Is this present global order still ‘fit for purpose’? Much can be said for both sides of the argument. One thing is, however, clear. An alternative order or vision is not on the horizon. It is useful to bear this in mind whilst evaluating two developments. The first is the underwhelming first hundred days of the Donald Trump presidency which finds itself in an internal civil war situation with both the ‘deep state’ and the ‘fourth estate’ and provides cause for anxiety to some that it may be unravelling. The second is Beijing’s spectacular Belt and Road Initiative (BRI) extravaganza.
Some initiatives result in the building of institutions that are viable and establish their relevance over a period of time. Others, such as the ill-fated League of Nations, start badly and then fail altogether. Those based on flawed thinking find it even more difficult to take off. The present global, post-1945, order can broadly be characterised as having evolved in two phases, the pre-1989 and post-1989 phases. The disintegration of the Soviet Union, the end of the Cold War and the advent and what seemed like the triumph of globalisation resulted in some intellectuals like Francis Fukuyama to go somewhat prematurely into a celebratory dance.
Brexit and Mr. Trump’s victory appeared to some observers to change all that. As I observed elsewhere, it was far too early in 1989 and still too early in 2017 to celebrate the premature demise of globalisation, free trade, human rights, the Washington consensus and interventionist mindsets. All that Brexit and the Trump presidency signify is that Western industrial democracies have still not come to terms with slow rates of economic growth.
Still the only superpower
Does this provide an opening for an alternative order to come into being? Some rebalancing will most certainly take place. But no fundamental alteration and restructuring of the existing global order appears, at this point of time, to be realistically on the horizon. Any suggestions that the Chinese are taking over or that the two world’s largest economies have now resolved all their differences cannot but be somewhat fanciful.
The U.S. is not only an $18 trillion economy but also has by far the largest industrial military complex and a lead in technology and innovation that it will take several decades for China, the second largest economy, to catch up. The U.S. provides global leadership in terms of global public goods. Even allowing for some set-back through mismanagement, it is inconceivable that these global public goods could be provided by even a transforming China.
This brings us to the BRI extravaganza. When the initiative was first announced in 2013, it was clear that the motivation was to find external outlets for the surplus infrastructure building and manufacturing capacity that had been domestically created and for which demand was now petering out. This brings us to the essential kernel of the problem. Large white elephant type mega projects, such as the one in Hambantota in Sri Lanka, can never be attractive for private investors who will look for returns on their investment. This is where China’s state banks come in. With 68% of Sri Lanka’s GDP now required for debt servicing, such infrastructure projects have their limitations. A railway line China is building in Laos is expected to cost $6 billion and is unlikely to break even after 11 years, as anticipated. Meanwhile Laos’s public debt stands at around 60% of GDP. This is a familiar pattern in country after country. Yes, the Chinese are investing heavily overseas but not in BRI projects. BRI projects get funding from the state banks and are laying the ground for acrimony with local communities, on adequate compensation for land acquisition, Chinese labour, collusive award of works and a host of other problems. All these point to an economic model that can never be viable.
The EU-27, which account for a significant proportion of global economic activity, refused to sign on to the trade statement in Beijing. Add to that this the $18 trillion U.S. and $5 trillion Japanese economies. It appears highly unlikely that these countries will sign on to a global scheme that is designed to favour contracts being awarded to Chinese economic entities.
India’s position is beautifully captured in its May 13 statement: “…connectivity initiatives must be based on universally recognised international norms, good governance, rule of law, openness, transparency and equality. Connectivity initiatives must follow principles of financial responsibility to avoid projects that create… debt burden for communities….” Also: “Connectivity projects must be pursued in a manner that respects sovereignty and territorial integrity.”
(1). ImperativeMeaning: of vital importance; crucial; giving an authoritative command; peremptory.
"immediate action was imperative"
"the bell pealed again, a final imperative call"
"the imperative note in her voice was unmistakable"
(2). ScourgeMeaning: a whip used as an instrument of punishment; a person or thing that causes great trouble or suffering.
For Example, "the scourge of mass unemployment"
"our people did scourge him severely"
"political methods used to scourge and oppress workers"
(3). ExtravaganzaMeaning: a literary or musical work marked by extreme freedom of style and structure and usually by elements of burlesque or parody; a lavish or spectacular show or event
For Example, "the over-the-top extravaganzas that are usually staged at halftime during the Super Bowl"
(4). AdventMeaning: the arrival of a notable person or thing.
For Example, "the advent of television"
(5). DemiseMeaning: a person's death; conveyance or transfer of property or a title by will or lease.
For Example, "Mr Grisenthwaite's tragic demise"
"the manor and the mill were demised for twenty-one-year terms"
(6). PeteringMeaning: decrease or fade gradually before coming to an end.
For Example, "the storm had petered out"
(7). KernelMeaning: a softer, usually edible part of a nut, seed, or fruit stone contained within its shell; the central or most important part of something.
For Example, "this is the kernel of the argument"
"the kernel of a walnut"
(8). AcrimonyMeaning: bitterness or ill feeling.
For Example, "the AGM dissolved into acrimony"
(9). CollusiveMeaning: involving collusion; fraudulently contrived by agreement
For Example, "a collusive agreement to increase prices"
"The company was acting in collusion with manufacturers to inflate prices"
"there was collusion between the two companies to fix prices"
(10). PursuedMeaning: follow or chase (someone or something); continue or proceed along (a path or route).
For Example, "the road pursued a straight course over the scrubland"
"the officer pursued the van"
What's trending in BankExamsToday
Smart Prep Kit for Banking Exams by Ramandeep Singh - Download here