Skip to main content

Hitachi

Hitachi Research Institute

Interview

Interviews with experts and opinion leaders from our research network

Shifting Trends in Globalization and International Security
- The Long-term Outlook for Globalization and How Global Companies Should Respond -

In these times of geopolitical instability and social unrest, populist movements have been rising against free trade and immigration around the EU and in the U.S. There is a growing backlash against global integration as these movements encourage countries to look out for their people’s own narrow political interests. For this interview, we invited James Stavridis, Dean of the Fletcher School (a graduate school of international affairs) at Tufts University, to discuss the current state of geopolitical affairs and what it means for the future of globalization.
(We had this interview in the U.S. on November 2, one day before the U.S. presidential election.)

Dean James Stavridis

interview engilsh 38-01




James Stavridis, Dean, is the 12th leader of The Fletcher School since its founding in 1933,
a former Admiral in the U.S. Navy. He led the NATO Alliance in global operations from 2009 to 2013 as Supreme Allied Commander.
He also served as Commander of the U.S. Southern Command, with responsibility for all military operations in Latin America from 2006-2009.
A Fletcher PhD, he won the Gullion prize as outstanding student and has published eight books and over 150 articles.
His focus is on innovation, strategic communication and planning, and creating security through international, inter-agency, and public/private partnerships in this turbulent 21st century.

Globalization Going Backward

Shirai:As globalization has increased over the years, economic disparity and immigration issues have become a serious problem around the world. We are seeing anti-globalization campaigns, including the Brexit movement in the United Kingdom (taking a strong anti-immigration stance and paving the way for Britain’s departure from the EU), the divisive presidential race in the U.S. (with immigration and free trade agreements taking a prominent place in the political discussion), and other anti-integration movements gathering momentum in Europe. It seems that globalization is now facing intense challenges or even going backward. Today is a very sensitive day, with just one day before the U.S. Presidential Elections. However, we’re here now to discuss long-term views. First, I want to ask about globalization. Historically, from back in the 1980s, Reaganomics and other related ideas had expanded a kind of liberalization in economics. Especially after the Cold War, so-called globalization accelerated, with more free trade agreements and regional economic integration. Over time, with global trade expanding, worldwide economic growth rates accelerated. So there are many achievements related to globalization. However, globalization is now facing a tremendous amount of backlash. Globalization is now facing a variety of problems relating to immigration, unemployment, and growing income inequality. So now we have the current situation. Is it possible to revitalize or reignite globalization, or will globalization still continue to face this kind of backlash?

Stavridis: I think this package of ideas that we call “globalization” includes the movement of people across borders. It includes trade and significant international trade flow. It includes trade agreements among nations, which makes such trade possible and profitable, and it also includes the idea of global institutions that are foundational, such as the United Nations, the World Bank, the International Monetary Fund (IMF). I would also include the North Atlantic Treaty Organization (NATO) as one of these. I think the long throw of history will continue toward increased globalization over the long term. We should think of globalization as a wave. It will have periods of time where it will rise and periods of time where it will decline, but I think the long-term trend continues up, enormously. For example, think of the history of Japan, which for centuries was the least globalized modern society in the world. And yet, following its decision to expand into the world, Japan became a significant global actor. That trend is duplicated in Europe and in the U.S. All of these societies have been going up in terms of globalization over the last 200 years. There have been periods when it goes up, and then it declines a bit. But then it goes up again and declines a bit. I think we’re in a tactical moment when we are seeing downward pressure on globalization, but personally I do not believe that the long-term trend of history is going to suddenly reverse. And the reason for this is because globalization provides the most benefit to the most people. There will be individual pockets of people who experience loss, but over time more people will benefit more broadly through the ideas of globalization that I have outlined. So, strategically, I think globalization will continue, but I would say that we’re in for a three- to five-year period of consolidation.

Shirai:Actually, developed countries like Japan, the U.S. and Germany can expand trade and increase their growth rates. Developing countries have a big opportunity for growth as well. Even for those developing countries that don’t have enough money on their own, they can accept investments from other countries. However, in a short period of time, it looks like people in the U.S., Germany, and the United Kingdom are all shifting their priorities and focusing their attention within their own countries and on the everyday lives of their own people. Can the political leaders in these countries do anything to change the minds of their citizens? What kind of policies and actions should our political leaders be taking to overcome the backlash against globalization?

