The New Cold War
America, China, and the Echoes of History
Since the early 1990s, daily life in poor countries has been changing profoundly for the better: one billion people have escaped extreme poverty, average incomes have doubled, infant death rates have plummeted, millions more girls have enrolled in school, chronic hunger has been cut almost in half, deaths from malaria and other diseases have declined dramatically, democracy has spread far and wide, and the incidence of war—even with Syria and other conflicts—has fallen by half. This unprecedented progress goes way beyond China and India and has touched hundreds of millions of people in dozens of developing countries across the globe, from Mongolia to Mozambique, Bangladesh to Brazil.
Yet few people are aware of these achievements, even though, in aggregate, they rank among the most important in human history. In 2013, the Swedish survey organization Novus Group International asked Americans how they thought the share of the world’s population living in extreme poverty had changed over the last two decades. Sixty-six percent of respondents said that they thought it had doubled, and another 29 percent said that it hadn’t changed. Only five percent knew (or guessed) the truth: that the share of people living in extreme poverty had fallen by half.
Perhaps that ignorance explains why Washington has done so little to take advantage of these promising trends, giving only tepid support to nascent democracies, making limited investments in economic development and in new health and agricultural technologies, and failing to take the lead in building more effective international institutions. Whatever the reason, many developing countries are now responding to what they perceive as the United States’ indifference by looking elsewhere—especially toward China—for deeper engagement and advice on how to keep growing. At the same time, climate change, the slowdown in global growth, and rising tensions in the Middle East and beyond have begun to threaten further progress. As a result, the United States now risks missing out on a historic chance to strengthen its global leadership and help create a safer, more prosperous, and more democratic world—just at the moment when it could help the most.
Global poverty is falling faster today than at any time in human history. In 1993, about two billion people were trapped in extreme poverty (defined by the World Bank as living on less than $1.90 per day); by 2012, that number had dropped to less than one billion. The industrialization of China is a big part of the story, of course, but even excluding that country, the number of extreme poor has fallen by more than 400 million. Since the 1980s, more than 60 countries have reduced the number of their citizens who are impoverished, even as their overall populations have grown.
This decline in poverty has gone hand in hand with much faster economic growth. Between 1977 and 1994, the growth in per capita GDP across the developing countries averaged zero; since 1995, that figure has shot up to three percent. Again, the change is widespread: between 1977 and 1994, only 21 developing countries (out of 109 with populations greater than one million) exceeded two percent annual per capita growth, but between 1995 and 2013, 71 such countries did so. And going backward has become much less common: in the earlier period, more than 50 developing countries recorded negative growth, but in the later one, just ten did.
The improvements in health have been even bigger. In 1960, 22 percent of children in developing countries died before their fifth birthday, but by 2013, only five percent did. Diarrhea killed five million children a year in 1990 but claimed fewer than one million in 2014. Half as many people now die from malaria as did in 2000, and deaths from tuberculosis and AIDS have both dropped by a third. The share of people living with chronic hunger has fallen by almost half since the mid-1990s. Life expectancy at birth in developing countries has lengthened by nearly one-third, from 50 years in 1960 to 65 years today. These improvements in health have left no country untouched, even the worst-governed ones. Consider this: the rate of child death has declined in every single country (at least those where data are available) since 1980.
Meanwhile, far more children are enrolling in and completing school. In the late 1980s, only 72 percent of all primary-school-age children attended school; now, the figure exceeds 87 percent. Girls in developing countries have enjoyed the biggest gains. In 1980, only half of them finished primary school, whereas four out of five do so today. These leaps in education are beginning to translate into better-skilled workers.
Then there is the shift to democracy. Prior to the 1980s, most developing countries were run by left- or right-wing dictators. Coups and countercoups, violence and assassinations, human rights abuses—all formed part of regular political life. But starting in the 1980s, dictators began to fall, a process that accelerated after the Cold War. In 1983, only 17 of 109 developing countries qualified as democracies, based on data from Freedom House and the Center for Systemic Peace; by 2013, the number had more than tripled, to 56 (and that’s not counting the many more developing countries with populations of less than one million).
As those numbers suggest, power today is far more likely to be transferred through the ballot box than through violence, and elections in most countries have become fairer and more transparent. Twenty years ago, few Indonesians could have imagined that a furniture maker from central Java would beat one of Suharto’s relatives in a free and fair election, as Joko Widodo did in 2014. Nor would many have predicted that Nigeria, then still under military rule, would in 2015 mark its first peaceful transfer of power between parties, or that Myanmar (also called Burma) would hold its most successful democratic election the same year. Across the developing world, individual freedoms and rights are honored to a much greater degree, human rights abuses are rarer, and legislative bodies have more power.
