One of the most extraordinary geopolitical trends of recent years has been what might be called, with apologies to John le Carré, “coming in from the cold.” Many countries that had excluded themselves from the globalization system and maintained an adversarial relationship with the West have recently performed an about-face, opening themselves to foreign investment and normalization of relations. Myanmar (formerly Burma) was the first of the recent converts, making rapid progress since 2011. Iran has followed with on-again off-again negotiations on a nuclear deal. Is Cuba the latest example?
To answer this question, one must first understand the trend itself. Generally speaking, there are two factors that appear to be driving these countries’ decisions to put aside decades of isolation. The first of these is the emerging markets boom. A heat map of global economic growth in 1992 (see below) was hardly a compelling advertisement for the globalization system. “Open your markets to the West,” it said, “and the West will get really rich while you struggle.” As the map shows, most emerging economies outside of Asia were floundering, while the U.S. powered head. This was the tail end of the so-called “great divergence,” in which the poorest countries of the world became relatively poorer, in complete contradiction of economic theory.
By 2005, the global economic growth heat map looked very different. Nearly every economy in the world was booming. Led by China and India, the ‘BRICs’ were catching up with the West, and looked set to surpass the United States in economic size. The only emerging economies whose performance was wobbly were the refuseniks: Iran, Cuba, North Korea, a few others. Of course, 2005 was the peak of the mother of all property bubbles, and by 2010, following the global financial crisis, the picture looked rather different (see the map below). At least it looked different in the West. The emerging markets – nearly all the emerging markets – carried on booming.
This broad-based growth in emerging economies, apparently independent of trends in advanced economies, was a great advertisement for coming in from the cold: developing countries that embraced liberalization appeared all but guaranteed to perform well.
The second factor that I believe has encouraged countries to abandon their pariah status is China’s example. Of course, China came in from the cold itself, following Nixon’s visit in the 1970s. After that, China enjoyed three decades of breakneck economic progress. But perhaps more importantly, China enjoyed this boom without undergoing a change of government: its leaders successfully embraced capitalism without embracing democracy. This suggested that isolated governments might be able to pick and choose. A pariah state’s despotic regime could sign trade agreements and participate in meetings of global leaders while still locking up dissidents at home. During the 1980s, Vietnam demonstrated that China’s success was no fluke, embarking on essentially the same course.
For those governments that had isolated themselves from the West, the path to rapprochement was laid open: embrace the West, receive its economic gifts, and retain unquestioned authority. Myanmar’s steps down this path, tentative at first, look increasingly assured. During a speech in the fall of 2013, I was asked to pick an unexpected success story for 2014. I picked Iran, on the grounds that it was likely to come in from the cold as well. In retrospect, I don’t think Iran was the best choice for a “success story,” but Iran’s direction of travel has definitely been towards engagement with the West, despite fits and starts.
And so, is Cuba next? Almost certainly. To be sure, the U.S. has taken the first big step. But the negotiations that produced the recent diplomatic deal involved some – admittedly minor – concessions from Cuba. And Raul Castro is clearly the one taking the big political risk. Obama is on his way out. The Castros, by contrast, have spent their political lives blaming the U.S. for Cuba’s economic troubles, and have nowhere else to go. Even a tentative embrace of their northern neighbor is a tricky step to take without stumbling.
Still, I do think Cuba will, in the years to come, follow other pariah states in coming in from the cold. Over 2015, progress may be slow. Lower oil prices have made the country’s economic difficulties less pressing. But the potential benefits of embracing normalization of international relations, if the process can be managed adroitly, are amply demonstrated by others’ success.
And after that, who is next? The other big story that closed out 2014 was of North Korea, the Interview, and the hacking of Sony Pictures. But if in the next few years North Korea’s approach to the international community changed markedly, I would not be too surprised.