Interesting times
Pakistan Today 28th November 2010
We certainly do live in interesting times, but I regard it as a great blessing rather than a curse, as our Chinese friends would have it. We have seen the world change repeatedly from the end of World War II to the current ongoing economic diminishment of America and Europe and so much in between that I would run out of space.
Essentially, the rousing plank of world wars is ideology that exploits the lowest common denominator to get public support – fascism versus democracy, secularism versus religion, capitalism versus communism – all to do with dominance and maximizing economic advantage. They bubble and boil in the cauldron of power until one day some incident leads to the lethal brew spilling over and the cold world war becomes hot. Just as the assassination of Franz Ferdinand (Archduke of Austria-Este, Austro-Hungarian and Royal Prince of Hungary and of Bohemia and Heir Presumptive to the Austro-Hungarian throne) in Sarajevo on June 28, 1914, triggered off World War I; the bombing of Pearl Harbor and the invasion of the Soviet Union turned Hitler's European war into World War II; the US-Soviet standoff that we called the Cold War was in reality World War III (fought mostly by intelligence and, when unavoidable, by proxy), and the Soviet defeat in Afghanistan triggered off its demise and the advent of the uni-polar world; the tragic events of September 11, 2001, triggered off World War IV, that America named the 'War Against Terror', fought again with a new and most potent kind of weapon yet – the human bomb – and against a new kind of enemy – 'Shadows' cast by Frankenstein's monsters of America's own creation – Non-State Actors Versus State Actors. What next?
The impending and unavoidable defeat of the US and its allies in World War IV and the huge amount of money borrowed and wasted in Iraq and Afghanistan has triggered the demise of the uni-polar and the advent of a multi-polar world, even if it doesn't signal the end of World War IV just yet. For that we will have to wait for the second great economic downturn, which may be upon us faster than we imagine.
Because World War IV is led by the US on one side and Muslim militants on the other, some believe it to be a war between secularism and Islam or even the recent Judeo-Christian Combine versus Islam. Yet others would like to believe that it is the coming of Armageddon, when Christians and Jews will jointly fight the forces of the anti-Christ (which Christian fascists consider Islam to be) until the latter are decimated and Israel truly comes into being, unchallenged and unbothered. As you can see, the world may have changed many a time but the high incidence of fruitcakes in it remains undiminished. It is a war that America is losing. And it is a war that has triggered off its economic diminishment if not collapse because it brought its economic contradictions to the fore.
The US brought this upon itself by getting involved in two unnecessary wars, one contrived. It exposed the structural weaknesses in its economy, its sorry economic condition brought on by reckless borrowing and the acute state of bankruptcy of its financial institutions due to reckless management and weak regulation driven by greed and avarice. While we blame greedy bankers for taking huge salaries and even bigger bonuses, we forget that what they did was entirely legal, though immoral. The laws and the system allowed them to be both greedy and immoral. It was this same greed and immorality, duality and megalomania driven by the hegemony drive that informed America's relations with other states, especially of the Third World. It could not last. It had to implode. It did.
All claims of having "got over the hump", "green shoots", "turnaround" and "recovery" are so much poppycock. They just cannot help misleading their own people and the world, underlining the amorality of capitalism. They have done nothing to correct the acute fundamental and structural flaws in their economy and their financial institutions. All their bailouts were throwing bad money after worse to bail out banks and bankers, not to make ideological adjustments to the capitalist free market ideology and bail out those who suffered at the hands of corrupt banks. America's total indebtedness is even worse than it was in October 2008, when the downslide started. Many of its states, particularly its richest, California, are bankrupt. The dollar has lost value and is continuing to lose value. Unemployment is at a long-time high. Manufacturing is receding. Banks are not lending and people are not borrowing. This does not portend well for a consumption-based economy. America's total debt is at least as much as its GDP, some half of it to China. Credit Default Swaps of between $50-60 trillion overhang, like dark, ominous clouds threatening a mega storm. The commercial real estate bust is neigh. No, the fundamentals, already terrible, have got worse.
The only thing that has saved the American economy so far from utter collapse is China, because it too would suffer woefully were America to go belly up. America is its biggest customer. How people with the wisdom of the Chinese could put most of their eggs in one basket and make their economy so dependent on the health of someone else's mismanaged economy stupefies me. They should have started boosting domestic consumption years ago in order to weather just such an eventuality. They could easily have done this since their domestic consumption is very low and savings very high, and thus gradually reduced their dependence on exporting to America, which they are beginning to do now. I can only put it down to the rapid drive for economic development. It has been so rapid that it has left the world breathless. Perhaps it was high-speed economic progress that caused a temporary suspension of the fabled Chinese wisdom and their genetic long-term thinking. The backlash had to come.
This does not mean that China will not wrest maximum advantage out of this flux, but at a pace that doesn't adversely impact its economy. As you see the Yuan revalue you will also see the mighty dollar recede. Soon, oil will not be traded in US dollars alone and new oil bourses will start coming up, ending the dollar's monopoly in oil. As to the over $4 trillion debt the US owes China, plus some of the Chinese surplus of $2 trillion lying in dollars, the only way out that I can see is debt-equity swaps, which means that China will end up owning a lot of America's prime family silver. That's the way the cookie crumbles. That's the swing of the pendulum.
The Euro could collapse too. It is a currency without a father – or many fathers, to be precise. They need to devalue, but if they do, it could accelerate the economic collapse of Spain, the UK, Italy and Portugal – Greece and Ireland have already gone that way. The British Pound has become marginalized.
But don't simply write America off so fast. Whatever happens, it will retain the most precious asset of all that makes a country primus inter pares. It has the world's largest and most advanced knowledge bank. No one else comes close in comparison. As long as they have that and they start seeing sense – which can only come with the end of juvenile recklessness and the advent of some wisdom – America will remain a power to contend with. Wisdom is not new to America. Its founding fathers had it by the bucketful, more than collectively seen at any one time. It was this wisdom that led America to become the world's first (largely) consensual hegemon rather than the usual coercive hegemon, as the European colonialists had been.
Actually, we are a very lucky people, living in times in which history is being made by the minute. I am following the growing tensions between China and India, China and America's cyber wars, China and the US... you should too.
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