Stavridis: I think there are three things that are very important for political leaders to utilize to enhance the understanding of the benefits of global trade. First, there are groups of people who are disadvantaged by global trade. For example, there are factory workers that lose their jobs, because the factory’s owners decide to close down the factory and move production to another country.

That group of workers needs a robust and visible program of retraining and reeducation, or new training programs, so they can find productive ways to shift their work and their lives using different skills. Second, our political leaders need to make the geopolitical general case for free trade and for the Transpacific Partnership (TPP) in particular. It’s an important economic agreement, but it is also of extraordinary geopolitical and security importance. That’s because it enhances the alliance between the U.S. and Japan, which is foundational in Asia. It also brings in nations from Latin America and other Asian nations. I think this kind of powerful grouping around a free trade agreement has a very strong argument on the security side. Our political leaders need to clearly make that argument to the people. Third, and perhaps most importantly, our leaders should demonstrate the overall benefit of these free trade agreements using actual statistics and economic studies. There are some smaller groups of people who are hurt. However, all of us, as consumers in society, benefit from more efficient and economical distribution of material goods. Free trade lowers prices. It makes more goods affordable. It energizes our economy and strengthens our ability both to import and to export. At the same time, I think there are also powerful arguments for free trade that our political leadership need to make more clearly to the American people, the British people and the Japanese people. They need to demonstrate that free trade makes sense. I think it does, and it is a key component of globalization.

Shirai:So how do you evaluate the impact of these changes and how they influence various countries’ domestic policies? How can countries avoid social upheaval and the inflammatory and divisive rhetoric that comes with this opposition to immigration and immigrants?

Stavridis: These are really important questions, because another enormous part of globalization is immigration. In the U.S., I think our political leaders need to do a much better job of telling the stories of successful immigrants, who are coming into this country every year. They’re opening small businesses, becoming productive workers, and raising good families. There are many more positive stories compared to the small number of negative stories about immigrants. That positive story of immigration is a powerful part of the U.S., of the American Dream, of our ideal for our society. That story needs to be told as well as the other arguments I mentioned.

Leadership of the U.S. and Alliances between Nations

Shirai:The economy and national security are now closely related. However, the U.S. looks like they’re ending their role as the world’s policeman maintaining peace. So, I suppose that one of the reasons here the American people’s mindset has been changing over time is because they probably don’t even want to go to places like Syria and Iraq. Why do you think the American people’s mindset has changed in this way? With all these changes, our evolving political world requires that allied nations, including Japan, engage in more cooperative action. Perhaps that could be through something like the NATO alliance, one that would include Japan. Can the U.S. continue to build these kinds of relationships to unify nations, even as the U.S. is stepping out of its central role in these matters?

Stavridis: I agree with that. Americans don’t think the U.S. should be the world’s policeman. It’s not our job, not our role. We don’t have the resources to do that. We don’t have a desire to do that. I think that with two very difficult wars in Iraq and Afghanistan over the last ten years, and with some 6,000 the U.S. soldiers killed, the American public no longer has the desire to play the role of the global policeman. However, I actually think the U.S. will continue to play a central role, indeed a critical leadership role, in creating coalitions of nations and working together with other nations to create positive outcomes through collective action and collective security. I’ll give you an example. In the current struggle against the Islamic State, it is very clear that the U.S. is not going to deploy 100,000 troops or 150,000 troops, which is what we did in Iraq and Afghanistan. However, the U.S. is willing to deploy 10,000 troops, or perhaps 15,000 troops, joined by European troops, Arab troops, Asian troops, including Australia, New Zealand and others. The U.S. is capable and willing to build coalitions against the Islamic State and others. It will require all of us to work together to create security. It will also require international institutions, like NATO and the United Nations Security Council. We have to find ways to use these institutions to build coalitions and to galvanize the indigenous forces in these regions to create collective security.

China’s Expanding Economic and Military Presence

Shirai:One of the big changes, compared with the 1980s and the 1990s, is China. China is still continuing to expand their presence, economically and militarily. China has been expanding its economic presence to catch up with the U.S., and it has been strengthening its military presence in the South China Sea. China is also aiming to create a new economic order in Asia through its “One Belt, One Road” strategy and through the establishment of the Asian Infrastructure Investment Bank (AIIB). So what kinds of things are you expecting to see in Xi Jinping’s China over the next five years or ten years?

