Today's date:
Winter 2012

Globalization 2.0

Eric X. Li is chief executive officer of Chengwei Capital and a member of the 21st Century Council.

Shanghai—Once again the West is at the brink, and along with it, the world is holding its breath. So soon after 2008, this time the epicenter is in Europe. One week before the G20 summit in Cannes, European powers struggled to contain the Greek debt crisis that refuses to go away. Once again, at the wee hours of the morning, a deal was struck by heads of governments and bankers with weary eyes that involves write-downs of which details are to be worked out, austerity measures to be implemented at future dates, and fire-wall rescue funds for which the money needs to be found. Sound familiar? 

President Sarkozy got on the phone with President Hu Jintao to lobby for China’s investment in Europe’s rescue fund. At the Pre-G20 Summit Forum of the 21st Century Council, world leaders, such as Al Gore, Gerhard Schröder, Gordon Grown, Ernesto Zedillo and Pascal Lamy, gathered to discuss the precarious state of globalization and, again, China was the elephant in the room. Will China, they asked, step up and provide the public goods for globalization that so far the United States-led Western order has shouldered? It certainly seems to be China’s responsibility to do so, they say, as it has ridden, or free-ridden, as many might contend, the Western-provided global economic and security infrastructure to become the second largest economy in the world. 

China’s position is best seen from the request by the Chinese participants, led by an influential foreign policy adviser to Chinese leaders, for an edit to the forum’s communiqué: the phrase “emergent nations led by China” was to be changed to “emergent nations including China.” Or perhaps better yet, don’t mention China at all. 

Ever since the beginning of globalization at the end of the Cold War, the West and China have been operating in parallel universes. Two versions of globalization have been concurrently developing. Globalization 1.0 is globalization as we know it because it is visible and loud. Globalization 2.0, by contrast, has been invisible and quiet. 

From George H. W. Bush’s “new world order” to Bill Clinton’s “moment of miracles,” from George W. Bush’s “ending tyranny in the world” to Barack Obama’s “single standard for all who hold power,” from the WTO to the IMF, from Wall Street to Pennsylvania Avenue, from Iraq to Afghanistan, from Washington to Oslo, the proponents of Globalization 1.0 are convinced of a universal outcome for all of mankind:  liberal electoral democracy shall rule every nation, an ever-opening Market (with a capital M) for both goods and capital will create a singular world economy with the same rules for everyone, everything and everywhere, and unifying it all are the almighty individuals endowed with God-given rights who all want to drink Starbucks coffee with non-fat milk. 

For twenty years now, they have led this drive for their universal vision, emptying the treasuries earned over many generations by their forefathers, mortgaged their children’s future, expended the lives of their young soldiers, hollowing out their countries’ industries, with near complete disregard for the integrity of their own cultures and the welfare of their own peoples. For countries in the Globalization 1.0 sphere, the political and commercial elites have reaped the lion’s share of the economic and political benefits of globalization while the vast majorities are losing ground. In the United States, the leading nation of Globalization 1.0, Wall Street, Silicon Valley, and Hollywood form a holy trinity that, through its decisive influence on the political system, is guarding the benefits accrued to them with bailouts and policy paralysis. In Europe, it is the same quagmire. Little wonder that anger and frustrations are being taken to the streets. And now the same elites are on television scratching their heads asking: “Why are we bankrupt?” Perhaps what they confront is much more than financial bankruptcy. It is potential moral bankruptcy that is facing their version of globalization. This is Globalization 1.0—globalization based on universality.

Then there is another version of globalization—Globalization 2.0—that has been taking place all along. It is quieter, without bold proclamations; it is perhaps not so coherent in its narrative; it does not get one’s blood boiling or set one’s imagination on fire with some utopian end in sight for all mankind. It seems to be operating in the shadow of Globalization 1.0 but stands in fundamental opposition to the meta-narrative of Globalization 1.0. In fact, it is the anti-meta-narrative. In the last 20 years, it has brought hundreds of millions of people out of poverty; it has industrialized in a speed unprecedented in history; it has indeed modernized without subscribing to the religion of modernity.

For countries in the sphere of Globalization 2.0, elites seem to recognize that their responsibility is first and foremost to improve the livelihoods of their own peoples and navigate their nations in a seemingly chaotic but indeed organic world order to realize that objective. At the core of Globalization 2.0 is the primacy of culture as the basic unit of human civilization: the belief that each culture or civilization is unique and should be seen as such from the very rock bottom. There is nothing more underneath that could somehow unify them and thereby produce something universal. Cultures are fundamentally incommensurate to each other. And only in recognizing and respecting this incommensurateness can the convergence of interests among them be realized and perhaps a more peaceful world order along with it. This is Globalization 2.0—globalization based on plurality. 

We are at a moment when global problems demand global solutions. The monumental challenges facing human civilization, climate change and the need to rebalance the global economy among them, seem to indicate a necessary convergence of interests between the West and the rest. Why, then, are such global solutions not forthcoming? 

