U.S. Relations With the People's Republic of China (2008)

Office of the Director of National Intelligence

Remarks and Q&A by the Deputy Director of National Intelligence
For Analysis & Chairman, National Intelligence Council

Dr. Thomas Fingar

The Henry L. Stimson Center
Washington, DC

November 21, 2008

MS. ELLEN LAIPSON (President, Henry L. Stimson Center): Good afternoon, everyone. Thank you so much for coming. I'm Ellen Laipson. I'm the President of the Stimson Center, and it's a real pleasure to welcome you to this very special event. As you may have been hearing in the news, yesterday the National Intelligence Council issued its quadrennial report on global trends. This is an exercise that the NIC has been involved in since 1996, but each iteration of this report becomes more and more of a global conversation, and I know that Tom Fingar will tell us more about the inputs to this year's version of this Global Trends study. It's intended to try to help a new administration get the strategic picture of what the international landscape looks like and will look like over the early years of a new Presidential administration.

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DR. THOMAS FINGAR: Thank you, Ellen. Thanks to the Stimson Center for hosting us, and let me correct one aspect of the introduction. Nobody played a minor role in this. And the Stimson Center's involvement, as with that of the other sort of partners, were central in reaching out to different communities, channeling ideas to us. This is truly a collective undertaking, and I would be remiss not to knowledge Matt Burrows, who is sitting over here to the left, who really is the principal drafter and the one who tried to organize and did a very effective job of pulling it together, ideas from a great many places.

What I'd like to do this afternoon is to speak briefly about the purpose of Global Trends 2025, describe briefly how it evolved, what we have learned about the process, and then to highlight some of the themes, the drivers, the shapers, the dynamics, the factors depending on how social science-y you are in your approach. But the conditions that will shape the future will shape and require decisions made, not just in Washington but around the globe in the years between now and 2025, although we'll be focused on that 17 years into the future.

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This time we worked several drafts and shared them on a website, which we gave access to essentially anybody who wanted it, to comment on. We had several drafts circulate around the groups, again inside the United States and around the world. I was fortunate enough to participate in discussion sessions in both Indonesia and Beijing. The one in Indonesia was all Indonesians. The one in Beijing had participants from nine countries. Those reactions to a draft were very, very helpful. We did that a couple of times.

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I mentioned demography. We accept the World Bank projection that 1.4 billion additional people will inhabit the world in 2025. That tells us something but not much that's useful. More significant is, only 3 percent of that increase will be in the West, as the West is traditionally defined, but to include Japan. Almost all of the growth will be in sub-Saharan Africa, the Middle East, portions of Asia other than Japan and China, and it will be in Central America. One of the consequences of that pattern of growth that will be immediately apparent when you look at the map is a lot of it occurs in what has been called the arc of instability, that runs from western Africa across the Maghreb, through the Arab heartland, and across Central Asia. A lot of it is in the Islamic world. A lot of it is in countries that are already somewhat to significantly unstable. It also occurs in a region that has some other problems that I'll fold into the equation in a moment.

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But a young workforce is also energetic, and those that are ambitious can be a great source of opportunity. For example, when we looked at the age structure in the Middle East out to 2025, it looks very similar to the age structure in the Republic of Korea and in Taiwan on the eve of sort of rapid industrial kick-off, rapid increases in prosperity, in education. The raw material, the human capital will be there. It will be very important to know whether that youthful population has the education needed to move into a more industrialized world, and whether there will be sufficient educated workforce and stability, predictability to attract the capital that will be there. Korea and Taiwan as models on both education and good governance that was able to attract the investment leading to a take-off. If one looks at other parts of the world in 2025, there is the potential -- there is the potential -- to emulate these successful modernizers.

Another dimension of demography is the graying of certain countries. Europe, particularly southern Europe, Japan, Russia, and toward the end of this period, China will have very, very significant dependency ratios. Smaller number of young people supporting larger numbers of old people, and the dependent children that are a part of any society. But project out four decades of the one-child policy in China. That's a very heavy dependency ratio if the family is to provide the sustenance for the over-65 population. Either the family gets much richer, or some other mechanism -- social security, social safety net -- needs to be put in place.

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Climate change almost certainly will begin to have an impact in parts of Asia, including India and China. And water is the primary -- competition for water in the riverine portions of south Asia. The depletion of subsurface aquifers in the north China plain, where hundreds of thousands of wells were drilled in the '60s are being depleted. And the magnitude of the impact is increased because of the size of the populations. That by 2025 we're looking at nearly 1.5 billion Chinese, probably almost as many Indians having to depend on less reliable sources of water.

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The report looks at the rise of the BRICs -- Brazil, Russia, India and China -- because of the size of the nations, the populations. Their impact on global affairs is much greater but there are many other nations that are rising. Indonesia, Turkey, Iran potentially. Very much more important players on the world stage in 2025.

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The rising powers, and two of the biggest ones in Asia, India and China, arguably have benefited substantially from the status quo. They've been very successful. Much of the rest of Asia has been very successful in the existing international order. As defenders of the status quo, they are not inclined to change the system, to go to something that is unproven and uncertain, particularly if the change requires taking on additional burdens that a reordered world is likely to apportion responsibilities somewhat differently than was done 60 years ago. The diminished role of the United States, the attachment to the status quo of other key players is going to make it hard to find the mechanisms to come to grips with the institutional inadequacies.

