Geopolitics

Could this be the death of the dollar?

philmullan Changing world order, Debt, Geopolitics, Trade

The single most important prop sustaining the US economy today is the global power of the dollar. America’s current relative prosperity (which until recently was dubbed ‘US exceptionalism’) rests far more on the role of its currency than on its tech companies, abundant resources or famed entrepreneurial spirit. Because the dollar is accepted as world money, when the American state and its corporations spend or borrow abroad, foreigners have been willing buyers. This has enabled a seemingly endless flow of cheap money to support the economy at home.

Today, however, this special benefit is looking increasingly vulnerable. And the greatest threat to the dollar’s status doesn’t come from Russia or China or even Europe, but from the US government’s own actions.

Read the full article here.

The death of the West?

philmullan Changing world order, Geopolitics, Politics, Rivalries, Trade

‘There are decades where nothing happens; and there are weeks where decades happen’, Vladimir Lenin is supposed to have said. But the globalised world order collapsing within the space of weeks would be momentous even by the Bolshevik leader’s standards. This is certainly what many international politics watchers think is happening.

Bronwen Maddox, director of the Chatham House think-tank, has said that the concept of the West as an alliance of liberal democracies is ‘probably’ over. Michael Clarke, a former director general of the Royal United Services Institute, has been more forthright. ‘The West is dead’, he said. Meanwhile Marc Chandler, chief strategist at Bannockburn Global Forex, has said that Trump’s policies will ‘end globalisation’.

The problem with these obituaries to the West, these valedictions to the world order and to globalisation, is that they assume that a decisive transition has taken place in recent weeks. But this is not what is happening. Rather these declarations express the dawning, and deepening, recognition by the west’s elites of the existing instability of global politics and economics, even though this has been so for some time.

In truth, the geopolitical and economic shifts and fractures that Trump has brought to the fore over the past few weeks have been taking place for years.

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Trump is hardly the West’s only trade warrior

philmullan Creative destruction, Economic growth, Geopolitics, State intervention, Trade

Enough of the hyperbole about Trump’s tariffs. His tariffs are wrong, but so is the rest of the west’s obsession with Trump-driven trade wars. For a start the hysteria over Trump’s tariffs ignores, and distracts, from just how protectionist most mature economies have become. Protectionism in its many forms impedes the domestic business investments needed for productivity growth. And the parallel fear-mongering about a ‘trade war’ is clouding the bigger geopolitical, as well as the economic issues, at stake today.

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The fall of China? Don’t bet on it

philmullan China, Economic growth, Geopolitics

For years Western experts have been talking of China being on the verge of financial and economic ruin. So far it has survived. But China’s uneven post-Covid recovery has brought Western gloom about its economic prospects to new heights this year.

This dismal thinking draws on real economic problems. China slipped into price deflation in July, as growth in retail sales and industrial output slowed. And in August, Country Garden, a major property developer, missed payments on some of its debt. To cap all this off, Beijing announced last month that it will stop publishing youth-unemployment figures, after reporting record highs – a sign that the authorities are keen to bury bad economic news.

So, might the dire expectations from Western economists finally come true this time? Certainly, economic growth has slowed substantially since those heady days during the 1990s and 2000s, of growth rates of more than 10 per cent per annum. But since China has survived all the previous portents of ruination, it would probably be wise not to hold our breath. Gloomy predictions of China’s imminent economic collapse say more about the West than they do about China.

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The end of the American century

philmullan Changing world order, Economic policy, Geopolitics, Rivalries, The longest depression

Many believe that the war in Ukraine will reverse or bring an end to globalisation. However, this is not the first time that globalisation has been declared dead. Obituaries were published after the financial crash of 2008, after the Brexit vote in 2016 and after the election of President Trump in 2016. Yet more obituaries were penned following the pandemic lockdowns and the accompanying disruption of global supply lines.

When a phenomenon is repeatedly declared dead, only to repeatedly survive, it should raise questions about the usefulness of the concept used to describe it. That certainly goes for the concept of globalisation. World economic developments simply do not follow an either / or, more-or-less logic of globalisation or de-globalisation.

In order to understand today’s economic developments, it is better to start not with globalisation, but with the idea that the world economy is always in flux – that the balance between international and national is always changing. We can therefore ask: which features in the world economy are likely to be magnified or sped up by Russia’s invasion and why? The most important impact will be the acceleration of the existing fragmentation within the world economy, both at the regional level and at the national level.

Read the full article here.