EU Global Strategy. These are: • First, Security and Defence, so as to improve the protection of the EU and its citizens; • Second, Building Resilience and taking an Integrated Approach to conflicts and crises. A priority are the EU’s surrounding regions to the South and East, but also for instance Central Africa is mentioned. Important will be “early warning” and more attention will be given to the post-conflict phase; • Third, Addressing the Internal/External Nexus. Providing external security can only be done if also the internal dimension is addressed in EU-policies,

ropean Union. Since the end of the Second World War, these Anglo-Saxon powers were the traditional allies of what later became the European Union. The US still seems to be committed to NATO, but this partnership has come under strain. Trump interprets the relationship in a mercantilist way, namely: the EU should buy more American weapons. At the same time, the biggest defence spender in Europe – the UK – will leave the Union by April 2019. This means a new balance will have to be struck in geostrategic affairs. European defence cooperation will gain relatively compared to the trans-Atlantic strategic relationship. There is now also an opportunity to invest part of Europe’s de-

for instance counter-terrorism, counter-violent extremism, migration, sustainable development and cybersecurity; • Fourth, Updating existing strategies and preparing news ones. Traditional diplomacy and security & defence policy will need to be combined with an effective climate diplomacy, energy diplomacy, economic diplomacy and cultural diplomacy. • And finally, Enhancing Public Diplomacy. The educational exchange “Erasmus+” programme and the academic research programme “Horizon 2020” are mentioned in this regard as tools to project a vision of what the EU stands for. These can all be seen as fruitful and necessary steps in further enhancing the role of the European Union in a changing world order. According to the EU High Representative on Foreign Policy Federica Mogherini, the EU Global Strategy Process has been a reminder of the European Union’s strategic interest in a cooperative world order: “It has helped us to swim against the tide, keeping our unity and building strong alliances around our key priorities”. However, next to an institutionalist approach we also need a geopolitical analysis of today’s and tomorrow’s geopolitical challenges. What can geopolitics teach us about the moment in which we live, and the kind of a European foreign policy one would need? Hereafter we address several major developments that will become increasingly difficult to ignore:

fence spending in our own know-how and expertise, from which also a future business model could be derived. The EU could follow Estonia’s example in cyber security for instance. The EU will still depend for many years on the defence capabilities of both the UK and the US, but in key domains such as air transport, the maritime dimension and logistical planning, the EU will gradually be able to stand by itself. With the UK out as “geostrategic bridge” between America and Europe, one may expect this will also affect the geostrategic priorities of each of these actors. The day may come when one would realise that the American geostrategic agenda for Eurasia does not always completely match with the continental European one.

1. E UROPE’s ANGLO-SAXON ALLIES ARE (TEMPORARILY) OUT OF SERVICE The Brexit Referendum in June 2016 and the election of Donald Trump as American president in November 2016 have a clear impact upon the Eu-

2. T HE NEED TO REVIEW THE RELATIONSHIP WITH RUSSIA Since the Ukraine crisis of 2014, the relationship between the European Union and the Russian federation has severely deteriorated. EU officials in 2013 failed to realise that the negotiations for a geoeconomic Association Agreement with the Ukraine could also have geostrategic consequences for the EU’s relations with Russia. Did Moscow respond in an offensive or rather in a defensive way? There are several schools out there. The situation in the Crimea, in Donetsk and Lugansk, will not be reversed soon, quite to the contrary. Several EU countries pursued a sanction policy vis-à-vis Moscow, following the American administration of Barack Obama. This has not solved but rather worsened the relations between the European Union and the Russian federation. But on paper, both actors need one another. Natural gas in exchange for foreign income is crucial in this regard. In Russia,

the Stabilisation Fund has been largely depleted as a result of Western sanctions (and the lowering of the oil and gas prices during the same period). What remains is the Welfare Fund of about 75 billion euros, give or take. If that would deplete by the end of 2019, major political instabilities in Russia could take hold. This would not be in favour of the European Union. In a worst case scenario, Putin would be replaced by a hard liner. The question can thus be raised how the relations between the EU and Russia could be reinvigorated. Restarting that relationship through academic, cultural and economic diplomacy could be a way to stabilise the current misbalance.

ic point of view, China will retake its global place which it enjoyed before the 1820s. Beijing is using its excess capital to invest in new initiates such as the Silk Road Economic Belt and the Maritime Silk Road. In time, many countries in Europe could benefit from these investments. Today already several European countries are non-regional members to the Asian Infrastructure and Investment Bank (AIIB). Hungary is among them, next to Austria, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, Poland, Portugal, the Netherlands, Sweden. As China’s geoeconomic weight will further increase, this will be translated into geopolitical power. It is fine for the European Union to also try to get “a piece of the action” in this regard.

3. THE INEVITABLE RISE OF CHINA At the same time, we are witnessing after the 19th Party Congress in Beijing a China that finds itself in its next phase of development. From a geoeconom-

However, as a result of the more global geopolitical changes, the EU will increasingly need to adopt a “balance of power” approach both in geoeconomic and geopolitical terms. Such a balancing act

What European foreign policy to address today's and tomorrow's geopolitical challenges?

will also demand a more integrated foreign policy for the EU, but one in which the centre and the member states still closely work together. Instead of looking at trade in purely bureaucratic terms, the geostrategic dimension will also have to be included in the analysis. Multiple external powers will vie for influence in Europe and its neighbourhood. 4. S TRUCTURAL INSTABILITY IN THE MIDDLE EAST & NORTHERN AFRICA The period since the so-called “Arab Spring” in 2011 has shown how unstable many of the countries of the Middle East and Northern Africa are. Quite rightly, the current High Representative for EU Foreign Policy, Mrs. Mogherini, states that “their problems are also our problems”. The French-British intervention in Libya in 2011 on the basis of the principle “Responsibility to Protect” may well have been a mistake, at least in terms of how the postconflict phase was handled. The Western stance in the Syrian crisis de facto supported the agenda of the rivals Saudi-Arabia and Qatar. Today we see a clear power struggle in the Middle East between Saudi Arabia and Iran. Whereas the relations between some EU-countries and Saudi Arabia have worsened because of allegations individuals from these countries financed jihadi terrorism in the past, most EU-countries still stand by the Joint Comprehensive Plan of Action which was struck between the international community and Iran with regard to their nuclear enrichment. There are clear tensions between the EU and the US on these issues. Europe’s geoeconomic interests clash here with those of Washington. The Syrian crisis, the Libyan crisis and the crisis in Yemen of the past years have produced major regional instability in which jihadi terrorism could flourish. In addition a migration crisis was triggered, which still is only in its “containment phase”. After emergency measures such as the erecting of borders by individual EU members such as Hungary and the so-called “Turkey-deal” between the EU and Ankara, new policies will need to be developed. The second phase of stabilisation of Northern Africa and the Middle East will take more than a generation. The EU will need to refocus a large part of its development cooperation geographically

to this region. After bringing stability back, it will need to make these countries economically stable and give them access to the internal market. Many of these countries have a young population. If they are unable to provide in their own livelihoods, they will resort to other means. At the same time the effects of climate change are each year clearly biting harder in the Mediterranean. Integrated policy solutions will be needed to soften the hardest blows. If the EU is unable to “stabilise” this so-called “ring of fire” in its own neighbourhood, the Union will have failed at providing one of its core missions; providing security. 5. I NTERNAL STABILITY AS A MEANS TO BRING THE EU TOGETHER There are currently several misbalances within the EU itself: • First, in the Eurozone the tensions between the richer North and the poorer South sparked a debate about responsibility versus solidarity which is still unresolved. It is sometimes forgotten that countries such as Germany and the Netherlands are benefiting substantially from a weaker Euro compared to their former stronger national currencies. This is due to the weaker economies of the south of Europe. As a result, Berlin can produce budget surpluses. Chancellor Merkel has however not re-invested these surpluses in southern Europe. In the financial economic crisis, southern European countries such as Greece, Spain and Italy were forced into austerity policies under the flag of ‘responsibility’. Now that these economies have implemented harsh policies for years, the question remains whether northern Europe should not convey more solidarity beyond rescuing their own banks. Only when it is realised that the fate of all Euro countries is linked to one another can the political tensions between the richer North and the poorer South be managed more. Added to this dimension, one should also take into account that the poorer South is and will also be confronted with some geopolitical challenges that need to be addressed in a more balanced way and shouldered by the whole of the European Union. One is climate change, the other is migration as a result of growing instability in the border regions of the EU. • Second, the European project has mostly been an

“If the EU is unable to »stabilise« this so-called »ring of fire« in its own neighbourhood, the Union will have failed at providing one of its core missions; providing security.” economic one so far, with the internal market at its core. This neoliberal Europe has however failed to produce a Social Union. It is not a coincidence that forms of populism gain political weight in such an atmosphere. The current European Union is mostly an economic project. In the wake of the 1989 revolution, the internal economic borders have been demolished. This has produced a lot of investment in Central- and Eastern Europe and has brought the EU together as a whole. The increased competition has however put downward pressures on wages and social protection. Although there is a European Commissioner on Social Policy, the Belgian Marianne Thyssen, the results are still rather limited. Only with regard to social dumping some progress has been made the last couple of years. Globalisation has also created a lot of structural changes within many different economic sectors in Europe. This process seems to be accelerating even more. It has sparked resentment in certain regions that cannot catch up. This in itself produces populism, as voters feel that they are threatened in their own livelihoods. As a result of Brexit, the EU did its own introspective analysis. One of the conclusions was that European citizens wanted more protection, also in social terms. The challenge for the coming years will be how to build a more Social Europe to compensate for the neoliberal paradigm, which perhaps has grown too far. This exercise will not be easy as the economic variables of north, east, west and south in the Union are quite different.

•T hird, we are currently experiencing a Third Industrial Revolution in which products will be more tailor made, based upon cradle-to-cradle solutions and more sustainable business models. This offers a major promise for a European renewal if governments invest wisely. The new technologies which are currently being developed offer promises for a more sustainable future in which waste is recycled, energy is being produced and consumed in a more renewable way and future economic growth will be driven by innovative technological challenges. Ambition in this regard through academic research projects such as Horizon 2020 and public-private cooperation can create a renewal in Europe’s economic superstructure. The EU’s population is one of the most educated in the world, potentially able to seize the opportunities linked to these economic challenges. If the European Union countries invest systematically and in a coherent way in such technologies, this could spearhead the EU geoeconomically as an innovative economy. Already now a race is going on between China and the United States of America in this domain. The EU will also need to develop a strategy to protect the intellectual property it has developed in such domains as renewable energy technology, so as to be able to market it maximally in the global economy. Geoeconomically, the EU is in need of a new business model. At the same time, this will again put strains on the internal workforce as some sectors could produce structural unemployment as a result of the latest technologies such as self driving cars and the application of machine learning and, even in the future, aspects of artificial intelligence. If the EU invests wisely in converting its workforce, it can produce a new “geo-technical ensemble” via which Europe can compensate its demographic decline through spearhead technologies, and thus still remain relevant on a global scene. This can only be done if a concerted action is created between the European, national and subnational level in this regard. Internally it could also create new challenges and opportunities for regions within the EU. There exist many other problems of internal stability in the EU. But at the same time they offer opportunities for the European Union to re-invent itself. Through such a process of renewal, the EU could one again become a beacon in a New World Order that is more fluid and unpredictable.

“ONE BELT, ONE ROAD” FROM THE PERSPECTIVE OF THE EUROPEAN UNION: CHALLENGE OR OPPORTUNITY? Author: Viktor Eszterhai

Together with the multipolarisation of the international order, One Belt, One Road, the central initiative of Chinese foreign policy creates a new environment for the European Union. The analysis gives an account of the challenges posed and the opportunities offered to the European Union by One Belt, One Road.

THE PLACE OF THE EU IN THE INTERNATIONAL ORDER LED BY THE USA After World War II, countries of Europe integrated into the liberal international order led by the United States, which turned into a unipolar, global hegemony of the USA after the Cold War. Typically, the power of the United States rested on four pillars: the leadership role taken in the world economy and financial life; military dominance, ensured by its unique military capacity and system of allies; the international system of institutions, briefly called the Bretton Woods system; and Western rules and norms, which have become universal in international life. After World War II, Western European countries typically were active supporters of the international order led by the United States. This was not only because they did not have such economic and military capacities that would have allowed them to compete with the USA, but also because the international system provided them with numer-

pean countries have typically taken – often despite their smaller economic might – greater roles in major international organisations of finance, such as the International Monetary Fund (IMF) or the World Bank. Finally, the Western rules of international relations could be regarded as natural and universal for European states, because they stemmed from the fundamentals of the European Westphalian interstate system. As decision-makers of the EU saw the world in a similar way as the USA did, they often sought to apply these rules and principles in international life and expect them from other players in cooperation with it, sometimes by passing on a normative model (integration of Central and Eastern European countries, or the Eastern Partnership Programme), sometimes with coercive military power (e.g. Libya). Against this backdrop it is clearly visible that although the EU had landed in a kind of subordinated position to the USA, and could fulfil the role of a second-rate power, fundamentally, it was favourable for it due to the benefits received, as it strongly supported its existence. Thus, the decision-makers of the EU – based on Gramsci’s analogy – created an elite who did not just accept but actively supported an international order based on American hegemony.

THE MULTIPOLARISATION OF INTERNATIONAL ORDER AND CHINA – THE INITIATION OF AN ALTERNATIVE INTERNATIONAL ORDER After the financial crisis of 2008-2009, the unipolar nature of the existing international order, prevailing since the end of the Cold War, has been questioned more and more often. There are voices claiming that due to the growing international weights of developing countries – such as China, India or Russia –, in addition to the “relative decline” of the USA, the world might soon return to a period of multipolarism. According to classical geopolitical schools and the structural realist school of the theory of international relations, a multipolar structure represents more instability and more competition between major powers. According to a different approach, rivalry between major powers does not necessarily ensue conflict if players find a path to cooperation, mainly by way of newly established institutions and transregional mechanisms, or by imposing a new international order. Multipolarisation does not automatically mean the creation of an international order based on new rules, but it definitely creates such changed environment and conditions to which all players must adapt, irrespectively of the fact whether it is favourable or unfavourable for them.

ous benefits. The USA, as a player ensuring “common good” has indeed contributed to the economic development of European countries. In the quick recovery from the collapse after World War II, Marshall aid played a significant role, but the openness of the American market or the protection over maritime transport routes were also significant factors. Furthermore, the USA supported the idea that post-war Western Europe and later the European Union (EU) should become an important centre of world economy. In addition, the USA provided military protection for Western Europe within the framework of the North Atlantic Treaty Organisation (NATO) during and after the Cold War, allowing the majority of EU countries to spend only a small amount on military defence. A third important factor is that European countries also took a prominent role in the international system of institutions, which had its centre in the USA. It is best demonstrated by the fact that the two of the five permanent members of the UN Security Council are European countries – the United Kingdom and France–, and, generally speaking, Western Euro-

“ONE BELT ONE ROAD” FROM THE PERSPECTIVE OF THE EUROPEAN UNION: challenge OR OPPORTUNITY?

players as well as cities, private individuals, NGOs, etc. These make the initiative more than a largescale infrastructure programme; through five connections China creates the hardware of a new international order that places the Eurasian continent in the centre. A deeper integration of Asia, Europe and Africa may change the geopolitical fundamentals of the current architecture of global order, originally established trough the management of sea trade and sea trade routes by Western powers since colonisation in the 16th century. China, however, does not influence the existing international order by creating a new network – it has already started to fill the framework One Belt One Road represents with its new, “parallelly working” institutions. These include transregional agreements to redesign the relationship between specific regions and China, such as the Forum on China-Africa Cooperation (FOCAC), or the “16+1 Cooperation”, but the new financial institution of the Asian country, the Asian Infrastructure Investment Bank (AIIB) has also attracted great attention.

The current potential challengers of the hegemony of the USA – with one exception – tend to have no coherent concepts of world order; what they have in common is their critical view of the hegemonic role of the USA and their aspiration to dismantle US hegemony. The only exception is constituted by the large-scale One Belt, One Road initiative, launched by China. ONE BELT, ONE ROAD The One Belt, One Road (or by its longer name, the Silk Road Economic Belt and Maritime Silk Road) initiative was announced by the President of the People’s Republic of China, Xi Jinping in Kazakhstan in September, 2013. The initiative can be best grasped as a draft concept with a goal to redefine the system of relationships between Europe, Asia and Africa. The emphasis is put on connecting regions, five types of which are identified by official state documents. The first one is political coordination, which means the coordination of the policies of national, regional and international institutions. The second one is implementing physical infrastructure, which consists of connecting new

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and existing networks of roads, railways, oil and gas pipelines and optical cables, completed by industrial parks, logistics centres and sea ports cooperating with each other, redefining traditional economic relationships between manufacturing hubs, markets and sources of raw materials in this vast region. The third type is constituted by ensuring unimpeded trade, which initially means the removal of bureaucratic trade barriers, but, in the long term, it also includes the extension of free trade zones. The fourth one is financial integration, the aim of which is the harmonisation and joint control of financial services and the currency swap of the regions concerned. Finally, the fifth type is constituted by strengthening peopleto-people bonds, which lays great emphasis on cooperation in research and development, promoting tourism, and providing scholarship opportunities and exchange programmes for students, experts, researchers. Due to the revival of relationships, One Belt, One Road can be best grasped as a network which can be expanded extremely flexibly in space, encompassing state-owned, economic and institutional

One Belt One Road is an initiative that targets to reshape the international order. Therefore, all players concerned have no other choice but give a response to this new challenge. It is a burning issue also for the EU, as the Chinese concept counts on a new Eurasian system of relationships, in which the EU would be quite evidently given a prominent role. ONE BELT ONE ROAD AND THE EU The relationship between the EU and China has been extremely ambivalent in recent decades. On the one hand, they are important partners for each other, which is symbolised by a comprehensive strategic partnership agreement concluded in October, 2003. Trade between the EU and China has dramatically increased in recent decades, and the two parties are important trade partners for each other. On the other hand, the relationship used to be characterised by several conflicts of interest and disagreements, featuring a combination of economic, political, normative and ideological elements. This creates a framework that strongly influences beliefs about One Belt One Road within the EU. Unsurprisingly, there is as yet no common EU position on the initiative. The study seeks to give an account of major opportunities given and challenges posed to the EU by the initiative.

CHALLENGES One of the most frequently voiced criticism of One Belt One Road within the EU is that it is basically a draft vision, in which the exact responsibilities of the parties concerned remain unclear. It is unknown which Chinese institutions are responsible for planning, and with whom the specific subsystems of the EU should cooperate. The position taken by some decision-makers of the EU is that under such circumstances efficient planning is impossible, and Chinese leadership cannot expect the EU to support an initiative that raises several questions. A criticism often expressed about the initiative is that projects implemented so far – especially infrastructure investments and their form of funding – are not transparent and conflict with EU regulations (public procurement, environmental impact assessment, technical standards, etc.), and pose a challenge to European principles and values. It is not only within the Union, however, where the implementation of projects poses a challenge but also in neighbouring countries and regions (Eastern Partnership, Central Asia), where Brussels has tried to act as a kind of normative actor in past decades. China’s new rules and norms might mean a newly emerging alternative in these countries. The projects to be implemented within the framework of One Belt One Road (e.g. through railway lines or road networks) provide Chinese firms with better connectivity with nearby countries, which, naturally, might mean increasing competition for some companies in the EU. Furthermore, this is completed by the restructuring of the Chinese economy taking place now: increasing wages and more rigorous internal regulations make China take a step towards high-quality, innovation-driven industrial production, supported by smart industrial production, i.e. a modernisation programme announced by the government focussing on the intertwining of information technology and production (Made in China 2025). Chinese companies producing with a higher and higher added value inevitably enhance competition for European companies of the manufacturing industry. Earlier, major trade routes concentrated in Western European ports – located mostly in countries with a greater influence within the EU –, but the new infrastructure im-

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“ONE BELT ONE ROAD” FROM THE PERSPECTIVE OF THE EUROPEAN UNION: challenge OR OPPORTUNITY?

“One Belt, One Road, a central initiative of China’s foreign policy, and the multipolarisation of the international order create a new environment for the European Union” plemented within the framework of One Belt, One Road prefers the Eastern Member States of the EU and Mediterranean ports (e.g. Piraeus), which is another significant economic impact. Finally, European companies would get into competitive disadvantage compared to Chinese companies due to the lack of transparency even if they were interested in taking part in the projects of the initiative. The fact that new institutions related to the initiative (e.g., AIIB, Silk Road Fund, etc.) have been established without the active participation of the EU and it can only join them is another frequently voiced agreement. The renunciation of rule-making rights creates a kind of dilemma, reflecting China’s intention to obtain the supportive attitude of the EU towards the initiative while providing Europe with a typically passive and inclusive role in it. Finally, the One Belt, One Road initiative serves explicitly geopolitical goals, critical voices claim. First, it divides the EU, splitting Member States into supporters (typically countries of Central and Eastern Europe and Southern Europe) and opponents, which – based on the “divide and rule” principle – creates an opportunity to China to intervene in the domestic affairs of the EU. In a wider context, the goal of the initiative is to undermine the existing international order characterised by global US leadership. For the reasons explained in the introduction, however, the EU has many advantages in the existing order, which, reasonably enough, several interest groups do not want to give up. Taking an active role in the One Belt, One Road initiative would definitely af-

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fect the EU-USA relations, contribute to a further fragmentation of the current order, leading to unforeseeable economic, political and military consequences. The EU seems unprepared for the new situation especially in terms of military, as supporting the Chinese initiative could almost certainly result in the simultaneous weakening of the NATO. In addition, it has been suggested that the initiative could pose a challenge to security policy as China’s influence, growing through its investments, violates the freedom of major (primarily maritime) transport routes – ensured by the USA –, putting international trade in jeopardy.

The implementation of the grandiose projects may mean considerable orders for the European construction industry, with which it might be indirectly beneficial for other industries (machinery industry, electronics, etc.) and services as well. Furthermore, strengthening the East-West relationships to be built within the framework of the initiative significantly overlaps with the European Commission’s Investment Plan for Europe of (more widely known as “the Juncker Plan”), one of the objectives of which is to eliminate infrastructure bottlenecks, first of all in the Central and Eastern European region. The projects of One Belt, One Road can be coordinated with other European development

be indispensable for the EU to assert its interests more successfully. Finally, active participation in the initiative would allow Europe to participate actively, as a policymaker in the changes taking place in its environment. The EU lost considerable ground in East, Central and South Asia after the economic crisis in 2008. Theoretically, One Belt, One Road can become a platform providing for a turnaround. Active participation would result in the EU’s ability to more easily influence the operation of institutions established within the framework of the initiative, and to more strongly promote its own ideas, economic and social normative standards. With all these, it could

OPPORTUNITIES

programmes, such as the EU-China Connectivity Platform, or the Eastern Partnership, where China’s inclusion can theoretically enhance the efficiency of the projects.

exert a stronger impact on shaping One Belt, One Road than with criticising it as an outsider.

Finally, for the economy of the EU, increasing Chinese investments do not only represent a challenge in the EU, but also raising significant capital and, in the future, an uptake of technology, for which there will be a growing need in the future. It is also justified by several successful acquisitions completed earlier (Volvo, Pirelli & C. SpA, BorsodChem), despite the fact that fear of Chinese investments has grown in recent years. Especially less developed states of the EU (Southern Europe, Central and Eastern Europe) regard Chinese investments as opportunities to be seized and which might promote their own socio-economic modernisation.

The arguments listed above reveal that the One Belt, One Road initiative poses serious challenges but, at the same time, also offers opportunities to the EU. All these, however, make the development of a uniform foreign policy strategy on community level extremely difficult, because the initiative is conceived in different ways both by nation states and various interest groups. Theoretically, the EU can give three responses: it does not deal with it, it rejects it or it takes part in its shaping. Whichever response is given, it is safe to assume that not all nations and interest groups concerned will be equal beneficiaries of it.

In addition to the economic sphere, the BRI offers political and geopolitical opportunities to the EU. Undoubtedly, the BRI may be effective at mitigating some challenges faced by the EU, because it may stabilise its environment through common economic development and is likely to reduce migration pressure or terrorism. In fact, the most exciting question is whether Europe, supported by the BRI, can transform its century-old Atlantic focus, leaving more room for a Eurasian orientation. This new orientation would entail a decrease in the USA’s European influence and international role, which offers the opportunity to Europe to be able to break out from its subordinated, secondary role and could become a major power of international order enjoying full rights. Naturally, this radically new geopolitically orientation requires a more coherent defence and foreign policy, which would

In fact, the transformation and multipolarisation of international order raises another question: to what extent can the EU ignore the changes generated by the One Belt, One Road initiative and taking place in its environment? One Belt, One Road is expected to exert a growing impact on the life of Asia, Eastern Europe, the Middle East and Africa. In these regions – due to Brexit and internal economic and social problems, among others –, the EU is expected to be less able to compete with China, thus rejecting and ignoring the initiative may entail a further dramatic decrease in the international influence of the Union, accompanied by a certain international isolation. The transformation of international order might imply such coercive force that might possibly result in the implementation of a policy conflicting with the aspirations of the decision-makers of the EU.

In Addition to frequently voiced criticisms, there are more optimistic opinions as well. According to the supporters of the initiative, it offers several opportunities to the EU in the economic sphere in the first place. New interconnections implemented within the framework of One Belt, One Road may not only mean more intense competition but also new markets to European companies. The relative isolation of adjacent regions is a burden also to European companies, but the planned new infrastructure and the related services (e.g. logistics) can be a benefit for them as well. This process is perfectly illustrated by Eurasian railway transport, which is referred to as a symbolic realisation of One Belt, One Road, but in fact it came into being on the initiative of German multinational companies, years before the announcement of the Chinese plan. Further opportunities are offered by the reduction in transport costs due to the new infrastructure, which can be beneficial for EU trade. In many cases, the projects of the initiative can present excellent investment opportunities to the European financial sector, supporters claim. Although China has established several banks and funds in recent years, alone it will be unable to implement the grandiose plans, therefore it will need to involve as many state and market players as possible. Furthermore, One Belt, One Road concerns several countries that are anticipated to have a more dynamic growth potential in the future than developed markets do. These are exactly the benefits that European countries joining AIIB as founding members despite the USA’s open disapproval wanted to grab.

CONCLUSION

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EUROPE’S VIEWS ON THE ONE BELT, ONE ROAD INITIATIVE Author: M arcell Horváth, Eszter Badics, László Bartók, Tamás Jávori, Gábor Kudar, Vivien Anett Pintér, Gábor Zajka

The “One Belt, One Road” (OBOR) initiative, announced in 2013 by Xi Jinping, was not welcomed by European countries in the same way. Generally speaking, the states of the Old Continent initially took an attitude of distrust towards the project, and steps serving a careful approach and later specific cooperation have been taken gradually, since 2015. The project launched by the largest country of East Asia was viewed with suspicion by most European countries because they could see it as further enhancement of globalisation, and they were concerned that the economic scheme would be eventually put by Chinese leadership at the service of their political ambitions – strengthening China’s major power position. That is a fact that China, emerging and gaining strength economically, represents a competitor for many developed European countries. The country has been accused of, among others, aiming at nothing else but shattering the unity of the European Union. The Chinese economy is seen as an extremely selfcentred economy by many, thus it is primarily interested in projects to be implemented directly in Europe and not in granting European companies easy/ easier access to the Chinese market. It is demonstrated by numerous administrative and other barriers erected to European companies intending to invest in China, the burdensome issuance of operating licences, and binding them to technological transfer. In addition, European companies often complain about discriminatory treatment, unfair market competition (taking place with the partici-

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pation of a high number of state-owned companies) and the ignorance of cyber security issues, and they also resent that they are often forced into joint ventures with Chinese companies. Nevertheless, most European countries could/can see the opportunities in OBOR that are opening up due to their favourable geographical location, advantageous economic situation, developed financial infrastructure or the advantages they have in a specific sector, whether it be industrial, agricultural, technological or cultural. Europe wishes to base the cooperation on equal partnership, mutual trust, rules acknowledged by all, and such basic principles as the rule of law or respect for human rights. This summary gives an account of how the perception of the OBOR project has changed in the countries of the European continent, the countries that have joined the programme, the fields and the intensity of their high-priority cooperation with China. The analysis focusses on the relations that France, the United Kingdom, Switzerland, Belgium, the Netherlands, Germany, the Baltic states and the countries of the Mediterranean (Italy, Spain, Greece, Portugal, Malta and Cyprus) have with China. INTRODUCTION – THE OBOR INITIATIVE As the dynamic economic growth of the past decades has been slowing down, China must find solutions for the following strategic challenges in order to escape the middle income trap:

1. it must satisfy the hunger for energy and raw materials of the domestic industry in the long term; 2. it must find new markets to maintain economic growth; 3. i t must export overcapacities in specific sectors (e.g. construction industry); and 4. m ust diversify. In order to achieve the above objectives, President Xi Jinping announced the “One Belt, One Road” (OBOR) initiative in 2013. Within the framework of “One Belt, One Road”, China is planning to invest $1,000 billion in railway, port and road construction to connect Europe with China, and achieve Eur-

suance of operating licences, and binding them to technological transfer. In addition, European companies often complain about discriminatory treatment, unfair market competition (taking place with the participation of a high number of state-owned companies) and the ignorance of cyber security issues, and they also resent that they are often forced into joint ventures with Chinese companies. Nevertheless, most European countries could/can see the opportunities in OBOR that are opening up due to their favourable geographical location, advantageous economic situation, developed financial infrastructure or the advantages they have in

asian connectivity, which could create a new kind of harmony in the world order. The international recognition of OBOR is also indicated by the fact that so far over 100 countries and international organisations have expressed their intention to join the initiative, and over 40 Memorandums of Understanding have been signed by China under the aegis of OBOR. In 2017, China’s trade with the countries participating in the initiative amounted to $ 1,140 billion, which means an increase of 17.8 per cent compared to the previous year. The related financial cooperation can be implemented primarily in the forms of loans; thus, the programme means long-term investments for China.

a specific sector, whether it be industrial, agricultural, technological or cultural. Europe wishes to base the cooperation on equal partnership, mutual trust, rules acknowledged by all, and such basic principles as the rule of law or respect for human rights. This summary examines the positions adopted by Western European, Southern European and Northern European countries on the initiative.

