18 May 1998
A Muddle in Birmingham
The Western powers need to get serious about an agenda for the next century
Gerald Segal


It has been a good couple of years for the West. Not only was Communism trashed a decade ago, but the Gulf War of 1991 demonstrated the West's military might. In the last year, the illusion of a Pacific Century and a competing Asian model of capitalism was heaved into the trashcan of history. So why is it that the pre-eminent grouping of Western powers-the G-7-is in such a muddle?

The G-7 Western powers (the United States, Japan, the United Kingdom, France, Germany, Italy and Canada) will meet in Britain's most uncool city, Birmingham, on 15-17 May. More accurately, the G-7 will form the core of the G-8 (including Russia), a new grouping formally launched in Birmingham, but in this G-7-G-8 muddle lies the heart of the problem. Effective management of world dominated by the West-call it a Westernistic world-requires real leadership.

Western leadership was built on a strong trans-Atlantic alliance (mainly NATO). In the early 1970s the finance ministers of the United States, United Kingdom, France, Germany and Japan began effective coordination of economic policy. The first G-5 summit was held in November 1975 but by 1976-77, with the inclusion of Italy and Canada, the group was well on its way to becoming more a circus than an effective club. Ever since the G-7 summit in Naples in July 1994, Russia has been gradually included, even though its economy is virtually irrelevant to global prosperity and its democracy is fragile. The politically correct but equally politically naive are now calling for China to join-a country with a still small (but growing) economy but with one of the world's more nasty dictatorships.

The irony is that just as the world becomes more Westernistic, the core Western powers are losing both their focus and their ability to cooperate effectively. The G-8 summit will make much of its new 'streamlined agenda' but the leaders will spend two-thirds of their time talking about issues they can do little about-crime, 'social exclusion', employment, third world debt and global poverty. They will barely touch on the serious challenges for the international system that can be met through decisive leadership by the Western powers that matter. Managing the collapse and recovery in Pacific Asia is perhaps the most pressing of these challenges. Asians have demonstrated that they have no Asian solutions and China is being applauded merely for not imploding. It was the United States, with the support of the European Union, that organised IMF relief for Asian basket cases, and European banks, with support from American and Japanese ones, that led efforts to rollover Asia's private debts. Asia's crisis will be on the G-8 agenda, but no concrete initiatives are expected. Nor will there be new ideas on how to manage volatility in the international financial markets.

A second challenge is managing the consequences of creating a new global currency-the Euro. One might have expected the world's leaders to have serious discussions about the risks inherent in creating the world's second largest reserve currency, but at Birmingham they will barely have time to merely repeat well-rehearsed positions. Nor will there be much chance to discuss a longer-term challenge-the need to begin a new round of negotiations in the World Trade Organisation.

The dumbing down of Western leadership has many causes, but the biggest problem is soggy thinking about what made the West so successful in the first place-capitalism and political freedom. Leadership of the Westernistic world must only include those robust democracies with major economies. Thus the launch of the G-8 in Birmingham is effectively a draft of the death certificate of Western leadership. What we now need is serious club that leads the Westernistic world.

This New Millennium Club would have two categories of members. In the economic category there would be the three powerhouses of the global economy-the United States, the EU and Japan. The United States, by virtue of its robust economy and strengths in the information economy of the future, would be bound to lead. The EU, with its new single currency and already effectively coordinated trade policy, is bound to find itself drawn into an ever-closer economic union. If the United Kingdom stays out of the Euro, its voice will not be heard at these heights. A Japan that fails to de-regulate and reform its economy risks being buffeted by the slipstream of trans-Atlantic economic power.

The New Millennium Club will understand that leadership of the global economy also requires greater coordination of political and security issues. In this category of the club there will be something that looks remarkably like the new NATO. The United States will sit in the largest comfy armchair while the United Kingdom and Germany perch on the two sides. France will sidle up from time-to-time. Canada and Italy, like the Netherlands or Spain, will be ordinary NATO members without seats at the top table. As NATO evolves and contemplates using its capability in greater coordination outside Europe, Japan will be told it can only sit at the table if it becomes serious about military cooperation with Western powers.

Like any exclusive club, there is a need for a waiting list. Russia is an obvious candidate, but even if its democracy should become more stable, its puny economy and rusting military will leave it in the Italy-Canada-class for some time. China is at least a generation away from a serious democracy. The result, oddly enough, is a new century that looks much like the recent past-one dominated by American power and its trans-Atlantic allies.

Segal is the Director of Studies at the International Institute for Strategic Studies in London.