Open Forum

Black Swans: Order and Disorder in the Global System

The clarity of the Cold War with its neat division between the communist and capitalist worlds,
and not so neat addition of the non-aligned or third world is over. There will be no grand strategy
that guides the behavior of the United States or any other great power. Different strategies will
be followed across different issue areas. There may be a global disruption, but if it occurs it will
not be because of structural factors, deep underlying causes that could not be managed. If
disorder does occur it will be the result of a black swan, a concate- nation of low probability
events with hígh impact that could not be predicted in advance with any confidence.':

The stability of the global order and the prosperity of its individual member states will be
determined by how well three basic sets of issues are addressed: first, the changing power
distribution in the international system; second, the provision of global governance; and third
the ability of actors with limited un- derlying resources-malevolent states, states with limited
governance capac- ity, and transnational terrorist organizations-to use weapons of mass de-
struction to threaten entities with much greater resources. The first issues, most clearly reflected
in the rise of China, can be managed. The second can, in most instances, be addressed through
a series of agreements among coalitions of the willing. The third poses the greatest risks to the
stability of the interna- tional order. A black swan could appear out of the nexus of weapons of
mass destruction and perverse or weak political systems.

The Rise of China

At sorne point in the not too distant future China's GDP will rival or surpass that of the United
States, even though its per capita income will remain far smaller. Power transitions can lead to
military conflict if the rising power's as- pirations and interests cannot be accommodated within
the exísting system. Historically, there have been three causes of conflict: territory, spheres of
in- fluence, and international regimes. A rising power may move to redraw inter- national
boundaries and seek to redefine spheres of influence; or establish new international regimes
by creating new principles, norms, rules and decísion-making procedures.

The classic case of a disruptive power transition is the rise of Germany in the nineteenth and
twentieth centuries. Germany was unified by Bismarck's adept diplomacy and limited wars.
Germany led Europe in the second industrial rev- olution defined by heavy industries such as
steel and chemicals. lt hadan im- pressive civil service and a formidable military. But Germany
was surrounded by powerful neíghbors, France to the west and Russia to the east, and con-
strained by Britain's powerful navy. Bismarck tried to stabilize Germany's posi- tion in Europe by
eschewíng colonial expansion in Africa and by building an alliance structure with Russia and
Austría-Hungary, the Dreikaiserbund, de- fined by a shared conservative ídeology and
monarchical political structure. This alliance ultimately failed not only because Bismarck's
successors were less clever but also because of the tension between ídeology and political iden-
tity, which linked Germany with Russia and Austria-Hungary, and the pres- sures of realpolitik,
which drove Russia to seek an alliance with France to lessen the threat presented by Germany.
Germany's defeat in the First World War did not fundamentally alter the basic structural
problem of a Germany

that was powerful enough to threaten its neighbors but not powerful enough to dominate
them. In fact the Versailles settlement, by creating a string of rela- tively weak states along
Germany's eastern border made it even more tempting for Germany to resort to war. German
power in Europe was contained after the Second World War by dividing Germany, by reducing its
territory, and most important by the entry of the United States into the European balance of
power.

The temptations that made Germany's rise in Europe in the twentieth century so catastrophic
are less compelling for China's rise in the twenty-first century. China's territorial ambitions are
troubling but modest. As of 2008 China had been involved in 23 territorial disputes. It had used
force in six of these, com- promised on 17, and signed treaties for 15.2

There could, however, be open and significan! conflict over territory. Different parties migh!
misunderstand how the other side understands its vital interests. Emergency communications
channels that could <lampen a crisis have not been established, at least not to the same extent
as those that existed between the Soviet Union and the United States. At least sorne Chinese
military plan- ners believe that nuclear weapons provide an umbrella beneath which conven-
tional wars might take place.

Nationalist pressures might lead China's leaders to engage in aggressíve and risky activity that
would be politically beneficial in the short term but could be costly in the longer term if economic
ties within the región and with the United States deteriorated. A serious military clash over
disputed islands would be the result of a black swan produced by sorne combination of popular
demonstrations, bureaucratic clashes, accident like the Hainan Island incident, and nationalist
reactions across the reglón.