Global poverty is falling faster today than at any time in human history.
Yes, many of these new democracies have problems. And yes, the march toward democracy has slowed since 2005—and even reversed in some countries, such as Thailand and Venezuela. But in many more—from Brazil to Mongolia to Senegal—democracy has deepened. Never before in history have so many developing countries been so democratic.
As states have become wealthier and more democratic, conflict and violence within them have declined. Those who think otherwise should remember that as recently as the 1980s and early 1990s, much of the world was aflame, from Central America to Southeast Asia to West Africa. There were half as many civil wars in the last decade as there were in the 1980s, and the number of people killed in armed conflicts has fallen by three-quarters.
Three major forces sparked this great surge in development progress. First, the end of the Cold War brought an end to the superpowers’ support for some of the world’s nastiest dictators and reduced the frequency of conflict. As ideas about economic and political governance began to change, developing countries introduced more market-based economic systems and more democracy. Second, globalization created vast new opportunities for economic growth. Increased flows of trade, investment, information, and technology created more jobs and improved living standards. Third, new and more effective leaders—in politics, business, religion, and civil society—began to forge deep change. Where courageous figures, such as Nelson Mandela in South Africa, stepped forward, countries progressed; where old-style dictators, such as Robert Mugabe in Zimbabwe, remained in power, countries languished.
This incredibly wide-ranging progress should not obscure the considerable work that remains: progress has not reached everyone, everywhere. One billion people still live in extreme poverty, six million children die every year from preventable diseases, too few girls get the education they deserve, and too many people suffer under dictatorships. Countries such as Haiti, North Korea, Uzbekistan, and Zimbabwe lag far behind. But the fact remains that an enormous transformation is under way—one that has already substantially improved the lives of hundreds of millions of people.
The United States should welcome and encourage this progress. For starters, broad-based development enhances global security. It is not true that poverty necessarily breeds terrorism, as some argue—after all, most poor people are not terrorists, and many terrorists are not poor. But it is true that poor states tend to be weak states unable to prevent terrorist and criminal networks from operating on their soil. Sustained development strengthens government institutions and reduces the need for outside intervention. As former U.S. Secretary of Defense Robert Gates put it, “Development is a lot cheaper than sending soldiers.”
Development also builds states’ capacities to fight pandemic disease. Guinea, Liberia, and Sierra Leone were overwhelmed by Ebola in 2014 largely because they all had weak health systems. The same was true in many of the countries hit hardest by the HIV/AIDS epidemic decades ago. As poor countries grow wealthier, however, they become better equipped to fight diseases that can spread quickly beyond their borders.
A more prosperous developing world also benefits the U.S. economy. The spread of economic growth creates new markets for American businesses not just in China but also in Brazil, Indonesia, South Africa, and beyond. Developing countries are buying more and more aircraft, automobiles, semiconductors, medical equipment, pharmaceuticals, consultancy services, and entertainment. Although the growth in trade with developing countries has slowed during the last year, their economies will no doubt remain major market opportunities for U.S. companies. In 1990, such states accounted for one-third of the global economy; today, their share is half, and they purchase more than half of U.S. exports. In 2011, Walmart spent $2.4 billion to acquire a controlling share of a holding company that operates more than 350 retail stores in South Africa and 11 other African countries, signaling a level of interest in African consumers that would have been unimaginable two decades ago.
To be sure, emerging markets also create competition for U.S. businesses and hardship for American workers who lose their jobs as a result. But they also create many new jobs, as American firms expand abroad and as companies in the developing world send more capital to the West. Moreover, developing countries are increasingly coming up with their own innovations and technologies, in medicine, agriculture, energy, and more. The United States should respond to this growing competition not with protectionism but by strengthening its own capacities: rebuilding its infrastructure, improving its educational system, and investing in new technologies.
Finally, development helps spread and deepen the values that Americans hold dear: openness, economic opportunity, democracy, and freedom. These values tend to go hand in hand with growing prosperity: as incomes rise, citizens demand greater freedoms. History suggests that even governments that do not welcome these ideas eventually embrace them or are replaced by those that do. And as more developing countries achieve progress under market-based economic systems and democracy, other countries seek to emulate the model. The United States and Europe have a strong self-interest in encouraging this process, since it will enhance global stability and add to the number of like-minded partners that can help address future challenges.