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The world will be a multipolar one. It arguably is now. The U.S. unipolar moment is either over now already, my view; it certainly will be over by 2025. But we don't envision a new balance of power world, a new bipolar world. Multiple poles. The rising states, Europe, Japan will remain important and arguably be even relatively more important than they have been. Of course China, India, and we envision Indonesia within the region being very important. Historically multipolar systems, particularly multipolar systems that are in transition, are less stable than either bipolar balance of power worlds, or unipolar empire-dominated worlds. So a time of great transition, flux, new challenges, new rivalries, with erosion of the long, effective mechanism for managing problems, the fact that we will be in a multipolar world, the number of actors, not just a lot greater than it was in the 1940s when the new order -- we have three times as many countries, but in addition to countries we have all these multinational corporations, nongovernmental organizations, multiple identities. We anticipate the sort of national identity will be less important as a determinant of self-identity than it is now, and there will be religious identities, racial identities or ethnic identities, tribal, regional, class identity facilitated by communication. We have communities that stay in contact through the Internet, moving around, and sort of a phenomenon of homogenization, albeit with lumpiness and some degree of tension that could go the other way, of increased awareness of identities other than that of the nation-state.

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I'll use China as an example. If growth slows to less than 8 percent, by Chinese projections it's not possible to create enough jobs to accommodate those that will enter the job market in the cities annually. We would love to have 7 percent growth in this country. We're going to have a lot less, at least in the near term. The potential for instability in countries particularly with youthful populations is really quite daunting.

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DR. FINGAR: Can people hear if I sit back here? Let me first sort of not correct but clarify the element on the alternative to the Washington consensus, liberal democratic market-driven system as we discussed it in the study. We pose as a question as to whether for a number of countries that have governance, problems that face developmental challenges, whether the success of China and the resurgence of Russia, and in similar ways success of some other rising countries will create at least the impression of the existence of an alternative to liberal democratic market societies, in terms of an authoritarian state capitalist model, where legitimacy is based on performance, governments deliver the goods and services, are accepted, there's not a perceived need for participation, involvement either as a safety valve or to make the government more responsive. We posed it as a question. I personally don't think so. I don't think it's a viable model that gets to the source of innovation.

But might it be an attractive model to countries of Central Asia, countries in the Middle East, some of the countries in Africa that have struggling governments and struggling economies. To look at the success of the economy, if you can get growth, prosperity, greater strength, without having to become democratic, that might have a certain appeal. It may be a chimera. It may be a short-term solution with long-term negative consequences.

Now the innovation question. Probably it's necessary to distinguish from all kinds of innovation. Technological innovation, a lot of it continues to come from the United States, from the industrialized world more generally. It will come from China, it will come from Japan. Again, the large modern economies with good education systems will have ideas. Where the money is to translate ideas into new industrial procedures, new products, that's going to be a function of where the venture capital money is. On the shift of wealth from West to East broadly, there will be more of the sovereign wealth funds in the Gulf, the sovereign wealth funds, Singapore, China, the large amounts of money in Japan -- at least there's a potential there to fund innovation. The potential may not actually be realized. The willingness to take risks, the potential cost might exceed the potential gains of changing the system. Different cultures of course are less susceptible, willing to innovate.

I'm not sure by 2025 some of the more cautious, conservative societies, including many in East Asia, will become hotbeds of innovation. To bring it full circle, it's back to sort of expectations of the United States to provide not just leadership but ideas, new things. Whereas once upon a time we had an idea for a new thing, it had a reasonably good chance of being welcomed or seriously considered. Now, if we have an idea, it may be thought of as more in our own self-interest than to the benefit of the larger community. We have to regain confidence.

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QUESTION: A lot of people are talking about a setback of democracy in Asia, you know, based on what happened in Philippines, Taiwan. In this report have you projected any projection of the democratization or consolidation of democracy in Asia?

And the second question is, on your report page 34, scenario four, indicating that if U.S. decided to have a cooperative relationship with China, Japan might move to that direction, seeking a more alliance and good relationship with China, including Taiwan and South Korea would follow suit. But we know that in Taiwan there is a very diversified, or even polarized point of view about their future. So I wonder that on a micro scale, will that be some important fact should be ignored in this report? Thank you.

DR. FINGAR: Let me take the challenges to democracy. We don't look at it in great depth, but as we look out, we see more challenges to the newer democratic states, the ones that have gone through pain, that have yet to realize a lot of gain, benefits of it. Rise of populism, and the need to manage competing demands. It's still relatively optimistic, if you will, about democratization, that it will continue. But less rapidly than it did over the last decade-and-a-half, that consolidation of democracies will be uneven and difficult, the difference between electoral democracies and liberal democracies being one that will persist.

The scenarios were intended, again, not to be projections of the future but ways of thinking about how trendlines will cross, how developments will interact, where opportunities for political engagement. And every one that we've got in there can be viewed in multiple ways, and say this will happen, it won't happen because. If it happens, what the consequences might be. And the one that you cited is the same -- yes, of course there are differences in Taiwan and in everywhere else, some who will look favorably on these developments and some who will look with disfavor.

Matt, did you have anything on democratization?

MR. MATHEW BURROWS (Counselor, National Intelligence Council): No, I think you covered this. I mean, there are waves.

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