In the aftermath of the Cold War, as countries around the world seek to reposition themselves, China has emerged as the number one challenger to the United States. It has also emerged as its number one partner. This has made each critically important to the other. Just consider the report issued by China’s Ministry of Foreign Affairs, following a meeting on 15 November of U.S. and Chinese leaders in San Francisco, which included both President Xi’s declaration that his country’s most important bilateral relationship in the world was with the U.S.—and President Biden’s agreement that his country is in the same position with respect to China.
In both the Chinese account of the meeting and the subsequent account published by the White House, the two countries clearly accept each other as partners—although they see their relationship rather differently. On the one hand, China has suggested to the U.S. that neither country should interfere in the other’s affairs but should instead “cooperate in the exercise of their great power responsibilities” (i.e., govern the world together). On the other, the U.S. expresses certain expectations (and even conditions) that boil down to this: the U.S. is willing to acknowledge China’s role as a partner in world governance—as long as China upholds certain human rights, and meets certain economic, trade, security, and military expectations.
This relationship is fundamentally characterized by the fact that China approaches bilateral relations and world affairs from a pragmatic perspective, while the U.S. approaches them from a more ideological perspective. Further complicating matters is the fact that neither superpower is internally unified. In the U.S., different ideologies compete fiercely with each other—even within the two major parties. And China faces fractious divisions of its own.
‘New economy’ and ‘old economy’
These internal divisions are not solely the result of ideological fault lines in each country. An important disruptive factor is the technological revolution based on the use of big data and artificial intelligence (AI). This goes hand in hand with the ‘green technology revolution,’ which challenges industries in both countries.
China and the U.S. are also now the principal competitors in heavy industry, as well as in the closely related fossil fuel industry. Of course, the two economies don’t only compete; they also need each other. They both still need physical products to trade. At the same time, old industries also need products from new industries (such as AI services) if they are to remain competitive, since the application of new technologies across existing product chains enormously increases productivity.
It is not by chance that the struggle between the ‘old’ and ‘new’ economy is a particularly important factor in U.S. domestic politics. To a large extent, the development of the world’s digital and green technologies is concentrated there. China is essentially the only national economy that can compete with the U.S. in this area. The U.S. claims this is because China has an unfair trade policy (by either coercing potential investors into transferring their technology or by stealing technology from the U.S.).
Whether the U.S. is right about China’s trade behaviour is not only an economic issue; from a global political point of view, it is also a security issue. Indeed, the military application of ‘new economy’ products—particularly digital products—not only ensures technological superiority in the competition for civilian production but also on the battlefield. An example: in the first weeks of the Russian aggression against Ukraine in 2022, U.S. technological support made the Ukrainian defence more successful than expected. Russia was thus forced to abandon its original military objective of extending its influence over the whole of Ukraine and settle for an all-out war to take over eastern Ukraine.
The main pillars of Russia’s economy remain the military-industrial complex and hydrocarbon-based energy production. To allow the world of big data companies to control these would have meant a radical re-ordering of Russian economic and power relations. So, in the absence of a link to the ‘new economy,’ Russia began to drift away from the world’s dominant powers—economically, in terms of ‘soft power,’ and, as the attack on Ukraine made clear, in terms of military technology. Even among Ukraine’s Russian-speaking population, Russia’s attractiveness was disintegrating. This became particularly striking after the beginning of the military aggression. Regardless of ethnicity, the people of Ukraine chose the West. This is precisely what Russia continues trying to change by force.
Europe takes over the ‘green economy’
In terms of digital developments and innovation, Europe is also lagging behind America and China, though in a different way than Russia. The ‘new economy’ is very much present in Europe because of the economic and political openness of the Old Continent. However, it is more second-tier than cutting-edge. Even the performance of scientific laboratories in Europe is not on a par with those in the U.S. Information security is also a key issue for the ‘new economy.’ But the inability of European countries to provide security (especially data and information security) equal to that found in the U.S. or China is a critical factor.
Europe is trying to make up for all this by surpassing other countries in the transition to a ‘green economy.’ By pursuing the most radical ‘green transformation’ in the world, Europe is forcing the U.S. to defend itself (by resorting to protectionist means) against a European ‘green revolution.’ But the U.S. is not only defending itself against Europe; it is also attempting to create a mutual economic reliance in world politics.
NATO was created in this same spirit at the beginning of the Cold War. In fact, at its inception, it was suggested that the alliance needed an economic dimension. This was expressed in Article 2 of the Washington Treaty, which established NATO. And though it has yet to be the basis for any truly meaningful economic policy, it remains the most powerful military alliance in the world.
