December 2023

The art of Alpha

Two global markers have emerged from the wars in Europe and the Middle East.

Ukraine flagged up Russian supply chain security, specifically with food and energy. With China, security, clothes, phones and other day-to-day paraphernalia are equally applicable.

Then came Israel-Gaza,which underlined the degree to which current world order institutions are broken and in urgent need of repair.

What, though, is the way forward and which beacons should we be following?

The United Nations Security Council, set up as the final arbiter of international law, is acrimoniously deadlocked, its mission to maintain peace and security in tatters.

But, in the current climate, no government is willing to cede ground enough for real reform.

The views of the 193-member General Assemblyare mostly ignored. Its recent overwhelming votes which condemned Russia’s Ukraine invasion and Israel’s bombing of Gaza,might reflect a general world opinion, but they washed like water of a duck’s back when it came to doing anything about it.

Meanwhile, there remains a belief in Western capitals that democracy and shared values are panacea and supply chains can be protected by severing manufacturing links with potential enemies –a process known as de-coupling.

The idea that India or Germany will suddenly stop buying Russian energy or America will ban the sale of the Chinese-assembled iPhones is clearly nonsense, as was the tragic fantasy that Western-style democracy could be injected into Iraq and Afghanistan.

But sifting nonsense from reality is not good enough.

With broken systems and polarised thinking, there is urgent needfor a new way of thinking that challenges orthodoxies. Today’s stakes are too high tokeep getting policy wrong.

The Indo-Pacific is developing along two parallel strands.

From the governmental top-down, talk is about security such as threats against Taiwan and the reliability of India as a Western partner.

It is here that Cold War rhetoric lifts its head because of an unresolved conundrum.

The economy of Taiwan, for example, relies heavily on China, while India buys weapons and oil from Russia. Yet Beijing and Moscow are seen as enemies of the United States.

All Indo-Pacific nationsneed to examine how much they can expect to benefit economically from governments hostile to the very country that isguaranteeing their security. Failure to plan on this issue risks leading them towardsthe very situation which they have repeatedly said they do not want to happen – having to choose sides between superpowers.

The parallel track running from the bottom-up, grassroots level is more straightforward and offers more hope.

Away from media headlines, ideas, trade and commerce are flourishing.  Trust is being built, not through policy papers in faraway capitals, but on deals and partnerships shaped by commerce.

The driversare not shared values or geopolitical strategies but the forging of common interest relationships revolving around business, technology and wealth creation.

Last year, despite repeated headlines about Chinese invasion plans, Taiwan racked up its largest ever trade surplus with Beijing. US-China trade also reached an all-time high.

It is here we see a clear divergence between those concentrating on economic prosperity and those in government prioritising security.

Both are needed, yet more of a spotlight needs to shine on this bottom-up, wealth-creating, trust-bonding environment that knows how to override differing political systems in order to build win-win arrangements.

Corporate and market needs, not ideological rivalry between superpowers, should take the lead in honing supply chain security along the maxim that money flows towards where it is safe.

With wars raging andinstitutions creaking at the seams, top-down global governance is failing.

We would be wiseto move our sights downwards towards innovators and deal-makers and ask:what systems do they need to bring security and prosperity?

In the world of markets and commerce, there is a phrase called ‘Hunting the Alpha’, nailing down a business arrangement that delivers better than expected returns.

Commerceis the shared interest of the Indo-Pacific. Alpha could become the unifying beacon all parties are hunting.