OBOR is financed by: • D evelopment banks: Asian Infrastructure Investment Bank (AIIB), New Development Bank (NDB) • I nvestment funds (Silk Road Fund, China-CEE Investment and Cooperation Fund, Sino-CEE Fund, China-EU Co-Investment Fund) • C hinese commercial (BOC, ICBC, China Construction Bank) and policy banks (China Eximbank, China Development Bank, Agricultural Development Bank of China) • C hinese, state-owned other financial institutions (e.g. China Investment Corporation, China International Trust and Investment Company) Chinese economy is seen as an extremely selfcentred economy by many, thus it is primarily interested in projects to be implemented directly in Europe and not in granting European companies easy/easier access to the Chinese market. It is demonstrated by numerous administrative and other barriers erected to European companies intending to invest in China, the burdensome is-

FRANCE AND THE “NEW SILK ROAD” INITIATIVE For a long time, the “New Silk Road” plan, launched by the Chinese leadership, was not a priority in France, thus neither Hollande’s government nor Macron’s cabinet, formed in 2017, addressed the topic in substantive terms. By the end of 2017, however, it had become clear that the French corporate sector did not want to be left out of the economic initiative launched by the Chinese in 2013. It was evidenced by a large-scale economic conference related to the “New Silk Road” programme, organised by IRIS (Institut de Relations Internationales et Stratégiques), a think tank on international affairs in late November, 2017. In January 2018 Emmanuel Macron paid a visit to China, with the objective – among others – to let Beijing know that France wished to engage in the initiative. The French President, however, indicated that participation in the project did not necessarily mean Chinese investments realised directly in France, but the fact that French companies are ready to “assist” in infrastructure investments made along the Silk Road, whether they be investments in Asia or Africa. Emmanuel Macron

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also said that Paris, naturally, did not close itself off Chinese investors – but despite its liberal economic policy approach – regarded the protection of strategic sectors as a priority. Furthermore, he also hoped that Chinese partners would also respect the principle of reciprocity, also emphasised in a joint communication issued by France, Germany and Italy in July 2017. The French President emphasized that it should not be a one-sided and one-way project but should be implemented as an economic programme based on mutual cooperation. During his visit to China, Emmanuel Macron also indicated Paris’s readiness to participate in the Green Silk Roads initiative launched by Beijing’s leadership in June 2017, which is justified by the experiences and strengths of the French corporate sector in the development of renewable energy sources and the implementation of other environmental investments. In particular, the French corporate sector is ready to take part in progressive projects representing high added value. Six months after French President Emmanuel Macron’s visit, Prime Minister Édouard Philippe also visited the Far Eastern country and held talks with

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Chinese President Xi Jinping and Chinese Prime Minister Li Keqiang on the implementation of economic and trade roadmap outlined in January. The fact that Beijing lifted the embargo imposed on French beef in 2001 can be put down as a success of the meeting held in June, although the lifting of this sanction within six months had been promised to the French President at the beginning of the year. In addition, the Chinese party confirmed that young, innovative French companies were highly welcome in China. In relation to the “New Silk Road”, Édouard Phillipe said that the initiative could be supported if the objectives of the project would be implemented in a transparent way, with regard to the principle of reciprocity and financial sustainability by China’s leadership, as promised. To the question as to why France does not fully commit to the plan, Christian Vicenty, the expert of the Ministry of Economy and Finance on the New Silk Road Project gave the following answer in his presentation delivered at Dauphine University: the French have not at all been experiencing globalism taking place since the 1980s as a positive event. Thus, not surprisingly, participation in a

project strengthening globalisation may provoke fear in most citizens, and also French leadership is suspicious about China’s major power aspirations. On 30th May, 2018, The Committee on Foreign Affairs, Defence and Armed Forces of the French Senate published a comprehensive report prepared by their working group responsible for the New Silk Road, entitled ‘Is BRI a simple economic label or new world order for France?’. The report confirms that balanced relationships must be created between China, Europe and France, and, the authors of the report think, it is important that – in the spirit of multilateral cooperation – trade partnerships should be based on reciprocity, respect

al within the framework of the Silk Road. The agreement contained a loan facility of $1 billion, which can be used by the French partner to purchase Chinese cargo vessels. • A lthough indirectly, but French oil company Total also profited from the New Silk Road project, since the Silk Road Fund was a key funder for the exploitation of liquefied natural gas fields in Yamal, at the northern costs of Russia. Total has a stake of 20% in the project. • C hina Mobile International Limited (CMI) opened its French subsidiary on 2nd March 2018. After China Telecom Corporation Limited and China Unicom, China Mobile is the third Chinese tel-

for competition and protection of intellectual property rights. To achieve these, the report set out geographical, economic and environmental recommendations.

ecommunications company to enter the French market. The services of China Mobile can be used by Chinese companies present in France as well as Chinese tourists. The long-term goal of the company is to extend their activities over francophone countries in Africa, as further, OBOR-like investments are expected in this region. • French XL Airways does not only offer destinations in Northern America, the Caribbean and Israel, but also expects significant passenger traffic into China. XL Airways launched its first flight from Paris Charles De Gaulle airport to Jinan, the capital of Shandong province on 9th July 2018. In the near future, the company is expected to launch flights to Beijing and Shanghai.

Presentation of investments realised so far The following events are worth highlighting about the French implications of the OBOR project: • I n April 2016 the first freight train carrying Chinese goods arrived from Wuhan in Lyon. • I n November 2017, Dourges rail station in northern France welcomed the first freight train containing Decathlon brand products made in China, and little bit later a freight train containing the products of French automotive group PSA Peugeot-Citroën. Decathlon announced that goods of one train per month were expected to be transported on this route from Wuhan to the French town starting in 2018. It also means that Dourges can sign up onto the list of potential terminal points of the New Silk Road. • W ithin the framework of the OBOR cooperation, French start-up Actility will build an IoT network covering a territory of 23 square kilometres in the Beilin District. • I n February, 2018 Marseille International Fashion Center was inaugurated, in which Chinese products would be sold. Although the shopping centre is not directly related to the OBOR project, according to Challenge5 magazine the inauguration of the centre might be a preamble to the southern port city’s becoming a potential maritime destination of the Chinese economic initiative. • I n 2015, Marseille-based shipping company CMA CGM signed an Agreement of Cooperation with Chinese China Merchants Holdings Internation-

THE UNITED KINGDOM AND THE NEW SILK ROAD INITIATIVE Due to its geographical location, it would be safe to think that the United Kingdom stays away from the OBOR project launched by Beijing in 2013, since none of its routes would run through the island state, and no destination hubs can be found there. Nevertheless, London has been interested in the initiative from the very beginning. The first official steps were taken in 2015, when UK chancellor of the time, George Osborne, paid a visit to China, and soon London was among the first ones to join the Asian Infrastructure Investment Bank (AIIB). The leadership of the island state could see a considerable opportunity in the OBOR initiative and awaited actors of the British economy and finance express their interest. According to a working paper prepared by the China-Britain Business Council in 2015, British com-

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• T he first freight train between China and the United Kingdom arrived in Britain at the beginning of 2017, and three months later a freight train departed from London to China. • E urope’s first research programme on the New Silk Road was launched at Oxford University on 13th September 2017. The programme, which is available within Oxford's Faculty of Law, is led by Prof. Denis Galligan. The objective of the research project is to examine the laws and regulations pertaining to the New Silk Road as well as its trade agreements. Role of commercial banks and the opinion

panies could play a significant role in the following fields thanks to the OBOR project: providing infrastructural, financial and other professional services and counselling, agriculture, renewable energy and other environmental solutions, transport technology, energy industry and mining of raw materials, e-commerce and logistics. In addition, the British business sector have good chances in the field of medical technologies, life science, tourism and the creative and culture industry. After June 2016 – after the Brexit memorandum – the OBOR project attracted an even greater interest of the British political and business sphere. After the voting, the governing Conservative Party made it clear that the country wanted to make an even more active use of the opportunities offered by globalism, and participation in the initiative launched by Beijing was a possible way of that. Theresa May, however, remained cautious, and was not willing to sign a Memorandum of Understanding giving Britain’s official endorsement to the OBOR project during her visit to China in January this year. This was contributable to the fact that British leadership – as well as that of many other Western European countries – still views the New Silk Road with suspicion. It is seen by many as nothing else but the extension of the Chinese economic expansion, flooding domestic markets

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with Chinese products and the acquisition of British (and other European) innovative companies. The British Prime Minister, however, referred to her country’s commitment to participating in the OBOR project. The benefits of the OBOR project for the United Kingdom According to fDi Magazine, a bimonthly publication from the Financial Times group, the United Kingdom enjoys several benefits from participating in the Chinese initiative, primarily because the English language fulfils the role of being the “lingua franca” of the global world, illustrated by the fact that it is the foreign language choice of 93% of Chinese school children. Furthermore, common law is a significant factor, upon which the legal system of the United Kingdom and the United States of America as well as Australia and India is based, and also forms the legal basis for several international laws. Another advantage of the island state is that it is home to some of the best universities in the world, ensuring an abundance of talents in the United Kingdom. Description of the investment and the initiative realised so far Within the framework of the programme launched by the Chinese, the following UK-related project has been realised:

of the central bank London can gain a significant advantage primarily in the financial services sector as, beside New York, the British capital counts as the largest yuan-trading market in the world. But while the OBOR zone does not extend as far as New York, connectivity is not a problem for London, and the City may play a key role in the finances related to the initiative. Thus, it is not a coincidence that the City of London signed a partnership agreement with Hong Kongbased Infrastructure Financing Facilitation Office (IFFO) in December 2017 to promote cooperation between the British financial centre and Chinese banks on OBOR-related projects. Banking experts argue the United Kingdom will be able to complete the financial background tasks of specific projects, making risk management, legal and other financial analyses, but it will be also able to provide expert advice. British banks will be able to be present in the specific projects as financial intermediaries, which is well illustrated by a British bank, Standard Chartered, already taking part in over 40 projects. On 17th September 2017 HSBC Bank was granted the “Best Overall International Bank for Belt and Road Initiative” award in the Asiamoney New Silk Road Finance Awards ceremony, mandating the British bank as the leading financial partner of the participants of the OBOR project. SWITZERLAND AND THE “NEW SILK ROAD” INITIATIVE The One Belt, One Road initiative of the Beijing leadership is regarded as an exceptional opportunity by the Swiss government, and the Alpine country intends to take a significant role in it. Switzer-

land has further advanced in its cooperation with China than its European competitors have, since it was the first country of the continent to make a free trade agreement with Beijing. The country’s commitment to the New Silk Road project is also indicated by the fact that it helped the work of the Chinese leadership in establishing the Asian Infrastructure and Investment Bank, and also joined the organisation in early 2016. The interest of the Swiss is also demonstrated by the fact that Switzerland – as opposed to most Western European countries – was represented on presidential level by Doris Leuthard at the OBOR Forum organized in Beijing in May 2017, which was an obvious diplomatic message to China’s leadership. Switzerland is not developing relationships only with China, but also with other Central Asian countries participating in the project, including Tajikistan, Kyrgyzstan and Kazakhstan, which were visited by Federal Councillor Ueli Maurer in 2017, assuring their leaders that Switzerland endorsed the initiative, therefore former Soviet republics can rely on them also in financial intermediation and co-funding. On behalf of the Swiss government, both Doris Leuthard, the President of the Swiss Confederation and Ueli Maurer, Head of the Federal Department of Finance have expressed a positive view on the New Silk Road project, which offers considerable opportunities of the Swiss corporate sector. Jörg Gasser, State Secretary for International Finance considers it a long-term programme which has begun lately therefore there are as yet no concrete results to be assessed but China will undoubtedly complete the project to achieve the goals set. Gasser thinks that Switzerland does not pose a threat to China, since it is not a member of the European Union, it has a stable economy, and the OBOR project will do nothing but strengthen the economic relationship between the two countries. Investments realised so far and possible further cooperation The New Silk Road initiative provides the Swiss corporate sector with excellent economic opportunities, especially for the transport and energy industry, telecommunications networks, the development and manufacturing of renewable energy sources, the aviation and food industry. A further goal is to take part in developing the financial infrastructure of the programme in the field of financial intermediation and risk assessment.

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As Switzerland has no ports, the best way for the Alpine country to join the New Silk Road projects could be through the development of railway lines. Ticino canton in the south of Switzerland has been establishing increasingly close connections with Kazakhstan, one of the major participant so the OBOR project. Due to its proximity to Italy and Mediterranean ports, Ticino is already a privileged centre of trade in Europe. According to the calculations of the Chamber of Commerce of Lugano, the trade volume between Ticino and countries most involved in the OBOR project has increased as metals, vehicles and luxury watches are exported to Hong Kong (+19%), China (+14%) and Russia (+31%). In order to develop railway lines, the construction of the 15.4 km-long Ceneri Base Tunnel has already started, its opening is scheduled at the end of 2020. Role of commercial banks The commitment of Swiss loan institutions and insurance companies is well reflected by the fact that several market players – such as ABB Ltd., Credit Suisse Group, UBS Group and Swiss Reinsurance – have already expressed their endorse-

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ment of the New Silk Road project. The role that is fulfilled in OBOR by the Swiss financial sphere has been also emphasised by the State Secretary for International Financial Matters at the Federal Department of Finance (FDF). BELGIUM AND THE NEW SILK ROAD INITIATIVE In a conference held at the Chinese Embassy in Belgium in 2016, Belgian Deputy Prime Minister Kris Peeters said that his country was interested in taking part in the New Silk Road project. The politician pointed out that the port of Antwerp and Zeebrugge could play a central role in the Chinese initiative. Furthermore, Peeters confirmed that Belgium was ready to join the Asian Infrastructure Investment Bank (AIIB); however, this has not happened yet, currently Belgium – according to the website of the bank – is still among the future members. The prominent role of Belgium, and that of Antwerp in particular, in the OBOR project was also appreciated by the Chinese Ambassador to Belgium. The port city is planned to be an important terminal of trade conducted between Europe, Africa and China, as well as the China Railway Express.

Walloon Export Agency (AWEX) organized a workshop dedicated to “One Belt, One Road”, in Louvain-la-Neuve, Belgium, on 5th June. Sébastien Goulard, manager of Cooperans, a consulting agency promoting the implementation of the “New Silk Road”, gave a presentation on the benefits of the OBOR project to Belgian entrepreneurs and export consultants, and advised them to participate in this transcontinental project. The expert highlighted that Wallonia had such characteristics that would make the region a key link in the OBOR project. Investments realised so far Within the framework of the OBOR initiative, cargo trains have arrived in Belgium several times. • I n particular, the port of Zeebrugge received trainloads from the Chinese factories of Volvo. The motor vehicles were sent subsequently to the automotive markets of Europe from the port. The goal is to receive four to six cargo trains weekly in the Belgian port, as a result of which 30 to 40,000 cars can come annually by rail from China to Belgium. • T he Memorandum of Understanding concluded by the two countries can be regarded as another important step. Pursuant to the Memorandum, the parties will conduct impact assessments to

investigate the possibility of establishing a rail connection between Antwerp and Caofeidian, China, which would greatly promote the flow of Chinese and European goods. Furthermore, the parties are also planning to establish a port training centre. • At the beginning of 2018 Chinese COSCO Shipping Corporation was granted a concession right to manage the port of Zeebrugge. The parties expect trade between the two countries, which has already been significant, to expand further. • O n 12th May 2018 the first “Silk Road” freight train, loaded with 34 containers transporting industrial minerals, arrived from the city of Tangshan to the port of Antwerp. The Chinese government plans to send one or two trains to the Belgian city on a monthly basis, and the local governments of the two cities are planning to sign a Memorandum of Understanding. THE NETHERLANDS AND THE “NEW SILK ROAD” INITIATIVE The Dutch government seeks to develop a framework which assesses both the benefits and the risks of participating in the OBOR project. The Ministry of Foreign Affairs undertakes a task of coordination between the different ministries,

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which, in cooperation with the representatives of the given industries, will analyse the possible consequences of the “New Silk Road” programme. It is worth highlighting that the Dutch primarily conduct negotiations within a bilateral framework, therefore they are not committed to establishing an agreement on EU or international level through the cooperation. The Netherlands is a founding member of the Asian Infrastructure Investment Bank (AllB) and has contributed a capital of some $1.07 billion to the establishment of the credit institution, in which it has a voting right of 1.07 per cent. During his visit to China in 2018, Dutch Prime Minister Mark Rutte explained that Dutch companies were willingly taking part in “reviving the ancient Silk Road”, but they needed to know the details. They expect, for example, China to ensure the participation of foreign companies in the OBOR project on a non-discriminatory basis, and they would rely on already existing international organisations – such as the World Trade Organisation – in commercial dispute settlement.

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Investments realised so far and potential further cooperation The Netherlands is one of the largest trading partners of China, due to primarily the transit trade conducted between the two countries. Most products arrive from Germany, and go to China via the port of Rotterdam. Within the framework of the “New Silk Road”, Chinese shipping corporation COSCO has acquired a stake of 35 per cent in the company operating Euromax Terminal of Rotterdam port. After the acquisition of shares, China’s largest shipping company confirmed that for them, the Dutch city would remain the most important port in Europe. Dutch companies primarily see business opportunities in ports to be built outside Europe and performing their related management tasks. Furthermore, the Dutch agricultural sector also see potential in the project, as their products can reach the Far Eastern country more rapidly and cheaply due to the development and a better use of railways. In 2016, three Dutch commercial companies (KLG Europe, Royal Wagenborg and H. Essers) launched a joint venture company named

New Silkway Logistics with the aim of providing logistics services between the cities of Duisburg and Chongqing. In addition to Rotterdam port, the railway line between Chengdu and Tilburg, constructed within the framework of the “New Silk Road”, must be mentioned. It carries consumer electronics from China to the Netherlands, while oil, automotive and agriculture products are transported to China. Furthermore, a new railway line was opened in March 2018, connecting the city of Yiwu, next to Shanghai, with Amsterdam’s port, Amerikahaven. The route is 11,000 km long, and runs across Mon-

In an interview given in December, the diplomat spoke about the relations of the two countries. First and foremost, he emphasized that economic relations were continuously developing between China and Germany, which naturally implied conflicts. He strongly criticised the new Chinese act on cyber security; he thinks it is an essential need of every company that the parent company and the subsidiaries can have secure, online end-to-end communication. Therefore, Chinese authorities were requested to have a dialogue with the companies concerned, but it has not yet taken place. According to the ambassador, China – due to its economic rise – represents an increasingly seri-

golia and Russia. Chinese Citic Telecom CPC acquired Linx Telecommunications BV in 2017, within the framework of the OBOR initiative. The Dutch telecommunications company provides services in several countries through which the “New Silk Road” passes. This is how the Chinese company wants to promote the information flow along the “New Silk Road”.

ous competitor to Germany, but regrettably Chinese businesses do not always outmatch German companies in a fair market competition. More and more German companies approach the embassy and express their grievances about increasing discrimination as a result of state intervention and administrative obstructions. It is difficult for many companies that Chinese authorities bind the licensing of their activities to forced technology transfers and compulsory joint ventures with Chinese partners. Nevertheless – as opposed to previous promises –, market entry in China has not become easier at all for foreign companies. About the “Made in China 2025” initiative, Michael Clauss said that China had started a very dangerous experiment in economic policy, rising concerns that China might be steering towards a self-centred economy which would eventually leave little room for foreign businesses. Such an approach will not only harm the interests of foreign companies but ultimately be to the detriment of China itself. At the same time, the diplomat emphasised that the new German government immediately after taking office would reach out to the Chinese leadership in order to jointly address the issues. The ambassador did not want to suppress the fact, either, that the investment climate was changing negatively for foreign companies in China.

The role of commercial banks Several Dutch credit institutions have indicated their willingness to take part in financing specific trade transactions and managing the risks involved. GERMANY AND THE “NEW SILK ROAD” INITIATIVE How the OBOR project is perceived from the perspective of German politics? The position of Germany’s ambassador to China Germany’s position about OBOR is not clear yet. For example, Michael Clauss, Germany’s ambassador to China gave several, surprisingly trenchant interviews to the South China Morning Post in 2017. Clauss primarily criticised the ”16+1” initiative, which is seen by the diplomat as an attempt to break the unity of the EU. However, he praised the OBOR project; he thinks the programme can contribute to economic development both in Asia and Europe. He added, however, that China should work on making the initiative as popular as possible. According to Clauss, Germany’s economic successes and the history of the EU are textbook examples of achieving positive results with models built on mutual trust and rules acknowledged by all.

The opinion of the German Minister of Foreign Affairs On 19th August, Heiko Maas, Germany’s Minister of Foreign Affairs gave an interview in which he warned of the growing Chinese influence in world politics. According to Maas, China applies a centrally controlled model of state-run capitalism, with many imposed limitations, and it is consist-

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the parties avoided all topics implying any conflict. This is how Ms Merkel managed to take part in the meeting without speaking a word about the Silk Road. In July, a large delegation, headed by China’s Prime Minister, arrived in Germany for an intragovernmental meeting. The German press called the visits China’s new “charm offensive”. The message of the Chinese clearly was that their country had committed to further opening. In his writing published in the Frankfurter Allgemeine Zeitung, China’s Prime Minister explained his country’s intention to seek a new kind of, closer cooperation. His government will do everything to ensure Chi-

ently working to expand its influence and pursue its geostrategic interests. At the same time, China’s leadership tries to portray themselves as a major protector of the free world. In the interview, Maas pinpointed his belief that Germany must seek to cooperate with countries representing similar values. Germany is committed to democracy and free trade, thus Canada, Japan, South Korea and South Africa could be initial points of contact for an alliance. Content of the grand coalition agreement and the steps of the new government The China-related content of the agreement concluded by the parties during coalition negotiations is definitely worth exploring. In this document, the parties have stated that the balance of global power has significantly shifted in economic, political and military terms in recent years. The changed interests of the USA, China’s gaining strength and Russia’s policy all indicate that Europe must take its faith into its hands even more. The representation of common interests and the preservation of a social model based on solidarity can be achieved together. A strong, democratic and competitive EU is the response to global problems.

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In connection with Asia, the coalition parties have pointed out that the dynamic economic expansion of the region continues to offer tremendous opportunities for Germany and Europe. However, unresolved conflicts imply a considerable threat, therefore Germany and Europe wish to act as economic, social and security policy partners in the region. In relation to China, it has been highlighted that the influence of the country is expected to grow, thus Germany’s primary aim will be to expand their strategic partnership. In the opening of their markets, Germany and Europe must follow the principle of reciprocity. The coalition parties think that the OBOR initiative is an example of the potential opportunities and risks about China, to which a European response must be developed. However, it is important to highlight that – with regard to China’s diverse claims to power and the build-up of leverage – Germany will emphasise the importance of a rule-based international order for stability and a functioning global economy. In addition, Germany will also insist equally on the protection of human rights and rule of law. In May, the Chancellor paid an official visit to Beijing. This meeting was overshadowed by the trade policy of US President Donald Trump, that is why

nese and Western countries are treated equally. However, accusations that China does just the opposite in practice cannot be heard only in the circles of President Trump. According to foreign companies doing business in China, the only reason why these criticisms are not louder is that many are concerned about the consequences. Those who voiced their opinions criticised authorities, the lack of rule of low, censored internet, and the status quo of human rights. Several studies have come to the conclusion that China is opening up only on paper, or make real concessions too late. Chinese companies, often state-owned businesses, already enjoy monopolistic positions in the market by the time Western ones can enter. Truly enough, in addition to risks, opportunities are also enormous. It is not a coincidence that China has been Germany’s most important trading partner since 2016, and German automotive giants such as Daimler, BMW and VW, and several medium-sized German companies realise most of their profits in China. A European response to the Silk Road project is taking shape As the coalition agreement purported, the German government primarily hoped for a joint European response. The restraint of the German party regarding the Silk Road shown in recent months can be explained by the fact that – according to the weekly business news magazine, WirtschaftsWoche – the EU is planning to adopt a comprehensive strategy, responding to the Silk Road initiative. According to an internal document of the EU, obtained by the magazine, the new, comprehensive “strategy to improve connectivity between the EU

and Asia” will be presented by Federica Mogherini, the High Representative of the European Union for Foreign Affairs and Security Policy, on 19th September. The specific goal of the plan is to strengthen energy, transport and digital networks between Europe and Asia, as well as intensify relationships in the fields of education, research, innovation, culture and tourism. The Foreign Ministers of the European Union are going to meet in mid-October, and will give their consent to the concepts. The plan harshly criticises China: the country is investing huge amounts in some countries, which makes them unhealthily dependent on and indebted to China. How the OBOR project is perceived from the perspective of the German economy Germany is a strongly export-oriented economy, and as such, heavily relies on developed and wellfunctioning infrastructure. This is why the OBOR project has become a very important topic in Germany from the very first moment. Even the name “Silk Road” is a German “invention”, coined by geographer Ferdinand von Richthofen during his expeditions in the 19th century, which has made the initiative even more popular in Germany. Hamburg-based German Asia-Pacific Business Association (Ostasiatische Verein-OAV) comprises 500 German companies doing business in the region. According to Daniel Müller from OAV, the majority of German companies initially didn't know what to make of the OBOR project when it was launched in 2013, but the initiative has really come to companies in 2015 when AIIB was founded. However, initial enthusiasm swiftly faded, Müller thinks. He primarily has resented that China failed to come up with a coordination principle, as only inscrutable ideas have been encountered yet, which were assigned the name "New Silk Road". This is why German companies have shown so far low activity towards OBOR (with the exception of the two largest German banks). In May 2017 Chinese Premier Li Keqiang paid his third official visit to Berlin. Shortly before his arrival, Deutsche Bank announced to take part in the infrastructure development related to the “New Silk Road” project with $3 billion in cooperation with China Development Bank in the next five years. It is not a coincidence that Deutsche Bank is interested in the project as Chinese HNA Group is its largest shareholder. The Chinese investment

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of Commerce and Industry (Deutscher Industrieund Handelskammertag) spoke out in favour of strengthening economic relations between Germany and China. This step is especially indispensable in the context of the USA’s changed economic policy.

joint venture can also delegate a member to the of supervisory board of Deutsche Bank. On the occasion of the Chinese Premier’s visit to Berlin in July 2018, Commerzbank made an important announcement. The co-operation framework signed by German Commerzbank and Chinese ICBC (Industrial and Commercial Bank of China) in July 2018, intends to use the opportunities inherent in the New Silk Road based on an existing partnership. Commerzbank is the only German financial institution with which ICBC has a Memorandum of Understanding, but the ad-hoc cooperation of the two banks along various transactions has a history of 20 years. According to the Memorandum, the two parties intend to finance projects the primary aim of which is to promote the construction of the “New Silk Road” in a value of $5 billion within five years. The cooperation covers the financing of OBOR projects, capital market activities and trade. According to Nikolaus Giesbert, member of the Board of Directors of Commerzbank, the strong lending capabilities of the German financial institution in Europe combined with ICBC’s knowledge of the Chinese market will greatly assist, on the one hand, European corporates to map business opportunities along the trade corridors and, on the other, Chinese corporates to invest in Europe. In relation to the OBOR programme, Germany’s most significant inland port, Duisburg, where 24 freight trains arrive from East Asia every week,

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Limiting Chinese investments in Germany According to a draft, the acquisition of a shareholding of at least 15 percent in a German company engaged in defence technology – or any other procedure or product concerning national security – by investors from outside the EU could

and Deutsche Bahn, which has expanded its activities in Asia are worth mentioning. Although 24 freight trains do not seem too few at first sight, but the business still generates losses. This is mainly contributable to the fact that carriages transport too little cargo on their way back. According to Daniel Müller from OAV, the Chinese party must improve transparency to a great extent to make the project popular among German companies, and avoid the risk that the Silk Road becomes “one-way”. German corporates, who are afraid that fair competition cannot be expected, are sceptical primarily due to risks and the participation of too many state-owned Chinese companies. Jörg Wuttke, Chief Representative of German chemical company, BASF in China, is also sceptical about the OBOR project. As far as he can see, too many countries with different and rivalling political systems take part in the initiative. In addition, the differences between the levels of development of their infrastructure are too large, from different voltage in long-distance cables to different track gauges. By contrast, Garth Ritchie, member of the Management Board of Deutsche Bank is optimistic about the programme; he believes that it represents huge opportunities for the economies of both Europe and Asia. Directly before the government consultation in July 2018, Martin Wansleben, the managing director of the Association of German Chambers

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be scrutinised in the future by the German Economic Affairs Ministry, which considers whether the acquisition poses a threat to public policy or public security. This share used to be 25 per cent. Although the government has never used its veto power, in the recent past it did raise concerns, and, as a result, an investor withdrew its offer. Although the draft does not mention China in particular, but it is obviously targeted against Chinese companies, which have been engaged in a particularly aggressive acquisition practice in Germany recently. Experts are concerned that stricter controls may entail diminished foreign investor appetite, but the spokesperson of the Economic Affairs Ministry believes that Germany remains one of the most open economies of the world and the government should not be necessarily expected to block a high number of investments in the future. THE NORDIC COUNTRIES AND THE “NEW SILK ROAD” INITIATIVE After the OBOR project had been announced, most countries adopted a wait-and-see approach and sought the opportunity to join. Basically, Nor-

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dic countries are not located along the “New Silk Road”, thus up to now they have been hardly mentioned in relation to the project. Denmark’s role, however, must be highlighted: the country – the only one from the region – entered into a strategic partnership with China in 2008, which was renewed in 2016. China’s announcement made on 26th January changed the entire status quo fundamentally. A White Paper was presented, which includes detailed guidelines about how the “Near-Arctic State” intends to assume a more significant role in the region. According to the document, the changes in the climatic conditions of the Arctic have created a fundamentally new situation, to which China must respond as it affects the climatic conditions of the country, and offers new opportunities for the economy, the industry and the agriculture. •F rom China’s perspective, the Arctic can be especially attractive as a new trade route. According to some calculations, this sea route can be two weeks faster than the one running through the Suez Canal in the south. The Shanghai-New-York distance could be cut by one week, compared to the Panama Canal.