With regard to spheres of influence, it would be in China's interest to dislodge the United States
from the eastern Pacific, to end the American security treaties with South Korea andjapan, and
to eliminate or reduce the possibility of an American naval blockade that would impede China's
ability to import pe- troleum from the Middle East. This will not happen. South Korea andjapan
will prefer the friendship of the United States to the close embrace of China. American material
interests dictate that it maintain a strong military and eco- nomic commitment to South and
East Asia.

China will be able to enhance its influence in Central Asia where the "stans" will want a balancer
agaínst Russia and an alternative outlet for their energy resources. The maritime powers-Japan,
South Korea, the United States-will not be able to counter increasing Chinese influence on the
Asian land mass. The Shanghaí Cooperation Organization (SCO), even with its limited accom-
plishments, is one manifestation of China's influence. Aside from Central Asia, however, there
will not be opportunities for China to establish a clear sphere of influence even though its
engagernent in Africa, Latin America, and else- where will increase.

With regard to international regimes, the American policy of seeking to get China to embrace
existing principles and norms and enmeshing China in ex- istíng rules has been more successful
in the economic realm, less successful in security affairs, and unsuccessful with regard to
democracy and human rights. Every American administration for the past 40 years has opted for
integratíng rather than excluding China from the existíng international order. The United States
will press China on trade, exchange rates, and cyber-security, continue the mostly cooperative
relationship on financia! sector reform initiated through the G-20, and fail to reach agreernent
on macro-economic manage- ment, which, for both countries, is too deeply enmeshed in
domestic politics to allow for flexibility in international negotíatíons. Although China will not
become a responsible stakeholder, bearing sorne of the burden for maintaining the
contemporary regime structure, it will not articulate new principles and norms either. China
will moderate its cyber activities only if the United States and others develop effective
counter-measures or credibly threaten to increase costs by, for instance, denying student visas
or blocking sorne Chinese prod- ucts. China may elide, bend, or cheat on existing rules but it will
not offer al- ternatives. Open trade is critica! for China's continued growth. Access to West- ern
technology, both legal and Illegal, facilitates development. A breakdown in cooperation would
be more costly for China than it would be for the United States because the domestic legitimacy
of the regime is so heavily dependent on economic performance.

Beyond the economic sphere international regimes are less developed to begin with and
cooperation between China and the United States will be limited. On security issues China has
cooperated on sorne issues but not others. It has par- ticipated in anti-piracy activities in the
Indian Ocean but rejected the Ameri- can interpretation of Iegitimate activities within the
exclusive economic zone. China has sent forces to virtually every UN peace-keeping mission but
never bought into the American led interventions in Iraq and Afghanistan. Chinese oil purchases
from Iran have to sorne extent offset export restrictions imposed by Europe and the United
States. American officials describe the re-balancing as a contribution to the stability of East
Asia, even though it is most easily un- derstood as balancing against China.
On issues of human rights and democratization Chinese and Western leaders have almost no
shared interests, although even here Chinese officials have ac- cepted the prevaíling rhetorical
frames. They have embraced at least the lan- guage of human rights and democracy and
refrained from challenging extant principles and norms. They have characterized China as a
democratic country pointing, for instance, to local government participation. China has signed
several human rights conventions but it is not clear that these have had an impact on its
behavior. The United States and China have carried on primarily ritualis- tic discussions of
human rights, although the United States has succeeded in securing the release from prison of a
few Chinese dissidents.

In sum, despite the power transition now takíng place, China's rise will proba- bly not precipitate
a clash with the United States. The greatest danger is a black swan event associated with
territorial disputes about offshore islands or Taiwan. American engagernent also makes it very
difficult for China to alter spheres of influence except in Central Asia. China will not challenge
the basic principles and norms of existíng international economic regímes, Even in other issues
areas, where China's underlying interests diverge from those of the west, such as human rights
and democracy, China will not offer an alterna- tive set of principles and norms.

