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Rik Kirkland: Hi, I’m Rik Kirkland, director of publishing at McKinsey & Company. We’re here today with Ian Bremmer, president and founder of Eurasia Group, a leading political-risk consultancy. We’ve been in this era of open markets and rising globalization. Is there something different now, in the wake of the crisis? Do you think that this has become a bigger issue?

Ian Bremmer: Over the course of the last 20 years, as an investor, there was one thing you could not afford to get wrong, and that was globalization—that, increasingly, multinational corporations were becoming the most important global economic actors. They were taking advantage of global economies of scale. They were looking to maximize profitability—sometimes long term, sometimes short term. But that process was inexorable.

What we have seen over the course of the past six months is that that process has turned on its head; now globalization is no longer on an expansionist track; that states are becoming much more important in terms of their impact on the global market. So, it’s changed.

The second point is that we now have been living in a much more global economy for a while. And so, as a consequence, we’ve come to rely on the fact that we will have access to these markets. During the period of the cold war, if the United States suddenly didn’t have access to the Soviet Union, it wasn’t a problem. If the Soviet Union had fallen apart or had perpetuated itself for another two, three, four decades, it wasn’t going to have a tremendous impact on the US economy.

That’s not true today. The United States and China are married. They’ve got kids. They need each other. And, if the United States doesn’t have the same level of access to China’s markets, if the US doesn’t have the same level of access to Chinese surpluses—in terms of purchasing US Treasuries—the US has a serious problem, and so does the rest of the developed world. So, a move away from globalization toward state-directed economic activity has much greater impact now than at any point in the postwar period.

Rik Kirkland: Let me ask you here to make a prediction. How would you describe the era you think we’re moving into over the next 5, 10, 15 years?

Ian Bremmer: Well, I think that there are two different major trends that we’ll see over the coming years. The first is that state capitalism will increasingly prove a greater challenge to globalization. We will see it with the increasing power of national oil corporations, as opposed to multinationals; with state-owned enterprises in emerging markets becoming increasingly powerful, particularly in countries like China and Russia, also in the Gulf states; with the growth of sovereign wealth funds as increasingly important in the international investment climate; and, also, with the extraordinary impact of stimulus packages, which, you know, we may see as a stimulus, but other countries will see as protectionist and vice versa, regulatory frameworks and the rest.

So, that is the first major development. Second major development is, we’ve been living in a world over the course of the past generation where the United States has been seen as the world’s singular, unipolar state. And we’re moving away from that, because the United States has neither the same political capital nor the political willingness to provide that heavy lifting, to ensure the provision of public goods on a whole host of different topics—whether we’re talking about nuclear proliferation or climate change or collective security in Iraq and Afghanistan or financial architecture globally.

But as we move away from a US-led unipolar system, we’re moving toward a nonpolar system. Not a multipolar system—where different countries have strong interests, sometimes competing, in what the world will look like—but a nonpolar system, where there’s a greater abdication of global leadership.

Rik Kirkland: No new power rising up to try to replace the US role, in other words.

Ian Bremmer: It’s not that there aren’t other countries that aren’t prepared to take leadership, but they’re not prepared to take global leadership. And so, what I think you’re seeing is that, you know, there clearly will be areas of regional leadership that will become stronger.

But, these two major trends—the move to state capitalism and the move to nonpolarity—as we look out over the next 5, 10, 15 years, the most important point I can make is that they are not equilibrium states. They will create their own indigenous shocks. These global challenges that I talked about—the nuclear proliferation, the collective insecurity, climate change—these things aren’t going away. And in the absence of global leadership, we will see greater shocks to the system until we are jarred into a new geopolitical balance.

Rik Kirkland: You have a whole set of categories for best bets and authoritarian globalizers and others. Could you kind of take us on a little tour of the world, if you could?

Ian Bremmer: I see sort of three big winners out there, over the medium to long term. First, there is the Chinese model, all right? Their ability to stimulate the economy—in terms of infrastructure spending, in terms of creation of social safety net, in terms of pushing consumer spending—is vastly greater than anybody else out there.

Rik Kirkland: So you’re not in the camp that thinks that the rise in unemployment or some of the social strains will put extraordinary pressure on the [Chinese] government or cause it to fracture in some way?

