- 04 Apr 2009 09:59
#1858104
By HoniSoit
The current financial crisis, it is not unreasonable to argue, will have important geopolitical ramification, possibly leading to a major, or at least the beginning of a major shift of power from the West to the East (but not necessarily from the 'North' to the 'South'); however, while this view is prevalent, it is far from certain that it will take place.
Signs of a Shift of Power?
For some time now, there has been speculation in the mainstream press about the possibility of China or more broadly the East-Asian region emerging out of the current financial crisis and assume a more importance and assertive role in international affair. This may be reflected in the likelihood that some of the rapidly development countries including China would have a more say i.e. more voting power in the International Monetary Fund as a function of making more monetary contribution to the fund. The Chinese government, for its part, has already lectured the West on its financial deregulation. This is quite the reverse of the past practice where the United States, The World Bank and the IMP lecture the rest of the world on the virtue of free market, economic liberalisation and financial deregulation. In addition, the Chinese Premier, Wen Jiabao, in his much quoted words 'I'm a little worried' expressed his concerns about the adverse impact of the fiscal and monetary policies of the Obama administration on Chinese holdings of dollar assets. Furthermore, the Chinese central bank, echoing the United Nation, Russia and Europe, has also called a basket of reserve currencies to replace the dollar; while this will not happen any time soon, it should be taken more as a sign that China is beginning to want to be more vocal on the international stage. So are these all signs that there will be a major shift of power?
The Twin Premises
This idea that China and the East-Asian region may come out of the financial crisis stronger is of course predicated on the twin premises that the power and prestige of the United States is and will continue to wane, and China and the East-Asian region would fare relatively well economically in comparison to the US. However, the realisation of both scenarios is far from certain.
Firstly, while the United States has been hard hit by the financial crisis, the government has been mobilising state resources to rescue its financial system, recapitalising rather than reconstituting it. This may or may not be successful, but given the adaptability of capitalism for now it would be too early to pronounce the end of American hegemony (or the end of neoliberalism, let along capitalism itself). Indeed, as the United State is still far ahead of rest of the world economically, it is some time before any single country to catch up. While the European Union could compare itself to the US, the eurozone economy is not faring particularly better itself*; on the other hand, the East-Asian, or Asian-Pacific region is yet a closely integrated economically like the EU and hostilities between states would likely prevent any formation of regional union that could challenge the US economy.
Secondly, it is rather easy to point out the problems of the Chinese economy itself. Having succeeded in maintaining speculative rate of growth over three decades, it has to face the problems inherent in this speculative growth, namely the over-reliance on export and the ever deepening income inequality. Now that the Chinese economy can hardly look to the West to absorb its export (a situation which also drags down the Asian-Pacific regional economy as many of the countries in the region have boosted their economies from exporting to China), it also cannot look inward to domestic consumption to stimulate the economy considering the lack of state provision of social welfare, and the low spending power of its great majority of population. And of course, there is the issue of mass unemployment, already some 20 million laid-off migrant workers according to Chinese government's own estimate, which could lead to social instability, something the Chinese government is gravely feared of, and the problem of extreme environmental degradation also cannot be overlooked, its damaging effects requiring huge government expenditures to mitigate.
Finally, it would also depend on the duration of the financial crisis: while China is still maintaining some 6% (if you believe the Western estimate), or 8% (if you believe in the Chinese government forecast) annul growth, its export is sharply declining and many industries are facing the acute problem of overproduction. It could well be the case, if the crisis becomes a long depression, the Chinese economy will simply go down with the rest of the world.
Conclusion?
Well, there is really no conclusion. It is too complex to predicate the consequence of this financial crisis though it is very likely we will see a move to multi-polar world but not necessarily one that is stable. But it is well to remind ourself that we do not have to be passive observers. History is shaped as much by structural forces as by people like you and me who collectively could help shape the world in a way that is more decent and humane.
* I have in this article only make passing references about the European Union mostly because of my lack of familiarity with the European economies but also because it would further complicate a picture that is already complex and thus requires a much longer article. It may well be that the European Union would emerge in a far better shape than either the US or China.