It is because we are also at a moment when Globalization 1.0 is in trouble and Globalization 2.0 insists on remaining quiet and invisible. We are stuck in between. But perhaps 2.0 can no longer be so subdued regardless of its intention. China, the leading nation in Globalization 2.0, is becoming a beacon for many to see. Not that any country can emulate China’s path, because it is by Globalization 2.0’s definition not emulate-able. What is emulate-able, however, is the very idea that there is no emulate-able universal model and each culture must follow its own path. What political systems are most suitable, what economic models fit their developmental stages, and what fundamental values should constitute their societies are questions with unique answers to different places and peoples. Their choices should be respected.  Their voices deserve to be heard, not the least by the very peoples in the sphere of Globalization 1.0, where their political and commercial elites have, in the name of universality, robbed them of their heritages and their futures. 

Many voices are calling on China to be a more “responsible” player in the global system. Some have accused China of “free-riding” and not playing a constructive role in helping rebalance a shattered world economic order. China’s pronounced hesitancy, and even refusal, to be placed into a leadership role is either noted with resignation or met with resentment. But this sentiment misses a fundamental question: Is the West truly prepared to accept China as an equal and legitimate player on the world stage? Can the West cooperate with a major civilizational power that stands for fundamentally different and even opposing values and outlooks? Many in the West have hidden behind the self-delusion of Globalization 1.0 that as China develops it will inevitably and eventually adopt Western values that are billed as universal values. These people need to face the fact: China, rich or poor, powerful or weak, will NEVER become a liberal electoral democracy with market capitalism and the individual as the core unit of its society. The stumbling block to effective convergence of interests and China taking on the much-needed leadership role is not China’s unwillingness but the lack of consensus in Western societies on that future. Without such consensus, the rhetoric about responsible behavior and constructive cooperation will remain empty talks.  

Can globalization continue? Does the world face a future of cooperation or conflicts? The answer lies in whether the world can smoothly switch the operating system of globalization from 1.0 to 2.0. It is not as easy as going from Windows to Mac. The world watches with anxiety.


A Century for Sale | The Munk Debate in Toronto has in the past three years become a significant forum for discussing global issues of our age. The most recent one held in June 2011 (Does the 21st Century Belong to China?) has now been published as a book with the same title. The debaters were luminaries no less than Henry Kissinger, Fareed Zakaria (for “No”), Niall Ferguson, and Li Daokui (for “Yes”). For Dr. Kissinger, it was claimed that this was his first participation in a public debate on any subject anywhere.

The debate goes off on a strong start with Ferguson, demonstrating his usual mastery of both language and analysis, firing off undeniable facts, past and present, to make his case that China is well on its way to owning, indeed dominating, the 21st century: History is on its side; demographics are in its favor; industrial and financial power makes its strength unstoppable. To top it off, Western decline has opened up an historic window of opportunity for its rapid and inevitable rise.

Zakaria weighs in with a forceful rebuttal. China would repeat Japan’s derailment 20 years ago when it was thought to be taking over the world. Its faulty political system and economic structure would sap its vitality from within and the geopolitical oppositions from its neighbors backed by America would contain it from the outside. As the debate goes on, Zakaria reminds his audience of another important factor: for all its current problems, the US is not to be counted out. The innate power of America, its innovative culture, its economic resilience, and its military dominance would combine to help it retain the 21st century in its vault—another American century may be upon us. At one heated moment of exchange, the usually thoughtful Zakaria even throws in human rights as a wedge separating China from its prize.

Dr. Kissinger, the most senior and experienced practitioner in international affairs on stage, gives the most balanced and thoughtful analysis. China is much too preoccupied with the internal challenges it faces in building a strong and sustainable nation to have the desire or the capacity to dominate the 21st century. Besides, the world seems to be moving in a direction that the question of who might dominate it is no longer relevant.

The most revealing presentation is given by the only Chinese participant in the debate, the economist and senior government adviser Li Daokui. Li extols China’s obvious accomplishments and expresses confidence in the country’s continued success. But he largely refrains from saying anything about China dominating the 21st century—the motion he is called upon to support. Only in the end he divulges his true position: China will succeed but the 21st century would not belong to China; it belongs to any and all who are capable of adapting to a fast-changing world in which leadership is but a fleeting concept. It turns out this was a three-to-one debate all along—against the motion. Ferguson was the lone “Yes.”

Yet, on closer examination, the underlying faultline of the debate points to an even two-two match—albeit inadvertently: Ferguson and Zakaria vs. Kissinger and Li.

Ever since the onset of this current century, those on the side of Ferguson and Zakaria, mostly in the West, have been obsessed with the question to whom this new century shall belong. Since the last century indisputably belonged to America, it is indeed urgent that we determine who the owner of this century is so that all can organize their affairs accordingly.

But perhaps the concept of owning a century was but a short-lived anomaly in the history of human civilization. For a large portion of recorded history China generated a dominant share of the world’s GDP and maintained the longest continuing civilization, but no one called those Chinese centuries. The few hundred years during which the sun of the British Empire never set were not called British centuries. There were no Roman centuries or Athenian centuries. So what made the 20th century so special that someone had to be given ownership of it?