If a fundamental break between China and the West (including South Korea andjapan) does
occur it will be because of domestic not international develop- ments. Instability within China
rather than China's growíng international power could precipitate military action agaínst Taiwan
or disputed offshore is- lands. The Chinese government migh! not be able to contain popular
national- ist sentiments, which it has itself encouraged. The Party leadership might not be able
to exercise effective authority over all the military and other state in- stitutions.

Global Governance

In the contemporary period global governance will not be based on one single overarching set of
principies and norms. For at least three reasons there will be nothing equivalent to the
post-Second World War period of institution building. First, the contours of power are dynamic
and uncertain. By any measure the United States is more powerful today than any country has
been over the last severa! centuries, but China and India are growing quickly.Japan is stagnating
but still has a formidably large economy. The future of the EU and its member states is
uncertain. If the euro fails in part or completely Germany will be in a less advantageous
competitive position.

Second, the ideological predispositions of the majar powers do not divide along any clear lines.
The United States remains committed to a Lockean vision of individual freedom, democracy,
and market-based economies, and, com- mensurate with its power, is wílling to use military
force to secure both its ma- terial and ideological objectives. The majar European powers share
America's commitment to democracy, but put more faith in international law and organí-
zations, and are more reluctant to use force. Russia has no clear foreígn policy vision other
than exercising a sphere of influence in its near abroad. India, or at least sorne Indian leaders,
articulate a global vision based on India's unique culture anda division between global haves
and have-nots; other Indian lead- ers embrace realpolitik. China, pursuing policies desígned to
maximize its short and medium term material interests, has shunned global responsibilities, and
hardly shares European and American enthusiasms for democracy.Japan suffers not only from
two decades of economic stagnatíon but also from being in a part of the world that has made it
impossible to escape from heavy depen- dence on American tutelage.

Third, majar powers do not have the same understanding of key challenges in the international
environment. The majar countries in East Asia are primarily concerned with economic growth and
development. India is focused on not only development but also security threats from Pakistan.
Western Europe is enmeshed in a crisis over the future of the European Union. The United
States is more attentive than others to the possibilities of transnational terrorism. Climate
change is viewed as an existential threat in sorne polities and an irri tant in others. There is
dísagreement about the threat posed by the nexus of transnational terrorism and weapons of
mass destruction.

While changing power configurations, different values, and dísagreernent about key challenges
will preclude a new global order based on overarching principles that are supported by
well-funded, legalized and institutionalized international organízations, this <loes not mean that
we are entering a period of global disorder. Rather, global governance will be provided by
coalitions of the willing. The WTO will continue but preferential trade agreements, bilateral
and regional will become ever more consequential. There may be no agree- ment on climate
change at all, but if there is agreernent it will emerge not from a UN-type gathering like
Copenhagen but rather from the Major Emitters Fo- rum (MEF), whose 17 members account for
81 percent of hydrocarbon emis- sions.ç

The G-20 is an exemplar of a coalition of the willing, lt was created because the G-8, which did
not include the major developing economies, was too small, and a universal membership
organízatíon would have been too large. The G-20, however, is not based on any overarching
and agreed upon set of princi- ples and norms. There is no permanent secretariat with an
accompanying building.

The G-20 has had four major agenda items: bank capitalization, IMF reform, macro-economic
coordination, and the Doha round. lt has succeeded on two of the four. The members
facilitated the Basle 111 agreement, which helped to stabilize the international financia!
system after the 2008 crisis. They also ne- gotiated a redistribution of voting rights in the IMF.
On macro-economic pol- icy they created the Mutual Assessment Process, but its impact has
been lim- ited. Macro-economic policy is constrained by domestic structures and by the
preferences of citizens; these constraints have precluded coordination among the major
economies. The Doha round has not been revived although a num- ber of other trade
agreernents have been concluded over the last decade in- cluding, for the United States, recent
bilateral agreements with South Korea, Panama, and Colombia.