• C hina wants to assume an active role in extracting the fossil fuels of the Arctic. According to the White Paper, however, China also wishes to put great emphasis on using renewable energy resources (geothermal, wind and other clean resources). • F ishing opportunities also attract China into the region. • Furthermore, China wants to boost Arctic tourism. The continental and insular land territories in the Arctic cover an area of about 8 million square kilometres, with sovereignty over them belonging to Canada, Denmark, Finland, Iceland, Norway, Rus-

of the new project. Several Northern European companies with considerable experience can be attractive partners for Chinese investors in the fields of fossil fuels, fishery and the construction of trade routes. It is already visible that Nordic countries will seek opportunities, in competition with each other, to form a part of the corridor connecting the Arctic with Europe.

sia, Sweden and the United States, respectively. The idea that China should assume a greater role is not new; ‘the Arctic belongs to all the people around the world as no nation has sovereignty over it’, so said Chinese Rear Admiral Yin Zhuo in 2010. As one-fifth of the world’s population live in China, the rear admiral takes it for granted that the country should play a prominent role in the region. Since 2013, China has been taking part as an observer in the work of the Arctic Council. Some Nordic countries are expected to have closer cooperation with China within the framework

project. Of the three states, Latvia has the closest relations with China. The EU-Asia Summit was held in Riga in April, 2015, and the establishment of bilateral relationships followed. Since then, several cooperation agreements have been concluded in the agro-industry and logistics. Latvia was the first Baltic state to sign a Memorandum of Understanding related to the OBOR project at the end of 2016, during the Chinese Premier’s first official visit to Riga. Estonia’s relationship with China can be characterised as difficult. The Eastern Asian country

THE BALTIC STATES AND THE “NEW SILK ROAD” INITIATIVE Estonia, Latvia and Lithuania want to have their share of the opportunities presented by the OBOR

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froze economic relations with the Baltic state in 2011, as it received the Dalai Lama. In 2014, Tallinn officially apologised to Beijing, and subsequently, their relationship was reset. The main focus area of their cooperation is the agro-industry. The situation in Lithuania is similar to that on Estonia: the Lithuanians also support the Dalai Lama and Tibetan separatists. Since the beginning of 2015, however, the relationship between the two countries has eased and several agricultural agreements have been concluded by the parties, and Chinese investors have also arrived in the country to explore opportunities.

Map of the New Silk Road

THE ROLE OF MEDITERRANEAN COUNTRIES IN OBOR The “skeleton” of the relationship between China and Italy, Spain, Greece, Portugal, Malta and Cyprus is constituted by the OBOR project. In the past five years, several bilateral agreements have been made between Mediterranean countries and China, the largest investments, however, are infrastructure developments targeted to boost trade between China and European countries, i.e. the “Maritime Silk Road” and the “Railway Silk Road”, which affect the entire Mediterranean region. For long, Italy, as the most important economic player of the Mediterranean, took a rather lowkey approach to the OBOR project, but the Movimento 5 Stelle (M5S)-Lega government, formed in July 2018, made sweeping changes in bilateral relationships with China in August 2018 when it set up a China working group named “Task Force China” and sent an official delegation to China. Italy’s Economy and Finance Minister, Giovanni Tria and Deputy Governor of the Bank of Italy, Fabio Panetta visited Beijing and Shanghai from 27th August to 1st September 2018. Their official schedule contained several institutional meetings, primarily with the representatives of financial and monetary authorities. Tria had a bilateral meeting with Chinese Finance Minister Liu Kun, and also met Yi Gang, Governor of the People’s Bank of China. 9.1 The “Maritime Silk Road” The “Maritime Silk Road” starts in China, passes through Southeast Asia and India, touches the Eastern coast of Africa, and then arrives in Europe, in Greek and Italian port cities, which have always

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Black line: economic relations; blue line: “Maritime Silk Road”; green line: oil pipelines; red line: gas pipelines; dashed line: under construction Source: La Stampa

had great geopolitical roles throughout history. In Greece, the port of Athens, Piraeus plays a bridging role between China and Europe, and goods arriving from China are redistributed in this key container port. The role of Italy changed considerably at the end of August 2018 as Economy and Finance Minister Tria met personally with Wang Yanzhi, the President of the Silk Road Fund. During the meeting Tria emphasised that Italy may become the European hub of the “Maritime Silk Road” due to its ports along the northern Adriatic and Tyrrhenian Sea. Without doubt, Venice will be the number one port, as the maritime and rail Silk Road can cross each other here, and goods can reach Central and Western European countries. Spain and Portugal have not joined officially the Maritime Silk Road project even though Chinese companies have significant stakes in such port cities as Barcelona and Valencia.

former Prime Minister, Kostas Karamanlis and Hu Jintao, General Secretary of the Communist Party of China. Under the agreement, the Chinese party was put in charge of a part of the port by Greece, without a transfer of ownership then. Under the agreement concluded in 2008 and of a value of €831.2 million, the China Ocean Shipping Company (COSCO) has taken over two-thirds of the port’s area suitable for container operations. The Chinese container shipping company received a 35-year concession, and the deal also included upgrading Pier 2 and building a new dock (Pier 3), increasing annual container traffic capacity to 3.74 TEU (Twenty-foot Equivalent Unit) by install-

to 67 per cent. The new agreement, under which COSCO has undertaken another round of developments of a value of €350 million in the next 10 years to upgrade the port’s facilities. As a result of COSCO’s investments, and the continuous growth of international transport and tourist traffic, 2017 was another excellent year for Piraeus, marking a 6.4 percent increase at 3,691 million TEU. The long-term strategic goal of the Chinese operator is to transform Piraeus into one of the 30 largest ports of the world, and manage a traffic of 5 million TEU in 2019.

ing new cranes.

Road to Central Europe The Maritime Silk Road has tremendous potential for Italian ports (Venice, Genova, Trieste, Ravenna, Taranto). Chinese leadership is planning investments in order to develop the ports of Venice and Genova, connected to the European motorway network. The expansion and upgrading of the port of Venice is an important factor also in attracting Chinese tourists to Italy. In maps prepared in relation to OBOR, the port of Venice is often displayed as the European terminal of the Maritime Silk Road. In addition, the expansion of the ports

In 2009, COSCO brought other big transport companies (for example, Hewlett Packard Enterprise, Maersk Line and Mediterranean Shipping Company) to Piraeus. As a result, Piraeus has become the fastest growing port of the world, jumping from 93rd place to 39th in the rank of the world’s ports. Within the framework of the OBOR project, COSCO acquired a 51 per cent stake in Piraeus Port Authority for €280.5 million in April 2016, and further increased its stake in August 2016, up

Italy: Venice is the gateway of the Maritime Silk

Greece: Piraeus, bridge between Europe and China From a geopolitical perspective, Athens’s port, Piraeus is of cardinal importance for China and the OBOR project as geographically it connects three continents, Europe, Asia and Africa. The European Union is China’s primary trading partner, therefore the provision of appropriate trade routes would bring it obvious advantages. In light of this, the Chinese have had a majority stake in Piraeus since 2008; the agreement was concluded by Greece’s

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of Taranto, Ravenna, Genova and Trieste is also planned. This latter one is getting ever more due, as the leaders of the ports of Duisburg and Trieste signed a strategic collaboration agreement in June 2017 to strengthen their alliance in the “New Silk Road” initiative. Another initiative, developed by the North Adriatic Port Association (NAPA) and supported by Italy’s Ministry of Infrastructure and Transport, is also connected to the Maritime Silk Road. This is the so-called “5 ports project”, which aims at strengthening the collaboration between North Adriatic ports and open a kind of gateway between the countries of Central and Eastern Europe (North Italy, Austria, Germany, Hungary, Slovakia, the Czech Republic, Croatia, Bosnia and Herzegovina) and China. In addition to the Italian ports of Marghera, Ravenna and Trieste, the ports of Koper, Slovenia and Rijeka, Croatia take part in the 5 ports project. The Shanghai-North Adriatic route (8,630 sea miles) is some 2,000 nautical miles shorter than the Shanghai-Hamburg route (almost 11,000 nautical miles). Practically, it means that the Adriatic route takes approximately eight days less, therefore the shipping costs of goods are lower, and 135 kg less carbon-dioxide is emitted. The entire budget of the project amounts to €2.2 billion euro, €948 million is payable from the Italian public budget (in 2016, €350 million was allocated to the development of three Italian ports), and €1.25 billion derive from private investors.

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The “Railway Silk Road“ Italian-Chinese railway link between Mortara and Chengdu At the end of November 2017 a rail freight service between Italy and China was launched within the framework of the “New Silk Road” project. The first cargo train left from the city of Mortara (the most important intermodal terminal of Lombardy province and Northern Italy) to Chengdu, in the heart of China. This train was carrying Italian machinery, metallic products, tiles and motor vehicles. In addition, “Made in Italy” staple products (fashion articles, food and wine) are transported to china on this route, and Italy receives various Chinese products from the Asian country. The trains consisting of 17 wagons are suitable for carrying 34 containers, the trains cover the distance of about 10,800 km in 18 days, and run across 6 countries until they arrive in China. These cargo trains are currently running to and fro between Italy and China once a week, but they are expected to run twice or thrice a week by the end of 2018. Furthermore, Italy is also engaged in two tunnel projects related to the “New Silk Road”, due to which the shipping time of goods has significantly decreased, and the country has become more competitive. One of them is the Gotthard Base Tunnel, inaugurated in 2016, which sped up the Italy-Switzerland-Germany railway route. €21.5 billion was contributed by Switzerland and €12 billion was contributed by Italy to the construction of the tunnel. The other one is the construction of Lötschberg Tunnel, expected to be finished in 2020; both tunnels are designed to cut the rail journey time between Italy (Milan) and Switzerland (Zurich).

Spanish-Chinese Railway link between Madrid és Yiwu Within the framework of the Rail Silk Road, China and Spain launched a joint rail freight project in November 2014, which is the longest rail link of the world passing through China, Kazakhstan, Russia, Belarus, Poland, France and Spain.

than transporting cargo by vessels or trucks. With the help of the railway line, it takes half the time of the sea journey for goods to get from China to Spain. In addition, it is a more environmentally friendly way of transport than road transport, as trains emit 62 per cent less carbon dioxide than trucks do.

The purpose of the Madrid-Yiwu line, the so-called “Yixinou” line is to carry lower-value cargo, such as items for sale over Christmas, electronic products, toys, stationery from China to Europe. They return laden with luxury fashion items, wine, olive oil, mineral water, fruit juice and corks.

According to Spanish analysts, however, the project has not met the expectations yet. While trains arrive from China to Spain fully laden with goods, they return with much fewer products. The train service was regarded as a potential tool of striking a balance in trade between the two coun-

The initiative projected very promising trade prospects between the two countries, as the city of Yiwu is one of China’s most important industrial areas. For the trains, leaving twice a week from the Far eastern country, it takes about 21 days to travel the 13,000-km route. The trains leave from China, and pass through 6 countries before they reach Spain, taking the journey much faster

tries, but currently it is not fully contributing to reducing Spain’s trade deficit. In addition, the trains leave more rarely (once per week at best) and irregularly from Madrid, the service – due to technical problems – is often suspended, which slows down transport even more. Up to 31st May, 2018, the Madrid-Yiwu train ran 291 times, carrying a total of 23,636 containers of goods. The Railway Silk Road programme introduces the city

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and aims at promoting the growth and internationalisation of Italian and Chinese enterprises (mainly SMEs) conducting activities in Italy and China. The investment strategy is focussing on sectors that comply with the priorities identified by “Made in Italy” and Beijing’s Five-Year Plan 2016-2020. The role of Intesa Sanpaolo and CDP During the mission to China in August 2018, Intesa Sanpaolo bank group and Italy’s Cassa Depositi e Prestiti signed a Memorandum of Understanding to reinforce their supportive roles in the internationalisation of Italian companies, to help, in par-

of Zaragoza into the commercial bloodstream in 2018, and several Spanish institutions support the further expansion of the railway line. On the basis of a proposal, put forward jointly with Portugal, the railway line is planned to be extended as far as the neighbouring country. Financing OBOR projects: the Asian Infrastructure Investment Bank Italy was one of the first European countries to join AIIB in July 2016. The largest economy of the Mediterranean region invested $2571.8 million into AIIB, as a result of which it currently has a share of 2.6497 per cent in the investment bank. Spain joined AIIB in December 2017, and after paying $1,761.5 million, its current share in it is 1.8149 per cent. Portugal contributed $65 million in the investment bank, and received a share of 0.0670 per cent. Malta joined AIIB in January, 2016, and with $13.6 million, it has a share of 0.0140 per cent. Cyprus was admitted to AIIB on 25th June 2018, it received a share of 0.0206 per cent with $20 million. For the present, Greece is not a member of AIIB, but it is planning to join the Bank. Furthermore, the Industrial and Commercial Bank of China (ICBC) have opened several branch offices in the financial and economic centres of the Southern European region, such as Rome, Milano, Madrid and Barcelona. Some of the OBOR projects are financed also through ICBC.

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Bilateral OBOR projects between Italy and China Sino-ltalian Aerospace Platform – a relationships network to be established and developed in the aviation and aerospace sector The strategic programme between Italy and China has contained a relationships network to be established and developed in the aviation and aerospace sector (hereinafter referred to as the aviation industry) since March 2015. The programme has three pillars, engaging stateowned companies, large enterprises as well as small and medium-sized enterprises (SMEs). The so-called “Sino-ltalian Aerospace Platform” (S-IAP) primarily aims at helping Italian enterprises to enter the Chinese market in a gradual, sustainable and coordinated manner. S-IAP promotes the realisation of bilateral investments, seeks opportunities for research and development, encourages and ensures an effective dialogue between Chinese and Italian enterprises, monitors the market and organises promotional activities. Sino-ltalian Co-Investment Fund In May 2017 Fabio Gallia, Chief Executive Officer of one of Italy’s investment banks, Cassa Depositi e Prestiti (CDP) and Hu Huaibang, Chairman of the China Development Bank signed a cooperation agreement to create a new – €100 million – instrument, the Sino- ltalian Co-Investment Fund. The Fund could be expanded up to €150 million

ticular, Italian companies doing business in China and other, Italian-Chinese joint ventures already based in China. Under the agreement, Italy’s largest bank and CDP will develop together ad-hoc financial products tailored to Chinese market conditions and have committed to making bank transactions better meet the needs of the Chinese market to access credit and/or co-financing. The first actual step is the launch of a partnership between CDP and Intesa, within the framework of which a total of €200 million is available for potential financing transactions that promote the internationalisation processes of Italian companies and lending to Chinese subsidiaries of Italian enterprises. A Memorandum of Understanding in shipbuilding Italian shipbuilding company, Fincantieri SpA and the largest Chinese shipbuilding conglomerate, China State Shipbuilding Corporation (CSSC), have signed a Memorandum of Understanding for the extension of the industrial cooperation already existing between the two groups to all segments of merchant shipbuilding. Within this framework, Chinese cruise ships will be built for the Chinese market. Apart from that, research and development projects will be launched in various fields of marine engineering, which may contribute to, for example, developing vessels for the oil & gas industry, cruise-ferries, special vessels. A Memorandum of Understanding to reduce carbon-dioxide emissions Italian Snam SpA (Societá Nazionale Metanodotti), a company engaged in transporting, storing and re-gassing methane, and Chinese State Grid International Development Co. Ltd (SGID),

a subsidiary of the world’s largest energy utility, Chinese State Grid Corporation of China, signed a Memorandum of Understanding to reduce carbon-dioxide emissions. Pursuant to the Memorandum, they will examine a range of possible opportunities for collaboration, both in China and internationally, with a focus on migrating to new technologies and reducing carbon-dioxide emissions. As part of their collaboration, the parties are planning to construct various biogas and biomethane plants, which would play an important role in renewable electricity production, and to launch research and development programmes on possible opportunities in renewable gas, sustainable mobility and joint electricity-gas projects. Sino-Italian agricultural cooperation In May 2017, Han Changfu, China’s Minister of Agriculture and Ettore Sequi, Italy’s ambassador to China signed a Memorandum of Agreement to boost agricultural cooperation between China and Italy. The parties intend to have closer relationships in technological innovation and rural development, in addition to the agricultural sector. The “Silk Road of Knowledge” – Memoranda of Understanding The Italian government wishes to lay great emphasis on the so-called “Silk Road of Knowledge”. This scope includes tourism, culture, research and 700 intra-university (Rome and Beijing), higher education agreements. In January 2018, the programme entitled “2018 EU-China Tourism Year” was launched in Venice, the main purpose of which is to make Europe the most popular international destination for Chinese tourists. During the ceremony in Venice, a Sino-Italian Memorandum of Understanding was signed to facilitate collaboration in the tourism sector, the development of sustainable tourism and global destinations. In August 2017, the State Secretary of the Italian Ministry of Economic Development and the mayor of the Chengdu signed a Memorandum of Understanding about establishing a Sino-Italian Cultural and Innovation Park. In April 2017, Chinese Silk Road Fund, the Chinese fund for infrastructure development, obtained a 5 per cent stake in Autostrade per l’ltalia, a motorway operator company controlled by the Atlantia group.

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ASEAN 50 + EU 60 = 40 years of cooperation Author: Réka Tózsa

We are celebrating a special triple anniversary. The ASEAN (Association of SouthEast Asian Nations) turned 50 this year. Also, the European Union celebrated its 60th birthday this May, and the two organisations established an official relationship with each other exactly 40 years ago. This paper outlines the relationship of the two most successful economic integrations in the world on the occasion of this special triple anniversary. THE TWO MOST SUCCESSFUL ECONOMIC INTEGRATIONS IN THE WORLD The EU and ASEAN in numbers

power in the world; the common market gathering the developed countries numbers 510 million citizens. The ASEAN is the fifth economic unit in the world, although its membership mostly includes developing countries. The two markets together account for 15% of the global population. This cooperation has vast potential, in particular because the ASEAN is still in the period of catching-up growth with an economy of an average 5% increase. THE ASSOCIATION OF SOUTHEAST ASIAn NATIONS

The economic size of ASEAN

Both organisations were established in turbulent times. Europe aimed to bridge the political tensions arisen from World War II with economic cooperation, while Asia set up an alliance against the ideology of communism. Both organisations started as some kind of economic cooperation; however, by today they have achieved good results in the fields of security policy, education and culture. Still, the European Union has established a much stronger bond among the Member States for 60 years than the ASEAN for 40 years. The EU is the second strongest economic

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In 1967 the 5 founders (Indonesia, Malaysia, Singapore, the Philippines and Thailand) came to the decision to unite in order to stop the Communist ideology in the region. This collaboration was realised in the form of loose inter-governmental cooperation, with the primary aim of maintaining the stability of the region and preventing political radicalisation. In the subsequent years the organisation expanded to 10 members with the joining of the CVLM countries (Cambodia, Vietnam, Laos, Myanmar) and Brunei. In the 1990s, however, China’s rising and the Asian financial crisis led the members towards tighter closer cooperation. In 2015 the ASEAN Economic Community was established, representing much looser cooperation than its European version and aiming to provide the four freedoms (the free flow of goods, services, people and capital). In the future the cooperation will be extended and deepened in accordance

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with the three pillars specified in the document entitled ASEAN Blueprint 2025 (community vision, political and security as well as socio-cultural). DECISION-MAKING IN AN ASEAN WAY The defining feature of ASEAN is that its strength lies in the informal processes. In the beginning the founding fathers laid down two basic principles: national sovereignty is infrangible. On the one hand, no community interests may overwrite the interests of the individual member states; on the other hand, no member state may intervene in the affairs of another member state by the right of “ASEAN interest”. Unlike the European Union, there are no strong institutions that carefully prepare for, coordinates and enforce the decisions. Decision-making is based upon a consensus, which practically very often leads to indecision (we are talking about 10 very different members). If a decision is reached on any issue, the Member States themselves decide at what level they intend to implement it. However, the ASEAN is not about decision-making but coordination. The ASEAN is a dialogue. It is a platform that brings together the appropriate leaders in appropriate circumstances in order to discuss their common affairs. This kind of operation is called “ASEAN way”. According to some ironic remarks, at ASEAN more decisions are passed on the golf course

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than at the negotiating table. Thanks to this, the processes of ASEAN are most slow and less transparent. As the Dean of Lee Kuan Yew School of Public Policy, Kishore Mahbubani describes, ASEAN is advancing as a crab: two steps forward, one step back, one step to the side and one step forward again. At the same time, we owe thanks to the organisation for bringing peace and development to the region for 50 years and managing focal points such as the South China Sea dispute. ASEAN IN THE CENTRE Besides the “ASEAN way” of consultation mechanism, another frequently used descriptive term for the operation of the organisation is “ASEAN centrality”. The organisation operates in a geopolitical medium in which great powers distrust each other for historical or security reasons (China, Japan, USA, India). ASEAN is a perfect forum for the great powers to pursue a dialogue with each other, without commitment or any sensation. For the discussion of security issues, the ASEAN Regional Forum (1994) and later the ASEAN+3 dialogue with the participation of China, Japan and South-Korea (1997), the ASEAN+6 dialogue with the participation of the previous three countries and Australia, New-Zealand and India (2005), as well as the East Asia Summit with the participation of the previous six countries plus Russia and the United

States of America were set up (2005).ii The ASEAN is about the dialogue rather than spectacular decisionmaking or the conclusion of agreements. ASEAN AND THE EurOpEaN UniON The two regional organisations laid down their intent for cooperation in 1977. Since then a high-level dialogue has been organised two times a year in Europe and one time in Asia. In 1997 the two organisations alienated from each other. The EU had reservations in terms of human rights against the newly accessed ASEAN Member, Myanmar; therefore, they blocked its participation at the coming meeting in Brussels and introduced sanctions against it. The frosty relationship eased off only in 2007 and the EU and ASEAN Partnership was established. It may be the result of Catherine Ashton’s Asian opening policy that the first action plan was signed only for the period 2013-2017. Most of its 90 measures focus on the consolidation of economic cooperation, the enhancement of trade and investment, and the maintenance of peace, stability and security, and they also provide for the accreditation of a permanent EU ambassador to the ASEAN. ECONOMIC RELATIONS Primarily the trading relations are the most developed between the two regions. ASEAN is the fourth most significant trading partner of the EU, while the

EU is the second most significant one for ASEAN (excluding trade within ASEAN, which is the largest slice of the cake). As for the interest within the EU, the trading in goods (EUR 205 billion today) and the services (EUR 70 billion today) with ASEAN countries have nearly doubled over the past 10 years (EUR 205 billion today). Singapore is the most attractive partner in terms of both the goods and services as well as the investments. It is no wonder since it is regularly ranked high on the Ease of Doing Business index, while the remaining countries in the region are regularly listed low. It is easy to do business with Singapore. As a matter of interest: while in Singapore it takes 3 hours to complete the import documentation, in Lao PDR-ben the same procedure requires 216 hours. The ASEAN economic integration process has brought significant progress in the dismantling of tariffs and other limits between the member states; however, it is still difficult to comprehend the Southeast Asian “noodle bowl” type of trade rules. In 2007 the EU started negotiations with the ASEAN about a free trade agreement but it soon realised that it is more efficient to make agreements with each country individually. Recently an agreement with Singapore and Vietnam has come into force, but negotiations are in process with Malaysia, Indonesia, Thailand and the Philippines, too. Capital investment from the EU is important to the ASEAN. Practically, investments within the region are followed by the EU as the second largest investor (16.7%), then by Japan (14.5%), the USA (11.3%) and

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China (6.8%). The EU capital investments are primarily directed to Singapore, while Thailand, having a higher risk owing to the weak democracy and the frequent military coups, is also a popular destination. Although statistics reveal quite a lot about the relationship of trust and confidence, according to which the EU Member States still invest more into Switzerland than the 600+ million ASEAN market as a whole. Concerning the ASEAN outward countries, the key trading partners include the Western European countries: Great Britain, Germany, France, the Netherlands and Italy are the largest purchasers both in the trading of goods and services. In capital investments the Netherlands, Great Britain and Luxembourg attract the most capital but it mostly comes from Singapore. As for the Central European block, Hungary is the only noteworthy country as approx. 0.5% of capital investments flowing from the ASEAN was directed into our country in 2015, thanks to which we finished in sixth behind the popular Western countries. EDUCATIONAL AND CULTURAL RELATIONS European universities attract south-eastern youngsters; in 2014 more than 4,000 students and scholars studied with some scholarship in Europe. Since the introduction of the ERASMUS+ Program, this number has certainly risen. The EU SHARE Program is also worth mentioning since under this program the EU provides funds to the amount of EUR 10 million to the ASEAN countries to study the good practices of the European Higher Education Area (EHEA) and the Bologna process and adopt them for the establishment of a common higher education market in Southeast Asia (common recognition of degrees, mobility, etc.). The DUO program, established in order to promote the mobility programs between the ASEAN and the EU universities, provides an opportunity for the ASEM partner countries to finance the exchange of European and Asian students and professors. WHAT CAN THE EU LEARN FROM THE ASEAN? The European Union is the most developed economic integration in the world. Every year it provides support to ASEAN to the amount of USD 304 million in order to share their experience on integration. It is true that the Balkans of Asia, as C.A.Fisher British historian

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describes Southeast Asia, will probably never realise the European type of common market. The reason for this is diversity: Southeast Asia is the home to four civilisations (Jewish-Christian, Chinese-Confucian, Islam, Hindu-Buddhist). The nations that are diverse in terms of religion, culture, language and ethnicity would be reluctant to give up their sovereignty in favour of the community. However, they can learn good solutions from Europe in the fields of sustainable consumption, climate change, healthcare, the protection of human rights, good governance, etc. We speak less of what the EU could learn from the ASEAN. Therefore, let me take three examples of this, based on the ASEAN’s birthday greetings by the Dean of Lee Kuan Yew School of Public Policy, Kishore Mahbubani. 1. Engagement Policy in lieu of isolation. The EU frequently imposes economic sanctions if they have any reservations against the values of their partners (in terms of human rights, democracy etc.). The last time sanctions were introduced against Russia owing to the Ukrainian conflict; however, it had become isolated from Thailand (military coup) and Myanmar (coup and minority rights) in the ASEAN region earlier. Ethically, the sanctions seemed to be right; however, they are not working in practice. The Member States evade them as much as they can since their economic interests are adverse. They do not help the conditions of the partner country. On the contrary, ASEAN successfully applied the means of engagement in their problematic geopolitical relations. An example of this is the system of ASEAN Pluses (Plus 3 and Plus 6), with meetings ensuring regular dialogues with the geopolitical great powers of the region. Another example is the accession of Vietnam (1995) and Myanmar (1997) to ASEAN. These two countries are politically unstable, economically isolated and have suffered from the crisis of values. Still, the founders of ASEAN decided that they would imply a risk on regional peace and development if they stay outside than if they are admitted to the community and pursued a dialogue with. But behold me, Myanmar ended 50 years of years of military dictatorship in 2015 and held the first democratic elections, while the economy of Vietnam was becoming more and more open, and today it produces an average growth of 6% annually. Finally, Chinese cooperation can be a good example of commitment. China deeply condemned the establishment of the

ASEAN in the 1960s (remember that it was launched as an anti-communist block), while thirty years later it became a dialogue partner within the frames of the ASEAN+3 and it was the first great power to sign a free trade agreement with the ASEAN (2010). 2. Pragmatism. It is difficult to compare the organisational systems of two regional communities since they serve different purposes. By way of illustration, the annual budget for operating the EU’s institutional system is 8,000 times larger than the budget of the ASEAN Secretariat, although the EU has a lower number of citizens. However if we strictly consider the operation, the operation of the EU includes several elements which serve ideological purposes but have no practical aspects. An example of this is multilingualism. The EU uses 24 working languages, while the ASEAN only one. If the EU also used only English as a working language, it could use 1 billion euros annually. A similar example is the sessions of the European Parliament in Strasbourg, although this latter amounts to only EUR 140 a year. Another example of the pragmatism of the ASEAN is that it has always applied the principle of gradualness in the integration steps, while the advantages of multi-speed integration were admitted by the EU only with lots of difficulty. The idealistic optimism of the EU gains the victory even if no rules are laid down concerning the withdrawal from the eurozone or the European Union. 3. Cooperation with the Islam world. The strongest Member of ASEAN is Indonesia. 90% of its 220 million citizens are Muslim, still, it established excellent cooperation with the other Member States. It should be added that the Southeast Asian moderate Islam differs from the Near Eastern variant; however, Indonesia can still teach plenty of things to the European Union. Similarly, ASEAN can teach the EU about diversity, tolerance and peacekeeping, even if not everything can be perfect here either. A PARTING THOUGHT EU-ASEAN cooperation is an “unexploited opportunity” of the past 40 years. Will the fourth industrial revolution, the freer flow of persons, knowledge and technology bridge the geographical distance and all the differences, and will the two organisations find each other?

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The effects of the AIIB

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on the multilateral development banksâ&#x20AC;&#x2122; system 133

The effects of the AIIB on the multilateral development banks’ system Author: László Gere, Eszter Pálvölgyi-Polyák, Fruzsina Simigh

The global system of multilateral development banks developed after the Second World War: in this system the United States is the dominant player, trying to enforce and expand its economic and political interests partially through these institutions themselves. Therefore, the foundation of the Asian Infrastructure Investment Bank, announced by China, has triggered various professional and political disputes, over whether the bank is an attempt to overthrow the existing financial system and political world order by the economically and politically increasingly powerful China, or it simply tries to meet the existing development needs of the region – naturally along its own economic interests. The article tries to find the answer to this question through the analysis of the approved and proposed projects of the Bank.

Introduction Since its establishment was announced in 2013, the Asian Infrastructure Development Bank has been paid great attention to for its aims, and since it started operating, for its activities. Many analyses have been written on the possible economic, financial and political reform intentions of the Bank as well as its founder, China. Some of these consider the establishment of the Bank as a milestone Author’s note: the article was originally published as: Az Ázsiai Infrastrukturális Fejlesztési Bank megjelenésének hatásai a multilaterális beruházási bankok intézményrendszerére. In: KÜLÜGYI SZEMLE XVII:(1) pp. 142-166. (2018). The following article is the updated version of the previous one.

