Valdai Club

Both structural order and the emerging processes that guide it are on a path of acceleration. The international order is being conditioned by rising endogenous “processes” that allow the reconfiguration of power. In recent years, the transformation of the relationship between security, economy, technology, and health, has become a primary force driving issues of world change. South America must take note of the political and economic impacts that the pandemic has produced, so that it can develop a clear diagnosis of the future that awaits it. The publication of this op-ed marks the beginning of online collaboration between Valdai Club, Russia as part of its Think Tank project and CARI, Argentina. This is the first in a series of planned exchanges between the two organizations on bilateral and global matters. Stay tuned for more commentaries, videos and webinars in the days ahead.

The recurring question in the context of the  SARS-CoV-2 virus is whether the world of international relations will change after the pandemic disappears. However, order structures and the emerging processes that guide them have long been on a path of acceleration, rather than one of "change" or "continuity." Although the world will not be reconfigured immediately, it will not stay the same either.  

As per economist Paul Krugman, we are living through strange days, or rather, difficult times. Episodes that make the international order wobble are becoming more and more recurrent. Within the framework of security, Al-Qaeda and ISIS converted terrorism into a virulent global player with no "postal code," and a new participant in international geopolitics. These organizations modified the traditional state military threat into an asymmetric one, where "states" face "non-states." With regard to the economy, the 2008-9 financial crisis was the corollary of a process of financialization that transformed capitalism into hyper-globalized, with high volatility and impact on the real economy. Health, on the other hand, is also an area of issue, as diseases and pandemics are now defined by a more visible and faster-acting type of threat. During the first quarter of 2020, the number of Covid-2 deaths has been higher than those of HIV, Malaria and Influenza.   In the United States, the coronavirus has caused in just four days the same number of deaths that occur daily from other conditions.

The truth is that today the world is virtually paralyzed: economies remain slow, companies continue to go bankrupt, and the lack of demand for labor is overwhelming - the U.S. and Russia, for example, add up to about 30 million unemployed. According to a report published by the International Labour Organization (ILO), by the end of April, around 68% of the world’s labor force resided in countries where restrictions or quarantines exist. Furthermore, 37.5% of the labour force is employed in disruptive risk sectors such as food, services, trade, manufacturing, and real estate. 

In the meantime, even though politics seeks to answer all of the pandemic’s inconveniences, "anarchy" in international structures remains a constant. Not only will great powers not give in to the power dispute, as maintained by John Mearsheimer,  but will also deepen it, albeit in a more "tactical" way. These actors will seek to assert themselves, improving their relative position in the strategic-military and economic order, as we have seen with China and the US, or Iran  and Israel. But today, in the midst of the pandemic, high doses of cooperation between states also remain Russia has sent sanitary aid to Italy and the US, and China has done the same with Europe and Latin America. In the diplomatic field, this cooperation is based on the construction of empathy and coordination in ad-hoc forums, such as the G-20 and the Organization of Petroleum Producer and Exporting Countries (OPEC). At times, however, states act by clashing interests, and seek to get away with it. During the health crisis, several countries have engaged in disruptive actions to save their populations, such as closing borders and contesting medical supplies. Some have also advanced cross-accusations, with the U.S. blaming China for allowing the virus to spread.

As for the attributes of "hard power," those of a strategic-military nature have reaffirmed that conflict is inherent in human nature. Anyway, these carry the particularity of having to share protagonism with other power attributes. Finance, trade, and technology are no longer secondary players, and are increasingly adopting changing and difficult-to-predict behavior. Just as "hard power” defines the position of states in the international hierarchy, these  "non-hard" powers also mark world power structures. As Richard Hass says, there is a big gap between global problems and the capacity to meet them; “international community” is  aspirational and the State must give responses. 

In 2008, the "big crisis" carved international relations, and its aftermath has been difficult to control. Despite the dollar's continued leadership and the U.S.’ economic power, financial instability prevails, demonstrating the unresolved excesses of capitalism. During today's pandemic, actual great powers and those with less influence have been forced to settle, relegating maximization stances, because the system offers an uncertain future. For economist Carmen Reinhart, we have not seen such a crisis in the world economy since the Depression of 1930, and the crisis will affect all countries equally. 
 
