REVIEW: The J Curve
A New Way to Understand Why Nations Rise and Fall
Carnegie Ethics Online Monthly Column
September 7, 2006
By Ian Bremmer
(New York: Simon & Schuster, 2006)
Things get worse before they get better. Economists noticed that a country's trade deficit follows this pattern when the value of its currency falls. A weakened U.S. dollar, for example, tends to increase the U.S. trade deficit in the short term because, while the price of imports increases immediately, contracts remain constant. After demand shifts from imports to domestic goods, the trade balance improves—often the goal of an intentional currency devaluation. This pattern resembles a "J" on graphs and is therefore called the J curve.
Ian Bremmer, a political scientist who built a business on understanding risk, noticed that countries also follow a J curve when moving from a state of isolation to a state of openness. In this case, the curve describes the relationship between a country's openness and its stability, which is detailed in Bremmer's new book.
Bremmer's premise is that "as the energies of globalization open up the least politically and economically developed areas of the world, as the citizens of closed states learn more about life beyond their borders and discover that they don't have to live as they do, tyrants must expend more and more effort to isolate their societies" (p. 265), a point echoed by Natan Sharansky in his justification for democracy promotion. But Bremmer's point is that openness, not democracy, should be the tool of change. The task of the most open countries should be to work with international institutions to help the more closed countries through the rocky transition to openness and more enduring political stability. In fact, one can argue it is an ethical imperative.
The horizontal axis in Bremmer's J curve is openness; the vertical axis is stability. Openness is defined as a measure of the extent to which "a nation is in harmony with the crosscurrents of globalization—the process by which people, ideas, information, goods, and services cross international borders at unprecedented speed" (p. 7). The figures that comprise this index include the level of foreign direct investment flowing into a country, as well as the percentage of people who have access to global news. Stability is defined as a state's ability to withstand shocks, as well as its ability to avoid producing them. A country's endowments, such as natural resources or political plurality, will push it higher on the graph, while a tsunami or sanctions, for example, can push it down, making instability more likely.
So why not support stable but oppressive regimes, such as those in Saudi Arabia and Pakistan, in the interest of global security? Bremmer's answer is based in part on a humanitarian concern for the individuals who live in those states—"the most stable authoritarian regimes are the most repressive" (p. 22). Moreover, authoritarian regimes cannot last forever, as they will eventually "collapse under their own repressive weight and the energy released will send them hurtling down the left side of the J curve without brakes—or a steering wheel." Stable, open countries, like the United States, therefore have a duty to steward closed regimes toward openness in the interest of future global welfare.
Bremmer's book takes us on a journey along the J curve, starting at a position of moderate stability and low openness. Here we find the most isolated states, like North Korea, Cuba, and Iraq before the current war. All three derive their stability from the health and safety of their leader. As such, stability may be short-lived. Bremmer explains, "Authoritarians like Kim Jong-Il, Fidel Castro, and Saddam Hussein do not allow for the creation of the independent institutions on which peaceful transitions depend. A country that is stable only because it's closed will not remain stable for long if competing institutions create political rivalries" (p. 59). In turn, the book thrusts yet another stake through the heart of the argument for economic sanctions against such countries. Not only do sanctions starve the people living under oppressive regimes and give rhetorical fodder to the regimes themselves, they dampen the very forces of globalization that can accelerate change from within. Sanctions give despots exactly what they want—deeper isolation.
Isolated or not, all countries are in constant motion—back and forth—along their own J curves. There is a tension between individuals' desires for greater openness and an authoritarian regime's grip on power, as well as a temptation to roll back reforms when the resulting instability seems unbearable. Russia perfectly exemplifies this sort of back-and-forth motion. As a rule, the right side of the J is much higher than the left because once a state survives a shift to substantial openness, it becomes much more flexible, and therefore more stable, than a closed country could ever be. If the state is a tree and globalization is wind, well, the state better bend a little.
In the middle of the J curve, when nations that are moving toward greater openness experience a "slide toward instability," their leaders must choose between making the complete transition to openness or backsliding toward repression. In the face of instability, the leaders of Iran and Russia responded by limiting their people's freedoms; Yugoslavia erupted into war; and South Africa progressed to the right side of the curve. Iran needs to create jobs for its huge youth bulge, a possible driver for change. In light of this pressure, Bremmer advocates a policy of "selective engagement" with Iran. The United States can use this opportunity to strengthen trade and investment ties to drive a wedge between Iran's ruling conservatives and the rest of the country. Other countries that have made the transition but still face challenges to their place on the curve are India, Israel, and Turkey.
Where does that leave China? Bremmer devotes the penultimate chapter to the subject and argues that China remains on the left side of the J curve. While China has indeed opened its economy, Bremmer invites us to take Sharansky's "town square test" in Beijing. If you can walk into the middle of town and express your views, you live in a free society. This is not the case in Beijing, Bremmer contends. China's economic reform represents the Communist Party's "attempt to move from the left to the right side of the J curve without a fall into political instability" (p. 260). Bremmer concludes that instability is inevitable in China as it slides down the J curve, and the United States and the international community should do everything possible to keep China together by encouraging it to join international institutions, compete for Western assets, and build a prosperous, globally connected middle class.
For all the book's merits, its subtitle, "A New Way to Understand Why Nations Rise and Fall," is curiously misleading. Perhaps Bremmer and his publishers are targeting foreign-policy wonks, but the book is not just another grand theory on the international system, power cycles, and the rise of empire, as one is led to believe by the subtitle. When I first read the title, I was immediately struck by the possibility that the book might be mere punditry. There could be many J curves, I thought: one could probably replace stability with demand for accountability as the vertical axis and openness with economic growth as the horizontal axis.
But Bremmer is not being pedantic; he doesn't try to use one concept to explain everything. A more accurate subtitle might have been "A New Way to Understand Political Risk." Policy-makers must often steer the ship of state through rough waters in order to reach safe harbor. Even the best policies can appear misguided in the short run. To make sounder predictions, political risk analysts, traders, and policy-makers therefore must anticipate governments' reactions to shocks, be they earthquakes, terrorist attacks, or civil strife from joblessness or globalization. Bremmer's great success in this book is to make a powerful tool for understanding such risks accessible to nonexperts. The J Curve will doubtless influence mainstream debates for years to come.