The Proliferation Security Initiative (PSI) launched by the Bush administration in 2003 is another
example of a coalition of the willing. The aim of the Initia- tive is to stop the movement
ofweapons of mass destruction and accompany- ing delivery systems. The initiative relies on
existing national authorities. There is no new treaty creating new international law. There is no
secretariat. Countries join the Initiative by signing the PSI Statement of Interdiction Prin- ciples,
which obligates them to interdict WMD shipments to the extent of their own legal authorities,
to strengthen these authorities, and to share information with others. More than one
hundred countries havejoined although sorne ma- jar countries, includíng China and Indonesia
have not. Rather than tryíng to renegotiate the law of the seas, which guarantees free passage
on open oceans, the United States created the PSI, which legitimates more aggressíve interdic-
tion of WMD and related material through national law and several UN resolu- tions. PSI is one
example of a larger trend in which entities, in the case of PSI states, join international
arrangernents with no expectation of universality.

Another example, in a very different issue area is the Open Government Part- nership. The
Partnership was launched in 2011 by eight govemments and nine civil society organizations,
Fifty other governments havejoined since. There is no treaty. Rather, the Partnership is a
mechanism that allows individual mem- ber states, often in consultation with civil society, to
make public commit- ments designed to improve govemance through greater transparency,
more civic participation, and the application of new technologies. States are only ad- mitted as
members if they have high enough seores on a set of third party measures of good govemance,
Iimiting the possibility that the Partnership Will by used for window dressing.

The Extractive Industries Transparency Initiative (EITI) is another example of a

multi-stakeholder initiative with voluntary membership that is designed to im- prove
governance. The specific goal of EITI is to reduce corruption in extrae- tive industries by
having governments commit to makíng their revenues pub- lic. States, civil society
organízations, investors, and corporations are members of the EITI. The EITI has specified
validation criteria that countries must meet if they wish to be declared EITI compliant. The first
two countries to meet the criteria were Azerbaijan and Nigeria. Eíghteen other countries have
now met the EITI validation criteria and have been designated as compliant. There are
seventeen other candidate countries. As the validation of Azerbaijan and Nige- ria suggest, the
EITI is not a panacea. Both countries ranked 139 on the 2012 Transparency International
Corruption Perception Index."
The G-20, the PSI, the Open Governance Partnership, EITI arejust a smattering of examples of
new institutional initiatives that depart from the conventional model. (South Korea is a member
of all except EITI.) The members of these ini- tiatives are not necessarily only states. They are
coalitions of the willíng, not universal membership organizatíons. They do not necessarily
create new inter- national law. They may not have a formal organizational structure or a secre-
tariat. But they are contributing to global arder in a heterogeneous world char- acterized by
uncertainty about power distributions, differences over principies and norms, and
disagreernents about core international challenges

The Weak and the Restless

If a new period of disorder <loes emerge it is most likely to come not from the rise of China or
from failures of global governance but rather from actors with limited resources but access to
weapons of mass destruction. The spread of weapons of mass destruction, especially nuclear
and biological, pose a histori- cally unprecedented challenge. Actors with limited material
capabilities, both states and transnational terrorist organízations, can threaten the security of
states with much more substantial resources. Up until the present period there has always been
a fairly close relationship between the ability to disrupt and kill, and the basic resources
possessed by any actor. Although this relationship has been attenuated over time by the
development of guns and explosives, the harm that an individual or weak state or organízatíon
could do was not that great, For all of human history up to the present, the state that could
mobilize larger armies, more ships, and larger numbers of weapons usually won in war. Basic
measures of resources such as population, urban population, iron and steel production, energy
consumption, military personnel, and military expen- ditures (the measures in the Composite
Index of National Capability (CINC) for the correlates of war data sets) have provided a good
measure of potential na- tional military power.

