A New World Order: Is it Possible?
(March 26, 2022)
It is too early to say which way the Russia-Ukraine war goes but one thing is abundantly clear that no one will win it. Ukraine is losing its infrastructure, property and cities through wanton destruction. Thousands have died, injured, maimed and suffered from psychological trauma. Millions have internally and externally displaced as refugees with an uncertain future and its economy in shambles.
Russia is losing its soldiers in deaths and military assets worth millions in addition to facing crippling sanctions on its trade and economy. Shortages are leading to hyper inflation and lose in revenues is drastically plummeting living standards. Russia may double down (uses chemical and biological) or even triple down (uses tactical or short-range nuclear weapons) if provoked too far and that could rattle the World.
While the World is still struggling with catastrophes of Covid in past two and half years, this unforeseen war is now unfolding grave uncertainties with dismal implications. Russia and Ukraine together are major suppliers of oil, natural gas, grain, fertiliser and valuable minerals to rest of the world. Their shortages due to war coupled with sanctions will bring in countless miseries, especially in the third world. Hyper inflation of essentials may lead to famine, riots, mass unrest, political upheaval and even toppling of the governments.
Europe is to pay a heavy price too. NATO has committed to beef up its defence budget at a time when enhanced government support is needed more than ever before for social security in post-covid era. Draconian sanctions slammed by USA to cripple Russia’s trade and economy will bring immense financial woes on ordinary Europeans who are highly dependent on Russian oil and natural gas especially Germany; the economic powerhouse of the region. Alternate supply sources will be costlier and may take years to bring in. People will continue to face higher inflation and falling living standards. Settlement of millions of refugees from Ukraine will be at a huge cost. Differences in languages, way of thinking and social values could bring other social challenges in host countries.
There is only one obvious winner in this apocalyptic world: the great United States of America. War guarantees huge business and profit for US Military Industrial Complex; being a major supplier of defence equipment to Ukraine and Europe. (Such opportunities had dried up for US after war in Afghanistan and slow pace of conflicts in the Middle East.) Europe will be cajoled to cease its dependence for its energy needs from rogue and autocratic regimes and instead pushed to buying from the US at a much higher cost (US is now the largest producer of oil in the world and a net exporter). In addition, a war distressed, frail and economically broke Europe would have no alternate but to take refuge in the fold of US as a second-rate partner.
Circumstances are opening a window of an opportunity for East to take advantage of this turn of history. If China and India bury their grievances and join hands to develop a joint economic and military strategies with a prime goal of bringing peace and prosperity to their populations, a new and improved world order is not a far-fetched scenario to perceive. A world beyond the hegemony of the West where ‘might is right’ is coveted real game beyond apparent duplicity and diplomatic niceties. A world beyond dreadful conflicts and contemptuous dominance of a few, rather a spirit of cooperation to share the cake among all stakeholders. Though slices could be smaller for each but larger for the group as a whole. Russia could be an important member of this club. There is every likelihood that it would join, especially the way West is trying to erase Russia from the map (largest in the world with about 12% of total land mass) with punishing sanctions and acrimonious humiliations.
India has a long history of friendly relations with Russia ever since the days of old Soviet Union. Russia has always stood with India through many thick and thin circumstances. Russia is still a major supplier of defence equipment despite India establishing cozy relationship with US in recent years. India needs to stand up with its all weather-tested friend Russia to become an important pillar of emerging new order in Eurasia.
India and Modi have built a friendly relationship with Middle East countries. It has a potential to thrive and benefit immensely in coming years. India should not squander this opportunity with Islamophobia movement of BJP-Hindutva which was also rebuked recently by the group of 57 Organization of Islamic Countries. BJP is fairly secured in an electoral position. It can win hands down in many coming elections. There is no need to play dirty religious card to win elections, especially when Muslims account no more than 14% of India’s total population.
US influence on traditional Middle East allies like Saudi Arabia and UAE is waning. Saudi Crown Prince MBS and UAE Sheikh, Al Nahayyan declined to take call from President Biden for weeks. Then both rulers declined to receive US secretary of state, Bilken. They also rejected Western leaders’ pleas to increase oil production. On top of it, Riyadh invited China Xi Jinping for an official visit and opened doors for selling oil to Beijing in Yuan denomination. Iran is also taking advantage of West diversion due to Russia-Ukraine war and squeezing much more in the new nuclear deal (to be signed) than what was originally expected.
Dollar Monopoly: It costs only 14 cents to print a 100 USD note, but a buyer or holder of this note has to give up $100 worth of her/his real commodities and services (called seigniorage). Thus, US is expropriating Billions worth each year from the holder of USD all over the world. Currently, nearly 63% ($7 Trillion) of world foreign exchange reserves of Central Banks is in USD and about 70% of global trade in USD.
If a holder decides to ditch USD for gold, crypto or Yuan, the value of USD will fall precipitously and the great US financial empire falls like house of cards. China holds $1.1 Trillion. Imagine what may happen to the value of USD and American living standard if China alone decided to dump Greenback. But things are far more complicated than they look in a globalized world: each country’s welfare is interconnected and interdependent to one and other. Moreover, US along with its allies in Europe and international institutions do their best to subjugate the possibility of rise of any other currency as an alternate medium of exchange. It also empowers them to use USD as a deadly tool of financial WMD against a country they wish to punish.
Good news is that China has already established its currency with Yuan trading centres in Hong Kong, Singapore and Europe. The IMF could not resist any more and forced to add Yuan to its SDR (Special Drawing Rights) basket in 2016. In 2017, the European Central Bank exchanged EUR 500 million worth of its foreign exchange reserves into Yuan-denominated securities. Development in Digital Currencies and Cryptos are also going at a rapid rate. This gives hope for a new world order that can be materialized in not much distant future. A New world order will never be a reality unless monopoly of mighty US Dollar is dethroned. East has to develop and establish an alternative financial and payment system in world’s trade to supplement USD: a basket of currencies like Euro, Chinese Yuan (RMB), Indian Rupee (possibly tomorrow), Digital currencies, Crypto along with Gold.
About Mahmood Iqbal
An Economist (PhD). Former Principal Economist, The Conference Board of Canada. Adjunct Faculty Member, Carleton University, Canada. The author of “No PhDs Please: This is Canada.” Besides doing research on serious economic and policy issues for the last 25 years, like to write journalistic pieces on subjects of interest. An amateur Photographer. … Blog appears to be appropriate venue to post my wondering thoughts without any peer pressure and academic review process.
Originally published at http://ipotpourri.wordpress.com on March 26, 2022.