There have been other serious attempts to create economic alliances. In the 2010s, the Transatlantic Trade and Investment Partnership (TTIP) and the Trans-Pacific Partnership (TPP) were both initiated by the U.S., with the idea of benefitting Asian and Pacific allies. Due primarily to domestic political reasons in the U.S., both efforts failed. And today the question has shifted—and now seeks to understand how economic and trade relations between Europe and the U.S. will develop.
The emerging new world order
The 2023 Japanese presidency of the G7 was a major agenda-setter and alliance-builder. First, highly ambitious programme declarations were issued by specialised ministerial meetings, and then the Hiroshima Summit of 19-21 May 2023 adopted a joint document at the highest level advancing what is essentially a common world economic and security agenda. G7 ministers acted with an impressive show of unity on many issues, including world trade and other global policy matters—things on which they had previously disagreed as vehemently as they had agreed.
Unity today is particularly important. With Russian aggression towards Ukraine paralysing the UN and its Security Council, there is added importance for a major group of countries to demonstrate unity around a global vision. The G7 has become the defining workshop for shaping such a vision of an emerging world order. Although the decisions taken by the G7 most often function as ‘soft norms’ in international law, they are still of great practical importance. If for nothing else, members of the G7 are most likely to achieve common goals—or at least some of them—as long as they remain in cooperation with the rest of the world (or even without them).
In this respect, it is noteworthy that the Hiroshima Summit May 2023 invited the (mostly) democratic powers of the southern hemisphere: Australia, Brazil, India, Indonesia, the African Union, and the Pacific Islands Forum—as well as South Korea and Vietnam from Asia and Ukraine from Europe. They all came to the event. This did not signify their formal accession to the G7; however, it did signal their willingness to work as partners in the emerging new world order.
No such invitation was extended to China. However, the final document of the Hiroshima Summit—the Hiroshima Declaration—did state that China should not support Russia’s aggression in Ukraine. The Declaration also stated that the G7 recognises China’s status as a ‘great power’ and stipulated that it was ready to engage in dialogue and cooperation with it. With such statements, the G7 made it clear that they view China quite differently from Russia.
A few months later in August, the Johannesburg II Declaration—to which China was a signatory—of the XV BRICS summit in Johannesburg criticised the use of sanctions by Western powers. But it did not contain any comments that directly antagonised the G7powers. The BRICS also conspicuously refrained from taking a stand on Russia’s war in Ukraine. To the chagrin of some observers, the BRICS did not set themselves up as a ‘counterforce’ to the world order envisaged by the G7. (But how could they, given that two of its five members at the time—Brazil and India—were also guests at the G7 summit?) Similarly, the autumn meeting of the G20 did not become an arena of contention between the two potential camps, in line with the intentions of the Indian presidency of that forum.
So, at the moment, the G7 has no meaningful counterpart. If it were to have one, it would be made up of the likes of Russia, which is at war with Ukraine, Belarus, merging together in a confederation of other states, North Korea, as it develops a nuclear arsenal while starving its people, Islamist Iran, or Hamas, attacking Israel from behind the living shield of its own people. Of course, there are those who are attracted by this little circle of rogue nations and are tempted by the idea of being one of them. Venezuela, for example, is making territorial claims on its neighbour and is, therefore, also on the brink of war. Even so, it is difficult to call this motley group of countries the beginnings of the construction of an alternative world order. Rather, they each represent a different attempt to destabilise and violently upset the world order that is taking shape.
Hence, at present, there is no ‘the East’ in world political terms. Nor is there really a ‘West.’ Analyses based on East-West antagonisms or cooperation are therefore outdated and misleading. There is the G7, which has announced a vision of world order, and there are other powers linked to it at different levels, in different concentric circles (not unlike the layers of an onion, as it were). Among them is Hungary, which is not a direct member of the G7, but which is linked to it indirectly through its membership of the EU. If Hungary is clever enough, it could even exert a certain degree of influence on the G7 through this indirect link. More importantly, Hungary can benefit from this link. (This is true for all EU members.)
In many ways, America’s non-G7 Asian and Pacific allies—South Korea and Australia—are in a similar position as those who were external invitees to the Hiroshima Summit: they are the great powers and organisations of the ‘Global South,’ which, by inviting them, the G7 has classified as ‘kindred powers.’
At present, China has been offered the choice between cooperation (or at least dialogue) and non-cooperation. China has chosen the former: it has pursued dialogue and cooperation—but in parallel with rivalry (if not with the G7 as a whole, then at least with its biggest power, the United States). In November 2023, Xi gratefully accepted an invitation to a bilateral meeting in San Francisco. A month later, at the UN COP28 World Forum on Sustainability, Chinese climate change envoy Xie Zhenhua and U.S. presidential envoy for climate diplomacy John Kerry chatted for four hours. The green economy thus appears to be a key area of cooperation between the two superpowers. Although it is not known exactly what they talked about, Bloomberg noted that the mere fact that they were talking was good news for climate action.
