Mark Leonard

Britain is at a fork in the road with a choice to make about what role it will play in the 21st century. Yet, Britain’s Prime Minister David Cameron’s long-awaited speech about Europe is a miscalculation that will leave everyone frustrated.

With the speech, British euro-skeptics are denied an immediate referendum on EU membership, and pro-Europeans in Britain will lose their voice in the debate about Europe’s future while their country’s energy is wasted on renegotiating existing powers. Meanwhile, the rest of the world will have to deal with a quest for special treatment rather than have a reliable British partner at a time of uncertainty. Worst of all, Cameron’s promise to go for a cosmetic renegotiation followed by a campaign to stay in the EU is designed to obscure rather than resolve the fundamental dilemma facing his compatriots – a choice between two radically different British futures.

On the one hand, the euro-skeptics, who have held Cameron hostage in parliamentary votes on Europe, have a clear agenda. They have set out a modern argument that is very different from the blimpish isolationism of past decades. In the place of old arguments about European super-states destroying British sovereignty, they have an entirely new narrative of a Britain “tethered to the corpse” of the euro zone. They claim that the single market ties British business in red tape; the Customs Union holds Britain hostage to the protectionist lobbies of all member states; and the free movement of people is flooding its labor market with immigrants. The EU seems a fossilized relic of the 20th century in a new digital world. What matters to the skeptics, in the words of conservative columnist Matthew d’Ancona for GQ, is “not post-colonial reach or the ability to fight alongside America in military interventions, but the real freedom to trade globally.” He concludes: “What is so bad about being a new Singapore off the shore of Europe?”

The new euro-skeptics think that the modern era transcends geography, uniting the world economically and politically in the cloud. The countries they admire the most – such as Australia, Dubai and Singapore – have successfully managed to carve out a global role without being hung up on trying to shape the world. What the new skeptics want flows naturally from former Prime Minister Gordon Brown and Cameron’s foreign policy of trying to pull back from what Cameron saw as the “over-reach” of the Blair era.

The “Brameron” era has been characterized by a move away from both Washington and the EU, a sense of the primacy of economic diplomacy, and a greater interest in the troops in Afghanistan and aid workers in Africa than the pursuit of traditional influence. The intellectual rationale for this move is that while Britain may enter a “new Elizabethan age” where it retains a global outlook, it should refuse to be drawn into disputes about the shape of the euro in Europe’s backyard, in which it has little interest.

The disparate prospects of each continent have little in common. To the extent that they can be linked by a single theme in 2013, however, it is the idea of the unraveling of the global economy and the political integration that supported it. After two decades of globalization, this year will see each of the big political theaters re-erecting barriers and focusing more on domestic repairs than on global expansion. The unraveling has its roots in longer-term trends, but it is set to step up in the next year.

There has been a remarkable stabilization within the euro zone since European Central Bank President Mario Draghi’s intervention in the summer of 2012. But even as the euro zone integrates, the politics and economics of the wider European Union are likely to diverge. In practice, the measures toward an integrated banking union, increased parliamentary accountability and more incentives for reform could go hand in hand with the de facto economic and political disintegration of the EU. Economically, as Sebastian Dullien argues in a paper, “Why the euro crisis threatens the EU single market,” there is a significant risk of a gradual unraveling of the EU’s single-market system. A full euro zone breakup would shatter the euro, while a great leap toward political union could see shrinkage of the single market, as countries such as the United Kingdom withdraw from the heart of Europe.

Even muddling through the crisis seems likely to diminish the depth of the single market. In recent months, banks in the euro zone have withdrawn from trans-border business. Even poorly-managed German companies are paying significantly less interest on capital than well-managed Spanish companies. These new barriers between euro zone members will lead to a renewed focus on domestic markets. For Europe, this means less competition, less growth and higher prices for consumers.

Benjamin Netanyahu is trying to show that nothing has changed. Israel will defend its citizens just as it did before the Arab Spring. The language of Israel’s politicians, the brutal efficiency of its bombing campaign and the asymmetrical death count all echo Israel’s campaigns in the past. But the political dynamics surrounding this assault could not be more different.

The American president – rather than spending his time in the White House Situation Room – is flying around Asia planning his “pivot” from the Middle East. Egypt’s President Mohamed Morsi, rather than sealing the border, sent his prime minister to Gaza for a display of solidarity. And regional leaders from Qatar to Tunisia and Turkey are putting themselves in the middle of the skirmish. But rather than responding to this changed environment with a creative diplomatic strategy, Israel’s government seems to be doubling down on tried and tested techniques.