This is no Ionger the case. Nuclear and biological weapons can kill hundreds of thousands or
even millions of people. Securing nuclear weapons is expensive and complicated but North
Korea, whose per capita GDP of US$1800 (at PPP) places it near the bottom of all countries and
whose estimated total GDP of US$40 billion ranks as 103rd in the world,> has mastered the
basic technology as have India and Pakistan, both states with substantial aggregate resources
but low per capita GDP. Iran is putting itself in a position to quickly produce such weapons.
Israel, whose GDP ranks around 4oth in the world has a sub- stantial stock of nuclear devices
and the ability to deliver them thousands of miles away with fighter planes, submarines, or
missiles. Nuclear weapons will not necessarily be limited to states. It takes almost no
ímagínatíon at all to de- scribe a scenario in which Pakistani nuclear weapons could fall into the
hands of transnational jihadi organízations. A nuclear Iran, even with central state authorities
firmly in control of any nuclear arsenal, could decide to provide
weapons to Hezbollah or Hamas.

Nuclear deterrence, which worked so well in the Cold War, will not be as effec- tive in what Paul
Bracken has called the second nuclear age." Nationalist senti- ments now run much higher than
they did duríng the Cold War; neither Amer- icans nor Russians wished for the annihilation of
the other side. In contrast, the president of Iran has called for Israel to be wiped off the map and
catego- rized Zionists as the most detested people in all humanity. North Korean chil- dren are
subject to anti-American propaganda from kindergarten on. A recent DPRK propaganda video
states "Words spoken by the United States, a country that uses the law of jungle as the law of
survival for fitness, is meaníngless."

Nuclear weapons systems are complicated and difficult to control. They are subject to what
Charles Perrow has called normal accidents. Normal accidents cannot be avoided in systems
that are complex (have many feedback loops) and Lightly coupled. During the Cold War there
were numerous examples of false positives for the United States, attacks from the Soviet
Union that were not attacks. In 2007 six nuclear weapons were mistakenly loaded onto a B-52
bomber and flown over severa} American states. The United States and the So- viet Union
embraced practices that made the accidental use of nuclear weapons less likely, especially
second-strike capability and fail safe systems. lt will be much more difficult for new nuclear
armed states, with limited re- sources, to spend lavishly on safety and security.

The technology for producing bíological weapons is widespread, available to private

organízatíons, even individuals, not just states. There are about one million people that
understand cloning, Information about viruses is now transmitted between African hospitals with
limited technical capability and the American Center for Disease Control by sending the code of
the virus, not the virus itself. Codes for many diseases are available in the scientific literature.
Biologícal weapons involve dual use technology. Attribution will be diffi- cult, perhaps
impossible, if there is a release of a pathogen.

WMD attacks, especially biological attacks could come from anywhere, from inside a country
as well as from without. For the international system, how- ever, WMD in the hands of
relatively weak states with malevolent intent, or states unable to effectively govern their own
territory, pose the greatest threat. If there is a new period of global disorder, one that would be
characterized by high numbers of violent deaths, a decline in world trade and economic pros-
perity, and the abandonment of extant principles and norms, it will be because of a Black Swan
event emerging from the weak and malevolent.
There is no consensus on how these international threats might be contained, not even a
well-developed debate. Unlike China, where the opportunities and threats are visible, or
demands for global governance where the benefits and costs can be approximately calculated,
the dangers posed by WMD attacks em- anating from weak or malevolent countries (from
either governments or transnational groups) involve uncertainty rather than risk. There is
sorne prob- ability that an attack will take place, but it is impossible assign a value to what that
probability might be.Absenta value there is no straightforward way to un- derstand what level of
resources might be committed to mitigate that risk. Even if resources were not very constrained,
there is limited consensus on how they might be deployed.

Most of the weak and the restless can best be understood as polities in which domestic power
brokers, relatively unconstrained by laws or constitutional structures, compete for resources
and control: the Muslim Brotherhood and the army in Egypt: various regional leaders or
warlords in Aíghanistan, the Sunni and various Shi'a parties in Iraq; regional tribal groups in
Libya; the Ma- ronites, Druze, Sunni and Shi'a (Hezbollah) in Lebanon; the military and di verse
regional and ethnic groups in Pakistan; the military, Islamists, Tuaregs, and civilian politicians in
Mali. From an American and even a more interna- tional perspective there is no grand strategy
that can address the problem of the weak and the restless, but there is a best-case specific goal
and a worst- case fallback that can be used to orient foreign policy. The best case is to sup- port
political actors who can sustain states that have good enough governance -namely, good
enough to control transnational security threats and to offer sorne possibilities for economic
growth. The worst-case fallback is to use eco- nomic or military coercion to degrade the
capabilities or change the policies of specific groups within or without the state, but with no
expectation of improv- ing domestic governance.