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which is going to disrupt the post-WWII global financial system and in the end also the world order built on that. Others are choosing their words more carefully, they do not think the AIIB has that serious politically disruptive role. They explain the demand to establish this institution with the infrastructural deficiencies and development needs in the Asian region, simply defining this process as a reaction for these development necessities. The article has three main parts. The first one focuses on the background of the establishment of AIIB, highlighting China’s overcapacities and market opening challenges, together with the lagging of the broader region and its complex consequences, the significance of the Belt and Road Initiative (BRI) and the risks of the export-oriented Chinese economic growth. The second part focuses on the

conflicts between the existing and the new institutional system. After the theoretical analysis, the third part would analyse the actual operation of the Bank through the examination of the financial composition of the Bank’s approved and proposed projects. Our hypothesis is that the AIIB itself does not operate against the existing institutional system, since its real aim is to meet the development needs and complement the institutional deficiencies in cooperation with the other multilateral development banks. To justify that hypothesis, we have examined the bank’s projects to see if there are other international institutions involved in the certain projects or not, as well as to see the AIIB’s share in the certain developments’ budget. Background for the establishment of the AIIB According to a 2009 ADB (Asian Development Bank) report, by 2020 around $8 trillion will have been invested in infrastructure in Asia, 68% of

which for new capacities, and in sectoral distribution, 51% for electricity, 29% for roads and 13% for the development of the ICT infrastructure. China cited this report among others while establishing AIIB, claiming that the World Bank with its $220 billion or the ADB with its $160 billion capital still does not meet the needs of the world’s most rapidly developing and urbanizing region (according to other calculations, the emerging Asian countries would need $600 billion annually for infrastructure developments between 2010–2020 – even more, considering the climate change costs). Infrastructure developments are essential to improve the competitiveness of South and Southeast Asian countries (just one example is that without greater capacity harbours, countries like Cambodia are unable to receive more goods from China – via large container ships). These countries suffer from serious competitive disadvantages because of their infrastructure conditions, and their needs are underrepresented in the existing global financial system. At the same time, China has other motivations behind establishing this new institution. Xi Jinping an-

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it seems highly unrealistic that domestic demand could outweigh the weak demand of the traditional markets. In the near future the export will still be the most important engine of the Chinese economy; therefore, it is vital for the country to find new markets among the emerging economies, primarily in Asia where there are countries with significant population like India and Indonesia. One geostrategic aspect also has to be highlighted: China, the world’s second largest economy, has urged the reform of the international financial system, claiming a greater share from the Western-dominated financial system, but because the progress in this direction had been stuck, the establishment of the AIIB was a great leap forward for the country. The USA has veto power in the World Bank and the International Monetary Fund (IMF), Japan in the ADB, and China’s share and voting right in these institutions are far smaller than it would result from its economic power.

nounced the establishment of the AIIB roughly at the same time with the One Belt, One Road (September 2013, Kazakhstan) and the Maritime Silk Road (October 2013, Indonesia); therefore, the activities of the Bank are not coincidentally associated with the Belt and Road Initiative (BRI). All the more so because President Xi himself made it clear that the principal task of the Bank is to provide capital for the implementation of these initiatives. BRI means continental infrastructure development, building highways, railroads, pipelines and optical cables from the economic centre of China through Central Asia to Russia and Western Europe, and its maritime part means the building of a network of harbours and coastline infrastructure from the East China ports through South and Southeast Asia to the Persian Gulf, East Africa and the Mediterranean region. The BRI serves the deeper integration of the region’s countries, enhances China’s “soft power”, which will be strengthened with the AIIB even more. These two initiatives (the BRI and the AIIB) show China’s ambitions to take a leading role that mirrors its emerging global power position. The country is not only the region’s central player but also has world economic and global political role. According to many experts, the

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BRI extends China’s political strength, its access to energy sources and other resources (e.g. from Turkmenistan, Kazakhstan and Russia), while trade and economic initiatives strengthen its geopolitical position as well. The BRI clearly serves market acquisitions, which is essential for China’s future economic growth. Another aspect is that it would connect the relatively peripheral, underdeveloped Western part of China to the global economy. The BRI would help to achieve the Chinese nation’s renewal, the so-called “Chinese Dream”. The announcement of the BRI was on account of China’s export-oriented economic growth as well, because after the economic crisis in 2008 the market potentials of its Western partners decreased, so the country had to find new markets. Before the crisis, China’s export growth was around 20% annually, which fell to -2.8% by 2013. China’s traditional export markets, the United States, Europe and Japan began to be saturated, or their growth was moderate. And the frequently communicated shift from the export-oriented growth to the domestic consumption’s intensification was easier on paper than in reality. Between 2000 and 2008, the export gave one-third of the economic growth. But

Beside the economic gains there, are also political ones to implement activities under the umbrella of a multilateral institution, as these become politically more acceptable: the multilateral assistance is less connected to political interests, it facilitates the cooperation between different countries in a more neutral way compared to the bilateral agreements. It is China’s interest to attach positive initiatives to the country’s image instead of its negatively assessed international activities like the South China Sea dispute.

cial initiations like the internationalisation of the renminbi (to be included in the IMF’s SDR-basket) is to undermine the global financial hegemony of the US. Some opinions assess the appearance of the AIIB as it is only and exclusively about politics as well as about how China could dominate Asia. The strongest statement says that the AIIB is only a war-chest, aiming to bribe all the countries from Dili, Timor-Leste to Ulaanbaatar, Mongolia. This is not false accusation, since even the United States has confessed that the existence of the World Bank has secured the country’s political influence, Japan considers the ADB similarly. Therefore, in a way the suspicion of these countries is somehow right, that the appearance of the AIIB could erode their influence. Although the USA and Japan have encouraged China for a long time to play greater role in the assistance of the emerging countries, in their view China should do that within the existing institutional structure, the World Bank, the IMF and the ADB. Even before the foundation of AIIB, serious diplomatic rivalry has started between China and the

Conflicts between the existing and the emerging institutional system Many experts claim that the establishment of the AIIB was one of the most spectacular events in the international financial sphere. They say, it is a milestone for China in its aspiration for creating a multipolar world order, according to others, it is only an experimental project instead of a dominant new model, it is not leading to stronger Chinese influence.xvii In the following we would like to compare these two opposing viewpoints, together with the dominant arguments of the two sides. The United States has mixed feelings from the beginning about China’s economic rise. It suspects that in the end China’s aim with its other finan-

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United States, which has concluded in the “defeat” of the USA (considering the composition of the AIIB’s founding member states in the end), thus, a little bit exaggerating, it can be stated that the “United States lost its role as the underwriter of the global economic system”. But is this alarm really justified? Considering the size of the AIIB, it is not outstanding, just a medium-sized multilateral development bank. It does not seem to be a real challenger neither the ADB, nor the World Bank. But its significance does not lie primarily in its capital; from the viewpoint of building a new world order, its mere existence and the large number of its members is already notable. According to the hegemony theories, it is of key importance that the hegemon (whether it is global or just regional) exercises its political, military and economic power through an existing institutional system, and it can enforce new rules among the international community members through that. Therefore, the United States’ position in the global world order, and the era of Pax Americana, or the “American peace” can be rooted in WWII. Although the USA had significant economic superiority even from the 1870s, it gained the supervision over naval bases and accordingly, over world trade routes from the British through the Land-Lease Act in 1941. After that, the country has built the still dominant, so-called Bretton Woods system, which, through the establishment of the IMF and the World Bank, clearly based on the US dominance, and through the Marshall Plan, it helped to rebuild the war-stricken Europe (and convert it into a competent market). However, in this system the emergence of China triggers serious tensions. Beijing is more and more frustrated by its under-representation in the World Bank’s quota system (the US has the only veto power with its 17% voting share, while China has only 4,87%), and the American Congress regularly balks its reform attempts. Concerning the Japanese-led ADB, China also has only the fifth of the American or Japanese voting shares. Since China has significant internal motivation and also possesses the necessary sources, its individual, alternative institution-building attempt seems to be a logical consequence in the process.

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Beyond the offensive communication of the Western professionals and the media, even before the actual operation of the AIIB, some kind of “infrastructure war” has begun: for instance, the ADB has announced its “Partnership for Quality Infrastructure: Investment for Asia’s Future” fund, with a $110 billion capital (which exceeds the capital of the AIIB by $10 billion). Just before the meeting of the AIIB’s 57 prospective members in Singapore, the World Bank president, Jim Yong Kim has announced a new, $11 billion framework to finance the energetic, healthcare, educational and maritime economic investments of Indonesia. The winners of the competition are the region’s developing countries, because that way finally they will have the opportunity to develop their disadvantageous infrastructure faster. The rivalry-narrative is not groundless at all. In his analysis Mishra (2016) reveals how the AIIB could influence on many levels the regional and international position of China: 1) The institution is essential not only concerning the regional economic leading role of China, but also as a diplomatic initiative. 2) Since the AIIB would give a large share of the BRI’s financing background, through that the Bank would contribute to the Chinese economic influence’s extension 3) China’s aim now is to convert the regional economic order, which means that it would liberate the Asian economies from the Western dominance, directing them back to Asia, resulting a less dollar-dependent trade. Therefore, China plays a crucial role in other development banks besides the AIIB, like the New Development Bank, established especially for the BRICS countries, or the Shanghai Cooperation Organisation (SCO) Development Bank (still under construction). The US understands the power the AIIB holds since the United States exercised its economic-political power for decades through its international finance institution system. Therefore, America is aware that it means not only an economic, but also a political and strategic advantage. And now let us see the other side in this argument. In contrast to the American fears, it is worth mentioning that at the market of “development banks” there are many other initiatives besides China’s;

Table 1: The list of the AIIB’s approved and proposed projects in descending order of the project’s total cost The AIIB’s approved projects in descending order of the total project cost 1. Azerbaijan: Trans Anatolian Natural Gas Pipeline Project (TANAP) 2. India: Bangalore Metro Rail Project - Line R6 3. Indonesia: National Slum Upgrading Project 4. Pakistan: Tarbela 5 Hydropower Extension Project 5. China: Beijing Air Quality Improvement and Coal Replacement Project 6. India: India Infrastructure Fund 7. India: Gujarat Rural Roads (MMGSY) Project 8. ASIA: IFC: Emerging Asia Fund 9. India: Andhra Pradesh 24x7 – Power For All 10. Philippines: Metro Manila Flood Management Project 11. Oman: Broadband Infrastructure Project 12. Bangladesh: Natural Gas Infrastructure and Efficiency Improvement Project 13. Indonesia: Regional Infrastructure Development Fund Project 14. Oman: Duqm Port Commercial Terminal and Operational Zone Development Project 15. Tajikistan: Nurek Hydropower Rehabilitation Project, Phase I 16. Georgia: Batumi Bypass Road Project 17. India: Transmission System Strengthening Project (Tamil Nadu) 18. Indonesia: Dam Operational Improvement and Safety Project Phase II 19. Pakistan: National Motorway M-4 Project 20. Bangladesh: Bangladesh Bhola IPP (Independent Power Producer) 21. Bangladesh: Distribution System Upgrade and Expansion Project 22. Myanmar: Myingyan Power Plant Project 23. Tajikistan: Dushanbe-Uzbekistan Border Road Improvement Project 24. Egypt Round II Solar PV Feed-in Tariffs Program: Al Subh Solar Power 25. Oman: Railway System Preparation Project The AIIB’s 11 proposed projects in descending order of the total project cost 1. Turkey: Tuz Golu Gas Storage Expansion Project 2. India: Mumbai Metro Line 4 Project 3. India: National Investment and Infrastructure Fund 4. Georgia: 280 MW Nenskra Hydropower Plant 5. India: Amaravati Sustainable Capital City Development Project 6. Indonesia: Strategic Irrigation Modernization and Urgent Rehabilitation Project 7. India: Madhya Pradesh Rural Connectivity Project 8. India: West Bengal Major Irrigation and Flood Management Project 9. Sri Lanka: Solid Waste Management Project 10. Sri Lanka: Climate Resilience Improvement Project - Phase II 11. Laos: National Road 13 Improvement and Maintenance Project Source: https://www.aiib.org/en/projects/approved/index.html, and https://www.aiib.org/en/projects/proposed/index.html, query date: 02. 03. 2018

therefore, it is not necessarily true that the new banks would pose a threat to the US or Japan. According to the Chinese viewpoint, only the development of the Asian–Pacific region would require extraordinary amount of sources, thus the AIIB would get on well with the World Bank and the Japanese-led ADB. A multilateral institution also means an “umbrella”, and the multilateral assistance is less linked to political interests; it helps the cooperation of the countries in a more neutral manner compared to a bilateral agreement. It is an important aspect for China, since its critiques frequently label its overseas investments as “colonialist” or “imperialist”.

Li and Jiang (2016) argue that the AIIB as a multilateral financing institute, aiming to promote the regional economic development through infrastructural investments, can have no influence on the global financing government by definition, namely on the financial supervisory cooperation and the reform of the international monetary system, and obviously does not threaten the US role in the global world order. The statements claiming that the AIIB assigns “the Eastern shift of the global power relations” are rather based on impressions than on objective analyses. Therefore, according to the authors, the AIIB is more adapting to the existing global financial government structure. Three aspects of that are: 1) the business practice of the AIIB clearly seeks to cooperate with the other international financial

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The composition of project sources among approved projects (million USD) by 28 February 2018. The composition of project sources among approved projects (type; amount – million $) AIIB loan; 4188,60 own contribution; 5384,72

World Bank loan; 2553,80

EIB loan; 1883,00

other sources; 5852,08

EBRD loan; 562,50 EDB loan; 40,00

Source: html

ADB loan; 473,20

https://www.aiib.org/en/projects/approved/index.

The composition of project sources among proposed projects (million USD) by 28 February 2018. The composition of project sources among proposed projects (type; amount – million $) AIIB loan; 2355,2 own contribution; 4472,5

World Bank loan; 1738,5

other sources; 2057,8

Source: html

https://www.aiib.org/en/projects/proposed/index.

institutions. Jin Liqun, AIIB president has always stressed, that the AIIB is more a complementary, not a substitute institution – it facilitates, not disrupts the existing international financial system. 2) The AIIB represents a South–South cooperation, completing the North–South cooperation of the international development financing. The Chinese-led AIIB would likely take much more into account the specific circumstances of the developing Asian countries, rather than imposing financial assistance on political terms. 3) The AIIB could catalyse the reform of the international monetary system, even though it has no direct impact on it.

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Evaluation of the AIIB project list

Share of AIIB sources, among approved projects (%) (project costs without own contribution).

To support our hypothesis formulated at the beginning of the article, we examined the available approved and proposed projects from the institution’s homepage by the end of February 2018. Although this list does not allow large-scale conclusions to be drawn, however, a comprehensive picture can be created with it on the Bank’s current and estimated activities. At the moment, the list contains 25 approved, ongoing, and 11 other proposed projects (Table 1). Some basic information about the projects: there are seven different types of projects (defined by the Bank): transport, energy, infrastructure, telecommunication, water, urban and multi-sector. Among the currently approved projects the energy (11) and transport (7) projects dominate, the others are mainly multi-sector (5) projects. The proposed projects are more diverse, there are transport (3) and water development (3), energy (2), infrastructure (1), multi-sector (1) and urban (1) projects. Source: https://www.aiib.org/en/projects/approved/index.html

Energy projects cover general energy supply network developments, developments related to traditional energy sources (e.g. natural gas pipelines), and also building or improvement of renewable energy systems (hydropower, solar energy). Transport development projects include developments of road or railway networks and also ports. In general, infrastructure developments focus on urban infrastructure. Multi-sector projects are mostly about the establishment of some kind of comprehensive development funds (e.g. infrastructure development funds), or the implementation of complex projects (e.g. slum upgrading), covering the infrastructure, housing, social networks and many other areas. Urban and regional infrastructure developments have other types as well, like telecommunication, urban or water developments. The average project size is around $850 million. The project types and project costs show fairly large spread, there is no significant correlation between the project type and the project cost. It is understandable, because for instance among energy projects, we can find small-capacity solar energy constructions as well as state-level energy networks; among transport projects, we can find a project for building a short road section as well as

Share of AIIB sources, among proposed projects (%) (project costs without own contribution)

Source: https://www.aiib.org/en/projects/proposed/index.html

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The effects of the AIIB on the multilateral development banks’ system

the whole road network of a larger territory. The smallest project is the Railway System Preparation Project in Oman ($60 million), the largest is Trans Anatolian Natural Gas Pipeline Project (TANAP) in Azerbaijan ($8600 million). In general, own contribution accounts for roughly one-third of the total project cost, which is provided almost always by the certain country’s or province’s governments. Another slightly more than one-quarter of the project costs is financed by other sources, on average. Other sources could mean different development funds or agencies, companies, private investors, but mostly they are labelled just as “other creditors” in the project budgets, their

is practically the only financial institution involved. In case of the Indian project, the only partner is the Government of Gujarat; in case of the Bangladesh projects, there are implementing agencies named (the Bangladesh Rural Electrification Board and the Dhaka Electric Supply Company Limited, both of them are power service companies in Bangladesh); in case of the other three projects in Oman, local coordination and management organisations appear as creditors. In case of the majority of the projects (12), the AIIB loan’s share is between 5030%, the rest is financed by the AIIB with less than 30%.

identity is unknown. In our later analysis, as our article focuses primarily on the role of multilateral banks, own contribution has been withdrawn from the project costs.

Among the proposed projects, the Indian Mumbai Metro Line 4 project is financed entirely by the AIIB. Most of the other projects (8) are financed between 50-40% by the AIIB, and in case of two the AIIB share is under 20%.

Among the 36 analysed projects, there are 9 (onequarter) that are not financed by other multilateral banks, or at least the other project partners are unknown. All the others are co-financed by another multilateral development bank(s) beside the AIIB. The second most significant partner is the World Bank and the third is the ADB (considering the amounts they contribute to the projects, and the number of projects they are involved in) (figure 1 and figure 2). Consequently, this analysis reveals that the AIIB cooperates most intensively with its loudest critics, the United States and Japan (or rather with the institutions led by these two countries: the World Bank and the Asia Development Bank). By numbers, this means that the World Bank is involved in 19 projects in total (11 approved an 8 proposed), the ADB is in 5 (all approved). The EBRDand EIB-loans appear in 2-2 projects, and in one project the Eurasian Development Bank (EDB) is also involved. During the analysis we also examined the share of AIIB sources of the certain projects. To calculate that, we deducted the amount of own contribution from each project’s total cost, and then the amounts thus obtained were proportioned to the AIIB sources. The results are summed up in figure 3 and figure 4 (approved and proposed projects). The share of AIIB sources exceeds 50% among five approved projects. In all these projects, the Bank

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Considering all 36 projects, in six cases the World Bank’s loans exceeds the AIIB loans. In 11 additional cases, the two banks’ loans are equal, which means that in those cases where both banks are involved, there are no projects where the AIIB has higher share than the World Bank. The same comparison with the ADB results that in one case the AIIB-share is higher, in two cases both have equal share and in two cases the ADB-share exceeds the AIIB-share. The EBRD and the EIB are more marginal players, but the AIIB exceeds them in only one out of four cases.

The future role of the AIIB in the Asian development market is still open question. Although its international manner determines fundamentally the institutional standards, it cannot be ruled out that the more and more embedded institution will expand its influence more than the traditional players, thus becoming a regional hegemon. Conclusion The Asian Infrastructure Investment Bank has been a divisive institution ever since its announcement. Professionals and politicians have articulated many viewpoints on it: some considers it as an attempt to change the existing world order or at least part of the process of doing so, through which China’s ultimate goal is to eliminate to US hegemony. The institution’s existence goes far beyond itself, since based on its size and the number of its members it would be less “threatening”, but the offensive American communication on it suggested that the establishment of the Bank implies significant geoeconomic, geostrategic and geopolitical changes.

However, as the institution has actually started its operation, these debates have finally settled. China has always stated that the AIIB just fills a longstanding development gap in the Asian–Pacific region, giving assistance for the developing countries to meet their huge infrastructure development needs. Therefore, it is not emerging as a rival against the other multilateral development banks, rather it would contribute to the catch-up process of the region in cooperation with them. Although the Chinese economic and strategic interests cannot be denied in this regard, but looking at the operation of the Bank so far, examining the creditor’s composition of its approved and proposed projects, we conclude that the AIIB is rather pursuing a cooperative policy; it works along with the existing players, regarding the project financing. Thus, the previous offensive commentary about the disruption of the world order and the current financial system seems to be unfounded so far. And also those critical voices claiming that the Bank would not comply with the standards and criteria of the international financial system, because by working together with other banks, the AIIB had to adapt their standards as well.

This short comparison reveals that based on the analysis of the currently published projects it can be stated that the AIIB finances projects on its own only in a very few cases. Most of the developments are co-financed with other multilateral banks, in many cases with its so-called “rivals”, the World Bank or the ADB. Moreover, the AIIB appears in the co-financed projects mostly as an equal, or minor creditor. Based on this analysis, the view, according which the AIIB would disrupt the existing multilateral financing system by emerging as a dominant player in this area, is not proven. Moreover, those concerns are also not valid, according to which the Bank would not able to comply with the international standards, because in most cases the AIIB is only co-creditor, therefore, it has to adjust its own procedural rules to the other banks’.

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OF A MONETARY POLICY DECISION

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THE GEOPOLITICAL CONSEQUENCE OF A MONETARY POLICY DECISION

Author: Pál Péter Kolozsi

Between Friday, 11 September and Wednesday, 16 September, 1992 the formerly so proud and enormous British Empire suffered an embarrassing and painful defeat in the monetary market, which it used to dominate, against the speculative capital appearing in the international financial world, and was forced to exit the European Exchange Rate Mechanism (ERM). The speculation against the British pound, cementing the international reputation of George Soros’s name, was an important milestone both in the history of finance and European politics, leading to far-reaching consequences beyond its immediate economic and political impact. th

In their book ‘Six Days in September – Black Wednesday, Brexit and the making of Europe’, William Keegan, the doyen of British financial journalism, David Marsh, Managing Director of OMFIF, the international think tank for central banking, and Richard Roberts, a professor at King’s College even claim that the fall of the pound was the event that led to the Brexit referendum in 2016 and the exit of the United Kingdom from the European Union. The book – which focusses on those six days, as it is promised in its title – reconstructs that almost one week, and places it into context based on telephone conversations, recollections, interviews and articles of the time, presenting the events to the reader in a thriller-like manner. But exactly what happened during those six days and how do this six-day drama and the British Euro-sceptical traditions fit together? Who made a mistake, who is responsible for the shameful fall? What role did speculators and the Bundesbank have? Can the media be blamed? Maybe exit from ERM was not a disaster, but a prerequisite for the British economic prosperity lasting until the global financial crisis?

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Moving onto the recent past and its economic aspects, after World War II, Europe lay, both figuratively and literally, in ruins, and economic activities between nations practically ceased to exist. A major reason for this was the absence of an international payment and credit system, required for trade, and there were no convertible currencies. The situation was eased by the Marshall aid, as significant dollar liquidity appeared in Europe through the programme being in operation between 1948 and 1952, which enabled real economic cooperation. It resulted in the establishment of the Organisation for European Economic Co-operation in 1948, and that of the European Union in 1950, which allowed net settlement in 18 countries. In the Bretton Woods financial

cerns, especially in Paris: De Gaulle wanted the United Kingdom, which he considered unreliable, to be outside the European cooperation, and control the ancient rival, Germany all at once – including such elements as the veto against the British and the radical increase of the French gold reserves by 400 tons per year between 1958 and 1966 – but the French plan eventually failed. By the end of the decade the hegemony of the German economy became clear, as coalitions seeking balance of power came into fashion again among the three major powers of Western Europe. London was seen more and more as a counterweight of Bonn by Paris, arguing for exchange rate stability, and the German party, proposing a much stronger coordination of economic policies

system dollar was the central currency, but the pound remained the second most important international currency until the 1960s.

than the French were, wanted to prove with the British alliance that its Western orientation also remained strong beside the Eastern opening. The significance of the United Kingdom gained value, as a result of which there were no obstacles in her way to become an EEC member in 1973.

The authors believe that the idea of joining the EEC occurred to British Prime Minister Harold Macmillan due to Britain’s diminishing weight in world politics after the Suez Crisis in 1956, which was vetoed by French President De Gaulle – again, out of geopolitical considerations, but citing economic reasons. In the 1960s, the explosion-like development of Germany’s economy and the appreciation of the German mark raised con-

Monetary integration also accelerated. Led by Edward Heath, a strong supporter of the European Communities, London joined the European currency snake in 1972, but the British “adventure” did not last long: at the end of June London announced to withdraw from the cur-

BRITISH ISLES VERSUS CONTINENTAL EUROPE The relationship between the United Kingdom and Continental Europe had never been free from problems. Without forgetting the wars fought by the British against other European powers, the rapport was influenced substantially by the fact that in the last 1,000 years, great European wars, the construction and the demolition of the Iron Curtain, the rise and fall of dictators shaping European history, the often drastic redrawing of borderlines all had taken place on the European side of the Channel, and islanders could watch events from a fair distance. The British-Continental opposition is almost a cliché; the question is when this break-up dates back to: some think it happened when the Roman legions left Britannia (around 400), others would date it in the 1530s, when Henry VIII broke away from the Catholic Church. ‘We are with Europe, but not of it’, the authors quote Winston Churchill to present the British mindset; ‘if Britain must choose between Europe and the open sea, she must always choose the open sea’, he argued.

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THE GEOPOLITICAL CONSEQUENCE OF A MONETARY POLICY DECISION

one of Major’s chief political achievements was to convince Thatcher to join ERM – or perhaps such a situation evolved, partly due to the shifts in the broader political climate and partly due to the evolving British recession that this was the only possible step they could take. JOINING IN TOTAL SECRECY, MOUNTING TENSIONS The United Kingdom joined ERM in October, 1990. High inflation was an important problem of Britain then (it was almost 10 per cent in 1990, while it was less than 3 per cent in Germany), which was accompanied by a recession. On 5th October, Major notified the leaders

rency snake after burning reserves of $2.5 billion as an intervention. The Bank of England was not independent then, and its political weight was not significant, either, which is also demonstrated by the fact that the Governor of the Bank was notified only after the decision had been made that the pound would be permitted to float. By 1978, Italy and France had also left the currency snake, which led to the establishment of the European Monetary System in 1979. For the sake of “burden sharing”, the Germans, happily willing to extend the appreciation of the mark and its impact on competitiveness also over other countries, were strong supporters of the EMS project; the British, however, opposed it from the very beginning amid worries about the pound and their sovereignty. THE EUROPEAN MONETARY SYSTEM EMS was a fixed but adjustable exchange rate system, in which specific countries had the opportunity to depreciate their currency from time to time. Cross exchange rates were relatively quickly adjusted, in the first four years of the system – strongly determined by the oil crisis, the revolution in Iran and Volcker’s restrictions in the USA – in every eight months on average, and less frequently as the turbulence decreased. The United Kingdom formally joined the EMS in 1979, but not the Exchange Rate Mechanism (ERM), representing the core of the system.

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In the late 1980s the voices supporting ERM became louder in London, too, not least because the dollar was getting stronger and the exchange rate was approximating the humiliating 1-dollar level. Eventually, it was ended by the Plaza agreement in 1985, but the British government resisted then – entry had only one major opponent, but her name was Margaret Thatcher, who even threatened to resign if the pound were to join the exchange rate mechanism.

of Europe by phone that the United Kingdom would join the system, at a mid-market rate of DM2.95. Even then, the cross rate was considered too high by many (the leaders of Bundesbank in particular), while the fact that the British had decided on the exchange rate unilaterally while it should have been a collective decision arouse stiff opposition in others (Banque de France). In retrospect, it can be regarded symbolically that the British joined ERM five days after Germany was re-united – that is, the British tried to board Europe’s ship when the tide was changing, and it was not known which directions the others would take.

