The fall of Kabul may be the proverbial drop in the ocean with major consequences for the United States, China, Europe and even the world. It reinforces the call for change that may result in a new world order.
The fall of Kabul will probably go down in history as the greatest American humiliation since the Americans’ hasty departure from Saigon. While the Taliban speak of a peaceful handover, the images paint a different picture. There is great panic. In all haste, documents are burned at the American embassy. Helicopters fly back and forth to evacuate American diplomats. Expensive American military equipment falls into the hands of the Taliban.
At the airport, Afghans cling to the American military planes. Interpreters, their families and other Afghans who have helped the Americans and their allies stay behind and now justifiably fear for their lives. Meanwhile, Biden washes his hands and points to his predecessor, but it is like Churchill at Dunkirk saying that it was all Chamberlain’s fault and that the British had already fought too many wars on the European continent. This means the end of Joe Biden, just as the flight from Saigon meant the political end of Gerald Ford and the failed action surrounding the US embassy in Tehran meant the political end of Jimmy Carter.
A lot will change for China
The Chinese are probably not happy about the Americans leaving. Afghanistan borders China and the Taliban’s approach to the Uighurs will not have gone down well with them. The Chinese see the Uighurs as a domestic terrorist problem, but it now suddenly takes on a cross-border dimension. Moreover, Pakistan is an important part of the Belt & Road initiative and Chinese troops have already been attacked in the area in recent years. It is unlikely that China will interfere militarily in Afghanistan, given its history with the British, the Russians and now the Americans. At the same time, China will realise that the American security umbrella is far from watertight.
The chance that the Americans will intervene militarily once China takes Taiwan by force has clearly diminished. There is even a good chance that China will be able to annex Taiwan without a fight. If 75 000 members of the Taliban succeed in overpowering what the United States considers to be a well-trained Afghan army of 300 000, then 3 million soldiers of the Chinese People’s Army should be able to overpower less than 300 000 Taiwanese soldiers.
In the region, countries such as South Korea and Japan will want to strengthen their ties with China, as they too can have less confidence that the Americans will support them at all costs.
More refugees to Europe
The journey from Afghanistan to Turkey is one of just over 2,000 kilometres. Part of the 40 million Afghans will try to flee the country and travel from Turkey to Western Europe. The Taliban do not stop people at the Iranian border. There are already 3 million Afghan refugees in Iran. In September there are elections in Germany, next year April/May there will be elections in France. The arrival of many Afghan refugees plays into the hands of parties like AfD and Rassemblement National.
The only way to prevent that is to ask Ankara (in exchange for a lot of money) to keep the border closed, but Turkey is still stuck with 3 million Syrian refugees that Europe already has to pay for. Moreover, the love between Europe and Erdogan seems to have cooled. There is a risk that a Eurosceptic party will come to power in France, for example, as soon as that country indeed has to take in many Afghan refugees. The euro is a political project that can also be demolished in less than a week, but only by politicians. Brussels, meanwhile, does not seem to care about developments in Kabul. Thanks to the Covid pandemic, the flow of refugees into Europe has been tempered for a while, but Brussels would do well to prepare for a refugee crisis similar to the one in 2015.
The world is about to change
The fall of Kabul is not an isolated event, it may even be the straw that breaks the camel’s back. There are many things that are not going well in the United States. Since the attacks of 11 September 2001, the US government no longer seems all-powerful. It marked the end of the interwar period that began with the fall of the Wall. The image of a crumbling world power was confirmed by the difficult handling of natural disasters such as Katrina and also the Great Financial Crisis. The Covid-19 Crisis, Black Lives Matter and the storming of the Capitol also paint a picture of a government that is no longer ‘in control’. The result is that citizens want or even demand change.
Existing politics, its leaders and institutions are under fire. This has been reinforced by the lockdowns, the masks and the vaccinations resulting from the Covid crisis. Inflation has made food unaffordable in large parts of the world, a world that has become increasingly unequal in recent years. This is not something that is exclusive to our times. No less than 53 of the 57 epidemics since the Black Death have caused social unrest and revolutions.
For many things, the tide has been with us in recent years. Technology provided numerous new applications for consumers, China’s accession to the WTO made it a dual entity with the United States, resulting in increasing globalisation. All good for shareholders who benefited from an extremely efficient world, a world in which prices seem to be constantly falling. The tide has turned. Technology is now seen as a threat, China and the US are decoupling, there is a lot of nationalism as a reaction to the globalisation wave. These days, it is no longer about shareholders, but about stakeholders. They do not demand more efficiency, but rather robust systems. As a result, costs (wages, energy and logistics) are rising. These changes, of course, also affect the portfolios of investors. Many people see change as a risk, but for early stage investors there are mainly opportunities.
Han Dieperink is an independent investor, consultant and knowledge expert for Fondsnieuws, Investment Officer Luxembourg’s sister publication. He is currently active as Chief Commercial Officer at Auréus Asset Management. Earlier in his career, he was chief investment officer at Rabobank and Schretlen & Co. He provides his analysis and commentary on the economy and markets. His contributions appear on Tuesdays and Thursdays in Dutch on Fondsnieuws.