Ever since the end of the Cold War, the world saw a major shift in its political environment. The global financial crisis of 2008, happened to be a big deal.
According to Ben Bernanke “It could have resulted into a 1930’s style global financial and economic meltdown with catastrophic implications”. Needless to say, we survived the global financial crises and things surpassed. The global economic dynamics witness a drastic change entering a ‘new normal. Revealing the world to unguarded and perplexing challenges whose consequences are felt to date.
The post-Cold War world structure was designed and controlled by the United States. The main objective of Washington was to construct the International System on the foundations of a liberal economy. Of course, the governing system should be one as a whole in the global context, DEMOCRATIC. United States victory over USSR made it a superpower, worldwide. Organizations such as the World Bank, The International Monetary Fund (IMF), and General Agreement on Tariffs and Trade (GATT) joined hands with Washington to solidify the global economy and proceed with the capital flow.
The New International Economic Order (NIEO) fashioned by the U.S has core principles with respect to monetary services; fixing the dollar standard, transforming global economic governance in order to divert the gain margin of transition integration in the direction of the underdeveloped countries. Therefore, to conclude the geopolitical system of decolonization. Paving the way for a more viable democratic global order operating solely with sovereign states. Declared by United Nations in 1974, the NIEO was a proposal with a future vision that was very different from the olden days, primarily more in favor of Third World countries.
Since the superpower has to maintain its supremacy, the United States endorse its allies with aid to sustain its economic development. Marshall’s aid plan is one great example of its time, funding was intended for Japan during the Korean war period and Western Europe. In the 1970s, the U.S as a global hegemon hosted developing countries.
In the post-cold war period, the wave of globalization brought forth lot many problems, including prevention, crisis management, detection. Which the New International Economic System could not endure. The Bretton Wood system in 1973, collapsed indicating that with the underdeveloped countries, the United States needs to rest more on macroeconomic policy in relation to the developed countries for the purpose of sustaining the international monetary order.
Nonetheless, the initial framework of the world economy remains unaltered, irrespective of the challenges it has encountered over the period of time. In contemporary times the Unites States supremacy is very much challenged. Power politics is subject to growth and decline; may it be real or in relative terms. As of now, China has outpaced the United States which was significantly more powerful in the former times. With respect to the rest of the world, U.S power and influence have increased but in comparison to China, it has decreased. Considering power is not absolute, it’s relative.
Undoubtedly, the U.S has successfully maintained the monetary hegemony over the world for decades. The U.S has been known as the “currency heaven” which was subverted with the creations of the Euro. on the other hand, the Trillions of dollars spent on the Afghan war just to lose has made the Unites States incapable of driving the global economy as a hegemon. The unsuccessful diplomatic and economic policies have marred its image in the international system and likewise disrupted the international order.
Since the beginning of the 21st century, emerging power reordered the international economic system, maintaining rapid economic growth. According to IMF, Group of Seven industrialized countries (G7) in 2001 accounted for around 43.435% of the global GDP with respect to purchasing power. However, in 2015, its share declined to 31.5%. Meanwhile, BRICS contributed 19.3% to the economic hare which increased by 30.8% of the global GDP. But the underdeveloped countries didn’t show much of an improvement in the international economic system.
One cannot overlook the worsening effect of the global financial crises of 2007 – 2009. A one of kind global recession since WWII. Lehman Brothers collapsed the U.S subprime mortgage, the housing market defaulted, and the world merged into a global financial crisis. The economic wealth of trillions of dollars around the world diminished. Exposing economy to many problems like, interstate – intrastate conflicts, injustice, unequal distribution of resources, exploitation of labor class from underdeveloped countries, mass level of unemployment, unbalance consumption of global resources. Almost half of the world’s GDP, half of the world’s labor collapsed, in a course of 12 months.
A new dynamism
Since the United States’ dominance over the world economy declined, it shifted the focus towards overseas conflicts, striving to remain competitive in the International System. Meanwhile, China sneaked its way into the global economic shift, titling it in its favor. Strategically implemented its policy of opening up in the economic order, China, the world’s most autocratic regime, the world’s most centrally controlled system, is expected to be the global hegemon by 2026-2028. Leaving the U.S far behind in the global economy, precisely, in international trade and investments. China holds the international economic order through its economic strategies, changing the demography of the economic system. Beijing used an “all-in approach”, inculcating the forgotten, ignored underdeveloped countries, to boost the economy on a global level.
