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Letter from the Editor-in-Chief
The World Economy: Implosion, Explosion or Resurgence?
The twentieth century saw frequent shifts in the world economy. During the earlier part, Western Europe and in particular the colonial powers dominated the world scene. They employed every possible device to maintain their supremacy and garner all the wealth. This left most of Asia, Africa, Latin America in a state of destitution which has also contributed to the prevailing economic instability and unrest. So far the materially and technologically superior Western System has always prevailed. But in the later half of the twentieth century, that is after the second World War, the balance of power shifted towards the United States and much of the world was made to contribute to the enhancement of its wealth and might. Allowing others the right to exist only as surrogates without growing out of its sphere of interest, while keeping the Soviet bloc on the defensive, was the American policy. And during this period they enlarged their defense and security infrastructure not only to protect themselves, but also to dominate the entire planet.
The last four decades saw the emergence of Japan, and some South East Asian countries known as the Asian Tigers. Their expansion beyond a certain point aroused American concerns as it was perceived as a threat to the hegemon’s interests. That Japan was emerging as the economic power of the late twentieth century, was regarded as a challenge by the Western oligarchies; and a major operation called “downsizing Asia” was launched. This not only sent the Asian Tigers into a spin but also brought about a rapid decline of the Japanese economy.
Since then, some significant developments have taken place with the emergence of China and India as the key growth economies of the twenty-first century. Today about 70-75 per cent of all the world’s foreign exchange reserves are in Asia. The countries of the region with their growing economic cooperation and trade are fast approaching a threshold of seemingly irreversible empowerment. And it would appear that the Americans have already started considering that momentous event as a threat to their long term interests, and are trying by all possible means to bring the new challengers under control within the larger paradigmatic and financial structure of their making.
In the meantime, the “first world” economies, particularly that of the United States have reached a saturation point for their infrastructure and markets. Attempts to shift from physical productivity base to knowledge economy meet with severe intrinsic limitations. Firstly there is a growing cultural resistance and secondly, in the process of taking material development to its extreme, their citizens have been mentally impaired in terms of participating in the knowledge revolution. The pendulum has thus started shifting towards less developed countries of Asia in general and the two major economies, China and India in particular. With the emergence of the united Europe and the Euro and also of Russia as a major supplier of oil and gas in an energy market where perceptions of scarcity are fast raising prices, the balance of power is again shifting towards Russia and its major European partners. This has placed the dollar on the retreat and the Euro on the rise.
The other major shift is the one from production to services in the American economy. Industrial production and services have been migrating to countries like China, India and other East and South-East Asian nations. Latin American states like Brazil and Mexico are also now servicing the consumer needs of the American market. In fact, the dependence of the United States on imported consumer articles and service has made it exceedingly vulnerable in terms of balance of trade, value of the dollar and inflationary pressures. And this, along with rising concerns about credit card and real estate debts has eroded the United States’ ability to shape the world economy. Political pressures, threats of armed intervention and regime change are becoming increasingly counter-productive.
Substantial support to the American economy arose out of their control of the world’s, energy resources, of which so far they have been the biggest beneficiaries through the relative control of prospecting, drilling, refining and marketing. The leading oil companies have been an essential part of a unipolar system dominated by the Anglo-American oligarchies. But, even this sector is undergoing some fundamental changes in ownership, control and nature of markets which is limiting the preponderance of United States’ interests. Iraq is plunged in turmoil, and Iran is under pressure for allegedly making nuclear weapons. Saudi Arabia’s regime is destabilised because of the unpopularity of the royal family seen as closely associated with the exploitative system managed from the United States.