National governance or world governance?
We Hungarians have said many times before that it is better for superpowers to communicate and connect than to be at odds with each other. Still, it would be good if more of these discussions were shared with ‘outsiders’—or external powers. What they could then produce could have a major impact on world events—and on the direction of future international relations.
In the climate relationship between the U.S. and China, for example, it is unclear whether China is trying to counterbalance—or accommodate to—the dominant progressive ideology that seeks to transfer some of the powers of nation-states to international institutions (under the banner of ‘strengthening multilateralism’). Indeed, the narrative is that since the climate crisis is global, a global solution must be found—in other words, nation-states should transfer or subordinate their powers to supranational organisations.
That same narrative also posits that big data value chains would benefit from and function better if nation-state regulations did not obstruct the moment-to-moment transfer of production and sales capacity from one state to another. Harmonised supranational regulations, so the argument goes, are preferable to any national ones.
Left-wing ideologues have always been susceptible to the temptation of internationalism. And today they are more than happy to serve as ideologues of the ‘new economy,’ a role that has them function as political agents. The Right, on the other hand, is relegated to continuing its retrograde activities within the ‘old economy.’ Some conservative groups tend to uphold or facilitate this simplistic view, since they consistently play the role of stalwart—almost ideological—defenders of hydrocarbon-based energy and heavy industry. This may be because oil, coal, and metallurgy are all inseparable from the defence industrial complex—though the latter is necessarily national because it is a customer as well as a defender of the nation-state.
Such a division of Left-Right roles is a dangerous trap for the Right. It cannot win if it unilaterally commits itself to a lower productivity economic model. On an ad hoc basis, of course, each nation must protect its defence industry, as well as its heavy industry, and all the jobs they both entail. But failing to harness the potential of the ‘new economy’ could mean falling behind on the forefront of development. The truth is that the ‘new economy’ can build much more secure value chains if it were to rely on nation-states in full possession of their sovereignty (rather than on a global arena controlled by a ‘world-centre’). National values and the power of nation-state can and must be preserved—not in opposition to the ‘new economy’ but by it and within it.
That said, national values and interests should not operate freely in the ‘new economy.’ The preservation of linguistic and cultural diversity amid the use of digital technologies is, for example, a major theme in the debate over AI. This could be a decisive factor in the outcome of the worldwide ideological contest—one of the main fronts of which is the challenge to the primacy of nation-states by the ideology of global governance.
In this regard, the conservative, Christian democratic side—which is committed to the survival and dominance of nations and nation-states—has suffered heavy defeats around the world in recent years. President Trump’s 2020 ouster was an especially significant loss in this struggle because of the economic, technological, and military superiority of the United States. There’s thus no need to emphasize the crucial role of the upcoming 2024 elections!
Nevertheless, it’s worth noting that even his successor does not represent the most extreme version of the ideology of internationalism available in the Americas. Following the ouster of Bolsonaro, a much more hard-line, left-wing tendency is in power in Brazil with Lula. In the UK, the fall of Boris Johnson could also be considered a loss—especially if Rishi Sunak continues to distance himself from true conservative policies. And in Israel, the war against Hamas poses a serious threat to Netanyahu, one of the key figures on the international Right.
In Central Europe, the leading regional power, Poland, and Slovenia have recently overthrown their own centre-right leadership. However, it will take some time before it can be determined to what extent Poland will become a proponent of global governance.
There are still some strong conservative bastions, such as Kisida’s Japan (heir to Abe’s Japan) and Modi’s India. Both are successful because of their links to the ‘new economy’—or, more precisely, because of their ability to balance new and old technologies in a way that is well adapted to the social conditions of each. One can only hope that Milei in Argentina will also bring that country to success. The same might be said of Meloni’s Italy and Erdogan’s Turkey.
Elsewhere, Dutch voters have expressed their desire for a more consistent defence of national sovereignty by voting in Geert Wilders’ Partij voor de Vrijheid. It is worth also keeping an eye on Estonia, where both their society and political sphere are national and digital. In fact, Estonia is a brilliant example of successful national advocacy in the ‘new economy’ (despite having to devote a large portion of its national resources to defending itself against a potential Russian threat).
What next for Hungary?
It’s clear Hungary needs to preserve its sovereignty and boost its economy. At the same time, it must undertake the largest military build-up in its history. Moreover, because of Russia’s aggression against Ukraine, it must also complete the largest humanitarian programme in its history (and all while the world’s supply of money is running out!).
