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Authors: Stephen D. King
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distinction. The distinction was made because the credit crunch that began in 2007 cried out for a global solution; for a while, then, there was a commonality of interest.
History suggests, however, that commonalities of interest do not last very long. Until and unless the G20 is able to confront the difficulties outlined in this book, it is likely to head the same way as the League of Nations and the Bretton Woods exchange-rate system – in other words, into the dustbin of history. The G20 doesn’t really have the teeth to offer the international rule of law which was, in effect, forced upon the world by the imperial powers in the nineteenth century.
What might a new international order begin to look like? Already, there are clues dotted around the world. I suspect governments will increasingly use their influence to conduct foreign policy through their influence on international markets, encouraging the creation of bilateral relationships that appear to be driven by commercial interests but which, in reality, are an important part of modern-day realpolitik. Think, for example, of Gazprom’s dominance of the European energy market or Halliburton’s involvement over the years in Iraq. The connections between these firms and their political masters are enormously strong. More broadly, as countries push forward their own agendas, we are seeing the renaissance of ‘state capitalism’.
As already noted, state capitalism has been a fact of economic life for centuries. The East India Company, with its mercenaries and its cross-border drug dealing, was perhaps its greatest exponent. Nations have always happily traded land with each other in quasi-commercial strategic deals. Buying and selling is considerably lesspainful than shooting and bombing. To pretend that the private sector alone should be responsible for trading is pure fantasy.
A fine example is the Louisiana Purchase of 1803, when the US paid France $15 million for what now amounts to about 23 per cent of US territory, including all of present-day Arkansas, Iowa, Kansas, Missouri, Nebraska and Oklahoma, together with assorted bits and pieces of other US states, most obviously Louisiana west of the Mississippi, including New Orleans (interestingly, the US could solve its current debt problems by selling California to the Chinese although it somehow seems an unlikely gambit).
Thomas Jefferson, the US president at that time, was particularly worried about American access to New Orleans, by then a major port, and feared that trade could be undermined by French and Spanish hostility. Napoleon Bonaparte, meanwhile, had seen French power ebb away in Haiti and in the Caribbean more broadly. Without the economic benefits stemming from access to the lucrative sugar plantations, Napoleon was happy to strike a deal. Huge swathes of North American territory fell into US hands, prompting Napoleon to comment, ‘This accession of territory affirms for ever the power of the United States, and I have given England a maritime rival who sooner or later will humble her pride.’ 15
He was right. His conclusion prompts the obvious question. Confronted with increasing economic and political connections across the emerging world, will the US, like the UK before it, find that, at some point, its pride will be humbled? After all, the US was the nineteenth century’s emerging market. At the beginning of the twenty-first century, it sits upon the summit of economic and political power, waiting, like the UK a hundred years ago, for someone to knock it off. There is no shortage of pretenders to the throne.
These, of course, are major long-term issues. I will return to them in Parts Three and Four. In Part Two, I turn to some more immediatedifficulties. The rise of the emerging nations appears to be connected with greater economic instability – equity bubbles, financial crises, housing booms, credit crunches and global imbalances (to name but a few). Is there a link? Can Western
History suggests, however, that commonalities of interest do not last very long. Until and unless the G20 is able to confront the difficulties outlined in this book, it is likely to head the same way as the League of Nations and the Bretton Woods exchange-rate system – in other words, into the dustbin of history. The G20 doesn’t really have the teeth to offer the international rule of law which was, in effect, forced upon the world by the imperial powers in the nineteenth century.
What might a new international order begin to look like? Already, there are clues dotted around the world. I suspect governments will increasingly use their influence to conduct foreign policy through their influence on international markets, encouraging the creation of bilateral relationships that appear to be driven by commercial interests but which, in reality, are an important part of modern-day realpolitik. Think, for example, of Gazprom’s dominance of the European energy market or Halliburton’s involvement over the years in Iraq. The connections between these firms and their political masters are enormously strong. More broadly, as countries push forward their own agendas, we are seeing the renaissance of ‘state capitalism’.
As already noted, state capitalism has been a fact of economic life for centuries. The East India Company, with its mercenaries and its cross-border drug dealing, was perhaps its greatest exponent. Nations have always happily traded land with each other in quasi-commercial strategic deals. Buying and selling is considerably lesspainful than shooting and bombing. To pretend that the private sector alone should be responsible for trading is pure fantasy.
A fine example is the Louisiana Purchase of 1803, when the US paid France $15 million for what now amounts to about 23 per cent of US territory, including all of present-day Arkansas, Iowa, Kansas, Missouri, Nebraska and Oklahoma, together with assorted bits and pieces of other US states, most obviously Louisiana west of the Mississippi, including New Orleans (interestingly, the US could solve its current debt problems by selling California to the Chinese although it somehow seems an unlikely gambit).
Thomas Jefferson, the US president at that time, was particularly worried about American access to New Orleans, by then a major port, and feared that trade could be undermined by French and Spanish hostility. Napoleon Bonaparte, meanwhile, had seen French power ebb away in Haiti and in the Caribbean more broadly. Without the economic benefits stemming from access to the lucrative sugar plantations, Napoleon was happy to strike a deal. Huge swathes of North American territory fell into US hands, prompting Napoleon to comment, ‘This accession of territory affirms for ever the power of the United States, and I have given England a maritime rival who sooner or later will humble her pride.’ 15
He was right. His conclusion prompts the obvious question. Confronted with increasing economic and political connections across the emerging world, will the US, like the UK before it, find that, at some point, its pride will be humbled? After all, the US was the nineteenth century’s emerging market. At the beginning of the twenty-first century, it sits upon the summit of economic and political power, waiting, like the UK a hundred years ago, for someone to knock it off. There is no shortage of pretenders to the throne.
These, of course, are major long-term issues. I will return to them in Parts Three and Four. In Part Two, I turn to some more immediatedifficulties. The rise of the emerging nations appears to be connected with greater economic instability – equity bubbles, financial crises, housing booms, credit crunches and global imbalances (to name but a few). Is there a link? Can Western
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