Stavridis: I think you have asked the question in the right way, in that I think it will be Xi Jinping’s China for a long time. I think it is unlikely that he will let go of power. I think that he has a long-term vision for China, and that includes his own hand on the tiller. It also appears to me that his recent announcements, both in terms of the military and the political process, indicate his view that he will be very involved for quite some time to come. Well, I think that the recent announcements tell us that China will begin to move more aggressively in the South China Sea. I think China will attempt to push the U.S. out of Asia. I think China will attempt to create real division between the U.S. and Japan. I think it’s also clear that China will not work for a unification of the Korean Peninsula. All of that means that we will have a contentious and challenging environment in East Asia for some time to come.

Shirai:How do you think the power balance between the U.S. and China will be changing? Can the U.S. maintain the political and economic balance with China?

interview38-03

Stavridis: I think so. I am confident that we have the right diplomatic, political and economic tools to use with China so that we don’t have to use the military tools. At the same time, we will all need to work together. First and foremost, we need to be creating real alliances in Asia with Japan being top of the list, but also with Australia, New Zealand, I think Vietnam, and the Philippines, although that’s become more contentious lately, Malaysia. There are many nations that want to work together with the U.S. to maintain a stable balance of power in East Asia. Second, the economic tools are very powerful. This is why TPP is so important, and I am very hopeful that it will be passed by the U.S. over the next few months before President Obama leaves office. That would be a very good geopolitical foundation for this region. Third, I think that, culturally, engagement by the U.S. with China at every level, and with Japan alongside us, can work at the people-to-people level to ensure we don’t end up in a situation where we need to use the military instrument. Well, I’m optimistic, but cautiously optimistic, that we will maintain a stable and progressive relationship with China. It will certainly be challenging.

Shirai:Economically, so-called “Asia,” which contains China, ASEAN, India, Japan, and South Korea, is recognized and called the “growth engine” of the world economy. But one of the conditions, one of the underlying assumptions, is that Asia is stable, politically and militarily stable. So that is a very critical condition to keep the position of the “growth engine” for the world economy.

Stavridis: Yes. I think several things tell us that the engine for growth will continue to be in Asia. In Japan, it will be automation, autonomous vehicles, innovation, and technology. Japan’s population is not expanding, but Japan’s innovation continues to expand, and I think that’s a strong factor. In India, it’s the reverse. The population is so enormous that it will continue to create economic activity, and I think you’ll see India’s growth overtake China’s. It already is overtaking China’s growth, and it will continue to do so simply because of demographics and economic expansion. In the case of China, I think you will see a slowdown there, but the Chinese economy is big. It’s already the second largest economy globally. Even though its growth will slow, China will still be an enormous force to be reckoned with. Then you add countries like Vietnam in particular, the Philippines, Malaysia, and Indonesia. These are societies that are expanding and have incredible potential to expand. I think the demographics and innovation together would tell us that Asia will continue to be crucial. I will make one other point here, and that is the point you made is a very good one. We should include India as we think about the Indo-Pacific region. In particular, I think the relationship between Japan and India will be a crucial one in the coming years. The power of Japan’s innovation technology, experience of business, with India’s human capital, will be very powerful.

Problems in the EU and with Russia

Shirai: I see. You’ve shared some tremendous insights about the situation in Asia. Meanwhile, I think Europe is also now facing a very complex situation. There is a great deal of turmoil in Europe right now. From my perspective, one of the most surprising incidents this year was Brexit. The United Kingdom’s referendum results, voting to leave the EU, surprised the world. And it’s not just Brexit. In many countries throughout Europe, there are significant anti- EU movements. Taking into account Brexit and anti-EU movements in so many countries, can we assume for the moment that the EU is failing to unify its members?

Stavridis: Well, I think that’s one way to look at what we’ve been seeing.

Shirai: This creates something of a power vacuum in Eastern Europe. That provides something of an opening for Russia, governed by President Vladimir Putin, to become more active in expanding its territory and presence to Europe. Someone recently said that the EU is currently facing three risks. The first is the risk from the East side, specifically, Russia. The second is the risk from the South, from the Middle East and Africa. The third is internal risk, typically the homegrown terrorism. Anyway, the European situation is very complicated now. To the extent that the EU’s integration is now really all being questioned. Are there any effective action policies that can be taken to revitalize and reignite integration in the EU?

