ANOTHER WORLD IS WITHIN REACH
There is a silver lining in the economic and financial turmoil. The so-called Bretton Woods II conference, called by President Bush for Saturday week (15th) at Washington, was clearly intended by the US and the other lead capitalist nations to make the minimalist changes necessary to return the world to the 2007 status quo ante. The election of Obama however has changed all that.
Fundamental geopolitical change occurs when the shifting tectonic plates underpinning the balance of power abruptly reach a tipping point which opens up a profoundly new landscape. Thus the uneasy partnership between the State and private markets which managed capitalism between 1945 and 1973 was upended by the world-wide inflation from the OPEC quadrupling of oil prices, by the increasing confidence of the capitalist class emboldened by a monetarist ideology to face down trade union resistance, and by persistent tabloid sniping at the welfare state foundations of social democracy. The resulting Reagan-Thatcher counter-revolution between 1979 and 2008 unleashed the neo-liberal triumph of private markets through deregulation and privatisation, a ballooning of inequality, and the undermining of democratic accountability by a marked centralisation of State power. That system is now irrevocably broken by the excesses of its own internal dynamics. Once broken to that degree, a system never recovers in anything like the same form. It morphs into wholly different formations.
What determines those formations is the shifting contours of geopolitical power. The IMF, World Bank, GATT/WTO, and the Washington Consensus did not arise from contemporary theories of economic enlightenment, but from calculation of what best suited the interests of the US, their creator. That hegemony is now threatened on all sides. The US economy is dangerously over-dependent on imported oil, when over 90% of exported oil will by 2020 be concentrated in Muslim countries. US attempts to control this dependence by domination of the Middle East and Caspian Basin have led to imperial over-reach in Iraq and Afghanistan, which threatens a US humiliation and enforced withdrawal (even when it is dubbed a victory).
But the long-term threat to US hegemony now comes from the seemingly unstoppable rise of China. With a breakneck rate of growth of 7-10% over the last decade and a GDP of over $8 trillions, twice as large as Japan’s, China is now challenging the US over trade, financial imbalances, the struggle for oil and natural resources in Africa, Latin America and the Middle East, as well as regional dominance in East Asia. Indeed a new superpower coalition of China, Russia, India and Brazil, covering 75% of the world’s population and 80% of its natural resources, is now emerging and attracting the close interest of major oil producers such as Iran and Venezuela, as a counterweight to American power.
This precariousness of the current world order is exacerbated by three massive underlying pressures – over-exploitation of natural resources, over-population of a finite planet, and over-warming of the global atmosphere by greenhouse gases. Not only is the availability of oil likely to begin to dry up within some 40 years, water scarcity also already affects half a billion people living in regions prone to chronic drought. The UN expects this number to increase 5-fold to around 3 billions within just two decades, nearly half the entire world, with unprecedented implications for population displacement and refugee flows. And so great is the over-use of the Earth’s natural capital stock that is has been estimated that in 50 years’ time on current trends we will be exploiting natural resources equal to two Earths when, as some have percipiently observed, we only have one.
The new world order will be formed as a compromise between the interests of the new global power-brokers, the requirements of a more regulated capitalism, and the exigencies of the rapidly changing resource base of the planet. It will reflect the switch, which is now irreversible, from uni-polar US power to a much more fragmented and uncertain multi-polar system of shifting alliances. It will require new global institutions, not merely a limited re-writing of the remits of the IMF and its sister bodies.
It will also become in many ways a more dangerous world. The gradual proliferation of nuclear weapons is probably unstoppable once Iran is nuclear-armed within the combustible Middle East, while at the same time a revived Russia now and probably China later stokes a new nuclear arms race. A generations-long ‘war on terror’, as a cover for continuing US imperialism, threatens to set the post-Cold War world, if maintained, on a self-destruct course towards conflict between civilisations. Resource wars around oil, water and minerals will intensify. A human race that took 150,000 years to reach 1bn population and is now likely to take less than 250 years to reach 10bn faces the dark underside of globalisation in growing famine, increased transmission of disease, and unprecedented environmental refugee movements.
Given this impasse to which the world is now heading on several fronts, the Washington conference in December offers a once-in-a-lifetime escape route. But it will have to meet several conditions, most of which are potentially treacherous.
Unlike Bretton Woods I when a tiny elite of war victors could carve up the political, economic, financial and trade systems to suit their own interests, this time if the conference is to get anywhere it will have to be open not only to the old capitalist powers of the US, EU and Japan, but also to the emerging superpowers of China, Russia, India and Brazil as well as to regional representatives from Africa, the Middle East and southern Asia. Getting agreement on a multi-faceted new order, as the successive collapses of the Doha Round has shown, will be fraught.
The immediate requirement will be to replace a free-wheeling, no-holds-barred capitalism with a more stable, better regulated capitalism but without extinguishing its inbuilt innovativeness and dynamism. That is a very hard call. It means fixing the banking system’s appetite for speculative trading, hedge fund instability, derivatives, offshore accounting and securitisation, as well as the obscure reporting of corporate risk and sometimes dodgy auditing. Capitalism is not capable of mutual co-operation, but it has to be shed of its proclivity for the extremes of competitive recklessness, driven by greed for astronomic bonuses.
The conference offers too the best chance yet to align the global economic track to the carrying capacity of the planetary eco-system. Yet the response of governments worldwide to increasing climatic devastation and the risk of an irreversible tipping point this century, which could threaten human survival, has been glacial. Never has a global Green New Deal been more imperative, yet still widely resisted, but this conference might just offer the breakthrough so desperately needed.
A new world order will only be sustainable if, lastly, it is seen as more mutually beneficial and less greedily exploitative as this one is. A rather more equal balance of power across the world should make this more achievable. But the inequalities are now so staggeringly huge and the unwillingness of the rich hemisphere to face up to its Millennium Development Goals so great that it will require much more aggressive alliances between the poorer nations than simple reliance on Western altruism. At least the hope and opportunity is there which hitherto has not existed.
This article first appeared in Tribune on 14 November 2008.