On my last visit to Israel, I noted that officials speak about how their government in recent years has moved from making peace to “managing conflict.” They have built a wall to pen in potential terrorists, while launching periodic attacks to disrupt the military operations of Hamas and Hezbollah. (One official referred to these repeated attempts to defang Hamas as “cutting the grass.”) Every nation is entitled to defend itself. But unless violence is part of a political strategy, it rarely creates real security. The problem with these repeat military operations is that they create a growing pool of anti-Israel resentment in the neighborhood while eroding Israel’s international standing.

By a twist of fate, the world’s two most powerful countries will select their new leaders in the same week. On the surface, they are almost perfect mirrors of each other.

While the U.S. election promises a nail-biting finish, the results are likely to be predictable. In Beijing, the next leader – Xi Jinping – was ordained several years ago to be appointed General Secretary of the Chinese Communist Party at the Party Congress this week.

In the economic realm, the two countries’ trajectories are at odds. While Washington is suffering from an austerity crisis, China is coming to grips with a crisis of affluence. In the U.S., as Thomas Byrne Edsdall argues in his book The Age of Austerity, “The two major political parties are enmeshed in a death struggle to protect the benefits and goods that flow to their respective bases, each attempting to expropriate the resources of the other.”

It was a blood bath. A methanol tanker crashed into a bus, killing 36 people and injuring more near the Chinese city of Xian on Aug. 26. Soon after the accident, a photograph appeared online of Yang Dacai, the local official in charge of road safety, smirking at the scene of the crash. The photo prompted a flood of Internet anger. The comments of netizens soon moved from the official’s demeanor to the value of the watch on his wrist. Bloggers managed to unearth pictures of Dacai wearing 11 different luxury watches, together worth many times his official salary. Last Friday, the Chinese media reported that Dacai had been sacked after an investigation into corruption.

Yang Dacai is just the latest focus of an electronic herd whose activism and anger appear in sharp contrast to the staid and controlled official politics in China. The regularity with which these scandals erupt helps explain why an opinion poll in China 18 months ago revealed that 70 percent of senior Chinese officials live in a state of “Internet terror.”

Over the last few years, officials at all levels of government in China have fallen prey to electronic vigilantes who have exposed corruption by looking at the value of officials’ possessions or the misdemeanors of their relatives. This is what makes the effect of the Internet on Chinese politics so paradoxical: It could seriously lengthen the life of China’s one-party state. In much the same way that the market has saved the country’s Communist Party, China’s state-controlled Internet could save its leadership.

All breakups are tough. But the divorces we have learned to fear the most are protracted, conflict-prone and ultimately unresolved. All the signs are that China and America are in the middle of one of these messy divorces between abusive couples who hate and need one another at the same time. As Washington and Beijing prepare for new political leaderships, they cannot avoid a major renegotiation of the terms of their relationship.

Since the global financial crisis in 2008, we have been living through the slow and painful end of Chimerica — the period when the American and Chinese economies acted as one. It drove one of the longest periods of global growth and prosperity in history. This perfect symbiotic relationship — popularized by the historian Niall Ferguson — was based on China saving half of its GDP while America borrowed the money to finance a spending binge it could not afford. The romance ended in September 2008 with the collapse of Lehman Brothers. Now the terms of the separation between the two nations risk awkward discomfort for the rest of the world.

On a recent visit to Beijing, I was struck by the near-universal assumption that American demand will not return to pre-2008 levels. This has led to a lively debate about how to reorient China’s economy. On the one hand, China is hedging against the dollar by investing in companies and assets outside the U.S. On the other hand, Beijing is bracing itself for slower growth, while looking for substitutes for exports and fixed investment.

For most of the last 30 years China’s leaders have been kept awake at night worrying about their country’s poverty. But as the country approaches its once-in-a decade leadership transition this fall, it is China’s affluence, rather than its poverty, that is causing sleepless nights.

Deng Xiaoping declared in 1979 that the goal of China’s modernization was the creation of a “Xiaokang (moderately well-off) society,” where citizens would be comfortable enough to lift their eyes above the daily struggles of subsistence. For more than a decade, Chinese people have been living a version of this once-utopian concept.

On a recent trip to the prosperous Guangdong province on the Pearl River Delta I was struck by the sophistication and wealth of China’s urban experience – but also by the fragility of the social compact on which it is founded. The country’s economic growth “slowed” to 7.6 percent in the second quarter (the weakest quarter since 2009, when 20 million Chinese lost their jobs as a result of the global financial crisis). Only last week, Premier Wen Jiabao warned of tough economic times ahead.