Stavridis: First, I would add one other challenge. I think there is an increasingly significant challenge for Europe, which is also for all of our countries, and that is cyber. We still tend to think of threats and challenges as geographically based. I think we need to recognize that cyber is a medium that will continue to be a zone of challenge for Europe, emanating from Russia. So in addition to geographic threats from the South and the East and internal threats, I think we need to add cyber to your list.

Shirai: What kinds of steps can Europe take to try to improve its situation?

interview38-04

Stavridis: First and foremost, Europe needs to address its demographic decline. I think that perhaps its greatest challenge in the long term is declining populations, notably in the Baltics, the Balkans, Italy, and a number of other countries. Those countries need policies that encourage more internal growth, but they’re also going to need more intelligent immigration policies that allow carefully screened, but vibrant, capable individuals to come from Africa and the Middle East. Europe has never been comfortable with the idea of immigration, but as they’re facing declining populations, I think immigration is going to have to be part of the solution. Second, Europeans need to think more about their alliance systems in the world, and I would argue here that the transatlantic relationship with the U.S. remains of extreme importance for Europe, because of the economic and political linkages, and because of the European vulnerabilities to Russia in a decoupled transatlantic world. So I would counsel my European friends to invest time and effort in the transatlantic relationship. Part of that would be the Transatlantic Trade and Investment Partnership (TTIP), which is the TPP of the Atlantic. So I would say to the EU, invest time and effort in making that a free trade agreement with the U.S. Third, we’ve just seen this almost comical process between the EU and Canada trying to finalize a free trade agreement. The Canadian Prime Minister was told, “Yes, fly over and sign it. Oops, wait a minute. No, there is a small province in Belgium in Wallonia that can hold up the whole agreement. Please come. Don’t come.” It was resolved in the end, but the Europeans need to be more capable of creating a strong transatlantic bridge with the U.S. and Canada. I think that the TTIP is a big part of that. Fourth, I would say NATO itself is the Europeans’ best bulwark, certainly its best defense in the East and the South, for the external geographic threats. Fifth, I’d say focus more on cyber and, related to that, innovation. If I were counseling the Europeans, I would say, “Look at Japan. Look at the way Japan is adjusting to declining demographics, substituting robotics and autonomous innovation. There is a technology prescription in there that I think could be valuable for Europe. And then finally, I would tell the Europeans that they need to resolve Greece and the Euro question that’s associated with it. That is still a wound that is unhealed in the European economic sphere. The Europeans, in the end, are going to have to allow the Greeks to refinance some part of the debt or to forgive some part of the debt. The sooner they move in that direction, the stronger the Euro will be. I think all of their lack of decision there is what is holding the Euro down.

Shirai: One of the big challenges for the EU and Europe is that Putin’s Russia is very active in expanding its military and its territorial pressure. The EU needs to respond to Putin’s and Russia’s pressures effectively. In that regard, it seems important, even vital, to maintain the integration of the EU. What kind of actions should European countries be taking with regard to Russia? Currently, there are sanctions against Russia. Do you think these sanctions have been effective?

Stavridis: Well, I think that the Europeans have been reasonably successful and coherent in applying sanctions to Russia in the wake of the invasion of Ukraine and the annexation of Crimea. That was the right thing to do, and I have been pleasantly surprised at how the Europeans have remained fairly cohesive on those sanctions. When you combine those sanctions with falling oil prices, this creates real downward pressure on Russia’s ability to finance large military moves or to pursue any significant territorial ambitions. Together, these act as a kind of brake on Putin’s ambition. I think the Europeans need to remain unified on the sanctions. We also need to hope that oil prices will continue to be low, which I think will be good generally for the global economy as well. And we need to be resolute in our response to President Putin. We need to be clear that simply erasing a border and annexing a chunk of a country is unacceptable behavior in terms of international law. I should also add that Japan has been supportive of these sanctions, and I’m thankful to the Japanese leadership for doing so.

Examining Japan’s Global Position

Shirai: You have already mentioned some things about this, but I want to ask you again about Japan and Japan’s global position. Recently, Japan’s Nikkei Newspaper published a very interesting article. In the article, one person encountered a big bear in the forest and was very surprised and afraid. But another person, standing behind the bear, was not so afraid. The person standing in front of the bear is Europe, and the person standing behind is Japan. The bear, of course, is Russia. In another example, one person is standing in front of a dragon and feels surprised and afraid. However, another person, standing behind the dragon, is just looking at the tail of the dragon, and so that person doesn’t feel so afraid. The dragon is China, and the person in front of the dragon is Japan. The person looking at the tail of the dragon is Europe. So the positions of Europe and Japan are pretty much reversed. In the current situation, how are the U.S. and the American people looking at Japan’s current position?