What makes all this progress especially impressive is that it has continued despite a number of major shocks that in an earlier age could well have stopped it: the outbreak of the HIV/AIDS pandemic in the 1980s, the Asian financial crisis in 1997–98, the 9/11 attacks, the global food crisis of 2007–8, and the global financial crisis of 2008. In each case, pundits predicted that the disaster of the day would set back progress. Yet in each case, the gains continued.
There are good reasons to believe they can continue well into the future. The forces that sparked these changes were fundamental, not transitory. Governments have learned from their mistakes and gotten much better at managing inevitable downturns. Global integration has made critical technologies available to more and more people. State institutions have become more effective, with improved (if imperfect) legal systems, clearer property rights, and greater respect for individual liberties. Democratic rules and norms governing the transfer of political power, free speech, and accountability have become more deeply entrenched. Civil society groups are more active.
Continued progress isn’t automatic or guaranteed. But with smart choices, it is within reach.
These deep-seated changes have put enormous additional gains well within reach. If economic growth proceeds along the lines of most projections over the next two decades, some 700 million more people will escape extreme poverty. Per capita incomes in poor countries will double again, millions of childhood deaths will be avoided, tens of millions of children will get the education they deserve, hunger will decline, and basic rights and freedoms will spread further.
At least, that’s what should happen—but none of these future gains is guaranteed. Growth has slowed markedly since 2008 in emerging economies such as Brazil and China and throughout the developing world. Russia, Thailand, and Venezuela have turned less democratic, and South Africa and Turkey seem to be headed in that direction as well. The Middle East has seen the return of conflict and authoritarian rule. China’s aggressive actions in the South China Sea could spark a major conflict that could kill tens of thousands of people and devastate the region’s economies. Outbreaks of SARS and the H1N1 and Ebola viruses underscore humanity’s vulnerability to disease, and many doctors worry that growing resistance to antibiotics could reverse some of the hard-fought gains in health. Meanwhile, global population is on track to exceed nine billion by 2050, and the combination of more people, higher incomes, and warmer climates will place enormous strains on the world’s supplies of fresh water, food, and energy.
Although there are ample grounds for pessimism, the doomsayers continue to underestimate humanity’s growing ability to cooperate in the face of new challenges. In the eighteenth century, when Thomas Malthus looked at population growth and foresaw catastrophic famine, he failed to appreciate the advances in agriculture, health, and governance that human ingenuity could create. The same was true for those that predicted a population disaster in Asia in the 1960s and 1970s. Today, the problems facing developing countries are plain to see, while the new ideas and innovations that will overcome them are harder to picture. Continued progress isn’t automatic or guaranteed. But with smart choices, it is within reach.
Most of the key choices will be made in developing countries themselves. Sustaining progress will require leaders there to reduce their countries’ dependence on natural resources, make their economies more inclusive, invest more in health and education, expand opportunities for women, and strengthen democracy and the rule of law.
The future of the United States increasingly depends on growing prosperity, peace, and progress in the developing world.
Yet the future of development will also depend on the actions of the world’s leading countries, since poorer countries can prosper only in a strong global system. The United States must do its part by regaining its economic leadership through major investments in infrastructure, education, and technological advances in health, agriculture, and alternative fuels. It must act to fix its long-term budget problems by improving the solvency of Social Security, Medicare, and Medicaid and strengthen the financial system through better regulation. The country must also do a much better job of leading by example on democracy. Deep political polarization, the lack of substantive debate, the unwillingness to compromise, misguided foreign policy adventurism, and the Great Recession have made liberal democracy look unattractive and ineffective.
That malaise matters, because many developing countries are now engaged in a battle of ideas over which economic and political model they should follow. On the one side stands the model that has prevailed in the West since World War II: market capitalism coupled with liberal democracy. On the other is the model practiced by China, Vietnam, Ethiopia, and, increasingly, Russia, among others: state capitalism coupled with authoritarian rule. And there’s yet one more option, with a smaller but more dangerous following: religious fundamentalism, as promulgated by Iran and Saudi Arabia and groups such as the Islamic State (or ISIS) and Boko Haram in Nigeria.
As the Western countries struggle and China continues to rise, authoritarian capitalism is becoming more appealing. Consider Beijing’s ties to Africa. China purchased $26 billion in imports from the continent in 2013; the United States purchased $9 billion. Chinese investment in Africa has been growing by 50 percent per year since 2000, whereas U.S. investment is growing by 14 percent per year. Make no mistake: many Africans still prefer to follow the American model and view China with suspicion. But those attitudes are beginning to shift, and Beijing’s apparent ability to get things done will only enhance China’s appeal, especially if Washington seems to talk big but deliver little.
