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The Old Order Changeth
In a sense, you might say that they already have. Since the crisis started to roil Wall Street in the summer, the world has discovered that a sovereign wealth fund is not — as many must have thought — a stash of small change that Queen Elizabeth raided when she wanted a flutter on the horses. In the last 10 months, investment funds derived from public income and managed by government appointees have injected some $70 billion into U.S. finance houses. There is little sign of their role diminishing any time soon; the very non-Anglo-Saxon savings rates of Asian economies such as Singapore, and the wealth that $92-a-barrel oil is flooding into the Middle East, guarantees that there will be more funds from the East looking for opportunities in the West.
So far, I've been pleasantly surprised by the way in which the rise of sovereign wealth funds has not sparked off a wave of xenophobia in the U.S. (When the Japanese overpaid for everything from Hawaiian beachfront hotels to midtown New York City real estate and Californian golf courses 20 years ago, by contrast, half of Washington had a collective attack of the vapors.) Of course, in an election season, that may change — the IMF is probably wise to ask Singapore, Abu Dhabi and the blond sheiks of Norway to see if they can come up with a code of conduct for how the funds should operate — but so far, protectionism has been remarkably absent from U.S. political discourse this year. John Edwards, who was the most economically populist of the leading Democrat candidates for the party's nomination, is now out of the race; Mitt Romney's disingenuous pledge to save every lost job in Michigan may have won him the Republican primary there, but doesn't seem to have done him much good in other states.
Secretary of State Condoleezza Rice underlined the point in a plenary address on the first day. "The United States," she said, "continues to welcome foreign investment and free trade." Rice's speech was intelligent, thoughtful, illuminating, forward looking — and, as I heard two people say immediately after it, seven years too late. The non-Americans who comprise the majority of Davos devotees had made up their minds about the Bush Administration long ago. Still, in its statement of intellectual principles behind U.S. foreign policy, Rice's speech was clear and well argued. "We do not accept a firm distinction between our national interests and our universal ideals," she said, "and we seek to marry our power and our principles together to achieve great and enduring progress. This American approach to the world did not begin with President Bush. Indeed, it is as old as America itself." Rice went on to explain and defend the democracy agenda in the Middle East, and to assure her audience that "we Americans realize how central a solution to climate change is to the future health and success of the international system." She had nice words not just for the old allies of the U.S. in Asia and Europe, but for China, Russia ("recent talk about a new cold war is hyperbolic nonsense") and even North Korea.
All of that was just what the crowd wanted to hear in Davos, where such notions as multilateralism, a love of diplomacy and a suspicion of muscle as a way of settling international problems run deep. But however much Rice was applauded, it was hard to miss a sense that American dominance of the international agenda, so much a feature of Davos meetings from the mid-1990s until the U.S. invasion of Iraq in 2003, was a thing of the past. The woes of the U.S. economy, the difficulties in pacifying Iraq — even if the U.S. position there looks a lot better today than the bien savants of Davos would have imagined a year ago — and the rise of China, India and Russia all suggest that the period of a unipolar world has ended. Global discourse is shifting into topics where nobody could ever claim the U.S. is leading the debate — climate change is the obvious example. At the same time, the U.S. has been unable to demonstrate clear victories — that is to say, victories followed by stable political conditions — in the wars it has waged since 2001.
The presence of Hamid Karzai and Pervez Musharraf in Davos underlined the point. The Presidents of Afghanistan and Pakistan are both favorites of the Bush Administration, both frontline allies in the war on terror. Yet no amount of love and support from Washington allows them to sleep easy each night. Both are threatened by forces of Islamic militancy and Pashtun irredentism that all the might and muscle of the U.S. military have been unable to subdue — to say nothing of warlords enriched by poppy harvests (in Afghanistan) and a newly militant middle class (in Pakistan) that asks why a nation whose economy is growing by 7% a year cannot enjoy more of the freedoms that prosperity usually brings in its wake.
Of the two men, Musharraf was the more visible, using Davos as just one step of a European charm offensive that also took him to Brussels, London and Paris. Did it work? Depends who you asked. Musharraf made his points well, stressing the booming economy, insisting that he had a "multipronged" strategy against the Islamic extremist forces in the tribal areas along the border with Afghanistan, claiming that the coming election would be as clean as a whistle, and so on. He had a nice line in asking why Pakistan's nuclear arsenal should always be called an "Islamic bomb," when nobody ever refers to Christian, Jewish or Hindu bombs, and he made the familiar point that Western interlocutors should not ask too much in the way of democracy and civil liberties of a society such as Pakistan, in transition to modernity. Among the foreign-policy professionals in the halls, there was, I thought, a pretty widespread dismissal of his case as the special pleading of someone who would soon be shown history's door. Intriguingly, though, I spoke to two Western business leaders who told me how much sense they thought Musharraf spoke, especially about unrealistic demands for him to apply Western standards of democracy and human rights. His critics, they implied, should give Musharraf a break. They won't.