The authors think that British politics expected the pound to be strengthened by joining the system, allowing a reduction in interest rates. According to Hans Tietmeyer, International Director and later President of Bundesbank, it is incomprehensible how London could think that they would be able to reduce interest rates continuously after joining ERM, as it was obvious that German interest rates would rise due to the German re-unification. ‘If London really wanted lower interest rates, then it should have joined at a much weaker exchange rate, or should have stayed away from ERM for quite a while’, the German central banker summarized his opinion. Eventually, subsequent events justified the pessimistic scenario, although initially there were no signs suggesting any problems. The British economy arrived at the elections in April, 1992 in good strength: rise had started, inflation had decreased, the external equilibrium had improved, and interest rates could decrease. Conservatives, led by Major by then, won the election. Deep down, however, tension started to build up. German re-unification brought about a significant transformation in the European geopolitical space, and in terms of finance, especially the decision of a strong domestic nature to convert the East German mark to West German mark at a rate of one-to-one proved to be determining. Unification in this form undoubtedly

In the late 1980s, the British economy underwent a significant transformation. Thanks to deregulation, credit was growing, but in the meantime interest rates were kept high in order to reduce inflation, which curbed growth. With a freely floating exchange rate, a possible reduction of exchange rates would have caused a weakening of the pound and inflation through the rise of import prices. In this situation, ERM became an attractive opportunity: by importing the credibility of the Bundesbank, inflation could be reduced while maintaining a stable exchange rate and continuing the credit boom. At least, theoretically. At the end of the decade, the reference interest rate was as high as 15 per cent, and the external equilibrium was dramatically deteriorating, which led to the resignation of the strongly Euro-sceptical Chancellor of the Exchequer, Nigel Lawson – the father of renowned celebrity chef, Nigella Lawson. His successor was John Major, a supporter of Europe, who later became Prime Minister. As Chancellor of the Exchequer,

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Average annual pace, percentages United Kingdom Germany France

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Economic growth 1992-1999 2.7 1.4 2.0

1999-2009 2.5 1.6 1.9

Unemployment 2009-2016 1.2 1.0 0.6

1992-1999 8.2 8.4 10.5

1999-2009 5.2 9.0 8.5

2009-2016 7.0 5.6 9.8

led to the rise of inflation pressure in Germany, which was consistent with higher German interest rates. It is important to underline that Bundesbank – as opposed to other leading central banks – had already been independent from the government, and sought to keep away from political aspects. German inflation started

At the end of August and the beginning of September the Swedish krone got into trouble first, then the Finnish mark left the system altogether, and several tens of billions of dollars had to be spent on protecting the Italian lira. Market tension was mounting, and the British government took out an international loan of ECU10 billion

to rise in 1991, while other Western European countries witnessed a decrease, which led to German restrictions. German interest rates were below American ones by 3 percentage points in 1989, and they exceeded them by 6 percentage points in 1992. This marked a highly significant monetary turnaround in the Trans-Atlantic region and especially in Europe. This meant that the United Kingdom was trapped: (1) the gap between British and German interest rates was narrowing rapidly, which increased the vulnerability of the pound; (2) real interest rates started to rise due to inflation; (3) the pound had risen against the dollar, which made the situation of British exporters very difficult. The Maastricht Summit took place in this already difficult situation in 1991, which laid down the fundamentals of the economic and monetary union, and set a target date for the introduction of a common European currency. Bundesbank did not support that, and after Maastricht interest rates were raised again, on the grounds of a mounting inflation pressure. The Maastricht Treaty was rejected by Denmark in June, 1992, and then French President Mitterrand announced that a referendum would be held in France in autumn. Subsequently, Bundesbank raised interest rates again, provoking considerable indignation in other Western European states, as they were supposed to raise interest rates or depreciate their currency every time the Germans raised interest rates – which was dismissed by all for domestic policy and economic reasons. Major tried to make Kohl reduce interest rates, which was rejected by the Chancellor on the grounds of the independence of Bundesbank. And Bundesbank was adamant – quoting the words of Wim Duisenberg, President of the Central Bank of the Netherlands at that time, later the President of the European Central Bank, the German central bank was ‘like whipped cream: the harder you beat it, the stiffer it gets’.

as a pre-caution to defend the pound – roughly at the same time when George Soros deployed a resource of a similar amount to weaken and break the pound. THOSE PARTICULAR SIX DAYS On Friday, 11th September, 1992 the pound started to fall; first, John Major tried to manage it verbally (verbal intervention) – without success. Friday began with the free fall of the lira, and the Italian central bank immediately asked for help from Bundesbank, which, theoretically, was as supposed to defend the exchange rate range as Banca d’Italia. Accordingly, Giuliano Amato, Italy’s Prime Minister and Carlo Azeglio Ciampi, the President of the central bank called Helmut Schlesinger, President of the Bundesbank, who surprised everyone saying that when EMS had been created, the Bundesbank had concluded a secret agreement with the German Chancellor of that time, that in case the stability of the German mark required so, the Bundesbank could not be obliged to intervene. On Saturday, a German delegation arrived in Rome, and the Italians agreed to depreciate their currency, but no decision was made on the other currencies, which remained overvalued against the mark. London learned the news of the Italian depreciation on Saturday evening, but Major would not hear of the depreciation of the pound. The French thought the same; they were preparing for the decisive Maastricht referendum, and monetary market pressure and especially a depreciation would have improved the chances of winning of “no” votes. On Sunday, one could read about a critical period and monetary frenzy in British newspapers. Having perceived the seriousness of the situation, Schlesinger called the other central banks notifying them that the Bundesbank was going to reduce interest rates – the only question was whether it was too late for the Ger-

man central bank to intervene and whether this would be sufficient to sooth markets. At 9:30 a.m. on Monday, the leadership of the Bundesbank held a meeting in Frankfurt, and reduced interest rates for the first time in 5 years. The interest rate cut, however, proved to be too modest (25 basis points), and to many, Bundesbank seemed to have made the decision under political pressure, which immediately put the pound in a difficult situation. At the press conference held after the interest rate cut, Schlesinger explained that the decision had been hard to make due to high German inflation, which did not sooth the markets, either. The crisis of the pound was increasingly becoming the question of “when”. On Tuesday, the Financial Times wrote that after the lira, the next target of speculation would be the pound. But it was not the sensation of the day, but Schlesinger’s interview given to Handelsblatt and Wall Street Journal. The upheaval was caused by Handelsblatt, which sent Schlesinger’s answers to news agencies without authorization by Frankfurt, saying ‘before the French referendum, some currencies could still come under pressure’. If interpreted by market analyses, it meant ‘Sell sterling’. And that was exactly what traders did, that is, the fall of the pound was directly triggered by a German newspaper, which, throwing off the basic rules of journalism ethics, spread the ill-formulated words of

the President of the German central bank all over the media. An official correction was issued as early as the same evening, but with no impact: the pound started to plunge, Schlesinger’s words just added fuel to the fire (the German central banker apologised for this in a section of the book written by him). In this context, Wednesday, not surprisingly, saw a complete collapse of the pound, speculators defeated the world of central banks in a couple of hours – the authors think this battle was not “fair” as the official side was divided, there were significant conflicts of interest, and all market powers re-aligned and sold the pound. The outcome could not be any more certain. On Wednesday, the dealers of the Bank of England appeared on the market at 7.30 a.m., and sales were so intensive that by 10.00 a.m. the BoE had burnt $10 billion of its reserves, but the exchange rate did not move. This was when Major agreed to the first interest rate rise, which was immediately of 200 basis points. The British government announced that they would do anything to defend the pound, but neither this nor the interest rate rise had any effect. The attack became fiercer, but Major was out of telephone contact as he was at a meeting with the politicians of the Conservative party. With regard to the seriousness of the situation, executives of the central

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bank went to see the Prime Minister in person, but he did not cut off the meeting, thus in the middle of the attack against the pound, financial leadership had to sit on a sofa in the corridor and wait for Major until 12.45 p.m. The leadership of the Central Bank proposed to suspend ERM membership, attributing responsibility to the Bundesbank and the French referendum. In this period, every single minute cost £18 million to BoE, but the markets did not calm down, therefore the central bank announced another interest rate rise of 300 basis points – the second one within one day, which was perceived by the market as a sign of weakness. Before capitulation, the Germans rejected the British Prime Minister, and eventually the pound officially departed from ERM at 4.00 p.m., with the reserves of the Bank of England completely depleted. The pound immediately dropped by 3 per cent against the mark, earning huge profit to speculators. Italy followed the British, and Spanish peseta was devaluated. BLACK OR WHITE? In October, 1990 the United Kingdom joined ERM in full secrecy and without compulsory consultations – and two years later masses witnessed as it fell out of it tragically quickly. One month after Black Wednesday, Elisabeth II, the Queen of England, travelled to Germany and asked Schlesinger ‘whether speculators can really be so strong?’ And the German central banker just said that ‘in a system of fixed exchange rates with high differentials in the rate of inflation, they can. They have a high chance, unfortunately.’ On 20th September, the French electorate voted for the Maastricht Treaty by a very small margin, which immediately resulted in significant sales of francs in the market. Two days later, President Mitterrand received Chancellor Kohl in Paris, and the French president – unlike his British colleague – managed to convince the Germany party to reduce interest rates. ‘Germany makes a big mistake if it treats France the same way it treated Britain – the two countries cannot be compared economically, politically or strategically’, Jean Claude Trichet, the newly elected President of the Central Bank of France (and later the President of ECB) allegedly said. French arguments must have been convincing because the two central banks issued a joint statement and spent together more than $30 billion on intervention, raised the French interest rates and reduced the German ones, and managed to curb speculation, even if only temporarily.

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The authors of the book think that British politics had to pay for three big mistakes, as – they had failed to recognise what an advanced stage the project of the common European currency was in, especially on the French side, which influenced the operation of ERM in its essentials; – they failed to appreciate the economic and monetary policy significance of the German reunification, and the fact that due to the accompanying increase of interest rates by Bundesbank the British monetary easing would not be sustainable; – John Major had overestimated his own capability of and opportunities for influencing German monetary policies, as practically no result was achieved by the British Prime Minister in this critical period.

Not surprisingly, London did not like the exceptional treatment of the French; the Kohl-Mitterrand meeting was therefore classified. Nevertheless, Paris’s resistance did not last long: a speculative attack restarted, and in the summer of 1993 the EMS era practically ended by widening the exchange rate bands by +/– 15 per cent. ‘Problems were caused by the fact that Germany could not manage reunification, and wanted the other countries to pay for the costs’, Mitterrand summed up France’s opinion, according to the book. The sterling crisis gave way to fundamental changes, but there is no single opinion about the long-term consequences – some say that this Wednesday was not a Black Wednesday but a White one, as the British central bank became independent subsequently, and the United Kingdom saw a 15-year-long economic revival. The pace of growth was typically higher and unemployment tended to be lower than the French or German ones, and although the pound was depreciated, it did not result in inflationary pressure – which was potentially contributable to the acceleration of globalisation, the reforms on the supply side and the relatively subdued wage dynamics. The book draws a parallel – perhaps rather a strange one at first sight – between the exit from ERM and the retreat from Dunkirk in 1940, which was not by any means a British victory, but allowed to summon up strength and of the final victory later.

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British Conservatives, and Major in particular, having won an election victory couple of month earlier, could not recover from this humiliating blow for many years, which was amplified by the fact that the winners of the battle against the pound were very visible and identifiable, especially George Soros, earning international reputation during these couple of days. According to the book, which dedicates an entire chapter to introducing speculative and hedge funds, Soros could have won much more in these days than the often-mentioned £1 billion, and it also tells a lot that later Robin Leigh-Pemberton, the then Governor of the Bank of England, said rather sadly in an interview to The Guardian that he was likely to be remembered as the President of the central bank who was in office when Soros won. CLOSING REMARKS: FIRST AND SECOND BREXIT? The documents, descriptions, stories presented in the book obviously underpin that London tended to take part in European projects half-heartedly – there was maybe only one moment when this could have been turned around, the period of the ERM membership in question, which, however, ended in failure. The devaluation of the exchange rate was not unprecedented – before World War II a pound cost 4.86 dollars, in 1985 the exchange rate almost achieved parity, but the pound fiasco in 1992 could be regarded as an exceptional case

because of the circumstances and the consequences. A couple of decades earlier, the country, considered to be a global empire, burnt all its reserves, depreciated its currency and was forced to shamefully face the fact that in a great political project Germany, supported in its reunification, would not help Britain out. ‘The United Kingdom supported the reunification of Germany, but many Brits feel that they have to pay a high price for this support’, the British Prime Minister summarised his frustration in a letter written to the German Chancellor, but, as we could see, in vain. Beyond doubt, ERM membership and its disgraceful end fundamentally determined the British’ attitude towards the European integration and the European Union. One of the interesting findings of the book is that the exit from ERM in 1992 was the “first Brexit”, followed by a “second Brexit” in 2016. In October, 1990, it seemed that the traditional British-Continental controversy had been overcome at last and the opposition ended. The pink fog, however, quickly dispersed with the debate on Maastricht and the forced exit from ERM, and this disappointment culminated in the referendum in 2016, which represents a return to the separatism of the 1950s and 1960s. The authors believe that the ERM crisis is obviously an inflexion point in the UK’s relations to Europe; this is where the estrangement, consummating in the British exit in the not so distant future, started.

The British withdrawal from ERM in 1992 obviously brought the other European countries together. The authors point out that the sterling crisis accelerated the introduction of the common European currency, even its great opponents, Schlesinger and Issing adopted a milder tone after the crisis. Issing later admitted that the currency crisis of 1993-1993 had obviously been a turning point, subsequently the status quo could not be maintained. ‘The lira weakened by 30 per cent, South German companies manufacturing for the Italian market went bankrupt, and we concluded that the Common Market could not survive another crisis like this’, presented the real motivations the German central banker with surprising frankness. Subsequently, Frankfurt was less rigorous, and Hans Tietmeyer, heading the Bundesbank between 1993 and 1999, was the first President of the central bank who did not ever raise interest rates during his presidency of six years. The common European currency has been introduced since then, and the central banks of the Eurozone have been replaced by the European Central Bank, but all these did not prevent European countries from being some of the greatest losers of the global financial crisis that broke out in 2007 (some even think it just made things even worse). The authors argue that the reasons for this included an inadequate monetary policy system, and “collective mistakes” (Jacques Delors) and “complacent amnesia” (Mario Draghi) characterising decision-makers in the pre-crisis period. The only question that remains is whether the second Brexit of 2016 would bring along the strengthening of the GermanFrench axis, just like the first Brexit did, and whether the decisions made consequently would prove to be better decisions than the ones made after the sterling crisis.

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THE 4 INDUSTRIAL REVOLUTION TH

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THE 4 INDUSTRIAL REVOLUTION IN AFRICA – OPPORTUNITIES AND CHALLENGES TH

Author: Ráhel Czirják

Since the 18th century, industrial revolutions have fundamentally changed the economy, mankind’s relationship with nature, and everyday life. This process still lasts today, but now we can talk about the Fourth Industrial Revolution. Although technological achievements made throughout the centuries are regarded by most people as the means and signs of development, the complex process called the industrial revolution and the accompanying technical advancement also have their downsides. In our study composed of several parts, we explore the latest stage of the industrial revolution from Africa’s perspective, and we seek answers to the question as to what risks and opportunities it holds for the Black Continent.

The complexity of the topic prevents us from undertaking its fully comprehensive study, as there would certainly be a segment that we would not cover even in the case of a study composed of several volumes and conducted in collaboration with the experts of many other fields of science. Instead, we attempt to grab the potential effects of the fourth industrial revolution along three dimensions – economy, infrastructure and (natural) environment –, narrowing these dimensions to a certain extent, with regard to the fact that the study still would be too large-scale without doing so. Keeping all these in view, the aim of our study series is to provoke some thought, inviting readers to contemplate it and unfold a professional debate. Part One is about economy, Part Two is about infrastructure and the final part is about the natural environment, from Africa’s perspective.

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INDUSTRIAL REVOLUTION – FROM THE STEAM ENGINE TO ARTIFICIAL INTELLIGENCE The industrial revolution has fundamentally changed mankind’s relationship with nature, the methods of economic production, and, consequently, everyday life. As a result of the original accumulation of capital and embourgeoisement, the process, first unfolding on the British Isles, has been going on until today – but now on a global level. The approximately 250-year-old history of industrial revolutions can be divided into different stages. The academically most widespread division differentiates between three major eras, on the basis of the technology exerting the greatest impact on the economy: the initial period of the industrial revolution – in other words, the First Industrial Revolution – lasted from the 1760s

to the 1840s, with the steam engine being the most dominant invention, replacing the use of animal effort in agriculture, and allowed the launch of mechanised production in the industry. The most significant technological achievement of the Second Industrial Revolution – which lasted roughly from the 1870s until World War I – is electric power and its widespread use, and in relation to it, the beginning of mass production. The Third Industrial Revolution began in the late 20th century – roughly in the 1960s – and is hallmarked by electronics, information technology and the automatization of production. By now, there is a Fourth Industrial Revolution we can talk about, which is building upon the digital revolution of the third one, but forms a distinct, new era, due to the velocity and scope of technological advancement and its impact exerted on systems – including systems of production, management or governance –, argues Klaus Schwab, founder and Executive Chairman of the World Economic Forum. The Fourth Industrial Revolution is characterised by the fusion of various technologies, blurring the lines between the physical, digital, and biological spheres, which, apart from the transformation of different disciplines, the economy and the industry, also raises the question as to what it means to be human. The new era called Industry 4.0 is characterised by such inventions and research directions as artificial intelligence, robotics, the Internet of Things (IoT – internet-based connectivity of various devices, objects), autonomous vehicles, 3D printing, nanotechnology, biotechnology, materials science, energy storage, and quantum computing. As a practical consequence of the scientific-technological advancement, production is and may be becoming more flexible. On the one hand, this is the result of applying robotics in manufacturing, as “smart equipment” communicates with the environment while continuously measuring various parameters of the process, making the adjustment of production during the process easier, if necessary. The growing volume of data also allows of better adaptation to customers’ needs. The Internet and 3D printing, for example, liberalise access to technology, making the decentralisation of production possible. That is, in the present stage of the industrial revolution it is becoming more and more possible to establish small plants producing cheaply and flexibly.

Thus, the Fourth Industrial Revolution offers several opportunities, but it also entails risks. Below, we are exploring these from Africa’s point of view. AFRICA’S ECONOMY – PREMATURE DEINDUSTRIALISATION With the industrial revolution, the restructuring of the economies affected has begun, which is primarily reflected by the re-stratification of employment, which means the following development path in the case of the countries of the Western world: the first step is the flow of workforce from agriculture into industry, that is, industrialisation, later followed by a transfer of workforce released from the agricultural sector into the tertiary sector (second step). The third step is deindustrialisation, when industry gradually starts to lose from its weight due to a decrease in its share in total employment and an increase in the services sector – while there is a continuous decline in the primary sector. In the postindustrial development phase workforce flows only from the industry into the tertiary sector. The structural transformation of the economy is an important issue as the long-term sustainability fundamentally depends on it and on the fact whether economic growth is accompanied by social development. The structural change generating growth started on the Black Continent in the decade after decolonisation in: the flow of workforce from less productive sectors and areas towards more productive ones – that is, from agriculture into the processing industry and services, from rural areas into cities –, and from the informal sector into the formal one began. But by the 1980s-1990s, the transformation process had almost completely run out of steam, and today we can talk about Africa’s “premature deindustrialisation” – as Rodrik calls it –, as the decrease in the economic weight of the industry has taken place earlier than its level of development would have justified. Between 1960 and 2010, 18 percent of the workforce flowing out of the agricultural sector went into the industry, 88 per cent of whom found employment in the manufacturing industry. But the African manufacturing industry is dominated by informal small enterprises, which have low productivity due to their technological standards, market relationships and financial resources. Therefore,

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THE 4TH INDUSTRIAL REVOLUTION IN AFRICA – OPPORTUNITIES AND CHALLENGES

Sector shares of gross domestic product in world regions (2014-2015, %) Africa European Union East Asia and the Pacific South Asia Latin America and the Caribbean North America

Agriculture 16 2 5

Manufacturing industry 11 15 23

Services 54 74 60

18 5

16 14

53 67

despite growing workforce, the industry’s contribution to the GDP increased only slightly in 2010 compared to 1960: from 24.3 percent to 27.8 percent. 82 per cent of workforce released from agriculture found employment in the tertiary sector – the productivity of which is even lower than that of the industry –, which considerably increased the significance of services to the national economy – by 2010, it had produced half of the GDP and employed 73 per cent of the workforce, but this all happened while productivity decreased, as services are also predominated by the technologically underdeveloped informal sector. That is, despite the fact that the workforce that had become superfluous in agriculture flowed into other sectors, only a small degree of structural transformation took place in Africa’s economy – as most of the workforce went to the low-productivity services sector instead of the more productive manufacturing industry, which has a minor growth-generating effect. Consequently, the economic growth of the continent is not the result of internal development, but is the benefit of an advantageous external context – such as the growing demand for raw materials in the first fifteen years after the turn of the millennium. But what impact may the technological achievements of the Fourth Industrial Revolution have on Africa’s economy? One of the important features of the new era is that it is transforming the methods of production, which entails both potentials and risks. THE IMPACT OF THE 4TH INDUSTRIAL REVOLUTION ON AFRICA’S ECONOMY One of the most frequently mentioned threats is the replacement of more and more human labour by robots, which might lead to growing unemployment

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primarily in developing countries, where – as a result of a post-Fordist economic transition – production was relocated to from centre countries due to their cheap workforce. In this way, automatization mainly threatens with the extinction of workplaces requiring low qualifications – primarily in the manufacturing industry.

even against large companies. Collectively, these new businesses – although none of them may ever create billion-dollar businesses themselves – create millions of new jobs and they can exert more considerable effect on the labour market than a single large company would. Entrepreneurs, being champions of innovation, play a key role in the life of the economy by developing and introducing new technologies and methods of production. In this respect, Africa, where the proportion of entrepreneurs within the working-age population is the highest, 22 per cent, has enormous potential. But basically, the Black Continent can

use the opportunity offered by high entrepreneurial potential and the latest stage of the industrial revolution if two conditions are met: appropriate qualifications and adequate infrastructural background. Several studies have already justified the relationship between education and the performance of a given country: before the turn of the millennium, Barro calculated that an extra year in education (that is, increasing average schooling by one year) raises the growth rate of the economy by of 1.2 percentage points per year. In their calculations, Wilson és Briscoe concluded that an overall 1 per cent increase in school enrolment rates leads to an increase in GDP per capita growth of between 1 and

But the weight of the manufacturing industry is much less on the Black Continent than in, for example, Southeast Asia: it produces only 10 per cent of the GDP – in Southeast Asia this figure is more than double, 24 per cent –, and employs only 7 per cent of the workforce. But this seemingly small share of 7 per cent may be much larger if looked at on a lower territorial level. In Ethiopia, for example, automatization threatens 44 per cent of employees. Furthermore, forecasts suggest, between 2015 and 2030, 29 million people will enter the labour market on the continent annually, therefore Africa urgently needs to create new jobs – and not to threaten or extinguish them. But the Fourth Industrial Revolution also shows potential for Africa. Thanks to various studies and the Internet, small-scale manufacturing is becoming increasingly competitive, because, among others, automatization is getting increasingly cheaper, the customisation of products becomes possible even for a larger circle of customers, and raw materials are cheaper. In their study, Erik Brynjolfsson and Andrew McAfee present the efforts of Heartland Robotics to provide ‘cheap robots-in-a-box that make it possible for small business owners to quickly set up their own highly automated factory, dramatically reducing the costs and increasing the flexibility of manufacturing’. Thus, the technological innovations of the Fourth Industrial Revolution may put small enterprises into position by enabling an increasing number of people to launch flexible, small-scale manufacturing which is competitive

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Quality of infrastructure in Africa

the USA during World War II: devices and equipment to supply the army, and the facilities ensuring their transport and normal operation were called infrastructure. Other sources date the first use of the notion to the times of the Napoleonic Wars. There are several ideas about the meaning of the term, widespread in vernacular language by now: for example, some classify all factors related to human activity and functioning but arable land under the definition of infrastructure, while another approach regards the entire environment of microeconomic processes, including nature, as a part of infrastructure. Fundamentally, this is a term with technical con-

3 per cent. A study conducted in 2007 found that an extra year spent in education increased wages in Kenya by about 11.3 per cent and in Tanzania by 8.3 per cent. In the context of the industrial revolution, education, on the one hand, is essential to enable people to use the achievements of the industrial revolution, and by adjusting them to their environment, to further develop their environment, and to devise new, innovative ideas, procedures and solutions. On the other hand, education is likely to have an important role in eliminating the threat posed by automatization, as human labour tends (and will tend) to be replaced by robots in jobs requiring lower qualifications. But with re-training, and increasing the level of qualifications, the workforce concerned can be employed in other segments. The next chapter focusses on another important condition of tapping the potential of the Fourth Industrial Revolution: an adequate infrastructural background. INFRASTRUCTURE ON THE BLACK CONTINENT Infrastructure is a term of Latin origin; it means a fundamental structure, a fundamental building, or, in general, fundamentals, that is, ‘the fundamentals, the antecedents and the prerequisite of the creation, existence and development of a thing‘. Some sources claim that the term was first used in

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tent, ‘a basic requirement of economic activities, services, the life and development of countries, regions and settlements. Therefore infrastructure has a decisive role in the socio-economic development‘. That is – referring to the chapter focussing on economic impacts – adequate infrastructure, as well as adequate schooling, is a pre-requisite to harnessing the economic potential of the Fourth Industrial Revolution. In Hungarian and international academic literature, countless methods of grouping infrastructure can be read, but we present only one kind of classification below – the one that best suits the approach of this study paper. Within infrastructure, we can differentiate between technical or linear infrastructure, and social or human infrastructure. This latter one includes housing, the facilities for commerce and catering, institutions of health and medicine, education and culture, as well as various facilities for sport, mass holidays, recreation and leisure. This article, however, does not focus on these, but the technical infrastructure, which is more closely related to economic activities, and includes traffic and transport, energy supply, water supply, sanitation, waste water management, and the network and facility systems of information and telecommunications. On the state of Africa’s technical infrastructure, the Africa Economic Report 2017, prepared by the World Economic Forum, argues that the infrastructure deficits are rated as one of the top three constraints for Africa’s development. Within this, the level of development differs widely across sectors: the development of water, electricity, and transport infrastructure is “limited” or “disappointing”, although comparatively better outcomes have been

M-Pesa – mobile banking in Africa M-Pesa (M for mobile, pesa is Swahili for money) is a mobile phone-based money transfer, financing and microfinancing service, launched in Kenya in 2007 by Vodafone for Safaricom and Vodacom, the largest mobile network operators in the East African country. Since then, the service has been used by almost 30 million users in 10 countries. Practically, M-Pesa is a branchless banking service enabling customers to deposit, transfer or withdraw money with the help of their mobile phones – via text messages – for a considerably lower administration fee than the one charged by banks. Figure 2: M-Pesa

Economists Tavneet Suri (Massachusetts Institute of Technology, MIT) and William Jack (Georgetown University) examined the social impacts of the system for the period of 2008-2016. They found that the service lifted 200,000 households out of extreme poverty by increasing financial resilience: it provided immediate access to smallamount loans, enabled savings and, as a result, the launch of business activities. The authors found that with the help of M-Pesa, approximately 185,000 women could move out of agriculture into business.

seen in telecommunications and, to some extent, sanitation, but it still lags well behind the world average. Electricity supply is the least developed sector of infrastructure on the continent. Fundamentally, it can be stablished that the (both qualitative and quantitative) underdevelopment of Africa’s traffic and transport infrastructure is still holding back the economic development of the countries on the continent, as it – among others –

hinders the market access of products, significantly increases transportation costs and adversely affect the flow of foreign direct investment. With an average of 204 kilometres of roads per 1,000 square kilometres of which only one quarter is paved, Africa lags far behind the world average of 944 kilometres per 1,000 square kilometres. This is not only a barrier to the connectivity between settlements – regions and countries – but it has a negative impact (mainly) in cities: low road density versus high concentration of population causes congestions, which are significant sources of pollution and accidents. The situation of the African railway network is similar: its total length of 75,000 km, on a surface of 30.2 million km², translates into a density of approximately 2.5 km for 1,000 km², which is far below that of other regions and the world average of 23 for 1,000 km². The network itself is extremely fragmented, connection between countries is hardly provided, partly because tracks with different gauges have been built in each country, and 17 African countries do not have railways at all. The average technical speeds of African railways are about 30 to 35 km/hr, they railways in Africa carry only 2 per cent of the global railway passenger traffic and 7 per cent of the goods traffic. Consequently, costs of transportation (including all its means) in Africa are among the highest in the world, which makes trade more expensive, considerably reducing the competitiveness of African products in the world market. Poor road, rail and port facilities add 30 to 40 per cent to the costs of goods traded among African countries. Transportation costs may amount to even 77 per cent of the value of export in landlocked countries. Taking into all these into consideration, the World Bank seems to be fair to use such attributes as “limited” and “disappointing” when describing the quality of transport-related infrastructure. THE IMPACT OF THE 4TH INDUSTRIAL REVOLUTION ON AFRICA’S INFRASTRUCTURE Beyond more traditional elements of infrastructure, internet, and in a broader sense, information and communication technologies (ICT) are of great significance in the latest stage of the industrial revolution as they reduce geographical distances between, for example, economic actors, to zero.

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Zipline

Surprising as it may seem, there is one field where underdeveloped infrastructure may represent an advantage to the continent, and this one is in the environmental dimension. ENVIRONMENTAL IMPACT

difficult to provide healthcare to patients in more remote areas of the country. In order to improve medical care, the government of Rwanda launched the project in partnership with Silicon Valley-based robotics company, Zipline. Within this framework, a distribution centre has been built in the Muhanga region, where 15 custom-built drones, known as "Zips," take off. They can fly up to 150 kilometres and carry up to 1.5 kilograms of blood. Hospitals can order blood via text message, and have it delivered in 15 minutes on average, eliminating the need for onboard refrigeration or insulation. In Africa, ICT infrastructure and usage have improved significantly, enabling many people to access services that they could not even dream about. Mobile phones have enabled millions of Africans to manage their businesses more effectively through, for example, providing an opportunity for mobile banking (see: M-Pesa). Nonetheless, the gap with advanced economies on ICT usage has increased – it is even larger today than 10 years ago–, hindering the capacity of the continent to embrace the Fourth Industrial Revolution Despite these advances, Africa is not in a very good position in terms of the Internet, which can be regarded as one of the corner stones of the latest stage of the industrial revolution, either. Only 20 per cent of Africans have regular access to the Internet, which would be crucial for economic development, as most transactions and most of the economic activity are conducted online. Only 1.4 percent of Africans have access to a broadband connection. But the digital technology cannot transform the economy of the continent without universal electrification, that is, the completion of the Second In-

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dustrial Revolution. 645 million people lack access to electricity, which is, apart from the difficulties of everyday life, significantly encumbering economic growth. Currently, the lack of electricity is regarded as the greatest barrier by 39 per cent of African businesses. A study conducted in 2016 revealed that the number of electrical outages for sub-Saharan Africa in a typical month is about 8.5, and their typical duration is about 4.1 hours. As a result of the lack of maintenance work and new investments, and of a growing number of users in recent decades, the power networks of the continent are overexploited, outages are frequent, supply is irregular, while the price of electricity has been increasing. But new technologies create an opportunity to eliminate infrastructural deficits and to bridge the resulting gaps. A good example can be observed in Rwanda, where the world’s first drone delivery service was launched in October, 2016, which delivers blood to hospitals, cutting the waiting time of several hours to 15 minutes. In Rwanda, also called “the country of a thousand hills”, topographical conditions and poor roads in rural areas make it very

This system provides supplies in western Rwanda, where about 7 million people live in an area of over 18,000 square kilometres. In order to roll out the service, on the one hand, a drone airport is being currently built in Rwanda, which is scheduled for completion in 2020. On the other hand, the range of delivered products is also planned to be expanded, so that medicines and medical equipment could also be delivered like this. Nevertheless, the transformation of the economy can be based on the development of infrastructure if there is a critical mass: it requires the distribution of this and similar innovations that change and influence the lives of broad strata of society – and not just some highlights. But on the basis of the present state of the technical infrastructure of the continent, the report of the World Economic Forum suggests, African countries are not equipped to transition to a Fourth Industrial Revolution economy. That is, under the current circumstances, Africa cannot extensively gain the economic benefits provided by the Fourth Industrial Revolution, offered by flexible systems of production through new inventions and technologies.

