CHAPTER FIVE

Understanding Geopolitics and the New Infrastructure

Infrastructure and Isolation

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This book is intended to be used as a guide to modern global leadership. So far, we have looked at some of the paradoxical qualitative trends which are driving leadership change.

We’ve already established that it’s vital for leaders to look at the world with parenthesis as well as analysis. We established in Chapter 2 that inflation fundamentally changed when the Berlin Wall fell. While this was a political event, it was also a financial event. The Cold War dictated the policy of economic intervention and government spending. Militaries suddenly became less important, where previously they’d been a normal aspect of governance.

Historically, leadership had to consider geopolitics, but since the Berlin Wall fell a generation has grown up unconcerned by it. Now geopolitics is back and in this incarnation it is freighted with commercial as well as military considerations. Defence spending is on track to hit a post-Cold War record in 2018. Defence spending has become the new quantitative easing. It’s a backdoor stimulus to the economy. The new defence spending is also more technological and rather less military than before. It has immediate commercial dividends. Now it’s about military altitude satellites rather than new aircraft carriers. Governments and their militaries remain large, influential players. They fundamentally reshape the leadership environment and the economies that surround them. Their decisions affect citizens in many ways. It’s worth noting that conscription is being brought back across many European countries and that private organizations are increasingly being asked to fulfil intelligence tasks on behalf of their governments.

What do leaders know about the landscape of geopolitics? Many leaders travel the world with such ease and comfort that they think they understand the countries they visit. They may spend time in China and India and yet be surprised when the headlines reveal strategic security tensions between the two countries. Leaders often comment that the manufacturing centre of the world is Shenzhen and the coding centre is Bangalore. They may refer to oil-producing countries as rich. But is all this still true? The truth is that countries are in constant flux, just as technology, economics, prices and relative competitiveness are changing, too.

QUICK TIP Just because you’ve been to a country, it doesn’t mean you know it. Going is not knowing. Good leaders need to talk to local players and understand what’s changing. In any case, some countries are changing so fast they must be periodically ‘sampled’. Leaders need to be plugged in, switched on and clued up. Local geopolitics needs to be checked as frequently as the weather. Local is on the rise. A large proportion of Trump voters have never left their hometowns.1

Leaders endanger themselves and their teams by falling back on old notions and overconfidence. They must not only keep up with today, they also need to anticipate tomorrow because they’re constantly asked to allocate resources. For instance, do countries still matter as much as individual cities? Cities are on the rise as centres of population. Mayors are sometimes more important than prime ministers. Is China still the future or is the United States a better place to invest time and capital? Is Britain finished as a result of Brexit or is it embarking on a stronger future? Is the EU aligning more strongly or heading towards fragmentation? How will the Middle East look now that Saudi Arabia and Israel seem to have aligned and other neighbours are intensifying old rivalries?

The overlay of geopolitics is making the commercial landscape more complex. Governmental policy is responsible for vast capital flows, so understanding the way they behave is important for leaders. Being on the side of the future can make a big difference. For instance, organizations such as the Council on Foreign Relations and NATO make ever more reference to the possibility that we might be stumbling into some kind of new Cold War.2

Everyone assumes that the post-war international rule system can be depended upon to prevent conflict. Leaders in the 21st century, however, cannot afford to take anything for granted. They need to think about the competition for scarce resources, the rise in defence spending and the seeming loss of trust in the international rule system.

All this begs a key question. What do we really know about the world’s geography? In this new environment, everything we assume needs to be subjected to hard questions. Being a long-time expert on a location no longer confers authority. There are no experts anymore. There are just those who are more or less ignorant. The provenance of certainty is now mediocrity not excellence.

This is what we will cover:

Geography is destiny4

In 2015, Henry Kissinger told the US Armed Services Committee of the US Senate that: ‘The United States has not faced a more diverse and complex array of (foreign policy) crises since the end of the Second World War.’ Every nation must face this problem, he said, because ‘the existing international order itself is being redefined’. In other words, the geography of the international rule system itself is changing. The physical geography of the world is changing as well. Countries like China are building new transport connections and the United States and Europe are building new walls. Some places are becoming more competitive and others less so. People are on the move. Migration continues to be one of the most important defining features of the geopolitical landscape, as is the ongoing competition for scarce resources. Borders are fluid and moving, too.