The other large deposits are in Russia and the former Russian republics in Central Asia. The attempt at domination of these areas by the Anglo-American oil oligarchies is not meeting with uniform success. With Russia, China and India moving towards an energy partnership and the Russian state resuming control of its own oil major ‘Yukos’, the momentum is building up in favour of the Asian countries. The issue is where and how this major energy resource of Asia will move—East to Afghanistan, Iran, Pakistan, India, China or west through pipelines via Turkey into the Mediterranean. This is rapidly becoming a major reason for conflicts in Ukraine, Chechnya, Azerbaijan, Georgia, Uzbekistan, Kazakhstan, Kirghizstan and Turkmenistan. Yet seventy per cent or more of the world’s oil resources are in Asia where most fast-rising markets for these resources also lie. In question is the logic of largely Anglo-American oligarchies controlling the global flow of oil, and supplying it to Asian countries for hefty commissions. The future scenario will become visible as the situation evolves in Iraq and in Iran as well.
Another major energy reserve is in Latin America, especially in Venezuela. With most of the major countries of Latin America coming together in a mutually supportive mode, these resources are rapidly slipping out of the American control.
There are also many energy resources in Africa; in Nigeria, Sudan, Libya and some of the other countries of West Africa. Hence they are involved in growing conflict for the control of the continent.
Looking at the state of the world economy today, it is important to identify these shifting power centres and understand the forces at work. As a result, we see that there are two possibilities:
The energy continues to be under the domination of the Anglo-American oligarchies, which will then dictate economic policies in the five continents.
The responsible world leaders will act together, in a spirit of non intervention in the affairs of other countries, to prevent the forcible preemption of their resources, and to plan for the creation of a new human order in which each country can get its fair share of resources for human development. It appears that the Anglo-American oligarchies, whether or not under the unholy guidance of the neoconservatives, are in no mood to participate in such a universal enterprise. Using the mass media that they largely own and under the cover of fighting it these “elites” are manipulating international terrorism to make it a cause for wars, as in Iraq. It would be fair to say that the imperial masters will for now be unable to create voluntary coalitions in the service of their objectives. Indeed, because of their devalued credibility, any new attempt at provoking confrontation will have the unintended effect of reinforcing new self-protective regional alignments in Asia, Europe and Latin America.
Perseverance in the promotion of hegemonic interests would thus catalyse conflicts of unparalleled magnitude in which the superpower might find itself increasingly isolated again the rest of the world.
The present state of the world economy, can best be described in the following terms: The American economy is on the border of implosion. Transferring production to the less developed countries has boomeranged and many of the command and control centres of the world economy in both production and services have shifted to other, mostly developing nations, leaving the USA in rising debt, still unable to comprehend and assess the cost of the growing challenges to its supremacy. If Iraq, a small country of 20 million people with no credible defence infrastructure cannot be brought under the control of the Anglo-American military machine, how can the USA hope to win against countries like China, Russia, India, Brazil and many others it may be tempted to bring down? Any attempt to provoke larger conflicts instead of settling issues fairly through international mediation and cooperation will thus be suicidal and possibly unleash an Armageddon, the consequences of which are difficult to evaluate.
But to reframe new social structures during the slow collapse of the dominant role-model will not be an easy task. Recently we witnessed the demise of the Soviet system where an overwhelming state apparatus could not manage contradictions in attempting to carry out an agenda of massive military expansion while building a thriving consumer market. Similar factors are now bringing about the implosion of the free market system. It is time to examine new, less violent and more decentralised options for those who retain the freedom to act. The developing countries need to reject the ecologically destructive, morally, ethically and culturally bankrupt model touted by the west. Self-contained rural republics, a controlled market economy, and free public enterprises within a just, fair and sustainable value structure could lead us towards this new order. Instead of billionaire clubs, we need cooperatives to inculcate the spirit of trusteeship amongst the wielders of economic power in all its manifestations.
The coming demise of a violent and destructive system is a time to celebrate and to let new dreams and visions flower, making life gentler and more meaningful for all. We therefore, have asked some experts to examine the current globalised economic situation from various angles and to outline certain alternatives, essentially inspired by Asian values.
J.C. Kapur
New Delhi
March 2005