Prof. Bulent Gokay*
The economic downturn and recession, which spread across the globe following the US sub-prime mortgage crisis in September 2008, has become the dominant news topic of the past year. The latest statistics reveal that 2009 experienced the first worldwide drop in output since the Second World War. Today, one and a half year after Lehman Brothers’ sensational collapse, the entire world economy is in the grips of the most severe synchronised global recession since before the Second World War. Despite the euphoria that gripped the markets in late 2009, the global crisis has yet to bottom out.One voice is Chinese, and Zhou Xiaochuan, the Chair of the Monetary Policy Committee of the People’s Bank of China, speaks of structural reform of the international monetary system, with his call welcomed by Russia, India, and Brazil, based on their view that there are “inherent weaknesses” in the current international monetary system
with his call welcomed by Russia, India, and Brazil, based on their view that there are “inherent weaknesses” in the current international monetary system, with his call welcomed by Russia, India, and Brazil, based on their view that there are “inherent weaknesses” in the current international monetary system. Another is South American, with Brazil’s President, “…China-US relations are poised to turn increasingly conflictual.” Luiz Inácio Lula da Silva defending the right of national self-determination, noting that
. . . each country establishes the democratic regime that suits its people . . . [and that] The great lesson for everybody is that the state has an important role to play, and has great responsibility. We don’t want the state to manage business. But it can be an inducer of growth and can work in harmony with society. In Brazil, thank God, we had a solid financial system and public banks [emphasis added] with an important role in offering credit. And these were the banks that made sure the crisis here was not as bad as it was in other countries.2
While Zhou’s call is narrowly structural, and da Silva’s is broadly ideological, both are clearly seeing a world that is beyond the Bretton Woods system. Similar post-Bretton Woods views is now also appearing within the U.S., with Paul Kennedy noting in a September 2009 New York Times Op-Ed column, If one believes in the economists ’theory of ‘convergence’ — that is, the coming closer together of the product and income of companies, regions, and countries — then the conclusion is clear: As China, India, South Korea, Brazil, Mexico, and Indonesia all ‘catch up,’ the American share of things will relatively shrink. Sooner or later — and this debate really is about ‘sooner’ or ‘later,’ not about “if” — we are going to witness another major shift in the global balances of power3. Niall Ferguson goes further in suggesting that we are on the verge of a replay of the British-German geopolitical rivalry that led to the First World War. He claims that China-US relations are poised to turn increasingly conflictual.
The voices that we are now hearing are reflections of how history changes our focus as it changes the world around us. In the long history of global political economy, crises come and go, as do the focal points around which they form. To understand the voices we must also understand the history that gives them volume and reach.
The current crisis is destined to bring about fundamental changes in the world. The world will be different when the carnage stops. The crisis will bring irreversible geopolitical consequences. I’m not saying that it is all over for the USA. It is still one of the strongest countries in the world. But the reality is that the US economy and the rest of the US-centered economies of the West are fast losing ground. China, India and other large size emerging economies, have been strengthening considerably. What is underlying the current crisis is this historical shift: the ‘unipolar’ phase of US dominance is being replaced by a ‘multipolar’ phase, in which the US will continue to remain one of the most prominent powers, but has to share this position with China and India as the biggest and fastest growing rising powers. The post-global crisis world will be increasingly dominated by this relationship between the US and China, India, Russia, and other rising powers.
(Goldman Sachs projection of ten top economies in 2050)
The world has changed a lot over the past 50 years. Over the next 50, the changes could be at least as dramatic. A 2003 Goldman Sachs report, titled as ‘Dreaming with BRICs: The Path to 2050’, claimed that over “…the US will continue to remain one of the most prominent powers, but has to share this position with China and India as the biggest and fastest-growing rising powers.”
the next 50 years, Brazil, Russia, India, and China—the BRICs economies—could become a much larger force in the world economy. The report mapped out GDP growth, income per capita, and currency movements in the BRICs economies until 2050. The report read as ‘in less than 40 years, the BRICs economies together could be larger than the G6 in US dollar terms. By 2025 they could account for over half the size of the G6. Currently, they are worth less than 15%. Of the current G6, only the US and Japan may be among the six largest economies in US dollar terms in 2050.’4
Notes:
* Bulent Gokay is a Professor of International Relations at Keele University.
1 Mac Margolis, “Reason with him: An interview with Luiz Inácio Lula da Silva” in Newsweek, 22 S e p t e m b e r 2 0 0 9 . h t t p : / / www.newsweek.com/id/215940
2 Paul Kennedy, “The Dollar’s Fate” in The New York Times, August 29, 2009, http:// w w w . n y t i m e s . c o m / 2 0 0 9 / 0 8 / 2 9 / opinion/29iht-edkennedy.html[accessed in December 2009].
3 Interview: Niall Ferguson discusses the similarities between the former British Empire and America in its current state, NPR Talk of the Nation , April 14, 2003; Niall Ferguson, ‘What “Chimerica” Hath Wrought’, The American Interest Online, January – February 2009, http://www.the-american-interest.com/ article.cfm?piece=533 [accessed in February 2010].
4 Dreaming With BRICs: The Path to 2050, Goldman Sachs, Global Economics Paper No: 99, October 2003, http://www2.goldmansachs.com/ ideas/brics/book/99-dreaming.pdf [accessed in January 2010].