Ian Bremmer: I do believe it’s putting pressure on the government, but I think the government is extremely well placed to deal with it. I certainly don’t believe it’ll cause it to fracture. They have built up an enormous store of political capital and support from Chinese citizens. Now, Chinese citizens are angry about the downturn—but they’re not blaming Beijing, they’re blaming the West. And I think that Chinese government is likely to make use of that. We already saw it recently with Chinese leaders definitively saying that the American political model is not for them.

I don’t think those two things are a coincidence. And so we’re definitely going to see a more difficult environment for us to make money out of China. Maybe a more difficult environment for us to secure Chinese lending for American treasuries. But I think China, itself, will be resilient.

I like the Persian Gulf. A lot of political stability in those countries. Oil prices, of course, are lower, and they may drop lower still.

Rik Kirkland: You’re talking about the Emirates and the Gulf [Cooperation] Council?

Ian Bremmer: I am. In particular, I’m talking about Saudi Arabia, with only 25 million people, with very strong popularity of their king, Abdullah; with a succession model that looks much more stable and able to get through than a lot of people had feared before. [The country is] starting to unlock the untapped potential of women as employees within their country—50 percent of potential productivity that no one’s ever bothered with. Recently, now, they’re starting to. Over 50 percent of incoming university students in Saudi Arabia are women—one of the extraordinary stories there. And the fact that they are starting to look to really diversify their economy. But I also like Qatar; I like Kuwait; I like Bahrain. I think the Gulf, in general, taking a longer-term view, will be able to get through this crisis relatively well.

And then I’d say Brazil. Brazil’s changed. Lula’s changed. The political spectrum has really consolidated around the center. They’ve built a middle class that supports growth, that supports the creation of entrepreneurship in Brazil. They also are the Saudi Arabia of biofuels, and they have some of the world’s largest untapped oil reserves just to boot, off shore. Put all that together, Brazil looks very strong to me. And so, in this incredibly volatile environment, we do need to recognize there are some countries out there that are clearly going to outperform. And there are places that will be very attractive.

Rik Kirkland: We have a G-201 [summit] coming up. What are you hoping for? What do you think is going to happen?

Ian Bremmer: I think that it’s likely that the G-20 is going to have a very strong statement of principles: free trade, no protectionism, need for coordination, importance of and recognition of the severity of the crisis. Beyond that, I do not expect that we’re going to see fundamentally new financial architecture, Bretton Woods II.

Rik Kirkland: Are we going to see a coordinated stimulus?

Ian Bremmer: No. No, we’re not going to see coordinated stimulus, because stimulus is all about domestic politics—you go through legislatures; you’re dealing with domestic issues.

Now, that does not mean we’re not going to see more stimulus that will look like it comes out of the G-20. We’re going to see more stimulus come out of Japan. If the G-20 can ride that wave and say, “We were a part of this,” God bless ’em. I think there will be some of that, and I think that will be seen as positive. I think what we will see will be expanded cash for the IMF2 for bailouts. And I think that that will not just be IMF as usual, I think, because a lot of that money will be coming out of the emerging economies, particularly out of Asia. I think there’s going to have to be some sort of agreement and movement on voting rights within the IMF.

Rik Kirkland: Changing the weighting toward more developing countries?

Ian Bremmer: I think so. I think that we’re going to see an evolution, which will be the beginning of a geopolitical shift to recognize this very, very quickly evolving geoeconomic change in the world.

Rik Kirkland: One of the points you make is that a major strategic shift, or dislocation, in the world has been happening pretty much once a decade. So what are you looking at as you candidate for the next decade?

Ian Bremmer: I’m looking at major discontinuities because the system is not in equilibrium. Now, I don’t know which of these discontinuities will hit. Could it be climate change? And not only climate change on a global scale, but, for example, China just through industrialization and growth, growth, growth, systematically destroying its own environment, water table, air, soil, to the degree that the country just collapses in on itself, social dissent becomes too great? I wouldn’t say 5 years, but 10, 15, 20 years? We could imagine that as one.

Another one would be the fact that, as more countries go nuclear, some of these countries have connections to rogue organizations that have engaged in terrorist activities. Were we to see that over the next 10, 15, 20 years, that would dramatically change the way we think about sovereignty and the way we think about collective security and the international system.

So, we can point to different sort of shocks becoming sufficiently large that they jar the system out of this absence of leadership and individual governments increasingly controlling economic transactions. That’s the environment we’ll be in.

Rik Kirkland: Ian Bremmer, thank you very much.

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