Stavridis: Well, I think if I were Japanese, I think those two images are correct. However, I should also make the observation that a bear and a dragon are both very dangerous. And that’s true whether you’re standing in front of them or behind them. It’s a matter of what catches your attention the most dramatically. So for Japan that is clearly the dragon, and of course we know Japan has a significant territorial dispute with China over the Senkaku Islands. But, as you also know, Japan remains technically in a state of war with Russia and has a significant dispute with Russia over the northern territories. Well, I would say Prime Minister Abe and his new Defense Minister, I think they are taking the right steps to energize Japan’s self-defense forces. They’re very capable, very professional. Given their quality, and given the alliance with the U.S., I think Japan’s geopolitical position can be uncomfortable at times. Even so, I think it is a safe geopolitical position, both from bears and from dragons.

Impact on Global Companies

Shirai: In such a rapidly changing world and uncertain business environment, private companies, and especially global companies, will need to avoid geopolitical risks to expand and achieve sustainable growth. Global companies are facing so much risk as they look into the future. How can they manage in this environment? Are there particular areas of risk that you think need more attention?

Stavridis: I think that the top concern that I have been highlighting for big multinationals at the moment is in the cyber world. I think there is increasing risk of not only cyber-distortion and cyber-manipulation, but actual cyber-attack. And of course the recent attack on Dyn Corporation, which used the Internet of Things and turned it into an Internet of Botnets to attack many elements of the Internet. I think that was very concerning. The first point that I’ve been making to big companies is to invest more in cybersecurity. Push your government to provide better protections for you. Cooperate with public sector and fellow private sector entities to create defenses and create awareness of when you’re being attacked.

interview38-05

It’s often said, there are only two kinds of companies; those who have been hacked and those who don’t know it. Many companies are unaware that they have been hacked. Knowledge is power in the cyber world, so I’d say that cyber is at the top of my recommendation list. Second, we talk a lot about geopolitical risk, and we should. However, as I mentioned earlier, the long-term trend remains on the side of globalization and trade. So I think it is a mistake for companies to simply pull back into their native countries. I think now is the time to look for opportunities in the developing world, and here I would particularly look at parts of Sub-Saharan Africa. I think Brazil will be an interesting opportunity as it moves out of its current political challenges. And I think another interesting country is Turkey, which also has political challenges but I think the long-term path will be positive. In Europe, I think Poland represents real opportunities. So there are still a lot of global markets that are expanding and many global opportunities. So my second point is not to be discouraged by the turbulence, the populist movements, and the negative commentary. I think the long throw of history is on the side of globalization. Third, I think energy and technology will provide us some startling new ideas in the next three to five years. So I think the improvement in renewables and the pressures from the COP21 Global Agreement will make that area a very attractive one as well. In terms of downside and concern, I do think the possibility of an eruption of real tension in the South China Sea is quite real. I think that it is possible that Russia will use cyber to be very disruptive in Europe and European elections. I think that in the Middle East we will unfortunately continue to see deep turbulence in Syria for the next three to five years until we can achieve an understanding with Russia to try and bring that catastrophe to a halt. So there are many zones of conflict and challenge, but I think that overall the upside will triumph, despite all the tactical challenges we face today.

Shirai: That’s actually somewhat encouraging. I want to thank you so much for taking the time to talk with us and for sharing your thoughts so generously.

Stavridis: Thank you. It was my pleasure. Thank you.


*The pictures were taken by Anna Miller, Tufts University.

Editor's Postscript

interview38-08.jpg

For this issue, we interviewed Dean James Stavridis, who led the NATO Alliance in global operations as the 16th Supreme Allied Commander and was called “a genius in the Navy” for his achievements. He discussed the future outlook for the world and for global companies from a geopolitical perspective. By making comparisons with history Stavridis considered globalization as another wave, and said that globalization will expand in the long term. His analysis of the trends and relationships between nations and regions was also very thought-provoking. His comments encouraged us that companies should focus on business without flinching from populism and anti-globalization, while paying attention to cyber attacks and geopolitical risk.