Hungary can achieve its goals—and finance them—if it is the beneficiaries of the world order that is taking shape. There is no doubt that the good relations Hungary has built with China in recent years are useful. But this alone is not enough if Hungary truly wants to be successful. The evolution of the world order does not depend only on China; and China is not the only driver of economic growth—not even in the ‘new economy.’
For these reasons, it is essential that Hungary have a strategy for harnessing and leveraging its competitive advantages—not only through the G7 but also through its various multilateral links. Among other things, Hungary needs to prioritise and rethink its relationship with G7 members. At the same time, it needs to assess how it can influence decisions taken in the G7, including those determining the evolving world agenda. The Hungarian Presidency of the EU Council, in the second half of 2024, could provide a good opportunity for it to more boldly assert itself in this regard.
Additionally, a coherent G7 strategy for Hungary must involve intensive dialogue and cooperation with the organisations and countries of Asia and the southern hemisphere. (Their importance lies with the fact that these countries have been promoted to ‘quasi-kinship’ with the G7, given their ‘outsider status’ at the Hiroshima Summit.) More importantly, the Hungarian G7 strategy should also be a Hungarian strategy for the EU’s common foreign and security policy.
From a political point of view, Hungary must continue to lobby for nation-state sovereignty. This should remain the most important framework for the exercise of public power in the new world order. Decisions at the global level must be taken in the original sense of the word ‘internationalism.’ In other words, decisions should take place in the form of negotiations between nation-states—not (as the ideology of global governance would suggest) at a supranational level.
From an economic perspective, Hungary’s strategy toward both China and the G7 should focus on attracting to the country the highest value-added sections of the highest quality, international value chains. (One could call this ‘value-added diplomacy’: essentially a strategic approach to foreign economic policy.) If the stability of the national economy were ensured by the best investments from the world’s best companies, this could help Hungary avoid adverse situations (such as the fall in real domestic incomes in 2022-2023).
For successful diplomacy, we need the trust of the powers already mentioned—that is, the G7 and China—as well as of ‘new economy’ corporations. Hungary needs to build an international reputation based on real performance and innovation. It must demonstrate how it is a successful player in both data and information security, while also signalling that it is also free from foreign influence.
To do this, Hungary needs to make defending against various hybrid security challenges a matter of national security. It is important—though insufficient—to make the fight against foreign information manipulation and interference (FIMI) one of ensuring election integrity. The entire security ecosystem in Hungary has to be protected against all kinds of hybrid attacks. Without such measures, others will not trust Hungary with more sensitive valuable technologies. In addition, to successfully enter the ‘new economy,’ Hungary needs other improvements—particularly in scientific education, with an emphasis on AI.
Hungarian-owned, small- and medium-sized enterprises should be supported in their efforts to enter the ‘new economy’ under the best possible conditions. A business environment that is not only investor-friendly but also friendly to the economy must be strengthened.
Additionally, we must highlight those Hungarian national values in the context of the country’s increasing integration into the ‘new economy.’ These values include: respect for family values, human rights based on human dignity, and the preservation of national identity, religious traditions, and the cultures of the Hungarian national minorities, to name but a few.
There can be little doubt that other states in our region are doing much the same. However, it is important to see that all this opens up important opportunities for possible partnerships. On its own, even the largest country in the region—Poland—is a relatively small player in the big data economy. So are other countries. Therefore, the more we can do at a regional Central European level, the better our chances of successfully connecting to the ‘new economy.’
But in order to succeed, Hungary must have a G7 and a China strategy. It must also have a neighbourhood policy and a Central European strategy—including the Hungarian communities in the Carpathian Basin—with a focus on creating the regional conditions for linking to the ‘new economy.’ Hungary should take the lead in such efforts, both in the Visegrád Cooperation (V4) and in the Three Seas Initiative. Given the crucial role of green technologies in the ‘new economy,’ it is also important to develop cooperation with neighbouring countries to promote a sustainable ‘green transition’ grounded in realism.
One or two Central European companies with a strong Hungarian presence should be among the main players in the ‘new economy.’ The Central European Economic Area can only become a real success story in terms of the ‘new economy’ if it is built on a dense web of scientific links across the region. Thus, we must promote links between Hungarian and regional scientific communities, and strongly develop our science and technology (S&T) diplomacy—not only at a regional level but globally as well. Indeed, the exchange of scientific and technological information plays a crucial role in linking up with the high value-added sections of value chains.
These are not only foreign policy issues since foreign policy cannot be separated from an overall vision of national development. If Hungary is to succeed in the emerging world order, linking up with the highest value-added sections of the international value chains—i.e., integrating the ‘new economy’ as fully as possible into our national economy—must be seen as part of a ‘Grand Strategy’ for the country. And if this is based on a well thought-out—and consistently implemented—external economic strategy and foreign policy, Hungary’s development in the coming years and decades will continue to be a stunning success.