Aside from the broader task of getting their own houses in order, the United States and other Western powers should also assert leadership in several specific areas to keep the progress going. The first is climate change, which presents one of the greatest threats to poverty reduction. Most of the world’s poor countries had little to do with creating the problem, yet they will bear the brunt of the damage. Rising sea levels, changing rainfall patterns, higher temperatures, and dwindling water supplies will derail progress, will undermine global food production, and could engender major conflict. Developing countries have an important role to play in curbing emissions, but they will not switch to low-carbon fuels and other clean technologies if their developed-world counterparts do not. Washington has taken important first steps to reduce power-plant emissions and raise automotive fuel-efficiency standards, but there is a very long way to go.
Second, leading countries—especially the United States—should invest more in technological innovation. Much of the credit for recent improvements in living standards goes to vaccines, medicines, high-yielding seed varieties, cell phones, and the Internet. These new technologies (alongside old ones such as electricity and paved roads) have not yet reached everywhere, so simply making them more widely available would do wonders. But sustaining progress for the next several decades will also require significant investments in new vaccines, more powerful drugs, drought- and heat-resistant seeds, desalination techniques, and clean energy.
Third, Western powers need to upgrade the current system of global governance. The set of institutions that emerged after World War II were innovative for their time. For all their faults, the United Nations, the International Monetary Fund, the World Bank, the World Trade Organization, and the World Health Organization contributed significantly to global peace and prosperity. But these organizations are losing legitimacy and becoming less effective, in part because developing countries feel that they are inadequately represented in them. It is time for these bodies to give developing countries more opportunities for leadership, larger voting shares, and a bigger voice in decisions.
In 2014, the U.S. Congress failed to pass legislation that would have approved giving developing countries larger voting shares in the International Monetary Fund—a change with which all other member countries (and the Obama administration) had agreed. Almost immediately, China accelerated its push to establish a new development bank for Asia, and the BRICS countries (Brazil, Russia, India, China, and South Africa) followed suit by proposing a similar institution of their own. Washington then compounded its first error by trying to undermine the new institutions, reinforcing the view that it was just trying to keep developing countries in their place. The lesson was clear: when Washington fails to lead, developing countries will go their own way.
Fourth, the world’s leading countries should do more on trade. Although the United States is generally open to trade, its policies toward poor countries are strikingly protectionist: it charges high tariffs on many products from developing countries (such as textiles, shoes, and apparel) and tightly restricts the imports of a range of agricultural products (including dairy, peanuts, and sugar). Although free-trade programs, such as the African Growth and Opportunity Act, help, they are insufficient. Washington should extend duty-free and quota-free access to the world’s poorest countries—the 48 countries designated by the UN as the least developed. It should also push to formally end the Doha Round of multilateral trade talks, which remain on life support, and open a new round of negotiations that center on the issues developing countries care about, such as food security.
Finally, the United States and other leading countries should expand their foreign aid programs, both to solidify the nascent turnarounds in the surging countries and to support people in the states that remain stuck. In the past, such aid has helped lengthen life spans, increase agricultural productivity, alleviate humanitarian crises, and rebuild war-torn countries around the world. Most studies show that despite its shortcomings, aid has accelerated economic growth and helped support transitions to democracy, especially since the end of the Cold War.
But the answer is not just more money; the United States must also rethink how it provides assistance. For starters, aid agencies should develop innovative ways to encourage private investment. They can encourage local banks to provide loans to promising entrepreneurs, as does the Development Credit Authority, a small program within the U.S. Agency for International Development that should be expanded significantly. They can encourage investment in developing countries by working with local suppliers to improve the quality of the goods and services they sell or by financing private investors’ due diligence and environmental impact assessments.
At the same time, aid agencies should invest more in disseminating new technologies, working closely with universities, foundations, private companies, and local entrepreneurs. Doing so will require new types of relationships, incentive structures, and knowledge sharing, along with a greater willingness to take risks. Aid agencies should also invest far more in programs to support girls and women, since mountains of evidence show that doing so dramatically improves the health, education, and economic opportunities of poor families. Above all, they should provide much more funding to the poorest countries, and especially democracies, since progress on development in these countries will have the knock-on effect of improving governance. The Obama administration has taken important steps on this front, building on the Bush administration’s health programs and unveiling new initiatives on food security and electricity, but the next administration should scale up these programs to meet new challenges.
The future of the United States increasingly depends on growing prosperity, peace, and progress in the developing world. The last two decades have given humanity a tremendous start in what ultimately may rank as one of the greatest transformations in world history. Today, the United States has a rare opportunity to stand with the people and leaders of developing countries to ensure that this progress continues for decades to come.