The 20th century was indeed a special one. It was when modernity, given birth by the Enlightenment a few centuries ago, culminated in an existential struggle between two universal ideologies: Soviet communism and democratic liberalism. Both were modern and both were Western. Furthermore, both were totalitarian in nature in that each claimed the inevitability of a preconceived totality for all mankind. No one had made such a claim before, but the 20th century saw two.

In Soviet communism, class as the fundamental unit that transcended all cultural identities would take the whole world to the communist utopia. On the other side of the coin, democratic liberalism counted on divinely empowered individuals to vote their way to the liberal utopia. Both armed themselves to the teeth and drove their visions from continent to continent, even reaching the moon. In the end, the Soviet Union died and the American-led West lived—hence the American century.

The universal nature of those two warring ideologies made the Cold War a life-and-death struggle—a zero-sum war—and it was only logical that the survivor would claim ownership of the entire century. And it seemed only natural that the US would then move on to actually implement the utopia of democratic liberalism to cover every corner of the earth—globalization—as it has come to be known. Seven billion rational individuals would all make the right choices in the voting booth and the marketplace and thereby eventually unify the world under a single set of political and economic rules. At the 20th anniversary of the fall of the Soviet Union, an interim report card may be due on America’s universal project.

Economically, globalization has led to a period of prosperity around the world. It brought about industrialization at unprecedented speed and scale in developing countries, of which China is the most notable one. In developed countries, dramatic economic benefits have been realized from technological advances and increased efficiency in capital allocation. This process has been undertaken within a global economic and security infrastructure led and underwritten by the US. A myriad of global organizations, such as the WTO, the IMF, and the World Bank, provide the institutional framework within which goods and capital flow ever more freely. The physical sea lanes vital to it all are kept open and safe by the US Navy. American political and military power safeguards the delicate balance of the Middle East—the source of energy for this global industrial expansion. The complex web of US-built security alliances around the globe has kept the world from any major destructive military conflicts. All these many call global “public goods” are provided by the US part and parcel to its ownership of the century.

But not all have gone according to plan. At this juncture, the world is drifting further away from the original universal vision that drove this project. First, China became the largest beneficiary by taking maximum advantage of globalization. In just one generation, it went from a poor agrarian country to the second largest economy in the world. Yet, China does not, and probably never will, subscribe to the universal ideology of democratic liberalism, and its vibrant market economy is pointedly not capitalism. Many Americans are surprised by this, as it was widely believed that China’s economic development and integration into the world order would necessarily turn it into a convert of the Western religion of modernity. This is because ideological faith often leads to self-delusion. It is no different from the Soviet communists who believed all workers of the world would transcend their national and cultural allegiances to unite against capitalists of all nations. The same delusion is now leading many in the West to champion the Arab Spring for giving birth to liberal societies across the Middle East.

China has, and always will, act in its own best national interests. Its worldview is consistent with the cultural roots of the Middle Kingdom—keeping out barbarians, not invading them. It is directly opposite to the 20th century Soviet and American notions of universality. China appears to be a natural in this post-ideological century —exploiting the international system for its own benefit while defending against external encroachments of its sovereignty. With or without sufficient capacity, it will never seek to lead the current global system let alone invent, and pay for, a new one to run the world. So, in essence, the Americans have built a global system with a universal plan; China has ridden that system for free but would not subscribe to the plan—to be fair, China never said it would. Furthermore, its success is showing new possibilities to many other developing nations that never embraced the plan but were told by the West they could not prosper without it.

Second, the universal project, while failing to universalize the world, is instead universalizing—colonizing—America itself. During the debate, Zakaria touts it as a distinct advantage that the US is becoming a [universal] nation, building a land of opportunity for the world’s best and brightest. This is indeed the case except Zakaria’s [universal] nation is being built at the expense of the [American] nation.

While wars and nation building in the name of universality are being carried out in distant lands, at home in America globalization has created a permanent cosmopolitan class, or the Davos Men, in the late Samuel Huntington’s memorable phrase—the small group of globe-trotting, option-trading elites who reap the lion’s share of the assorted benefits of globalization. The rest of the Americans—the 99%, to borrow from Occupy—languish in stagnant and even falling living standards, with the nation’s industry being hollowed out and its polity incapacitated by debt. It is no surprise that the same elites are the most insistent on America carrying on with the universal project to make this another American century. For the first time since the Great Depression, a structural threat to American social cohesion has emerged.

Who will own this young century of ours? There is little uncertainty to China’s approach. The world’s second largest economy and longest continuing civilization will keep on managing its currency and trade rules to help it industrialize, enjoy the complimentary protection of the US Navy to secure its trades in raw materials and finished products, and gain increasing competitive advantages from solar panels to shoes. America’s path is the unknown. Will it retreat and rebuild the American nation, or will it allow its 1% to continue its universal project paid for by a mortgage on the future of the 99%? And what if America insists on extending its century ownership from the 20th to the 21st? China’s response seems to be: Keep it.