Externa! actors, if they are lucky, they may be able to identify a local baron whose preferences
are compatible with their own. In Egypt President Morsi will not be sympathetic to American
policies, but he may be able to govern ef- fectively and he <loes have an interest in promoting
the economic well-being of his own citizens. The criteria for evaluating leaders should not be
the quality of elections, the treatment of women or the level of corruption, but rather their
ability to maintain control of activities within their own boundaries and to open space for social
and economic progress.

In sorne cases there may be no one to support. The reluctance of the Western powers to place
large bets in Syria reflects not only an aversion to becoming involved in another armed conflict in
the Islamic world but also an inability to identify a group on which a stake rníght be placed.
The best possible outcome in Syria would be a Lebanon-like agreement, but such an agreement
will be out of reach until the competing groups within the country share the same under-
standing about the interna! distribution of power.
In Mali the United States <lid place a bet. The African Command trained the Malian army.
Members of that army, after having been defeated in the north- ern part of the country
overthrew the civilian democratically elected govern- ment. (Mali had hosted the Community of
Democracies in 2007.) Military in- tervention led by a French force, then prevented the country
from falling into the hands of Islamist radicals.

The options for dealing with malevolent states, regímes that do have effective control over their
own territory but threaten their neighbors and other coun- tries, are equally problematic. The
two principal examples in the contempo- rary world are North Korea and Iran. The policies of
both countries are the re- sult of interna} dynamics not international structures. A different
regime in Iran or North Korea would result in very different policies. Both countries have been
hostile to the United States. Both have an incentive to develop nuclear weapons, since the
possession of these weapons makes it less likely that a mili- tary opponent, even one with much
greater resources, would risk outright in- vasion. Non-military measures are not likely to be
successful. While personal- istic autocratic regimes are susceptible to economic pressure (they
need re- sources to pay off supporters and fear turning to their own military which they do not
control), military or party based autocratic regimes are not. Such regimes can pass the costs of
sanctions on to those groups that do not support the regime

For malevolent states, North Korea and Iran, the only option is buying time with the hope but
not the promise that the regime will transform itself, which might happen in North Korea, or fail,
which rníght happen in Iran.

Conclusion

There are three potential threats to world order: the rise of China, global gov- ernance, and
weak and malevolent states armed with WMD. With regard to China, there is a clear strategy:
integratíon into the existíng international ar- der. This strategy is likely to be successful
especially glven the American rebal- ancing toward Asia, which makes China's peaceful rise the
first best option for its leaders. If íntegratíon fails it will be because of a black swan resulting from
sorne mix of domestic nationalism, popular disorder, bureaucratic in-fighting or economic crisis
leading to outright conflict over Taiwan or offshore islands. Global governance, which during the
Cold War, was focused around universal membership (or at least universal membership minus
the Soviet bloc) interna- tional organízatíons, has now become more varied. The most
interesting inno- vations have involved the creation of coalitions of the willing such as the G-20,
PSI, Open Government Partnership, Majar Emitters Forum, and Extractive In- dustries
Transparency Initiative. These initiatives have been successful in sorne arenas but not others.
There is no crisis in global governance, but there are sharp disagreements about interests in
sorne issue areas. If there is a new world disorder, marked by international conflict, economic
crises, threats to regime stability, and a wholesale revision of basic principies and norms, it will
emerge as a the result of a black swan event emanating from the weak and the restless. A
nuclear weapon (perhaps from Pakistan, or North Korea, or Iran) ex- ploded by a transnational
terrorist organization in a majar city in Europe, America, or Asia would change the nature of
international relations forever.