I appreciate any comment
The current financial crisis, it is not unreasonable to argue, will have important geopolitical ramification, possibly leading to a major, or at least the beginning of a major shift of power from the West to the East (but not necessarily from the 'North' to the 'South'); however, while this view is prevalent, it is far from certain that it will take place.
Signs of a Shift of Power?
For some time now, there has been speculation in the mainstream press about the possibility of China or more broadly the East-Asian region emerging out of the current financial crisis and assume a more importance and assertive role in international affair. This may be reflected in the likelihood that some of the rapidly development countries including China would have a more say i.e. more voting power in the International Monetary Fund as a function of making more monetary contribution to the fund. The Chinese government, for its part, has already lectured the West on its financial deregulation. This is quite the reverse of the past practice where the United States, The World Bank and the IMP lecture the rest of the world on the virtue of free market, economic liberalisation and financial deregulation. In addition, the Chinese Premier, Wen Jiabao, in his much quoted words 'I'm a little worried' expressed his concerns about the adverse impact of the fiscal and monetary policies of the Obama administration on Chinese holdings of dollar assets. Furthermore, the Chinese central bank, echoing the United Nation, Russia and Europe, has also called a basket of reserve currencies to replace the dollar; while this will not happen any time soon, it should be taken more as a sign that China is beginning to want to be more vocal on the international stage. So are these all signs that there will be a major shift of power?
The Twin Premises
This idea that China and the East-Asian region may come out of the financial crisis stronger is of course predicated on the twin premises that the power and prestige of the United States is and will continue to wane, and China and the East-Asian region would fare relatively well economically in comparison to the US. However, the realisation of both scenarios is far from certain.
Firstly, while the United States has been hard hit by the financial crisis, the government has been mobilising state resources to rescue its financial system, recapitalising rather than reconstituting it. This may or may not be successful, but given the adaptability of capitalism for now it would be too early to pronounce the end of American hegemony (or the end of neoliberalism, let along capitalism itself). Indeed, as the United State is still far ahead of rest of the world economically, it is some time before any single country to catch up. While the European Union could compare itself to the US, the eurozone economy is not faring particularly better itself*; on the other hand, the East-Asian, or Asian-Pacific region is yet a closely integrated economically like the EU and hostilities between states would likely prevent any formation of regional union that could challenge the US economy.
Secondly, it is rather easy to point out the problems of the Chinese economy itself. Having succeeded in maintaining speculative rate of growth over three decades, it has to face the problems inherent in this speculative growth, namely the over-reliance on export and the ever deepening income inequality. Now that the Chinese economy can hardly look to the West to absorb its export (a situation which also drags down the Asian-Pacific regional economy as many of the countries in the region have boosted their economies from exporting to China), it also cannot look inward to domestic consumption to stimulate the economy considering the lack of state provision of social welfare, and the low spending power of its great majority of population. And of course, there is the issue of mass unemployment, already some 20 million laid-off migrant workers according to Chinese government's own estimate, which could lead to social instability, something the Chinese government is gravely feared of, and the problem of extreme environmental degradation also cannot be overlooked, its damaging effects requiring huge government expenditures to mitigate.
Finally, it would also depend on the duration of the financial crisis: while China is still maintaining some 6% (if you believe the Western estimate), or 8% (if you believe in the Chinese government forecast) annul growth, its export is sharply declining and many industries are facing the acute problem of overproduction. It could well be the case, if the crisis becomes a long depression, the Chinese economy will simply go down with the rest of the world.
Conclusion?
Well, there is really no conclusion. It is too complex to predicate the consequence of this financial crisis though it is very likely we will see a move to multi-polar world but not necessarily one that is stable. But it is well to remind ourself that we do not have to be passive observers. History is shaped as much by structural forces as by people like you and me who collectively could help shape the world in a way that is more decent and humane.
* I have in this article only make passing references about the European Union mostly because of my lack of familiarity with the European economies but also because it would further complicate a picture that is already complex and thus requires a much longer article. It may well be that the European Union would emerge in a far better shape than either the US or China.
I appreciate any comment
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