In the pre-pandemic times, the United States imposed billions of dollars’ tariffs worth of Chinese imports which China responded to retaliate but in kind. The escalation in the relations of the two biggest economies in the world paved the way to a new dynamism. Beijing strived that the tilt of this new dynamism should be in its favor. The pressure exerted by the United States was perceived by China in a positive fashion. Beijing made great efforts in its policy reforms which were a setback. China fought the U.S with negotiations, a more pragmatic approach keeping its soft image intact. Adjacent to this, the basic considerations and sophistication behind the calm manner of Chinese leaders are focused on the long-term strategic influence. Positioning themselves as the leaders of a new round of globalization. And nonetheless, keeping the commitment to opening up, unscathed.
The integration of China with the World Trade Organization in 2001, did help China connect with the world as an indispensable part of globalization. Regardless of the claims being made that China is not ready for the integration. The Chinese local financial companies polish their financial skills, learned how to manage risks, how to serve the needs of the clients with respect to foreign companies. Likewise, the 2013 global infrastructure development strategy by China, the Belt & Road Initiative (BRI) is more of a vision rather than just a lack of transparency, no respect of rules and regulations, it’s not just a set of institutions. Open for improvements, negotiations, connectedness. Putting it out that China is ready.
The definition, China being ready is different from the traditional definition of ready in the western world, which is being a leader in terms of aggression and provocativeness. China is not aiming to be forceful, violent, provocative, or aggressive. China centralizes inclusion, collaborations, co-prosperity, mutuality,
connectedness, a more allied approach that clearly depicts the soft image projection. Solely dedicated to the principle of negotiation. This approach can be named the new “Chinese Style”.
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The Post Pandemic World
The world took pandemic by surprise. Simply because the world was never ready, nobody ever thought of something of this sort coming in such an amplified manner. Anyhow, emerging from the pandemic is still challenging and underway, people are now expecting a friendlier political and economic system that’s much more effective than the ones before. A system that’s transparent, fair, and open, a system based on “meritocracy”.
The new world order has canceled the old world order. China pulled 627 million people out of extreme poverty, more than what the world’s entire democracies couldn’t achieve altogether. At the time of the financial global crisis, it was the non-transatlantic axis economies that rescued the global economic system. China throughout the global financial crisis grew 4½ trillion U.S dollars. Currently, Europe’s most successful economy Germany grows because its exports target developing Asia. Germany as of now exports far more to developing Asia than to the United States or even the transatlantic axis.
Since the beginning of the century, the world’s economic center of gravity, the middle of the Atlantic Ocean which is the transatlantic axis, shifted. Dragged by the rise of China, an illiberal non-democratic state. The world’s most well-known economists wrote, “that if you believe that the rise of Asia, the rise of China as well you were going to be surprised if you were surprised the same way that you would have been surprised by the collapse of the Soviet Union”.
So what’s China real impact?
China’s real impact is not being a larger economy than the United States but that it put forward a very different political system. China and the East Asian economies continued to follow the path of free-market capitalism. The same free market that failed in the global financial crises economies along the trans-Atlantic axis, led the rest of the world’s nondemocracies to grow. This took us away from our typical standard notions of liberal democracy. Here’s a point that challenges our view of the world order. Liberal democracies in contemporary times is a catchphrase or more of a code word for what we don’t have and what we desire to have. Democracy is set, set to a way, a way out.
In another perspective, liberal democracy obligating to be a liberal democracy, have absolutely nothing to do with elections. Nothing to do with the ballot box either. What needs to be done is to make your government insecure. Your governments, your leader, should regularly know that their position is constructed on the shifting dynamics of their people’s needs. The supreme responsibility of the government is to serve the needs of its people. The narrative that we are a liberal democracy because we have ballot box elections but the people remain unserved, reveals how deficient a system is. China on average continues to grow its economy 10% annually, prioritizing the needs of its people, being a Communist Party. The world’s biggest non-democracy for the past 5 decades.
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The United States has been acknowledged as a worldwide leader, a hegemon. Claiming to serve the needs of the world. Now in a demented perspective, nobody knows who choose the U.S as a global hegemon taking global decisions unanimously. This didn’t happen through a ballot box election. The U.S became a hegemon in the international system through its unrivaled influence, military strength, and being the richest state in the world. Presuming the ideals of liberal democracy, it is quite clear that liberal democracies do not serve the needs of people rather it’s more about serving the stakeholders.
In this new economic world order, it’s we, the people, who should be deciding global significance. Because we matter!
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