Perspectives

Global economy confused by ‘great and unmatched wisdom’

Published: Nov 2019

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Trump’s damaging decisions – although made with ‘great and unmatched wisdom’ – on Syria cannot be viewed in isolation. The reputation of the US has been dented considerably over the last three years. This has its consequences: partners are unsure as to whether they can still rely on Washington, opponents see fissures appearing in the Western bloc and believe they can take advantage of the chaos in the US, and international institutions and organisations that largely rely on the US are experiencing major difficulties.

Ornamental maze made out of cut bushes

The international system largely designed by Washington following the Second World War is generally referred to as the ‘international rules-based order’. This sounds very vague, since everywhere there is order there are certain rules. However, what analysts mean by this is that states have jointly – with a great deal of American influence – created a system in recent decades to shape international political, diplomatic, financial, economic and military relations. A system partially based on the free market – to a greater or lesser extent depending on the area – in which a certain consensus has come to dominate the basic rules (although, needless to say, a considerable amount of hypocrisy and opportunism is evident on a regular basis), in which organisations such as the UN and the WTO were developed, and in which the US assumed a leading role as the world’s policeman and supplier of the global reserve currency.

Due to this foundation underlying the global economy, market thinking steadily expanded, capital flashed across the world, global trade ran at full speed and growth steadily continued. It looked like the triumph of globalisation and the definitive victory of capitalist (social) democracy.

However, factors such as 9/11 and China’s individual interpretation of a market economy, for example, made it clear that not everyone was willing to conform to an American/Western model. The financial and economic crisis of 2008 and the painful aftermath subsequently resulted in more and more reservations about Western liberal democracy as a desirable political-economic model, not only on the part of China and Russia, for instance, but also among voters in Western democracies.

As an example, Trump won the election because many Americans were completely fed up with the political establishment and Trump promised to ‘drain the swamp’. Little has come of this so far. Instead, the existing swamp seems to have become even muddier.

The leader of the West is faltering at the very time when the Western political and economic model is sorely in need of support. Of course, America still has virtually immeasurable military and economic power, but legitimacy and authority are required to use this power as effectively and efficiently as possible. Trump & Co have caused serious damage to America’s legitimacy and authority as world leader with inconsistent, confused, short-sighted and sometimes entirely irrational actions that often seem to have no purpose other than to boost the ego and settle personal accounts – as opposed to serving the nation’s interests.

Under the post-1945 Pax Americana, American political authority and legitimacy generally coincided with the economic and military (super)power of the US. Many countries accepted the leadership role of the US, not because they were forced to do so by Washington, but also because, in their view, America rightly claimed this role and was willing to let others share in the proceeds of the US-led system. Other countries were less willing, but simply could not ignore the dominance of Washington.

The former group of countries increasingly wonders whether America is still entitled to and can be trusted with this position on the throne. The latter group eagerly uses the weakening power of the US to its advantage. This is actually easier because China, for example, is already the largest economy in the world according to some criteria and also because new ways of waging war work out to the advantage of the challengers and underdogs (for example, Russia has taken over Crimea and parts of the Ukraine using hybrid warfare).

These developments, including the enormous economic and military advances that China in particular has achieved over the past few decades, mean that the trade war between Washington and Beijing is far more than just an argument about access to each other’s markets. The trade war is part of the race for global political, economic, technological, financial and military leadership this century. This battle has only just begun. A partial trade agreement will therefore certainly not bring lasting peace between the two giants.

This is also because international institutions that might have been able to keep things under control are becoming increasingly paralysed. The UN is struggling with massive deficits because many members fail to pay their ‘contribution’. The US has by far the largest outstanding bill. Trump has made it clear several times that he does not care much about the UN. The UN secretary general has sounded the alarm, stating he will no longer be able to pay all the salaries by the end of this year.

The White House also has little sympathy for NATO, WTO and other international partnerships. Because of a US veto the WTO is also at risk of becoming paralysed at the end of the year.

In addition to weakening international organisations that were previously considered to support US power on balance, Trump has also torpedoed a number of international trade, security and other treaties.

Previous governments went to great lengths to weave a web of overwhelming political, economic and military power which was reinforced by alliances, partnerships, treaties and international organisations. This web is now slowly but surely being pulled apart by the US and other players who eagerly capitalise on areas where the US trips up.

In the area of free trade, for example, it looks as though the whole world is engaged in a trade war. However, many countries are quietly continuing to conclude trade agreements while sidestepping the US. The American weakening is also reflected in countries increasingly hedging their bets on Washington by getting into the good graces of China and/or Russia. For example, NATO member Turkey has decided to buy missile systems from Russia, defying the US. The same phenomenon is evident in Asia where hitherto loyal US partners increasingly tend to balance their relations with the US and China. A case in point was the Filipino president explicitly announcing a pivotal move from the US to China.

And even in Europe, countries are wondering how much loyalty they should bestow upon the transatlantic alliance and to what extent they should accept Chinese capital and influence. For instance, the US is putting considerable pressure on European governments to keep Huawei out when it comes to the ICT projects of governments. This pressure is certainly not always successful.

Even in the US, there are countless examples of behaviour being adjusted so as not to offend China. Marriott, Apple, the NBA and many more kowtowed to China; an authoritarian regime located thousands of miles away increasingly exerts censorship on the US.

These examples show the extent to which the position of the US in the world is weakening. This will be reinforced now that Washington has impeachment fever. Trump has opted for a battle plan that comes down to an attack on the constitutional state by refusing to cooperate in investigations by Congress, keeping witnesses away and basically claiming that the President is all-powerful, can do as he pleases and is above the law. A constitutional crisis looms. All this while the elections are fast approaching.

In other words, Washington will be far more preoccupied with domestic problems in the period ahead – and far less with coming up with robust and coherent foreign and economic policies that also take into account the interests of allies.

All in all, the outlook for the US economy is fairly poor from a political point of view. This occurs in a climate in which the US has largely supported the global economy in recent years. Other major economies are faltering discernibly and a further weakening of the US economy will only accelerate this slowdown. In short, growth prospects for the global economy are not getting any better due to domestic US political developments and the international policies of Washington.

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