Mankind’s impact on the environment can be examined in several different ways. In this article, we are examining the anthropogenic impact created by the industrial revolution starting from how the values of a complex index, the ecological footprint has changed. The ecological footprint shows the total area of productive land and water required continuously to produce all the resources consumed (e.g. food, energy, etc.) and to assimilate all the wastes produced, without damage, by a deﬁned person, population or activity, assuming a given level of development and resources management. The measurement unit of the ecological footprint is the global hectare, which represents an area of 1 hectare ‘the productivity of which equals with the average productivity of the Earth’s total biologically productive hectares’, that is, a land area with world-average productivity. Different soils, different utilisations of lands have very different productivity, which is averaged in the global hectare on a global level. If the ecological footprint of men is compared to the biocapacity of the Earth – its carrying capacity –, it reveals how much of the resources available of the resources available are used. If this rate – expressed in percentages – exceeds 100, we can talk about overexploitation, that is, the Earth is depleted to the detriment of next generations. Although ecological footprint calculations have been made by the Global Footprint Network, established for this purpose, only since 1961, the Hungarian literature contains a study paper that makes calculations going back further historically, with the help of which the anthropogenic impact on our Globe, rising sharply with the industrial revolution, can be illustrated. Co-authors Szigeti and Tóth estimated the size of the ecological footprint from historical GDP data going back as far as 10 000 BC, in five specific periods. During their research, they found that not overpopulation, but overconsumption is the primary drive behind the currently expe-

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THE 4TH INDUSTRIAL REVOLUTION IN AFRICA – OPPORTUNITIES AND CHALLENGES

Long term changes in Earth fullness and world’s total population, from 10.000 B.C. to 2008

rienced, unsustainable development. For almost 12 thousand years, the fullness of the Earth (that is, total eco-footprint divided by total biocapacity, in percentages) changed proportionally to the growth of the population; however, there has been a dramatic change from the beginning of the industrial revolution. Since then, the extent of consumption and Earth fullness have been exceeding population growth (Figure 4). The changes in the overexploitation of the Earth are well illustrated by the following data: Earth fullness (ecological footprint/biocapacity, %) was 0.05 per cent at the birth of agriculture (10 000 B.C.), 0.17 per cent in 3000 B.C., 5.48 per cent at the beginning of the Great European Conquests (1500) and 13.48 per cent at the advent of the industrial revolution (1820). Today, this value almost reaches 170 per cent! That is, the exploitation of Earth’s natural resources has increased parallel to technological advancement, at an accelerating rate. While at the dawn of the history of mankind, it took approximately 7,000 years to triple exploitation of the biocapacity of the globe (from the birth of agriculture to the appearance of civilisation), in Early Modern Times it took only 300 years (from the great European Conquests until technological-scientific revolution). In the two centuries lasting from the beginning of the industrial revolution until today, the anthropogenic impact – calculated with this method – has increased tenfold. However, the extent to which regions and continents with different levels of development exploit the biological capacities of our globe vary. Figure 5 demonstrates that the developed world (North America, Oceania and Europe) has the largest ecological footprint, while developing continents score around the world average or below. That is, the environmentally conscious – or at least claiming to be so – Western world with a

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Changes in the ecological footprint of regions (1961-2013)

high standard of living puts much more pressure on the environment than the global South, giving much less consideration to environmental viewpoints and having a lower level of income. One of the reasons should be sought in large infrastructural systems being developed from the beginning of the industrial revolution. For example, in the 18th century, the development of modern infrastructural systems began in the urban regions of the developed world to resolve sanitation problems – drinking water pipeline systems, drainage systems –, which, although meet the needs of the population, are unsustainable from an environmental point of view, and have caused the Earth’s resources to dwindle. (Another reason is consumption, which depends on individual decisions made on the basis of income levels and market supply, therefore it can be influenced by education and awareness-raising in case a specific level of economic development is in place.) In this respect, Africa’s infrastructural deficits can be advantageous from an environmental point of view. The continent and its cities have a chance to ‘leapfrog outdated and costly systems established during the industrial revolution‘, and realise environmentally sustainable solutions universally through using renewable energy resources and green energy, becoming increasingly significant in the Fourth Industrial revolution. That is, in the last days of the age of fossil fuels, economies counting as underdeveloped find themselves in a favourable situation, as they are not bound by the shackles of traditional industrialisation, therefore they have the prospect of skipping the resource-intensive production and consumption patterns of the Western world, and leapfrog into the post-fossil age. ‘Southern countries face important decisions about introducing

System of relationships between the dimensions studied

and designing infrastructures such as energy, transport, wastewater and communication systems’ to avoid this unsustainable course of the global North, opting for infrastructures which would allow them to embark upon a low emission and resource-light trajectory. As for the energy supply of the continent, currently only a little but more than one-third of the population have access to electricity. Furthermore, due to poor quality of the infrastructure and the lack of maintenance, a quarter of the capacity installed is inaccessible. It is obviously underdeveloped infrastructure and not the lack of resources that is responsible for gaps, as Africa – in addition to petroleum and natural gas – has an extremely favourable renewable energy potential: according to the calculations of the African Development Bank, Africa has 10 TW of solar potential, 350 GW of hydroelectric potential, 110 GW of wind potential and an additional 15 GW of geothermal potential – most of them unlocked. Currently, one-third (33 per cent) of energy is generated by electric power plants using coal, another one-third (32 per cent) is produced by using natural gas, and 12 per cent is generated by using petroleum. Less than a quarter (23 per cent) of energy production derives from renewable resources. Other sources estimate this value at 18.9 per cent. As a result of the Fourth Industrial Revolution, considerable advancement can be made in the use of renewable energy sources, which – if applied in an environmentally sustainable manner – may provide a solution to the infrastructure deficits of the continent – namely in electricity supply. Smart grids can distribute power across a number of homes in very remote locations, also improving the quality of human capital: children will be able to study at night and meals can be cooked on safe stoves, eradicating indoor air pollution, due to which 600,000 people die annually.

CONCLUSION In our study, we sought to capture the impacts which the Fourth Industrial Revolution exerts on Africa and its possible consequences. The study outlined that there is a strong interrelationship between the dimensions discussed (economy, infrastructure, natural environment), hence the impacts of the latest stage of the industrial revolution are very diverse and complex. The system of relationships between the dimensions can be outlined as follows: Economic development (structure, technological standards, productivity of the economy) is closely related to the state of the infrastructure, as it can be regarded, to a certain extent, as the imprint of and the prerequisite for the economic activity. A considerable part of the financial resources required for infrastructural investments is produced by economic operators, and the elements of infrastructure systems provide the technological background required for economic activities – thus, infrastructure is an essential condition of any economic activity. These two dimensions fundamentally – but not exclusively – determine the impact exerted on the natural environment by national economies and regions through the weight of the various sectors of the national economy (agriculture, industry, services), the technological standards to which they operate (e.g how much pollution is caused by factories), the energy carriers and raw materials on which the operation of the economy is based, etc. Economic and infrastructural development, and the condition of the natural environment determine the welfare and well-being of the society: are there enough jobs for people?; do their incomes afford them an adequate standard of living – thanks to the services provided by infrastructure systems?; does the physical environment (built and natural) provide them with a healthy environment?; etc. Although this interrelation system is a very simplified version of reality, it vividly demonstrates how complex the effects of new technological achievements may be. Along the specific dimensions, our findings about the impact exerted on Africa by the Fourth Industrial Revolution are as follows: The technological advances of the Fourth Industrial Revolution imply both potentials and threats for Africa. A threat is, for example, replacing hu-

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man labour by robots – typically in the manufacturing industry -, which would affect only 7 per cent of African employees, but, on a lower territorial level, this figure might be much higher: in Ethiopia, for example, 44 per cent of people active in the labour market are threatened with losing their jobs. The (potential) impact of new technologies on production – such as flexibility, better ability to adapt to the needs of customers and cheaper production –, however, represents an opportunity for the continent, as small-scale manufacturing can become more competitive through innovation and the Internet. This might result in the creation of jobs, and would exploit the remarkably high entrepreneurial activity of the continent. Addressing threats and tapping potentials are subject to two conditions: adequate schooling and adequate infrastructure. In terms of the latter one, there has been considerable development in specific sectors – such as the ICT infrastructure – in Africa in recent years, but it still lags far behind the world average – especially in such more traditional sectors as electricity, water or transport. In order for the Internet, a key element of the Fourth Industrial

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Revolution, to have a universal impact, first electric power, the achievement of the Second Industrial Revolution, should be in widespread use on the continent. According to a report of the World Economic Forum, the continent, with the present state of its technological infrastructure, is not ready to transition to an economic model based on the advances of the Fourth Industrial Revolution. From an environmental point of view, however, this deficit might be an advantage for Africa, as it has the chance to implement environmentally sustainable solutions through the application of renewable energies and green technologies – becoming increasingly important in these days – and to avoid the unsustainable development course of the Western world, the elements of which started to evolve at the advent of the industrial revolution. Thus, the impacts of the Fourth Industrial Revolution exerted on Africa are extremely complex, we cannot talk about entirely positive or negative consequences. It mostly depends on the continent what practical steps it will take in order to avoid expected threats and tap potentials.

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GEODEBATES ON THE IMPACT OF THE FOURTH INDUSTRIAL REVOLUTION

Author: PAIGEO

Part Four of the debate series GeoDebates were held at the seat of Pallas Athéné Innovation and Geopolitical Foundation on 21 st March. It focused on the question as to whether the global development gap can be bridged through the technological advances of the Fourth Industrial Revolution.

The Oxford-type debate hosted four invited guests this time as well. They represented two different viewpoints, that is, “yes, inequalities can be decreased”, and “inequalities will persist” through the latest achievements of the industrial revolution. Upon arrival, the audience had an opportunity to

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cast their votes on the keynote question. Before the debate, exactly half of the respondents thought that inequalities can be decreased through technological advances. At the beginning of the conference, a keynote study was presented, which revealed what impact the latest stage of the industrial revolution may

exert on the developing world – sub-Saharan Africa, and South and Southeast Asia in particular. The impacts were presented along the dimensions of the economy, the infrastructure and the environment, the conclusion on which can be summarized in two points: first, the dimensions studied are closely interrelated, therefore the development of any strategy requires a complex, systemic approach. Second, the effects of the Fourth Industrial Revolution are not entirely beneficial or detrimental. We can talk about both potentials and threats. In the debate, Tamás Haller, consultant at IBM Global Technology Services and Pál Belényesi, business advisor and university lecturer argued for a decrease of inequalities. They considered the number of potentials to be more significant, although the industrial revolution does pose challenges; thus, the overall balance is positive, that is, through technological advances the developing world can catch up. Although it is true that certain conditions must be met for this process, but if they are in place the regions now considered as underdeveloped might as well position themselves at the forefront. Andrea Szalavetz, senior research fellow of the Centre for Economic and Regional Studies of the Hungarian Academy of Sciences, Doctor of the Hungarian Academy of Sciences, and György Alföldi, architect, urban planner and developer, Deputy Head of the De-

partment of Urban Planning and Design at the Budapest University of Technology and Economics, argued against the gap-bridging effect of the industrial revolution. In their argumentation, they explained, among others, that on the basis of historical experiences available, all stages of the industrial revolution have increased social inequalities, therefore this can be expected in the current stage, too. Furthermore, although the Internet and various instances of technological innovation provide access to a wide-range of services, in reality, it expands the market of developed countries in the developed world – increasing their economic advantage –, while economic production in more underdeveloped regions is not being modernized by these innovations as its various prerequisites (such as infrastructure) are missing. Thus, inequalities are expected to persist or even increase. While arguing, the lecturers had a relatively hard time as they often put forward arguments that contradicted the stance they represented, which well illustrates the diverse nature of the impacts of the Fourth Industrial Revolution. At the end of the conference another poll was taken among the audience, the result of which was quite different from the first poll: affected by the debate, 70 per cent of respondents thought that global inequalities would not decrease as the result of Fourth Industrial Revolution.

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THE ESSENCE of CIVILISATION Author: Attila Grandpierre

It is one of the most important questions to us all as to what civilisation means, because it is related to the meaning of our lives, the exploration of our real selfidentity, our happiness, our health, the improvement of our conduct of life and discovering the path leading to a healthy future of mankind. In our days, one of the greatest tasks of mankind is to resolve the issues raised by the ecological crisis. Why have we got in an ecological crisis? Can the ecological crisis be resolved by Western civilisation, which has caused it? How can a civilisation providing a healthy, happy and meaningful life be promoted most effectively? What is the essence, the most fundamental attribute of Western civilisation? And first and foremost: what is the essence of civilisation? The original meaning of the word ‘civilisation’ is a high level of the art of life. The term ‘to civilise’ has a history of only a couple of hundreds of years. According to the “arbitrator” of the English language, Oxford English Dictionary, when the word “civilise” first occurred in English in 1601, it meant to bring out of barbarism; educate in the art of life, enlighten and refine. Let us put the question of barbarism aside, and let us regard societies organised in terms of a highly organised, highly intelligent and highly sophisticated art of life. This definition of civilisation is in accordance with one of the meanings of the word ‘culture’, according to which culture is an integrated system of learned behaviour patterns. In a broader sense, the word ‘culture’ also includes – in addition to moral nobleness and social sophistication related to the conduct of life – intellectual cultivation. We shall add, however, that from a civilisational perspective, it does matter what intellectual cultivation is focussed on. A criminal, for example, can be highly cultivated, but it does not mean, in the original sense of the word, that he is more cultured or civilised. In his work, ‘The Clash of Civilisations and the Remaking of World Order’, Samuel P. Huntington points out that both civilisation and culture refer to the overall way of life of people, and civilisation is a culture writ large. The essence of both is the conduct of life, intellectual cultivation, social sophistication. Rousseau concludes that although it is reason that makes one human, it is passion that leads them (J. J. Rousseau: Julie ou le Nouvelle Héloïse. 1761/1845, 211). The conduct of life is dominated by

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emotion and morality. It must be added that although our conduct of life is based on emotions and morality, it is the task of sense to make conscious decisions. In order for people not to contradict themselves, social morality and rational decisions must be consistent with each other. Our conclusion is that, according to this, the main attribute of a healthy and harmonious civilisation is a high level of our emotions and social morality, also consistent with a high level of human sense.

of power seems to entail in the long term the deterioration of the lives of factors forced under power, i.e. the population and the environment. What makes the idea of civilisation significant to us is that the goal of civilisation and as such, the future of the concerned part of mankind, are inherent in it. We can obtain a less biased and more complete picture of the idea of civilisation if we take its Oriental interpretation, or at least the Chinese one, into account in addition to its commonplace interpretations in Western civilisation. In China, civilisation is regarded as the consequence of the prevailing philosophy. In his study ‘The Three Types of Philosophical Wisdom’, Thomé H. Fang, one of the greatest Chinese philosophers of recent centuries, defined philosophy as the study and the synthesis of emotive (qing) and rational (li) reality. Following Yijing, Fang maintained that emotion and reason emerged from the Ultimate Original, which is unnameable and indescribable. Humankind is rooted in emotion and reason. Emotion and reason are mutually determining and interdependent. Fang differentiated between intelligence (zhi), knowledge that is based on reality and accords with reason, and wisdom (hui), which is human inspiration or desire (yu) and cor-

responds to emotion and proceeds in accordance with reason. On this basis, there are three types of wisdom: the first one focusses on reason; the second one on emotional orientation; and the third creates a harmony of emotions and reason. Fang argues that the first type is represented by ancient Greek philosophy, as they praised rational knowledge and reason, ignoring emotional realities. The second type is represented by modern European philosophy, which is built on desire, focussing on utility or usefulness, and endeavours to conquer the world and subdue nature. The third type is represented by Chinese philosophy, which maintains a balance between emotions and reason, the realm of feelings and that of thoughts, morality and sense. Three types of civilisation correspond to these three types of philosophy: the ancient Greek, the modern European and the Chinese. According to the current Chinese interpretation, the philosophical foundations of Chinese civilisation include, on the one hand, philosophical thinking and cosmology, and, on the other hand, values and a worldview. (Lai Chen: The Core Values of Chinese Civilization. Springer, 2017, 1). The Chinese do not regard China as a nation-state but rather as a civili-

OTHER INTERPRETATIONS OF CIVILISATION Beyond doubt, civilisation is complex and different aspects of it can be highlighted from different perspectives. The latest edition of Oxford English Dictionary highlights three aspects of civilisation: The stage of human social development and organisation which is considered most advanced; the society, culture, and way of life of a particular area; and the comfort and convenience of modern life. The ultimate foundation of Western civilisation, which fundamentally determines its all other attributes, is found in power by Michael Mann. Mann’s meticulous and in-depth analysis suggests that the main goal of Western civilisation is to further concentrate and grow power – and it is actually moving into that direction. When the most important viewpoint is power growth, all other viewpoints are vulnerable. The ecological crisis demonstrates that Western civilisation is not on the best track. A civilisation focussing primarily on the development

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sation-state (Jacques, Martin: When China rules the world: the rise of the middle kingdom and the end of the western world. Penguin, 2009), because it is not cohered by a force of ethnicity or power, but philosophy and values, reason and moral standards. In Chinese philosophy, family plays a central role in the organisation of the state; basically, the same laws govern the life of the family, the extended family, the clan and the state. Typically, breakfast is strictly at 8 a.m., lunch is at 12 p.m. dinner is at 6 p.m. in the whole country, and no deviation is allowed. The dominant school of Chinese philosophy is known as Confucianism in the West, but in Chinese it is a living and developing system built on the teachings of ancient wise

savage man; at least that is what the reactions of his body suggest (Arno Gruen: The Insanity of Normality. 1983).

men before Confucius (ruxue, Guan Xia: China as a “Civilization-State”: A Historical and Comparative Interpretation. 2014). The secret of China’s current revival is the unity of Chinese civilisation, family and the state; the unity of Heaven and mankind; a system of social mobility based on individuals’ merits (meritocracy); the unity of morality and governance; a system built on the teachings of ancient sages, on which the training of public officers is still based; and the unity of knowledge and governance (Ibid).

idea of cosmic sympathy was generally known: a kind of sympathy with the stellar world, which today comes forward only rarely and more vaguely in Western civilisation, usually in special states of consciousness, such as love or inspiration. Ultimately, our self-identity is rooted in Nature, in the Universe.

DEEPER LEVELS OF CIVILISATION AND SELF-IDENTITY The basic human life task is to discover ourselves, life and the world. The conduct of life, that is, conducting ourselves and controlling our behaviour, is based on our understanding of our self-identity and our life. Several levels of our self-identity exist simultaneously, which are in place all at once. As Huntington highlights, simultaneously with individual and national and social identities there is a deeper, civilisational self-identity. Huntington believes that it is civilisation that defines our deepest self-identity (Huntington 1998, 53). I would like to point out that there are more fundamental levels of our self-identity: belonging to mankind, the living world and the Universe. For example, in his book written on the social pathologies of contemporary civilisation, Kieran Keohane argues that our health and well-being do not only mean our individual and community life, because it embraces the whole of mankind and our relationship with Nature (Keohane, Kieran: The Social Pathologies of Contemporary Civilization. 2016). We are all humans, and as such, we belong to humankind, the Homo sapiens. Scientific experiences have proven that human compassion is still present in everybody, even in the most

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Our universal human identity does not mean the most fundamental level of our self-identity, as on a deeper level of our being, we are all living creatures. It is a fact that there is an ability of universal compassion in people. Until our civilisational preferences do not conflict with our compassion deriving from our humanity, humankind lives in one emotional community with the living world, the fauna and the flora, the Nature of the Earth. However, this is still not the most fundamental level of our self-identity. In ancient times, the

Our self-identity is closely linked with culture. Through watching films, listening to music and reading, we identify with the characters, the musical experience. If it happens frequently, it is repeated and becomes regular, it may have a profound impact on our self-identity. If the expected social roles and behaviours are harmonious with the given culture, with the ever lower level of culture of the consumer society in Western civilisation, these impressions can derail our self-identity. Our self is more of a treasure than it is conceived by the Western public mind. Our self is our ability to act, and it cannot derive from a lifeless material world unable to act. Our self is the messenger, herald and ambassador of the cosmic world’s ability to act. Our self is free; it is superior to the gigantic, cosmic chain of physical reasons. Our self is not a discretionary and arbitrary ability to provide. Our self is the outpost of the Universe so that it could act on Earth. Our self is free and able to govern our acts, but it is not an arbitrary ability to provide, as it is not alone, it can exist only if intertwined with life. The decisions of our self are governed by life, into a direction that is the most favourable for life. Without regarding life as governing, consciousness would become unfettered, groundless and meaningless, and if remains so for a too long time, it pulls the rug – life – from under its own feet. Let us get it straight: we need a civilisation that is in harmony with our deepest and best human being, which is able to ensure a high level of physical-mental-intellectual well-being and happiness, in which

human sense and morality are in harmony, which is in harmony with human sympathy, including the natural human feeling toward Nature and the Universe. THE LEVEL OF THE DEPTH OF OUR SELF-IDENTITY IS THE KEY QUESTION OF CIVILISATION The boundaries of our self-identity can be significantly modified by our civilisational preferences. If we draw the line at our civilisational preferences, as it is typical of Western civilisation (Samuel P. Huntington: The Clash of Civilizations), we exclude our natural self-identity from our self-identity. In this case, civilising influences become the main determinants of our personality. But if we conceive our self-identity as rooted in a more fundamental, natural world, Nature is governing us in what kind of a civilisation we are going to build. The level of depth of our self-identity is the key question of civilisation. ON THE ART OF LIFE OF PRIMITIVE PEOPLE: ORIGINAL AFFLUENT SOCIETIES Let us go back to the original idea of civilisation. Is there a barbaric civilisation, as it is suggested by Western

thought? If there is, which one is that? What we can say about the art of life of primitive people, said to be languishing on the lowest level of development? It is a fact that the hunting-gathering lifestyle was able to ensure the survival of mankind for millions of years. According to Richard Leakey, one of the greatest anthropologists of the world, it is questionable whether modern civilisation can survive for even two centuries (Leakey, Lewin: Origins. 1977). If we want the human species to survive, there is a lot to learn from ancient societies, remaining viable for millions of years. What about the art of life, the conduct of life, the quality of everyday life among primitive people? According to a widespread view of Western civilisation, hunting-gathering peoples have no culture or civilisation, their life is hard and difficult, they live their life on the verge of starvation, their efforts are devoted to their very survival. Facts, however, outline a completely different picture. Since the 1960s, more and more anthropologists pointed out we have a fundamental misconception about primitive people. Gathering and hunting are activities that require considerable knowledge and skill, and a profound understanding of the world. In the 1970s, Marshall Sahlins was the first to prove that primitive people fulfil all their dietary needs easily, with only 3 to 5 hours of work

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daily; the societies of hunters-gatherers are not that of famine but they are, in fact, original affluent societies. Sahlins’s stance has been justified by a series of subsequent studies. Richard Lee was studying the life of the !kung bushman tribe, living on the edge of the Kalahari Desert under particularly difficult natural conditions, for 18 months. The !kungs spend only 15 hours a week on procuring food. Their diet considerably exceeds the norms of the U.S. Department of Health in terms of the proportion of healthy vegetables and fruit, and the quality, quantity and the calories of proteins consumed. Their diet, it seems, is characterised by a high-level of welfare. They have plenty of leisure time, some of which is spent on visiting friends and family, and some on receiving guests. At these times they sing, dance trancedances, tell stories. (Jeremy Cherfas, Roger Lewin: Not Work Alone: A Cross-Cultural View of Activities Superfluous to Survival. 1980). Like !kungs, African pygmies and bushmen are also extremely and sophisticatedly cooperative, pay wonderful respect to life, their tenderness and their devotion to their families is astonishing (John Robbins: Healthy at 100: The Scientifically Proven Secrets of the World’s Healthiest and Longest-Lived Peoples, 2006). They demonstrate unconditional love of each other and life. The worst violation of their moral rules is to be cruel to children or old people (ibid, 279). IN SEARCH OF THE ANCIENT EURASIAN CULTURE: THE ABKHAZIANS The existence of the ancient Eurasian culture, which, as – in its Western name – nature religion or shamanism, but in reality a high-level philosophical system survived from the Carpathian Basin to Southeast Asia as long as until 600-1200 A.D., has been discovered recently (Grandpierre, A.: The New Silk Road and the Ancient Eurasian Civilisation. HUG 2017/3). This means that in this region the last couple of centuries could not completely erase the traces of a past being several million times longer. The ancient Eurasian culture survived in pentatonic folk music, folk tales, the traces of the philosophical system of One-Trinity, the deep strata of tradition and the view of life. The ancient Eurasian worldview could be best preserved in regions least influenced by Western civilisation. In popular opinion, people less influenced by Western civilisation belong to the “third world”, i.e. developing countries, are underdeveloped, and their life ex-

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pectancy is lower than in Western civilisations. What do facts reveal? An extremely long lifespan of over a hundred years, and – which is just equally important when assessing the development of the art of life, a long life spent in joy, happiness and health – is the most frequent among peoples which have been not affected or were affected just relatively late by Western civilisation, and which preserve their traditions (Hunzas, Abkhazians, Vilcabambas, Okinawans –John Robbins: Healthy at 100: The Scientifically Proven Secrets of the World’s Healthiest and Longest-Lived Peoples, 2006). There is a striking contrast between the culture of Caucasian Abkhazians and modern culture. Abkhazians live all their lives in physical and psychical vigour and visible joy of life. Singing, music and dancing have an important role in their lives. The Abkhazians do not seem to tire of joking even in an old age and always find new ways of having fun. Their high spirits and their sense of humour are impressive (Ibid, page 7.). The extraordinary cheerfulness, health, long life and joy of life of Abkhazians have a lot to do with the way children are raised and with their philosophy of life. They treat people, including children, in a consistent and respectful manner. Friendly behaviour is one of their most important values. They do not scold or punish children, they do not even raise their voice. They express their disapproval by withholding praise. A command is never repeated twice. Abkhazian children feel appreciation, and are remarkably disciplined. At school, they do not fidget, are able to sit in and pay attention for hours. The quality of the Abkhazian art of life is best characterized by such a high level of happiness, cheerfulness, balance and natural well-being, which is almost completely unknown in Western civilisation, but for them it is not a goal to achieve but a natural, everyday state. An extraordinary percentage of Abkhazians live to ripe old ages while retaining their full health and vigour, mental fitness and obvious joy in life (Ibid, 9). IN SEARCH OF THE ANCIENT EURASIAN CULTURE: THE HUNZANS Hunza, lying between Pakistan, Russia and China, was enclosed from the outside world for almost two thousand years. Its art of life preserves an ancient Eurasian mindset. In Hunza, there are no hospitals, no insane asylums, no drug stores, no saloons, no tobacco stores, but even no police, prisons, crime or beggars

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(Ibid, 49). The Hunza people are the most cheerful and helpful people that the members of the expedition visiting Hunza Valley have ever met (ibid). ‘The Hunzans appear to be the happiest people in all the world. They are happy because they are truly alive. They are happy because they are healthy’, American Geriatrics Society’s Dr Jay Hoffman summed up his experiences (Robbins 2006,51). IN SEARCH OF THE ANCIENT EURASIAN CULTURE: BHUTAN, THE HAPPIEST COUNTRY IN THE WORLD Bhutan, located in Southeast Asia, on the border of China and India, is one of the most enclosed states on Earth due to its natural features. They have lived in astonishing isolation for over 1,000 years. There have been no paved roads, electric and phone grids, motor vehicles or mail service until the 1960s. According to their ancient culture, the natural state of life is happiness, and the intellectual, spiritual and material aspects of life should be in balance. They have managed to retain their ancient traditions and way of life. As a result, Bhutan is the happiest country of the world. Although tribes which can be regarded as counterexamples also exist in the world, where life span is short and the art of life is on a low level (see the studies of Hill, Gurven and Keeley), in the most part of the ancient Eurasia, where the majority of mankind used to live, a coherent, high-level culture existed for millions of years (Grandpierre 2016). This cultural coherence ensured the biological unity of mankind, the fact that human evolution has not led to such considerable speciation like the difference for example between African and Indian elephants (Mann, Michael: The Sources of Social Power, Volume 1: A History of Power from the Beginning to AD 1760. Cambridge University Press, 1986). SOUTH AMERICAN YEQUANA INDIANS AND THE SIGNIFICANCE OF CHILD-REARING In the physical-psychical health, happiness and conduct of life of primitive people, their concept of childrearing, according to which close physical, spiritual and intellectual contact between and harmony of parents, babies and small children is the key to their physical, spiritual and intellectual health and happiness, has a key role. (Jean Liedloff: The Continuum Concept: In Search of Happiness Lost. 2015). The word for ‘work’, perceived as a necessity, as an activity done with efforts and without enjoyment, is absent in the

Yequana vocabulary. They enjoy all activities, they tell jokes to each other and have fun even during the hard ones. With all their activities, including the hardest physical ones, they seek to increase their well-being, due to their view of life. Their relationships with neighbouring tribes are very good. They have a close business relationship, their basic principle is that maintaining good relations is more important than good bargains (Ibid). Parents happily fulfil and develop their children’s innate needs. Children’s self-identity is unimpaired, it develops vividly and joyfully. There is no crib, separate nursery, playpen, rot, or pram, infants live their days full of joyful discoveries and experiences continuously in the company of their parents. As

tles in this world out of joint, they incorporate the mechanism of society in their inner world of emotions and thoughts, meant for something better. That is how the mindset suiting Western civilisation is developed, and the inner worlds of Western people also become out of joint. In his world-renowned book, ‘The Civilizing Process, Norbert Elias demonstrates how the European worldview and the corresponding art and conduct of life became more and more “civilised” in the last millennium. In the Middle Ages, ‘external pressure put on the individual was increasingly replaced by self-coercion, which is both a condition and a result of the emergence of a modern state based the monopoly of violence’ (the blurb to the 1987 Hungarian

everything happened as expected in the womb, the infant still expects, is almost sure that events will meet their expectations. In the modern world, it hardly ever happens (Ibid).

edition reads). It continued in the Early Modern Times, what is more, accelerated. In his work from 1795, ‘Letters upon the Aesthetic Education of Man’ Friedrich Schiller warned that the character of the modern age had degraded deeply, history had corrupted and depraved people, pushing mankind into moral barbarism. ’Every individual man carries, within himself, at least in his adaptation and destination, a purely ideal man, and the great task of his existence is to bring all changes of his outer life into conformity with the unchanging unity of this ideal.’ The solution of this task is the ‘better portion of our happiness’ and ‘not far removed from the moral nobility of human nature.’ The essential task of the state should be to represent ‘this pure ideal man, which makes itself known more or less clearly in every subject.’ Western states, however, ‘bend a degraded humanity under its iron yoke’. ‘Utility is the great idol of the time, to which all powers do homage and all subjects are subservient.’ ‘It cannot be denied that this final aim of the universe, is a cause of suffering’, (…) for individuals. The reputation of culture and refinement cannot be claimed by Western civilisation, Schiller adds. Humanity is the pure, objective ideal man living in the hearts of the citizens of the state, the conformity of mind and feeling; without this, man only forms a kind of fragment, and ends by being nothing more than the living impress of the craft to which he devotes himself, of the science that he cultivates. Then there is a rupture between laws and morality; enjoyment is separated from labour. Man becomes an opposite of himself. Schiller argues that the most important value is humanity, the conformity of mind and feeling. Our original selfidentity is violated by a civilisation that ignores the fact that man is more than a programmable machine. ‘The most obvious facts are the most easily forgotten. Both the existing economic order and too many of the

