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Authors: Stephen D. King
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enormously. Government spending in the Organization for Economic Co-operation and Development (OECD) area, for example, varies from around 30 per cent in South Korea and 35 per cent in the US through to around 50 per cent in the UK, France and Germany and approaching 60 per cent in Sweden. 13 The market’s influence on the allocation of resources is only a shadow of its nineteenth-century self, notwithstanding the efforts of Margaret Thatcher and Ronald Reagan.
The global rules that used to be set by the imperial powers are now agreed upon in shifting multilateral groupings, from the G20 through to NATO, from the North American Free Trade Association through to the European Union and from the United Nations through to, as we shall see, the Shanghai Co-operation Organization. Organizations exist to promote global commerce – alongside the regional arrangements in Europe and North America, the World Trade Organization plays a vital role. And there has been some, very limited, progress on climate change, even though the 2009 Copenhagen summit ended in acrimony.
There is, however, no such forum within which the perils and pitfalls of global capital markets can be acted upon, even though the massive growth of capital markets is surely the defining feature of modern-day globalization. Until recently, the closest we had was the International Monetary Fund (IMF). In the world of capital markets, though, the IMF has little information, no teeth and, across the emerging world, little trust. Nor can it offer the gunboat diplomacythat, in the nineteenth century, proved a useful way of enforcing – or imposing – property rights. As a result, we have a system of capital markets that has proved to be beyond regulation and supervision. Moreover, it is a system in which powerful nation states, not private investors, are beginning to play the dominant role. The United States provides the world’s reserve currency even though the Federal Reserve, the US central bank, has only to worry about monetary conditions in the US. Governments, central banks and sovereign wealth funds in the emerging world increasingly play a pivotal role as agents to transfer their nations’ savings to the developed world. And those nations which, in the nineteenth century, would have had the dominant say in global economic affairs are no more than has-beens. For them, the economic and political swagger of yesteryear has gone. The globalization roadmap is being redrawn.
NEW ARRANGEMENTS FOR A NEW DISORDER
The United States and Western Europe are being forced to come to terms with this new world order. They are, slowly but surely, having to accept that the rules of the global game are changing. The most obvious sign of this change, to date, is the arrival of the G20 as a potentially influential global organization, 14 in effect replacing the G8.
The US and other Western nations now have to accept their growing dependence on developments in parts of the world which, a few decades earlier, they would have treated as largely irrelevant. China, kicked about by the imperial powers in the nineteenth century, partially occupied by the Japanese in the 1930s, and economically handicapped through the policies of Mao Zedong in the 1950s and 1960s, suddenly finds itself in a pivotal position in the world economy. If, in the first decade of the twenty-first century, the US was the world’s biggest borrower, China had become the world’s biggest lender. China was not alone. Other creditor nations included Saudi Arabia and Russia.
The G20 is, so far, only a club for economies, not nation states. It is not designed to represent military powers or particular political systems (those issues are far too awkward). It is a modus vivendi, designed to deal with economic matters while conveniently ignoring other, perhaps more important, political affairs. Its existence is built on a pretence, namely that politics and economics can somehow be separated. That, I believe, is a false
The global rules that used to be set by the imperial powers are now agreed upon in shifting multilateral groupings, from the G20 through to NATO, from the North American Free Trade Association through to the European Union and from the United Nations through to, as we shall see, the Shanghai Co-operation Organization. Organizations exist to promote global commerce – alongside the regional arrangements in Europe and North America, the World Trade Organization plays a vital role. And there has been some, very limited, progress on climate change, even though the 2009 Copenhagen summit ended in acrimony.
There is, however, no such forum within which the perils and pitfalls of global capital markets can be acted upon, even though the massive growth of capital markets is surely the defining feature of modern-day globalization. Until recently, the closest we had was the International Monetary Fund (IMF). In the world of capital markets, though, the IMF has little information, no teeth and, across the emerging world, little trust. Nor can it offer the gunboat diplomacythat, in the nineteenth century, proved a useful way of enforcing – or imposing – property rights. As a result, we have a system of capital markets that has proved to be beyond regulation and supervision. Moreover, it is a system in which powerful nation states, not private investors, are beginning to play the dominant role. The United States provides the world’s reserve currency even though the Federal Reserve, the US central bank, has only to worry about monetary conditions in the US. Governments, central banks and sovereign wealth funds in the emerging world increasingly play a pivotal role as agents to transfer their nations’ savings to the developed world. And those nations which, in the nineteenth century, would have had the dominant say in global economic affairs are no more than has-beens. For them, the economic and political swagger of yesteryear has gone. The globalization roadmap is being redrawn.
NEW ARRANGEMENTS FOR A NEW DISORDER
The United States and Western Europe are being forced to come to terms with this new world order. They are, slowly but surely, having to accept that the rules of the global game are changing. The most obvious sign of this change, to date, is the arrival of the G20 as a potentially influential global organization, 14 in effect replacing the G8.
The US and other Western nations now have to accept their growing dependence on developments in parts of the world which, a few decades earlier, they would have treated as largely irrelevant. China, kicked about by the imperial powers in the nineteenth century, partially occupied by the Japanese in the 1930s, and economically handicapped through the policies of Mao Zedong in the 1950s and 1960s, suddenly finds itself in a pivotal position in the world economy. If, in the first decade of the twenty-first century, the US was the world’s biggest borrower, China had become the world’s biggest lender. China was not alone. Other creditor nations included Saudi Arabia and Russia.
The G20 is, so far, only a club for economies, not nation states. It is not designed to represent military powers or particular political systems (those issues are far too awkward). It is a modus vivendi, designed to deal with economic matters while conveniently ignoring other, perhaps more important, political affairs. Its existence is built on a pretence, namely that politics and economics can somehow be separated. That, I believe, is a false
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