VIENNA — When Arnold Schwarzenegger declared “I’ll be back” at the end of the first Terminator film, very few thought he was talking about returning to Austria. Yet here in Vienna, where Schwarzenegger made a surprise trip this week, there is speculation that his political career will be resurrected – Lazarus-like – in his abandoned homeland. And if he does take the leap, the Terminator could find himself playing a walk-on part in the most grandiose story of his career: the breakdown of the postwar European political order.

The talk is that Schwarzenegger could be one of the most visible faces supporting a putative new “Alliance for Austria” party that is being planned. The man behind it is the expatriate self-made billionaire Frank Stronach, who has pledged to launch a revolution in this placid corner of Central Europe. Last month he released a glossy eight-page personal manifesto that starts with the memorable phrase “unhappily, government is made up of politicians.” Pledging to rectify this anomaly, he talks about instituting lotteries that will allow ordinary people to suggest topics for parliament to debate, introducing a flat tax, and scrapping all corporate taxation for companies that invest in Austria.

According to the Austrian magazine News, Stronach has not yet decided whether to launch a brand-new party or effectively to buy the existing BZO party (a more moderate breakaway from the neo-fascist Freedom Party) by making a big enough donation. Apparently the former would cost 20 million euros, while the latter would be cheaper at 7 million. Stronach hopes to capture up to 20 percent of the vote, which would be the biggest political upset to hit this country since Jörg Haider’s party won a shock victory in the 1999 general election.

It may have been championed by European leaders such as Gordon Brown and Nicolas Sarkozy, but the G20 is increasingly seen as a disaster for Europe’s vision of global order. “We are not coming here to take lessons on democracy or on how to handle the economy,” said EU Commission President José Manuel Barroso ahead of the G20 meeting in Los Cabos, Mexico, where the euro zone crisis was expected to play a central part in discussions.

But after years of being on the receiving end of lectures from Europeans about how to run their affairs, the leaders of the world’s largest economies, including the “BRICS” nations (Brazil, India, Russia, China and now also South Africa) are seizing the chance to return the favor.

The EU’s lack of solidarity in the face of the debt crisis has squandered its moral high ground and engineered the region’s marginalization. Europeans are strongly in favor of global governance when it is a process they inflict on others, but they are not so keen when others comment on Europe’s affairs.

How many countries will Germany need to bail out before it has erased the guilt of the Holocaust? That is the provocative question posed by Thilo Sarrazin, a publicity-hungry maverick whose 2010 book attacking immigration shattered Germany’s political consensus and sold more than 1 million copies. Last week he returned to the scene of the crime with a new book called Why Europe Doesn't Need the Euro. In a much-quoted passage, he says supporters of eurobonds are driven “by that very German reflex according to which atonement for the holocaust and the world wars will never be complete until we have delivered our entire public interest, and even our money, into European hands.” This title has raced to the top of best-seller lists and sent jittery markets into panic. Sarrazin is a narcissist who is more interested in self-promotion than serious analysis. But his views on Europe – as well as the political class’s reaction to them – tell us a lot about how the euro’s political travails have come about, as well as how they are likely to unfold.

An opinion poll last week provides just the latest proof that Sarrazin has his finger on the national pulse: Over half of Germans think their country has suffered by joining the euro, while 79 percent reject eurobonds as a solution to the crisis. Sarrazin – a former regional politician and Bundesbank governor who was stripped of his official positions because of his views on immigration – is not a man to do things by halves. His book breaks not one but two German taboos by linking Holocaust guilt with questions about the sustainability of the euro. (It is designed to be a refutation of Angela Merkel's argument that the breakup of the euro would lead to the breakup of the EU.) But although – or rather because – Sarrazin is so good at mirroring public opinion, the German political establishment is falling over itself to bury his arguments: Peer Steinbrueck, the former finance minister (and possible candidate for chancellor), described it as “bullshit”; while the current finance minister, Wolfgang Schaueble, described it as "appalling nonsense."

The antics of Thilo Sarrazin are a product of the constrained, elitist nature of German politics where – after the experience of National Socialism – many topics are declared outside the realm of political competition. As a result, all mainstream parties are in favor of Europe, the euro and the Atlantic alliance, and against war, inflation and nationalism. The result is a restricted political sphere where politicians have often been able to act against public opinion without fear of challenge – including the decision to replace the über-popular Deutschmark with the strikingly unpopular euro. But those who dare cross the threshold of political correctness – as Sarrazin has repeatedly done – tap into a vast reservoir of pent-up popular frustration. And because the establishment cartel turns them into outcasts rather than arguing with their views, this reservoir continues to grow.