WESTERN CIVILISATION AND MORALITY According to the above definition of a civilisation, it should mean the highest level of the conduct of life, in which morality plays a key role. Western civilisation, however, was characterised by promoting materialism and ignoring morality even in the period when it was evolving. Ancient Greeks themselves, Strabo and Homer admit that troubles started with them. In his masterwork, Strabo (cca. 23 AD), referring to Homer (before 800 BC), writes, ‘our way of life has encouraged a change for the worse for nearly all people, introducing truphḗ and pleasures and fraudulent dealings and much greed besides. (…) extravagance...retail trade... injustice...corruption of morals... embroidery…’ (Strabo: Geographica. 1977, 318). Modern, materialistic civilisation, this relatively new way of experiencing life in which life and Cosmos are perceived as completely desacralised, has been built on these foundations (Mircea Eliade: The Sacred and the Profane). In the Western, profane civilisation the magic of the world and life is lost, human life has become hollow, everyday joyful activities have been replaced by the everyday treadmill, the pursue of money, power and success. WESTERN CIVILISATION AND THE CONTINUOUS INCREASE OF SELF-COERCION It is a widely known phrase that in Western civilisation ‘the time is out of joint’ (Shakespeare: Hamlet, 1602). When a Westerner is born and with all their self set-

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projects advanced for reconstructing it, break down through their neglect of the truism that, since even quite common men have souls, no increase in material wealth will compensate them for arrangements which insult their self-respect and impair their freedom.’ (R. H. Tawney 1926/2008, Religion and the Rise of Capitalism). The famous poet, T. S. Eliot asks the question in the early 20th century: ‘Where is the life we have lost in living? Where is the wisdom we have lost in knowledge? Where is the knowledge we have lost in information?’ (T. S. Eliot: The Rock: A Pageant Play, Part I. 1934). WESTERN CIVILISATION AND THE INCREASE OF BEING OTHER-DIRECTED It is a fact that by the mid-20th century, most of Western people had become other-oriented, as it has been described by David Riesman in his work ‘The Lonely Crowd’. Other-directed human life, however, cannot be regarded as the highest level of the art of life but rather that of manipulation. The goal of education is an individual who is capable of thinking and acting independently, who is capable of acting on the basis of values and moral principles in line with their individual, community and social life. Other-directedness is a form of submission in which an other-directed man acts in the belief that he executes his own independent decisions. The prevalence of self-coercion, its integration into the personality implies the more or less substantial modification or abandonment of our original self-identity. In a power-centred civilisation, other-directedness means being directed by a power alienating man from their own self. Noam Chomsky, one of the most outstanding scholars of our times, has established that Western society is under very definite pressures, which manipulate the mentality of the media and intellectuals in order to support major power structures (Michalis Nevradakis: Interview with Noam Chomsky. http:// www.x-pressed.org/?xpd_article=interview-withchomsky 2012). WESTERN CIVILISATION AND REPLACING THE NATURAL SELF BY THE EGO ‘Pattern and Growth in Personality’, a book by Gordon W. Allport, counts as a classic in Western psychology. Allport calls attention to the significance of the self. The self is the “hot core” of our life, its

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centre, its innermost essence. Undoubtedly, the infant is aware of his own self, but this is his natural self, which substantially differs from a later version of his self, the self-awareness of Western people. The original, natural self is replaced and overshadowed in the first five or six years as a result of a gradual learning process. This is the most substantial, most crucial change that ever takes place in one’s life. In the first years of their lives, young children are full of passion and are driven by the instinct of exploring the world and life. In Western civilisation, however, this exploratory instinct, the main drive behind infants’ activities, regularly bounces off walls and hurdles. To the Western mind, as Allport writes, the passion to manipulate objects is a bane of every parent. Parents, in accordance with their own adopted attitude and behaviours regularly hinder the exploratory instinct of infants, initially living in them unimpededly and passionately, the freedom of phantasy, immersion in play, loud selfexpression, joy and independent thinking. An infant is scolded and disapproved countless times. These suggest to him that his parents do not accept his natural self. The infant suffers and cries. As a result of hindering his natural drive by his parents, growing fear or apathy, insensitivity or dullness develop. We should note here that researches suggest that adipsia leads to the aging of the brain and the deterioration of the quality of life (Lalonde, Badescu: Exploratory drive, frontal lobe function and adipsia in aging. 1995). When accumulating impacts threatening his natural self fit together into a system, a period of negativism emerges. At the age of two, children are not yet competitive, repeated impacts grow strong enough to make them be so only by the age of three. In other cultures, it is not so, Allport adds. According to the Western individualist approach, a child’s self must develop into a self completely separate from others. This “development” implies losing the natural sense of human belonging. In other cultures, “I” is less separate from “it” or “you”. The “I” of Western people is typically the ego, defined on the basis of the expectations of Western civilisation, which replaces the original, natural self as an odd-one-out. The Western self develops from hindering and humiliating the natural self, as its replacement. Feelings of inferiority develop. Surveys demonstrate that 88 per cent of even highly performing university students know what it is to suffer from feelings of inferiority (Allport 146-150).

SECRET OF THE ARDENT AND BRILLIANT, GENIAL MAN: RETAINING THE NATURAL SELF Allport’s research results reveal that the self of Western people emerges at the age of five or six. After the age of six, a behavioural pattern based on the requirements of adults is firmly set (Allport 1985, 152). Let us compare this with the fact that infants usually retain their original, cute, free selves and their full creativity. Latest psychological studies have revealed that children live their lives as creative geniuses until the age of five or six. In their book published in 1992 (Breakpoint and Beyond: Mastering the Future-Today), George Land and Beth Jarman examined the creativity of 1,600 children ranging in ages from three-to-five years old with the help of a standard creativity test and then re-tested the same children at 10 years of age, and again at 15 years of age (Land and Jarman 1992, 153). According to the survey, the creativity of the same 1,600 children is almost unsurpassable: 98 per cent of them reached the “creative genius” level. Five years later, at the age of ten, only 30 per cent, and at the age of 15 only 12 per cent of them scored at this level. Later a research study was conducted to see how 280,000 adults perform when completing the test. The result: only 2 per cent of them scored at the creative genius level (Marke Rillo 2016, private

publication). On this basis, we conclude that when the ego, typical of Western civilisation, takes control over the original, natural self, this process implies the extinction of the passionate, ardent and brilliant natural self, innate in almost all people, and together with that, vigour, creativity and genuineness, while alienation grows and external duress is incorporated. CHILD-REARING AND THE FUTURE FATE OF MANKIND The inner invasion of external constraints degrades the greatest resource of people, their creativity, and to a huge extent. Alienation implies the numbing of the responsiveness to the deep strata of our inner world. The essence of being human does not seem to be lying in the superficial strata of consciousness but at the heart of our inner world. Exploring and understanding our original self has crucial significance to our self-knowledge. And if our original self turns out to be much more complete and potential than our modern self, than discovering our natural self has even greater significance. Modern psychology has demonstrated that people who have an especially close relationship with the deeper strata of their inner world, and are able to consciously form and express that, are geniuses (Kelly et al. based on Myers: Irreducible Mind).

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Thus, if our natural self was still in harmony with the deeper strata of our inner world in our childhood, then life was glowing in us passionately, with blazes reaching the sky. If we later distanced from our natural self, then this has set the blaze of life in us at an artificially low level. As American psychologist Gordon W. Allport (1985, 131) writes, ‘the I of Western people sticks out [from their inner world] like a stubbed thumb.’ If it were in harmony, our cosmic inner forces deriving from our being nature’s creatures would fill our self with drives suiting our original purpose. The fundamental civilisational significance of a healthy worldview lies in its ability to bring the fullness of life close to us again, expand and deepen our perspective, and, as a

of appreciation of parents, mankind, Nature, the Universe, deriving from our understanding that we originate from them, we can thank them our lives, we live on their umbilical cord, and we receive vital forces required for the fulfilment our lives. The sense of filial piety is the feeling that we must return all the good deeds that we have received from our parents, ancestors and the natural world. Filial piety is the child’s commitment to his parents, the most important element of which include a sense of obligation, respect for parents, attachment to parents and esteem for parents. In English, we could call it ‘sonship’, if we include daughters as well. By nature, sonship is passed forward from the endless array of ancestors to the

purifying force, unleash the full creativity of mankind. The fate of mankind and the next generation depends on it; the future of mankind will stand or fall with renewing the content and the quality of child-rearing and our sense of family.

source of all life on Earth, cosmic powers of creation, the Living Universe.

THE VALUE SYSTEM OF CHINESE CIVILISATION The power-cult of Western civilisation is even better illustrated if it is compared with the value system of Chinese civilisation, according to which: ‘morality is more important than law; this life [worldly – AG] is more important than the afterlife [philosophy is more important than religion – AG], community is more important than the individual, the spiritual more important than the material, responsibility more important than rights, the wellbeing of the people more important than democracy, order more important than freedom, and harmony more valuable than struggle’ (Lai Chen, 2016). The foundations of Chinese civilisation include, first, philosophical thinking and cosmology; second, values and worldview (Ibid, 1). In his book, Lai Chen highlights five main values: first, society is more important than the individual; second, family is the root of the state; third, the state must respect the individual; fourth, harmony is a more important tool of maintaining social order than conflict; fifth, peace between religions and complementary relationships must exist (Lai Chen 2016, 141). The significance of family has been discussed above. Family represents the foundation of the value system of the Chinese civilisation. There is no word in Western vocabulary for one of the cardinal basic values of Chinese civilisation. This is filial piety (xiao), which might be translated as being aware of and respect ancestral relations, a high-level

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THE IDEA OF PHILOSOPHY IN ANCIENT EURASIA The interpretation and significance of philosophy in China is very different from the one conventional in the West. Philosophy is not an ignorable exploratory activity failing to go beyond academic hair-splitting, as it is in Western civilisation. Philosophy is an intellectual activity focussing on the exploration of an adequate worldview and its creative application, for the conduct of individual and community life, or the selfgovernance of society, civilisation and mankind. Philosophy is an adequate application of the basic principles of civilisation, the constitution and laws of society in the broadest, natural and cosmic context. Philosophy is an exploratory activity dedicated to mankind, the Universe and life, the main aim of which is to be people’s compass and guide and a tool for making adequate decisions in their individual, community, social and civilisational activities. In Chinese philosophy, the questions of governing society have had a central role for thousands of years. The training of public officers is based on the traditions of ancient wisdom. Only the excellent ones can be leaders of society. As anyone can become excellent, earning outstanding merits on the basis of their talent, it is a tradition for thousands of years that the entire Chinese society is absorbed by the pursuit of excellence, of holding the most appreciated offices requiring the highest level of knowledge. Therefore, philosophy is intertwined with state life, the governance of the Chinese civilisation-state. It is a baseline fact of human life that man lives in the world. Since life and the world into which we were born are essentially given, mankind must develop a civilisation which is in harmony with life and the world. As laws

How the region of Eurasian nature religion-shamanism, marked with white, shrank between 600 A.D. and 1200 A.D. This is the only region on the map the age of which is not indicated. The reason is that this is the region of the ancient religion of mankind, more precisely, of its ancient philosophy, as philosophy, science and religion were not separated in that civilisation. We should remember that Chinese Confucianism and Buddhism have been built on this ancient philosophical system and can be regarded as its continuation. If we would track down the shrinking of the region of the ancient nature religion further in time towards today, present-day China, Japan (Shintoism) and South-East Asia would remain. Our civilizational self-identity linked the Carpathian Basin with Southeast Asia for thousands of years. Exploring this common, ancient Eurasian civilisation might have a significant role in building the New Silk Road together, recognising our shared civilisational self-identity, reconnecting people sharing the same traditions. of nature governing matter, life and mind connect man with the whole of the Universe, the exploration of these laws connects human life and the human mind with the life and mind of the Universe. The philosophical system of ancient Eurasia is the formulation of the cosmic basic principles of matter, life and mind, and their harmony. Since these three cosmic basic principles constitute and govern the Universe, and the Universe, ultimately, is a uniform whole, the One itself, on a cosmic level, matter, life and mind are necessarily in harmony. In this cosmic triumvirate, the material world is governed by life and mind. Life adds the ultimate value, and mind provides life with the most advantageous decision (Grandpierre, A. Soul and Universe (Lélek és Világegyetem), 2016). THE VALUE SYSTEM OF WESTERN CIVILISATION Western civilisation has replaced ancient wisdom setting values with value-neutral, modern knowledge, which focusses on matter while the significance of life is waning. As the mind focussing on the material world has been getting dominant, the coherent worldview prevailing from ancient times has become increasingly fragmented. Science and religion have separated. Philosophy and religion have separated. Philosophy and science have separated. State and philosophy have separated. The state and morality have separated. In Western civilisation, we know more and more about

ever smaller details, but less about the whole. Since it is primarily the mind that tells what role the detail has in the whole, by neglecting the whole Western civilisation has lost its comprehensive view, and with that, its adequate judgement and its ability of selfgovernance. In this situation, the increasingly materialistic worldview of mainstream Western civilisation has been prevailing unimpededly. Western civilisation has replaced the original worldview of the peoples gotten under its influence. With this, the real governance of Western societies has got out of the hands of the societies. Those who have a ready-made materialistic worldview – however high positions they may have – carry out sub-tasks only. The value system of the several-thousand-year-old mainstream of Western civilisation regards money, power and success as a priority. In Western civilisation, law is more important than morality; the individual is more important than the community; the materialistic is more important than the spiritual; rights are more important than responsibility. Western cosmology is materialistic. This was the first cosmology where ‘there was no particular place for humans, no place for God, and no explanation of the universe’s origin. Every traditional culture known to anthropology has had a cosmology— a story of how the world began and continues, how humans came to exist, and what the gods expect of us. Cosmology made sense of the ordinary world by de-

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fining a larger context and grounding people’s sense of reality, their identity, and their codes of behaviour in that grand scheme. A cosmology can only be taken seriously if it is believable, and after the scientific revolution’ traditional cosmology became irrelevant. ‘The new picture portrayed the universe as endless empty space with stars scattered randomly in it. It never fully replaced the Medieval universe in people’s hearts, partly because it felt so incomplete.’ (Abrams and Primack: Cosmology and 21st Century Culture. Science 293, 1769, 2001). It is a novelty of the exact, scientific theory of the living Universe in this crucial field that, in addition to the physical basic principle of the matter of the Universe, it demonstrates its biological and

civilisation, the average daily worktime is 10 hours. For the sake of simplicity, let us suppose that daily work on average takes 3 to 5 hours to the Abkhazians, the Hunzans, the Vicabambas, the Okinawans, !kung bushmen and the Bhutanese. If Westerners were as happy, cheerful and healthy as traditional civilisations best preserving the lifestyle and conduct of life of the ancient Eurasian civilisation, traditional civilisation could be regarded some three times more developed, that is, civilised. The problem is, however, that while traditional civilisation retains childhood happiness and health, the Western one ruins them substantially, to a hardly quantifiable extent. If traditional civilisation is regarded as a contributor to happiness and health, Western

nature. There are relationships between the laws of nature as well. Knowing the laws of nature renders human knowledge an endless times more effective than sensory exploration, because one law projects the occurrence of an endless number of phenomena. The material world is coherent because its laws of nature are summed up by one single, deeper-level law, which is called the first principle because all the fundamental laws of the material world originate from it. In physics, this principle is called the principle of stationary action. Knowing the principle of stationary action renders physics the most efficient. Similarly, the world of life is coherent, its basic principles stem from one single principle, as it has been proven by

logical basic principles, laying the foundations of ecological cosmology (Grandpierre A. 2018a: The Living Universe – The Scientific Foundation of the Ecological Civilization, book manuscript, submitted; 2018b: The Fundamental Biological Activity of the Universe. In: Eco-Phenomenology: Life, Human Life, Post-Human Life in the Harmony of the Cosmos. Springer. Publication Date: 08/06/2018; The Sun and a new theory of life: The Helios theory, HUG 2018/1, 205-215). Although Western educational pedagogy claims to be neutral in terms of worldview, the syllabus imprints a materialistic worldview in children’s mind. By introducing compulsory education, the materialistic worldview is being embedded ever more deeply in successive generations. Families take part less and less in childrearing. The media and the entertainment industry, conveying consumerism, are playing an ever greater role in influencing children’s self-identity but the role of the food industry cannot be neglected, either. A distinct term has been coined to characterise the life quality of the Western world, and this is alienation. Alienation is typical of Western civilisation, and it is in line with the observation that the I of Western people sticks out from their inner world like a stubbed thumb. According to a study of the World Health Organization (WHO), the number one, that is, the greatest problem of today’s world is behaviour disorders, civilizational hazards, depression and alienation.

civilisation proves to be a disruptor of happiness and health. Our calculation illustrates that Western civilisation is not a civilisation in the original sense, i.e. improving the conduct of life efficiently, of the word.

Ervin Bauer, the founder of exact theoretical biology. Similarly, mind also has laws of nature, the first principles of which are the logical axioms. These three first principles form a coherent whole, as, ultimately, the world is one. This leads us to the ancient conception of One-Trinity, which is the essence of the philosophical system of ancient Eurasia. The philosophical system of One-Trinity is the most efficient, most thorough, unsurpassably profound, comprehensive knowledge.

THE UNIT OF MEASUREMENT OF CIVILISATION: CIVILISATIONAL EFFICIENCY Based on the above, the measurement unit of civilisational efficiency can be introduced, which can be defined as the ratio of work time improving physical, spiritual, mental well-being and the total amount of time spent on work. Let us suppose that in Western

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THE SIGNIFICANCE OF PHILOSOPHY FOR CIVILISATION In ancient times, philosophy was not a speculation detached from man, life and the world, but the opposite, it was a natural and human perception, interpretation and understanding in man of man, life and the world: common sense. The basic activity of man is a physical-psychical activity that never stops increasing the well-being of body, mind and soul. Exploring reality is the basic intellectual activity of mankind, it is the foundation of their daily living. Reality is the world, life and consciousness. Exploring the Universe, life and consciousness are the basic intellectual activities of mankind: the highest and most complete, healthy philosophy. THREE COSMIC BASIC PRINCIPLES: THE PRINCIPLE OF MATTER, THE PRINCIPLE OF LIFE AND THE PRINCIPLE OF MIND Man lives in the world. It is the commandment of life that one must act. In order to act adequately, appropriately we need to know life, man and the world. In order to act, we must make decisions, interpret and evaluate life and the world, we need a system of decisions in line with life and the world. Knowing the relationships between facts in reality allows of adequate decisions. The most important relationships are the constant ones, upon which one can always and everywhere rely, and which govern events. Because of their high importance, these have a distinct name: laws of

COSMIC SOURCES OF OUR SELF-IDENTITY The coherent whole of the three cosmic basic principles enables the harmony of matter, life and mind, the harmony of soul and spirit, the harmony of atoms, feelings and thoughts. The coherent whole of the three cosmic basic principles enables a worldview. The worldview is extremely profound, because it encompasses the whole world through the three cosmic basic principles. The three cosmic basic principles penetrate both man and the Universe, and through them we have the most intimate relationship with our cosmic creative power. The essence of our self is the conscious factor of the ability to act, the ability to set goals, and this, whatever extent or quality it may have, is a universal attribute, the attribute of all living beings, which does not derive from the material world, but the cosmic world’s ability to act. And that means that our personal selfidentity is a cosmic capability and links us with the Universe. Another, instinctive factor of our ability to act is our life instinct, which urges us to act and provides the motivation and energy required for action. Life instinct is also a universal attribute, an attribute of all living beings, which does not derive from the material world, but the living Universe. Two, insepa-

rable factors of our self-identity, our self and the life instinct, are both of cosmic origin and cosmic nature. If we understand that, we can link our life with the cosmic world, cosmic life. Cosmic life is special, because the Universe is a coherent whole of all beings, thus it is an unconditional completeness of existence and life, and does not depend on anything but itself. Experiencing cosmic life is a fresh, powerful and pure feeling, an unlimited source of energy, an unsurpassable experience. This experience is the most real experience, the basic experience of ancient nature religions. The most characteristic element of the ancient Eurasian nature religion (Picture 1) is an intimate encounter with majestic Nature, astonishing even in its most simple manifestations. The ancient nature religion shows the highest respect for Nature, which invokes awe and admiration. We will find ourselves if we find a way of life diffusing the feeling of the fullness and certainty of life, and this comes when we experience our lives as of cosmic importance. We all were born onto Earth from the will of cosmic creative powers. The point of our life lies in the Universe. Our individual and community life, the life of the Homo sapiens is of cosmic significance. Our self is the messenger, herald and ambassador of the cosmic world’s ability to act. Our self-identity is an integrated whole, and makes real sense if it is linked with its cosmic essence. When we look at the three cosmic creative powers in us from our self, we experience them as life instincts. We are able to perceive the three cosmic creative powers directly with our deepest feelings. The three cosmic basic principles penetrate our body, soul and spirit, and as their fundamental governor motivates us to behave in accordance with the basic principles. The three cosmic basic principles are the instinct motivating us for physical existence, the life instinct, and the instinct for exploring and discovering the world. Life instinct includes our instinct for the purity and brightness of our feelings, and the instinct for the purity and adequacy of our thoughts. Pursuit of well-being is man’s fundamental pursuit. According to the World Health Organization, health is complete physical, psychical and social well-being, and not merely the lack of diseases or handicaps. Our natural basic pursuit or instinct to develop feelings to the highest possible level can be called the principle of soul, as by soul we primarily mean the whole of our world of emotions. Similarly, the natural pursuit or instinct to develop thoughts to the highest

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possible level can be called the principle of sense, as by sense we mean the clarity and the ability of whole of the world of our thoughts to foresee and think clearly. Human health and an integral self-identity are based on the harmony and cooperation of the world of feelings and the world of thoughts.

Leipzig, 1917). Recognising and scientifically proving that the Universe is a living being makes way to one of the greatest achievements in the history of philosophy: establishing a healthy worldview scientifically.

The world, life, ourselves and our communities must be interpreted and evaluated to be able to act. A worldview is a standard interpretation and evaluation sys-

Philosophy is the ultimate foundation of civilisation, and the art of life – or we could also say, the philos-

Research on worldviews cannot be regarded as successful until it gets to the full picture of the most fundamental attributes of the Universe. A worldview cannot be regarded as correct until it takes all essential, most fundamental characteristics of the world into consideration. If not only matter but life and sense also have their own, independent, universal basic principle, all approaches and worldviews which ignore even a single one of them is incomplete.

tem of the world. The philosophy of life is a standard interpretation and evaluation system of life. The vision of man is a standard interpretation and evaluation system of man. Our actions are reasonable if they match reality, and this requires the harmonisation of the worldview, the philosophy of life and the vision of man. The main goal of philosophy is to explore man, life and the world, and on this basis, to harmonise the life of mankind and the Universe. With the doctrine that Heaven is within people, Chinese philosophy achieves the superlative goal of philosophy, i.e. to harmonise Heaven and Man, and at the same time, elevates man

ophy of life – is its essence. The harmony of the philosophy of life and the worldview is natural, because we live our life in the world. The worldview, or in other words, approach, concept or perspective determines the conceptual frameworks and orientation of philosophy. The worldview governs thinking, and is the foundation of philosophy. However, it is the task of philosophy to create a correct and healthy worldview. Ludwig Busse, Professor at the University of Königsberg, claims that the history of philosophy is a series of attempts to establish a worldview (Ludwig Busse: Die Weltanschauung der grossen Philosophen der Neuzeit.

A worldview is a worldview because it has a coherent vision of the whole world. An incomplete worldview is, in fact, not a worldview; it just seems to be one within narrower conceptual frameworks. It is fundamentally and sorely mistaken to ground the governance of society and civilisation on an incomplete worldview, which can make the life of billions of people miserable for all their lives. A civilisation based on an incomplete worldview is a sick civilisation. In the vision of man of Western civilisation, money and the position of power are increasingly becoming value measures. Our physical and mental health and our human self-identity

THE HARMONY OF THE WORLDVIEW, PHILOSOPHY OF LIFE AND THE VISION OF MAN IS A KEY TO A HEALTHY WORLDVIEW

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into the sky, and brings the stars onto Earth. The superlative goal of philosophy requires the harmonisation of our concepts on man, life and the Universe, that is our vision of man, our philosophy of life and our worldview. The key to the harmonisation of the vision of man, the philosophy of life and the worldview, i.e., the healthy worldview is understanding that the Universe is a living being. THE RELATIONSHIP BETWEEN PHILOSOPHY AND WORLDVIEW

call attention to fundamentally different viewpoints. Man, in his deeper context, cannot be measured as how much profit he makes for society. Social mood and public mind are some of the most important drives of society. A healthy civilisation becomes an integral part of every person constituting civilisation if it can convey its healthy worldview to each member. A healthy worldview is healthy because it is complete in its essence, it is balanced, it is in harmony with the cosmic creative powers in man and with the living Universe. The worldview is more important than philosophy because – as Huntington referred to it in his book (Huntington 1998, 27-29) – it inevitably evolves in everyone and because it is usually present in us unconsciously, as a fundamental emotional bias. Our worldview is more important than specific facts and thoughts because orientation is able to achieve appropriate results from any initial situation, but the ever so rich universe of thoughts is not if its orientation is not appropriate. Therefore, a worldview is regarded even more decisive and fundamental than philosophy. The most important thing in everyone’s life is their worldview, because it governs all other things – our feelings, thoughts and acts (Naugle, David: Worldview: Definitions, History, and Importance of a Concept. 2016, 1).

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The fundamental question of civilisation – as far as we can see – is perhaps the most fundamental question of our lives. We can put it this way: Do we tailor our civilisation to our original, real and natural self-identity or we give up our original self-identity for the sake of our identification with a civilisation detached from man and life? THE ULTIMATE FOUNDATION OF CIVILISATION: THE SIGNIFICANCE OF OUR WORLDVIEW Let us proceed from what kind of a civilisation we need and let us raise the question: what is the ultimate foundation of this civilisation? Let us regard how much a civilisation facilitates the development and prevalence of man’s best physical, psychical and intellectual abilities, a high level of social mood and public mind, the quality of life, morality and creativity as the most important characteristic of civilisation. Human cooperation can multiply in a communal dimension. Mankind could live in peace, tranquillity, abundance and justice, but it lives at war, in chaos, in physical, mental or spiritual misery and amidst lies. Human civilisation can achieve a more developed level if it recognises how it can get rid of its inclinations forcing irrational behaviour. The human mind will become more developed if it recognises the fundamental significance of the communal interrelations of our lives and gets filled up with profound moral, social and ecological content. Ethical and social content is a consequence of a higher-level intelligence akin to phantasy or abstraction (Benedek, István: The World of Instincts (Az ösztönök világa), 1948). An unfolding intellect means the understanding of ever more profound interrelations. The most profound interrelations exist between man and Nature, and therefore they can be found on the level of a communal self-identity and a worldview. The efficiency of a civilisation developing high-level cooperation based on our best abilities can surpass the efficiency of an atomised society building on individualist people. The greatest resource of mankind is the deployment of cosmic creative powers inherent in the inner world of man. In the worldview of the living Universe, mankind is the important brain-centre of the Universe. In cosmic order, man can act as a well-functioning brain-centre if it sets its goals encompassing and going beyond mankind, for the benefit of all lives by adopting a comprehensive worldview of an ecological civilisation. According to the ecological worldview, people are not composed of all the atoms in their bodies but infinite and eternal

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cosmic principles, fundamentally the cosmic principle of life and the self deriving from cosmic life. Our selfidentity means more than an individual self-identity. Our identity is an integrated whole if it encompasses our communal, social, civilisational and cosmic selfidentity as well as our relationship with Nature. Our ecological self-identity is grounded by an ecological worldview. The ecological worldview can be regarded as the ultimate foundation of our self-identity. Let us assume that the ultimate foundation of civilisation is philosophy and cosmology, the system of values and the worldview (Lai Chen 2017, 1). The study of the relationship between philosophy and worldview has led to the results that the worldview can be regarded more fundamental in practice than philosophy. The ecological worldview also encompassing cosmic life is both personal and cosmic at once, and encompasses a cosmology full of life. The value system, ultimately, is also determined by the worldview, since the worldview encompasses the relations of the substantial components of the world, i.e. matter, life and sense. The basic types of the system of values and the worldview correspond to the causal order of matter, life and sense, and their relative ontological weights. In a balanced, healthy worldview these three basic factors are equally valuable, because all three of them are essential; however, life is the most fundamental because no value exists without it. In Western civilisation, materialism and material values have become dominant. In Europe, dualism, evolving in the wake of Thomas Aquinas and Descartes, ignored the most fundamental one, life. Idealism overexaggerated the significance of the psyche and the intellect. The harmony of feeling and mind, also emphasised by Rousseau, Schiller and Thomé H. Fang, is not sufficient alone, although they are supposed to govern human behaviour. A balanced worldview is centred around the harmony of feeling, mind and action. In this manner, the worldview encompasses our most fundamental system of values, the importance contributed to the material world, life and sense. Thus, the worldview encompasses the essence of philosophy, cosmology and our system of values. Following this path, we can conclude that the ultimate foundation of civilisation and its most effective tool is the worldview. It does matter whether our worldview matches the world or not. In the long term, a one-sided worldview, through the one-sidedness of lifestyle, leads to great-

er and greater deviations from reality. A civilisation based on a one-sided worldview is essentially incomplete, no matter what a high level it reaches in this single field, and that is the reason why civilisation is ill, thrusting the mankind affected into ever more severe crises in the long term. A healthy worldview is healthy because it gives a full, comprehensive picture of the essence of the Universe. The key to a healthy civilisation is a healthy worldview. The successes of the science of physics represent the most effective weapon of the worldview of Western civilisation. Physics is the science of lifeless matter. The scientific understanding of the essence of the Universe requires that the natural science of life and sense should become an exact science, retaining the

best traditions and conceptual apparatus of physics. In order for the ecological civilisation to become at least equally effective, the exact foundation of independent biology and psychology, complimenting the science of physics, is essential. It is of fundamental significance that school syllabuses should not be built only on a physical, material worldview, as they are today all over the world. Teaching the view built on physics from the age of 6 until the age of 18 or 32, for 6-810 hours a day tunes the consciousness, worldview and self-identity of the new generation to the physical worldview, consequently, steers them onto the path of Western civilisation. In our days, the time has come to lay the exoteric foundations of exact biology and psychology, and to lay the scientific foundations of a comprehensive, ecological worldview.