One Belt, One Road, One Circle (BRI) – a brand-new global infrastructure

Westerners have become used to their version of the world. The British foresaw the importance of the international date and time system, so they put the dateline through Greenwich. London thus became one of the few cities that could make a same-day announcement for the majority of the planet. Heathrow has only recently been overtaken as the busiest international airport in the world. No longer, though, will infrastructures automatically point at New York or London or Singapore. Instead, China is dramatically re-orienting the world in its direction. China needs resources from around the world to sustain its growth. It can no longer rely upon the infrastructure built by Western nations and the territorial certainties of the 20th century.

The biggest infrastructure project the world has ever seen

Infrastructure is geopolitics. Many leaders have not truly clocked the magnitude of the so-called Belt and Road Initiative. In China, though, it is real and happening. The world doesn’t know much about it because it’s happening in obscure places. Leaders might easily dismiss the BRI because they believe new infrastructure in, say, Kazakhstan is not relevant to their interests. It would be easy to think that this plan simply upgrades the Old Silk Road that runs from China through Central Asia. That, though, would be a mistake. According to The Economist, the BRI ‘is the kind of leadership the United States has not shown since the post-war days of the Marshall Plan in Western Europe’. BRI is in fact seven times larger financially.

The BRI is not really a plan. It is a series of discrete infrastructure deals with different purposes, financing arrangements and participants. Together, though, they add up to one massive network. Specific routes and pathways being established or strengthened, for instance:

All this investment will add at least a further $5 trillion to global investment. When you add this to the $18 trillion already invested by global central banks, you can see that this is not insignificant.

The BRI is ambitious even inside China. According to the official China Daily, ‘29 of China’s 31 provinces and regions are now served by high-speed rail, with only the regions of Tibet and Ningxia in the northwest yet to be connected.’13

China’s efforts to manage geography are not just physical. They are also occurring in the Data Sphere (see Chapter 6). China’s leaders are increasingly compelling the world to communicate on Chinese platforms such as WeChat. They are creating the infrastructure for quantum telephone calls which are said to be unhackable. The communications infrastructure may be less connected to the West, but the West is being more connected (physically) to China.

Defence spending is rising

The Kythera shows us that there is always a dark side to the trends. No discussion of geopolitics and the geography of the world today can avoid reference to the fact that defence spending is rising. This is a different but equally important kind of global infrastructure. The Jane’s Defence Budgets report projects that ‘Global defence expenditure is set to increase again in 2018 to reach its highest level since the end of the Cold War.’14 The same technological advances that benefit the world economy are also perfecting new weapons. For instance, China, the United States, Russia and some others are moving to hypersonic weapons that travel at Mach speeds and can cross the planet in very little time. New naval vessels and aircraft that operate without humans are being invented. Superpowers are in a new space race, spending money on speed and accuracy.

This raises questions that leaders should consider. After all, even the Council on Foreign Relations, an independent, nonpartisan think tank, writes about the possibility of ‘a new cold war’.15 While everyone wants to avoid such an outcome, it is hard to ignore the incidents between superpowers. There are air and sea incursions between many nations. The Japanese complain about the build-up of the Russian presence in the Kurile Islands, just as the United States complains about China’s increasing presence in the Pacific. Russia and NATO member states regularly accuse each other of engaging in provocative acts in the air and under the sea. One of the reasons here could be that all other former members of The Warsaw Pact, except Russia, are now part of NATO.16 Given that the Berlin Wall fell in 1989, it was unthinkable that by 2005, just 16 years later, all former Russian allies would be allied to the West.

From Russia’s perspective, the United States and NATO have been encroaching. A key battleground for this is what happens in Ukraine. Support in the country has been growing for it to join as well. This has accelerated since Russia took control of the naval base in Sevastopol that it leased from Ukraine for many years. The West may have taken the view that not taking action to support Ukraine would, in the long term, force it closer to NATO. Allowing Russia to continue using the port was no more than the status quo. The Russian Navy cannot sortie in war time because it would still need to navigate the Bosporus, which is controlled by Turkey, a NATO member.

Meanwhile, senior NATO leaders refer to Russia’s ‘Arc of Steel’,17 which implies that Russia is building a strategic security presence from the Baltics to the Mediterranean and into the Middle East. It also implies a hardening of nuclear capabilities. Russia sees the same thing in reverse. It sees the United States and China expanding nuclear arsenals and security capabilities.