Overnight, the U.S. approved launching an economic plan equivalent to 25% of its GDP. Similarly, the European Union (EU) approved a €500.000 thousand rescue package, and its countries are preparing to raise new debt. The pandemic crisis will have higher costs for less developed countries and will enable a faster recovery strategy for central economies. 

The international structure is being conditioned by “processes” endogenous to the system, which lead to a constant reconfiguration of power. These acquire important dimension because they accelerate within different intensities, what Joseph Nye and Robert Keohane call "institutional velocity”:  they sometimes move very fast, for example in the case of technological advances, and sometimes “slow down” in the face of a crisis, a war or a pandemic. In any case, they pre-announce the way the system is going to unfold and warn us about some of the future problems. Hence, the importance, as Graham Allison anticipates, of having prepared intelligence analysts, finance professionals, and historians to deal within and all kind of threats and risks that operate as instability factors. 

Over the course of a few weeks it seemed like the world would embark on a war and would not be the same as before. But the board where international relations are settled has produced unusual things: despite resisting, Russia has folded with Saudi Arabia and OPEC to reduce oil production, seeking to save prices and itself. Pragmatism has taken precedence over the abyss, as global energy consumption has declined for everyone. China, on the other hand, is being further swayed internationally for its actions against the virus. Faced with the severity of the pandemic, some leaderships seem not to be up to the task. This brings us back to a "first image" problem of international relations: war sometimes stems from the unforeseen conduct of men. Although some heads of state have minimized the threat, the phenomenon has overpowered them, forcing to face serious domestic problems.  

Today's particularity is that, once again, no one is immune from economic competition, war, or the pandemic. The actions of the actors involved are not static – as in a world organized according to comparative advantages – but dynamic, because they offer a greater or lower margin of performance depending on circumstances. There  are disagreements in the EU on how to get out of the pandemic and how to manage reconstruction costs - the European Commission estimates an equivalent of 10% of GDP. France, Italy, Spain, and Portugal, among others, support the idea of mutualizing debts incurred to cover health, social and economic costs; by contrast, the Netherlands, Finland, Austria and Denmark demand stricter rules to implement any measure. Reality will force them in one way or another to close ranks more closely around concerted spending policies; there is no room for "free riders." Even more, US and China are not cooperating each other to restore pandemic´s consequences.
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In all cases, power can be balanced, or managed more tactically. The current crisis should not elicit worries about a false dilemma between "economy" or "health," "states" or "international bodies," or  "democracy" or "non-democracy." Today we are in "pause mode," but there are signs that show the exit strategy. The first novelty is a paradox. Strict  quarantine compliance proves effective in eradicating the virus and preparing us to re-ignite economies. Another important development is that states have taken the lead in managing the crisis, moving the economic, social and health welfare policy machinery. Third, financial crises have already dusted central banks' "lessons learned" manuals to bring monetary and credit aspects straightened. Finally, we are already waiting for a vaccine, although taking into account testing delays,  it may take time to arrive.

In Latin America, the pandemic has not interrupted international politics, and Mercosur countries continue to seek alliances outside the regional block. Brazil and Uruguay have once again expressed the need to unilaterally conclude free trade agreements with other actors, such as the Pacific Alliance and the US. Argentina, on the other hand, recently decided to suspend Mercosur's external negotiations. The bifurcation of institutional structures in the Latin American experience has been a constant difficult to counter, but today, with low international commodity prices, disruption of international demand, increased public spending, and high monetary issuance, the post-pandemic world leaves us with little room to maneuver. 

The virus put the region on alert: regional framework countries will have to deal the crisis using heterodox policies - with a certain dose of orthodoxy – to simultaneously achieve modest and sustainable macroeconomic balances. This is the case of Argentina. The rule should be to lead actions capable of recreating synergies to enhance the effects, as ad hoc multilateral dialogue will allow agile and fruitful dialogue conducive to action. Despite the ideological variety that countries face, economic and political coexistence will be indispensable to at least draw up a smart roadmap. Several countries have demonstrated they are taking the health crisis seriously. Throughout the emergency, Argentina, Chile, Colombia, and Perú acted with the necessary force and speed to stop the threat of the pandemic. It is time now, to take the leap to coordinate strategies for economic growth.

From now on, a new stage begins to unfold, where the world gains a new impetus to deal with the uncertainty of the future before us. The real quandary lies in finding an order that will prevent collapse and minimize losses for everyone.