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BOOK RECOMMENDATIONS

IN THE SHADOWS OF THE AMERICAN CENTURY: THE RISE AND DECLINE OF US GLOBAL POWER BY ALFRED W. MCCOY After World War II, the United States controlled half the world's manufacturing capacity. By the end of the Cold War, the USA also controlled 50 per cent of the planet’s military power, with the help of which it ruled the world. Beyond this, Washington also operated an extremely effective, secret diplomatic apparatus, which allows of the full prevalence of the American hegemony over previous empires. However, as the author highlights, in spite of the almost unlimited opportunities offered by satellites, drones and cyber warfare, the USA’s share of the global economy has diminished, its diplomatic alliances have begun to weaken and it has abandoned its claim to moral leadership. Meanwhile, China is becoming the number one economic power, while it also seeks to dominate world politics. The 19th century belonged to Britain, the 20th to America – will China take the 21st?

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HOW DEMOCRACIES DIE: WHAT HISTORY REVEALS ABOUT OUR FUTURE BY STEVEN LEVITSKY AND DANIEL ZIBLATT Democracies can die with a coup d'état, but in most cases they can die slowly, due to several factors. This happens with the election of an authoritarian leader, the abuse of governmental power and the complete repression of opposition. All three steps are being taken around the world. In order to prevent similar events, we must all clearly understand their real backgrounds. In their book, Harvard professors Steven Levitsky and Daniel Ziblatt shine a light on the agony of democracies through examples from across 20th-21st-century history (from Augusto Pinochet in Chile to Recip Erdogan). Notably they point to the dangers of an authoritarian leader faced with a major crisis. Based on years of research, they present a deep understanding of how and why democracies weaken – there are several examples for this even today –, as well as a guide for maintaining and repairing a threatened democracy, for governments, political parties and individuals.

AMERICAN GRAND STRATEGY IN THE AGE OF TRUMP BY HAL BRANDS

THE PRICE OF AID: THE ECONOMIC COLD WAR IN INDIA BY DAVID C. ENGERMAN

American foreign policy is undergoing fundamental changes. The rise of Donald Trump and the promotion of the "America First" platform have challenged America's role fulfilled in the world in recent decades. From the South China Sea to the Middle East and Eastern Europe, the geopolitical challenges to U.S. power and influence seem increasingly severe – and America's responses to those challenges seem increasingly unsure. What role should the United States play in the world? Should America continue to pursue an engaged an assertive strategy in global affairs? In this book, a leading scholar of US strategy seeks answers to the above and similar questions, highlighting the dilemmas around American grand strategy today. While overviewing the development of foreign affairs since 1945 and outlining the major challenges faced by President Trump, the author also makes a proposal based on historical experiences for developing an ideal, longterm strategy.

Today, there is still significant discourse about foreign aid, challenging its effectiveness, operability and its system of distribution. However, the political character of foreign aid has been examined by only few, although especially during the Cold War, there was always the strategic thinking of major powers at the heart of development assistance. The author argues that superpowers turned to foreign aid as a tool of the Cold War. India stood at the centre of American and Soviet aid competition, primarily to pursue their own geopolitics. But the Indian elite sought to use the opportunities and spend foreign resources to promote the development of their country. Today, considering China’s role assumed in Africa, the political stakes of foreign aid are rising once again, as it can play a key role in the relations of western powers, China and African states.

THE DAWN OF EURASIA: ON THE TRAIL OF THE NEW WORLD ORDER BY BRUNO MAÇÃES The basic idea of the book is that the best word for characterising the emerging global order is 'Eurasian', which requires thinking on a supercontinental scale. After China and Russia, even European countries have recognised the increasing strategic significance of Eurasia, and the fate of the two continents are bound up. The author travelled across Europe and Asia, as a result of which he adds his personal experiences to historical and diplomatic documents, providing a fascinating portrait of this shifting geopolitical landscape. He believes that we can already see the coming Eurasianism in China's New Silk Road initiative, in the unique successes of cities like Hong Kong and Singapore, in Turkey's increasing role in the Middle East, as well as in the transformation of the United States’ relations to Europe and Asia.

AGE OF ANGER: A HISTORY OF THE PRESENT BY PANKAJ MISHRA How can we explain the great wave of hatred that is sweeping across the world today – from American school shooters and the rise of the Islamic State to the election of Donald Trump and racism and misogyny on social media? In his answer, the author argues with the help of historical examples that as the world became modern, there were always groups of people who were unable to enjoy its benefits – freedom and prosperity – and, consequently, were increasingly susceptible to demagogues. The many who were left, or pushed, behind or came late to this new world sought refuge in similar ways: with intense hatred of invented enemies, attempts to recreate an imaginary golden age, and self-empowerment through spectacular violence. Today, due to the advancement of technology, development, individualism and utilitarianism, there are many who still cannot enjoy the benefits of modernity, which often leads to tragic consequences for the whole world.

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EVERYTHING UNDER THE HEAVENS – HOW THE PAST HELPS SHAPE CHINA ’S PUSH FOR GLOBAL POWER BY HOWARD W. FRENCH – A BOOK REVIEW

is also very closely intertwined with restoring China’s position; it is a symbol of revenge for the damage suffered; obtaining it would mean the return of China’s greatness. In addition, the area is important for China partly because of suspected oil reserves, but mainly sea routes and rich fish reserves. However, it could not obtain them through the symbolic power of the tian xia system; it needs to gain control over the territories to exploit these. However, the steps taken to obtain them caused utter revulsion both in the countries of the region and the greater international community. Pursuant to the Hague tribunal ruling in 2016, islands created by filling up reefs and atolls do not meet the legal definition of an island, and accordingly, cannot generate maritime entitlement to a 200-nautical-mile zone. Theoretically, the court restored the Philippines’ rights in the given areas. Practically, however, the inertia of the Philippines can be seen: entering into an arms race with China would be hopeless, and so far the support of the United States and the international system has not proven to be sufficient to hold back the Middle Kingdom.

Author: Fanni Maráczi

Howard W. French’s book does not just provide a simple account of China’s history, but also highlights the milestones in the country’s past which are still influencing the leadership of the Communist Party in their foreign policy decisions. The book describes the history of the relations with the countries in the Asian region, with a special focus on the antecedents of the South China Sea disputes. Its most important lesson is that China’s subordinated position in the 19th and 20th centuries, into which China was forced by colonizing powers, was very much a century-long anomaly in the thousands-of-year-long history of the dominant major power of the region.

NATIONAL HUMILIATION Chapter One outlines the effect the traditional Chinese worldview, the concept of tian xia, has on their history. Tian xia – that is, everything under the heaven – encompasses all nameable territories, which are governed by the Chinese ruler. This does not mean that they were unaware of territories inhibited by other groups of people who existed beyond them and the peoples treated as “vassals” – they just simply did not regard them as important. They traditionally treated non-Chinese cultures as barbarians: the less similar their traditions were compared to those of the Chinese, the less significant they were regarded. In this rank, the Japanese, the Koreans and the Vietnamese took the most prominent place among China’s vassals. These peoples were the most exposed to Chinese culture, they adopted its writing system, and Confucianism, Taoism and Buddhism – all arriving from China – were dominant in their religious lives.

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This system – in which vassal states falling in China’s zone of influence regularly dispatched embassies to the imperial court and by handing over gifts repeatedly accepted the supremacy of the Chinese ruler – was unique in world history, and appeared as early as during the Han dynasty (206 B.C.-220 A.D.). Although it became symbolic in nature, it remained more or less valid until the end of Early Modern Times, and it still influences the Chinese mindset even today. That is exactly why Japan’s growing power in the 19th century, and then its attack against China, which shook the system of tian xia for the first time, came as a tremendous shock. The system is vividly illustrated by the example of the Ryukyu Islands, which, before it was incorporated into Japan as Okinawa, had been one of China’s quasi vassals, and they exhibited real loyalty to Japan when its power could definitely rise above China at the turn of the century. For China, defeats from Japan represented the sorest spot in a century of humiliation, making China

THE GULLET OF THE WORLD

realise the decline of its own imperial role. French’s book excellently highlights what the Chinese knew all along: the disruption of the tian xia system was just a temporary situation, and China would soon take the role of the most influential empire in the region again. ISLAND BARBARIANS China’s current ambitions to gain territories is even more ambitious than that of 20th-century Japan, also considering that they are maritime areas and not continental ones. As opposed to Japan’s ambitions, however, China seeks to expand without the use of force, which, naturally, does not mean that, should it be necessary, its military is not ready. For China, the Nine-Dash Line deigned to mark the territories controlled by China from ancient times is a development of the 20th century. It was first mentioned in 1947 in mainland China, during the era of the Republic of China ruled by Kuomintang. The significance of the Nine-Dash Line does not lie only in natural resources available in the area, but its notion

The chapter on the Strait of Malacca starts to tell the history of the area with the arrival of the Portuguese in the 16th century, who very probably could not have got a foothold in the region if China’s presence had not vanished there a century earlier, as a result of the isolation typical of the late Ming dynasty. Without the missions of Zheng He, the Muslim admiral and court eunuch in the 1400s, the history of the region cannot be discussed; with these voyages, it was possible to extend the broadly interpreted Chinese influence over most of the region. This person of Chinese history has become a symbol of their national pride, despite having been mostly forgotten – until he raised the interest of Western historians in the 20th century. His conquests are proof of China’s high level of technological development of the time, the extent of China’s influence over the region, and they are also excellent examples for the peaceful intentions of the country which – in the Chinese’ view – China still pursues in its foreign relations. When the Chinese write that meetings between the admiral and local leaders took place peacefully in most cases when Zheng He’s fleet appeared at the

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shores of the region, they tend to fail to mention its possible reasons: the world’s largest, wooden ships ever were carrying a large number of well-equipped soldiers on board, thus certain countries’ willingness to cooperate was very likely contributable to the obvious supremacy of the Chinese. Zheng He’s intentions did not have to be peaceful to achieve his goal without fighting in most cases. Zheng He’s character is usually contrasted with Western colonisers by the Chinese, but this is not fair, as the ships of the fleet were obviously constructed to carry continental troops, whose goal was to boost China’s prestige by intimidating the peoples of the region. Legitimating China’s recent activities with the missions of the admiral is not too fortunate as the routes of his ships avoided the most disputed areas of the region, as they are surrounded by – considering the technology of the time – hardly navigable waters. Thus, although his character resembles to his modern descendants very much from a certain perspective, in other respects his missions cannot serve as proofs of China’s immemorial presence. As the adventures of the admiral ended and the eunuchs’ influence in the court vanished, the great explorations ceased; the court banned the building of ships suitable for maritime navigation, and the country secluded itself from the impacts of the outside world. The sudden disappearance of Chinese presence allowed first the Portuguese then the Spanish to intrude into the region, and indirectly, of China’s subsequent humiliations and sinking into a semi-colonised state. A PACIFIED SOUTH The chapter discusses Vietnam’s relations to China, which determine the entire history of the country and its current foreign relations to such an extent that we cannot speak about Vietnam itself without these. The Chinese party as an external conqueror appeared first in 7th century BC, and the relationship with China, together with the changing extent of Vietnam’s independence from the empire, has remained an important motif throughout the history of the country ever since. While initially the Vietnamese were treated as barbarians, an under-developed

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culture, by Modern Times they have become one of the most Sinicized culture, the closest to the Vietnamese had tod o nothing one, in the region. Due to their geographical proximity, the Vietnamese know the system of tian xia very well; their own Confucian mindset and their historical experiences helped them to understand it. For an aggressive behaviour, the Chinese had to do nothing else but call their rules an emperor instead of a king, provoking their northern neighbours to a military strike. They embraced the concept of tian xia so much that, while enjoying regional supremacy, they started to relate themselves to weaker Southeast Asian peoples on an imperial basis resembling that of China, which determined their relations to Cambodia in particular. Their geographical and cultural proximity to China as well as their regional influence remained dominant in their 20th century history as well – making them attractive for colonisers, who regarded the country as “a rear entrance to China”. China’s influence over the country was not demonstrated only by their help to expel colonisers but the intertwining of the Communist Parties of the two countries is also of great significance. The Vietnamese mimicked the Chinese: Ho Chi Minh, who later united the country, met Zhou Enlai in France in the 1920s, and the Vietnamese Communist Party was established in Hong Kong in 1930. Ho Chi Minh had a kind of near-tributary relationship with Mao Zedong, and for Vietnam, Beijing’s communism was a role model throughout the Cultural Revolution. Relationships deteriorated as Mao’s paranoia about Soviet influence over North Vietnam was growing, which, with Beijing’s growing isolation, actually led to the Vietnamese’ turning away by 1969; by that time, the Soviets had been supporting them in their war fought against the Americans. A strong, united Vietnam after the end of the war would have meant the worst outcome for China, therefore it tried to cover itself with Pol Pot’s assistance in Cambodia before the end of the conflict, standing by a despised people hostile to the Vietnamese. The conflict led to the Indochina War in 1979, in which both parties declared themselves winners, but actually China did not succeed in achieving its goal, as Vietnamese remained in Cambodia until 1989. This is a war that China tries to forget – because it does not fit in their current rhetoric and contradicts their claim that China has never attacked any of its neighbours.

SONS OF HEAVEN, SETTING SUNS French starts the chapter dedicated to the issue of Diaoyu/Senkaku Islands by marking 2010 as the beginning of a new era when China’s economy overtook Japan’s. The relationship between the two countries is still definitely one of the most important points of Asia’s international relations, which often culminates in the problem of the islands whose sovereignty is disputed. Actually, it was not China but Taiwan that first made its claim over the Diaoyu Islands in 1971, denying Japan’s sovereignty, which traditionally indicates the year of 1885 as its beginning. In the 1970s, Beijing and Deng Xiaoping wisely turned a blind eye to the issue, in order for, among others, Japan to support a strengthening China with financial aids. In their relations, the events in Tiananmen Square caused a rupture, as Japan was the only Asian country to criticise China and suspend development lending. After a short period of cooling, the relationship between the two countries returned to normal, although high-level visits became rare. By the time of Jiang Zemin’s 1998 visit to Japan the Chinese acted with more confidence and assertion, demanding an apology from the Japanese similar to the one that they had made to South Korea for their war crimes. Not only were the Japanese unwilling to do so, but their attitude to China has taken a different direction since that period. Japan’s aversion to a submitted role manifested as early as during the Sui Dynasty in the 600s A.D., when they started to refer to their own monarch as the son of heaven; and by the time of the Tang Dynasty they demanded that the Chinese should use the word Nihon instead of the previous, degrading name of Wa country. Subsequently, Toyotomi Hideyoshi, a ruler in the 16th century set the goal of annexing Chinese territories to Japan. Thus, the issue of hierarchy led to conflicts throughout the history of the two countries. For China, it was unacceptable that such a strongly Sinicized country as Japan did not recognise China as superior. The island country could do so with Korea and Vietnam, but exclusively due to its geographical features; by today, however, the sea distance between the two countries does not defend Japan due to China’s technological development, which is made obvious by China’s growing presence in Japan’s waters since 2003.

With the end of the peaceful period created by the “harmonious society“ slogan of Hu Jintao’s government and the run-up to the Beijing Olympics, the events of year 2010 brought about a significant deterioration of the relationship between the two countries, when the Chinese captain of a vessel fishing near Senkaku Islands did not let the Japanese coastguard inspect his vessel, causing a diplomatic crisis. As a reaction to the issue of the ownership of the five islands, Japan bought three privately owned islands for the state when Beijing was in the midst of a leadership transition, which was conceived as a blatant attempt to weaken the power of the new president, Xi Jinping. This step did not lead to confrontation, but the severance of diplomatic relations meant the greatest crisis in the post-war history of the two countries. The issue of the islands is still an unresolved conflict in the relationship between Japan and China; and the behaviour of China’s leader during the meeting with his Japanese counterpart perfectly illustrates the persistence of the imperial protocol, which is still influencing their foreign policies. The meeting of Prime Minister Abe Shinzo and Xi Jinping in 2014 took place according to the conventional choreography of Chinese diplomacy: when a foreign leader and the Chinese president meet, the former one has to step forward to the other for the handshake, in the same manner as expected when meeting an emperor. In addition, in the photographs made of the handshake it is always the Chinese party who takes the left-hand side, where, right hand and arm outstretched, he does not need to turn away from the cameras to comfortably shake the hand of his partner, while the person standing on his right is forced to do so. In the photograph made of Abe and Xi, the Japanese party may seem displeased because of the conventional position, but Xi’s gloomy facial expression and reticence also made his situation more difficult. The 2014 photo is a perfect example of China’s attitude to the island country, which refuses to admit to being inferior to China. CLAIMS AND MARKERS Having faced strong resistance from Japan, China soon shifted its priority to the south, having a confrontation with the Philippines about the Scarbor-

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ough Shoal. This, however, marked only the beginning of a long chain of events. In May, 2014 China suddenly deployed its self-made deepwater oil drilling platform at the southmost point of the Paracel island group, which belongs to Vietnam’s Exclusive Economic Zone, but the protest of its former vassal did not prove to be sufficient to stop China’s activities.

time the United States had publicly noted how Beijing had pulled off a spree of island building unprecedented in scope around the Spratlys, also claimed by Vietnam and the Philippines. In the satellite images published, the air and naval bases, already finished by then, with a harbor capable of receiving the largest Chinese warships and a 3,000-meter-long runway were clearly visible.

ficient role in the institutions dominated by the United States. Both its ever more aggressive presence in the region and its attempt to transform the international system indicate that China is firmly advancing on the path to restoring its dominance prevailing for thousands of years – that is, the tian xia system.

Bending to China’s will threatened Vietnam’s communist government with losing the people’s confidence, while Vietnam’s filing a case before the arbitral tribunal of the United Nations Convention would have meant a loss of face in the region for China,

Initially, China justified its activity as creating security of navigation in the region for the benefit of all states in the region, merely for the common good; while, in reality, the construction serves only military purposes: China needs deep-water areas to hide its

We are at the dawn of a new era. Although its precise contours will be outlined in the future, as China is becoming a worthy challenger of the United States, there is only one question left unanswered: what will China do with its new position? The author tried to

thus the two parties were forced to the negotiating table. Vietnam achieved its goal by threatening with a partnership agreement with the United States, and China withdraw the platform due to weather conditions. At the same time, the announcement on the discovery of rich gas reserves near the island of Hainan provided some face-saving for China.

nuclear submarines from the United States, and they can be obtained exclusively by expanding southwards. The ruling against China by the International Court of Justice at the Hague – as Beijing had indicated earlier – could not affect the strategy of the country, as it is designed to achieve much longer term purposes for the Chinese empire, which the tiny countries of the region could hardly prevent.

complete existing speculations by naming the geostrategic goals seeming likely on the basis of studying Chinese history. The United States will need two things to cope with the new situation: on the one hand, it needs a much finer understanding of China and the way it works, and on the other hand, it has to accept that even the best outcomes will involve departures from the comfortable and familiar world order. One of the most important areas where the two parties must make new agreements is the division of power over the Southeast Asian seas, so that it should remain stable and the peaceful conditions could be preserved. In most cases, the best-case scenario for the USA is no more than preventing China from fully realising its strategic objectives.

China’s initial moves in the region have been often likened to salami slicing: Beijing has always sought to cut thin slices of the region without drawing the USA’s attention, and this, combined with the traditional strategy of fang shou, seemed to be working. This latter one means a kind alternation of periods of “squeezing” and relaxing”, which is also closely connected to the succession of seasons in the region: the March to June period raises the potential for clashes with weather conducive to fishing, explorations and naval manoeuvres. Conflicts can be negotiated on high-level forums from May to June, followed by the typhoon season, roughly June to September, which offers a window for de-escalation, and regional October-November summits allow leaders to engage and reaffirm peaceful intentions. The beginning of China’s maritime construction of several islands did not arouse suspicion in the major powers of the region, as they were busy with the Vietnam conflict taking place simultaneously. But the construction of the artificial islands at the Fiery Cross Reef did not begin then, it already started in the 1980s after the country’s economy had strengthened, to which the Vietnamese army reacted immediately – ending up with 64 Vietnamese soldiers killed in the conflict. In August, 2014 China continued its push into the Spratly Islands, and the first reports on their island building were published. By the late spring of 2015, the land fill of reefs had been going on for a year, by the

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Simultaneously with its activity around the islands, China announced the large-scale strategy of the New Silk Road – with a flair for strategy, first in Central Asia, badly in need for support –, which would boost the trade in the areas stretching between Europe and China by investing in far-reaching infrastructure development. Then the second half of the strategy was announced, which seeks to boost the trade and relationships of the Southeast Asian region in a similar manner, by building railways instead of ports. The choice of Indonesia, the country with the largest population in the region, as a backdrop to the announcement of the second half of the project had significance: its islands are located on the major maritime routes of the region, and the country also has a leading position within ASEAN. Recruiting Indonesia to the initiative’s side can greatly contribute to its success. The Asian Infrastructure and Investment Bank, established to finance the Belt and Road Initiative is an integral part of China often-mentioned strategy, which more and more frequently seeks to reconsider the existing international order. This legitimate concept is made understandable by the gap between its payments to the IMF and its share of votes; compared to its economic might, China is not given a suf-

CONCLUSION

French believes that there is a lack of confidence behind China’s assertive behaviour; as the successes of dynasties were marked by the expansion or shrinking of the territory of the country throughout history, its growth is also essential for Xi Jiping’s China Dream. Chinese leaders have realized that there has never been a better chance for the geopolitical return of the world of tian xia than today, and maybe such a chance will never return. However, their uncertainty is understandable: the economic growth of the country has slowed down, and its initial advantage seems to be vanishing. Its military spending, with the modernisation of its army, is increasing; its large workforce is not an advantage in this respect, but it would rather need technology- and materials-intensive developments.

In addition, although China is the only conceivable potential challenger to the United States, in modern days the difference between the power of the two countries was larger only in comparison with the USA’s outpacing the Soviet Union. Although the GDP gap has been successfully narrowed by China, this index does not tell anything about such disadvantages as, for example, the relatively lagging technological capacity of the country, or the underperformance of its scientific and engineering base – it will take a long process to make a change in these fields. China’s opening to the seas, turning away from traditional mainland warfare, however, is a relatively new phenomenon, and, compared to the United States, it is only in the initial phase of building a world-class naval fleet. The price of developing weapon systems is rising extremely rapidly, which will be soon unbearable for China, which, without allies, cannot rely on other countries to acquire required technologies in cooperation with them. The ageing of the population is one of China’s gravest problems to address – by 2050, the median age will increase to forty-nine years, or nine years higher than in the USA, the labor force of which is refilled through constant immigration. The one-child policy was lifted too late to stop the aging of the society, the number of people born in the 1950s and the 1960s is extremely high, and the pension system dedicated to provide services to them was established only in 2000 and is currently unable to meet the needs of China’s society. The increase of the number of dependent elderly people explains why China abandons Deng’s tactics of buying time under Xi’s leadership – whatever advantage it may enjoy currently, it can soon lose it, therefore it must use its opportunities now. The China, which is treated as equal with much to contribute to human betterment but, at the same time, is met with resolute firmness if need be, is a China that will mellow as it advances in the future and then most likely plateau – that is a China that will grow more secure in its power, a China we can live with.

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SMITH, Martin A.: Power in the Changing Global Order: The US, Russia and China. Polity. United Kingdom, 2012. Ch. 3-4. TARTAR, Andre Mira Rojanasakul and Jeremy Scott Diamond: How China Is Buying Its Way Into Europe. In: Bloomber.com, 2018.04.23. https://www.bloomberg.com/ graphics/2018-china-business-in-europe/ (2018.05.11) VARISCO, Andrea Edoardo (2013, June 3). Towards a Multi-Polar International System: Which Prospects for Global Peace? E-International Relations. http://www.e-ir. info/2013/06/03/towards-a-multi-polar-international-system-which-prospects-forglobal-peace/ (2018. 05. 04.) Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road. National Development and Reform Commission, Ministry of Foreign Affairs, and Ministry of Commerce of the People's Republic of China, with

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State Council authorization, March 2015. http://en.ndrc.gov.cn/newsrelease/201503/ t20150330_669367.html (2018. 06. 05. WALLACE, William: American Hegemony: European Dilemmas. In: The Political Quarterly 7. (2002), 105–118. WALTZ, Kenneth N.: Theory of International Politics. USA, Addison-Wesley Publishing Company, 1979. WÜBBEKE, Jost – MEISSNER, Mirjam – ZENGLEIN, Max J. – IVES, Jaqueline – CONRAD, Björn: Made in China 2025: The making of a high-tech superpower and consequences for industrial countries. Mercator Institute of China Studies, 2. December 2016. https:// www.merics.org/en/papers-on-china/made-china-2025 (2018. 05. 06.) ZHOU, Hong: An Overview of the China-EU Strategic Partnership (2003–2013). In: Zhou H. (eds) China-EU Relations. Research Series on the Chinese Dream and China’s Development Path. Springer, Singapore 2017. The Effects of the AIIB on the Multilateral Development Banks’ System ADB: Asian Development Banks Shareholders as of 31. 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LIST OF PICTURES AND FIGURES Move Europe East

The World in 2035: A Geopolitical Forecast

International Finance Centre

Figure 1. World Energy Outlook

Figure 1. BRUCE-LOCKHART, Anna: Tudnivalók Kína 900 milliárd dolláros Új Selyemútjáról. (China’s $900 billion New Silk Road. What you need to know); World Economic Forum, 2017; jún. 26. https:// www.weforum.org/agenda/2017/06/china-newsilk-road-explainer/

Figure 2. UN, The Economist

Figure 2. Mercator Institute for Chinese Studies (MERICS): A kínai hatóságok által tervezett projektek az OBOR keretén belül (Projects Subsumed under OBOR by Chinese Authorities); 2015. december https://www.merics.org/fileadmin/user_upload/pic/ChinaMapping/ChinaMapping_Silk_Road_DEC2015.pdf

Figure 1. Prepared by author

Figure 3. Gilani, Sayed: Kína 6 varázslatos gazdasági folyosója. Egy Övezet, E gy Út – a Selyemút (China’s 6 Magical Economic Corridors ‘One Belt, One Road’ The Silk Route); 2017; Linkedin.com. március 25. https://www.linkedin.com/pulse/chinas-6-magical-economiccorridors-one-belt-road-silk-syed-gilani/ Figure 4. Chatham House és DRC: Navigálás az új norma szerint: Kína és a globális erőForrásgazdálkodás (Navigating the New Normal: China and Global Resources Governance) 2016; Amazonaws.com. https://chinadialogue-production.s3.amazonaws.com/uploads/ content_image/content_image/805/OBOR_map_EN.png Figure 5. ChinaDialogue: ErőForrások áramlása Kínában 2014-ben (Resource Flows into China, 2014); 2015 Amazonaws.com. https://chinadialogue-production.s3.amazonaws.com/uploads/ content_image/content_image/2662/Screen_Shot_2017-0511_at_12.25.09.png Figure 6. Tengeri kikötők teher- és utasszállítási statisztikái (Maritime ports freight and passenger statistics); Eurostat Statistics Explained, 4. táblázat, 2017. január http://ec.europa.eu/eurostat/statisticsexplained/index.php/Main_Page

The Evolution of Chinese Geopolitics Table 1. Author’s own edition

Europe’s Views on the One Belt, One Road Initiative La Stampa

The Effects of the AIIB on the Multilateral Development Banks’ System Table 1. https://www.aiib.org/en/projects/approved/index.html, és https://www.aiib.org/en/projects/proposed/index.html, lekérdezés időpontja: 2018. 03. 02. Figure 1. AIIB official website https://www.aiib.org/en/projects/ approved/index.html Figure 2. AIIB official website https://www.aiib.org/en/projects/ proposed/index.html Figure 3. AIIB official website https://www.aiib.org/en/projects/ proposed/index.html Figure 4. AIIB official website https://www.aiib.org/en/projects/ approved/index.html

Figure 7. Főbb teherkikötők Európa adatszolgáltató országaiban 2015-ben, az áthaladó rakomány bruttó tömege alapján (Main cargo ports in the reporting countries 2015 by gross weight of goods handled.png); Eurostat Statistics Explained; 2017. január http://ec.europa.eu/eurostat/statistics-explained/index.php/ Maritime_ports_freight_and_passenger_statistics

The 4th Industrial Revolution in Africa – Opportunities and Challenges

Multipolar or Fragmented World

Figure 2. http://www.vodafone.com/content/index/what/ technology-blog/m-pesa-created.html# (2018.01.30.)

Graph 1. IMF World Bank – UNDP - New Economics Foundation, Peter Aldhouse, http://www.peteraldhous.com/fourways.html Graph 2. Stockholmi Nemzetközi Békekutató Intézet (SIPRI) Graph 3. SANDLER, Todd and GEORGE, Justin: “Military Expenditure Trends for 1960–2014 and What They Reveal”. In: Global Policy, No. 7, 2016, pp. 174–184.

Figure 1. http://www3.weforum.org/docs/WEF_ACR_2017.pdf (2018.01.30.)

Figure 3. https://www.trucks.com/2016/10/13/ups-zipline-dronedeliveries/ (2018.01.30.) Figure 4. SZIGETI Cecília – TÓTH Gergely: Történeti ökológiai lábnyom becslése a mezőgazdaság kialakulásától napjainkig. In: Gazdálkodás, 2014. 58. évfolyam, 4. szám, 361. https://www. researchgate.net/publication/277009491_Torteneti_okologiai_ labnyom_becslese_a_maezogazdasag_kialakulasatol_napjainkig (2018.01.30.)

Graph 4. IMF, ECB Graph 5. SWIFT Graph 6. SWIFT Graph 7. The Economist

A Book Review W. French, Howard: Everything Under the Heavens – How the Past Helps Shape China’s Push for Global power, Scribe 2017., 330.

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CREDITS EDITOR-IN-CHIEF Norbert Csizmadia MANAGING EDITOR Anton Bendarzsevszkij EDITORIAL BOARD Ágnes Bernek Anton Bendarjevsky László Körtvélyesi Péter Szatmári György Szapáry István Szilágyi Ákos Vajas COPY EDITOR Szilvia Kálla ART EDITORS Gyula Nagy Fülöp Kovács Zsófia Szabó PUBLISHED BY: Pallas Athéné Innovation and Geopolitical Foundation H-1014 Budapest, Úri str. 21, Hungary

AUTHORS Eszter Badics László Bartók Oleg Buklemishev Ramachandra Byrappa David Criekemans Ráhel Czirják Norbert Csizmadia Viktor Eszterhai László Gere Attila Grandpierre Levente Horváth Tamás Jávori David A. Jones Pál Péter Kolozsi Gábor Kudar Fanni Maráczi Eszter Pálvölgyi-Polyák Vivien Anett Pintér Dusan Prorokovic Fruzsina Simigh Diána Szőke Kong Tianping Réka Tózsa Gábor Zajka

DATE OF PUBLICATION December 2018

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