APEC in a New International Order

For the third time in this troubled century, the global community is faced with the difficult challenge of creating a stable and prosperous international order. The destructive First World War (followed by the Great Depression of the 1930s), the even more destructive Second World War, and the extremely dangerous Cold War confrontation attest to the terrible failures of the 20th century. Many observers, at least in the West, look back with nostalgia to the century long global peace and generally uninterrupted and diffusing prosperity of the 19th century. Today, many hope that with the defeat of fascism in World War II and the subsequent defeat of communism in the Cold War, the world will return to the peaceful and prosperous international order of the 19th century. However, while the past may hold useful lessons for creating a more secure international order, prior attempts to create a new world order are not especially reassuring. Certainly a stable and prosperous international order will require a greater contribution from the emerging economic powers of the Asia-Pacific Economic Cooperation (APEC) forum than is now taking place.

Ultimately, the stability of every international system rests on the political relations among the major powers. Political rivalry and conflicting political interests are the stuff of which great wars and international upheavals are made. However, today economic matters and interests have become increasingly important in the affairs of states. In a highly interdependent world economy, economic relations among the great and even the small powers help provide both the glue holding the international community together and the friction driving nations apart. Without a well-functioning international economy, the prospects for global peace and prosperity are slim indeed. The establishment of a stable global economy is thus the most important task in the larger effort to create a better international order than this century has yet experienced. Following World War I, the United States and other great powers at the Paris Peace Conference in 1918–19 (the Versailles Conference) hoped to create an international order based on a new and revolutionary principle. As proposed by President Woodrow Wilson, the classic balance of power system was to be replaced by a “community of nations” based on the then novel concept of collective security which was embodied in the Covenant of the League of Nations. This attempt to fashion a new world order failed for many reasons. But of particular importance, the failure of the victorious powers to reestablish a functioning world economy doomed any hope for a lasting and prosperous peace. As John Maynard Keynes pointed out in his prophetic The Economic Consequences of the Peace, Germany on the eve of World War I had become the core of a highly interdependent European economy. After the war, although a revival of the European and world economy would be impossible without full German participation, the victors (led by France) decided to punish and isolate defeated Germany rather than reintegrate it into the European economy. As Keynes predicted, this proved to be an important cause of the failure to revive the world economy and thus of its subsequent collapse in the Great Depression of the 1930s.1 This economic catastrophe in turn was a crucial factor in the outbreak of the second great war of this century.

In 1945 the opportunity once again presented itself to establish a basis for a stable world order. Having learned the lessons of the past, the United States under the leadership of Presidents Franklin D. Roosevelt and Harry S Truman, in cooperation especially with Great Britain, sought to found a new world order based on the concept of collective security and an open world economy. This Rooseveltian vision foresaw a universal political order embodied in the principles of the United Nations and cooperation among the victorious powers. In contrast to the Treaty of Versailles, this vision also included the reestablishment of the open, liberal, and multilateral world economy that had disappeared with the outbreak of the First World War. Germany and the other defeated Axis powers were in due time to be welcomed back into the system, and this universal international economy was to be governed by several new international economic institutions whose foundations were laid at the Bretton Woods Conference in 1944; these institutions were the International Monetary Fund (IMF), the World Bank, and subsequently the General Agreement on Tariffs and Trade (GATT). Once again, however, the hopes for a better international order collapsed. The political, ideological, and economic struggle between what Joseph Stalin called the “two systems” of capitalism and socialism led to a fragmentation of the international economy into two antagonistic blocs. Economic warfare rather than the pursuit of mutual economic interests soon characterized the postwar international economy.

The end of the Cold War and the collapse of the Soviet Union poses for the third time in this century the challenge and opportunity to create a stable and prosperous international political and economic order. Close cooperation of the United States and its Cold War allies, the foundation of the post-World War II economic order, is rapidly eroding. New economic, political, and environmental challenges have made many of the rules and institutions of the Bretton Woods system no longer adequate to the task of managing a highly complex and interdependent global economy. Historic political rivalries have been renewed, and emergent economic powers are making demands which must be accommodated. One must again question whether or not the contemporary actors can succeed where others failed in the past. I believe that without a stable and prosperous economic order, a peaceful international political order is impossible. Moreover, several features of the present situation will make the task of creating a stable economic and political order very difficult indeed.