Regional superpowers are engaged in new conflicts. The Saudi/Yemeni conflict now threatens to spread to other locations. The North Korean nuclear issue keeps drawing our attention to the Korean Peninsula. Russia and NATO18 have accused each other of simulating war in various military exercises. China and its neighbours seem to be in arguments involving military vessels and aircraft more often. It feels as if the ‘Peace Dividend’ is diminishing. The solution is, of course, greater diplomacy and dialogue, but as we’ve established, the behaviour change is not confined to either governments or civilians. Both communicate but don’t converse. The tone is often angry and impatient. Often, neither side demonstrates empathy.

Leaders from the private and third sectors are well placed to influence dialogue. They have less national pride and political prestige vested in the process. They do need greater awareness of the geopolitical pressures, but in some cases, it might be easier for them to manage dialogue. The tendency to avoid or suppress the subject might contribute to worse outcomes.

Old and new causes: but what about the wall?

What is causing this? The simple answer is that geopolitics has always been a feature of the global landscape. Its retreat in the decades following the fall of the Berlin Wall was the exception to the historical rule.

Economic policy has helped encourage the return of geopolitics. When central banks are under scrutiny for injecting stimulus and QE, defence spending is a way of adding more money without attracting economic criticism. It is a form of economic stimulus and popular with voters in times of financial crisis. One of the reasons given for promoting defence sales is that they create so many jobs in key political constituencies.

In a time of division and recession, militaries are also the employers of last resort. Governments can prop up economies and political prospects by expanding military spending. It is also true that the presence of a foreign opponent can help unite the public during difficult economic times. Domestic politics in many countries benefit from the allegation that foreign powers somehow were the cause. This is not new in history. Leaders, however, are in a strong position to choose positive outcomes if they can see the patterns and embrace collaboration over combat.

Consider the Korean Peninsula. After frightening headlines suggesting that there was a real risk of a nuclear event, we see China and the two Koreas fostering greater dialogue. The two Koreas arrived at the 2018 Winter Olympics under the same flag. Many cultural exchanges have been announced. For all the hectoring between the United States and China, the two superpowers seem aligned in their desire to prevent the worst possible outcome on the North Korean issue.

A new multipolar world with walls

A natural instinct when faced with unresolvable conflict is a wall. There is little use denying that Russia and its neighbours rattle each other. Poland and Lithuania are both building a weaponized wall around Kaliningrad,19 while Russia is increasing its naval presence and expanding its arsenal of missiles there.20 Sweden and Lithuania have both reintroduced military conscription as a result of their concerns about the escalation on all sides in the Baltic Sea.

Saudi Arabia has engaged in something not seen for decades – a naval blockade. Its target is its neighbour, Qatar. Most people had assumed that the Gulf States were all aligned. It turns out that they are not. What else might surprise us? Some parts of the world are worth paying more attention to. Russia is re-establishing its naval presence in the Mediterranean21 now that it has control over warm water ports in Syria. New gas fields have been found in the Eastern Mediterranean and many regional nations will lay claim to them as their value increases. As North Africa becomes less stable,22 it would be no surprise if nations from afar became interested in its oil and gas assets.23

Conflicts cause migration and vice versa

While China connects the world, others are building new walls. Everyone knows about the wall between the United States and Mexico. There are, however, many more. The historian Timothy Garten Ash says: ‘Europe’s walls are going back up – it’s like 1989 in reverse.’24 He talks of the ‘razor and barbed wire fences, like much of the old iron curtain’, which now cross European borders. Elisabeth Vallet, the author of Borders, Fences and Walls: State of Insecurity?, says: ‘There are now five times as many border walls as there were at the fall of the Berlin Wall in 1989.’25 Walls are going up in North Africa and across parts of the Middle East, including between Saudi and Yemen, between Israel and the West Bank and between Turkey and Syria.

Immigration seems to be the principal driver of the new mentality. In 2015, António Guterres, the UN High Commissioner for Refugees, made the case plainly: ‘In 2014 we had 59.5 million people displaced by conflict in the world.’26 His numbers were stark. ‘In 2010, there were 11,000 new people displaced by conflict per day. In 2011, it was 14,000. In 2012, it was 23,000. In 2013, it was 32,000. In 2014 it was 42,500 people displaced by conflict per day.’27

That does not include economic migrants who are simply looking for a better life. The United States now hosts a higher number of foreign-born migrants than at any stage in its history (Figure 5.1).