#End of #Empire – 1: World of divides and why #India may adapt to a more closed economy better https://t.co/6i23STiYI3 via @NewIndianXpress #satyajitdas
— Guillermo Ruiz Zapatero (@ruiz_zapatero) October 5, 2022
"There are decades where nothing happens, and there are weeks where decades happen".
"There are decades where nothing happens, and there are weeks where decades happen". Lenin’s phrase – there are doubts as to the attribution - describes periods when established economic, power and social relationships are challenged and sometimes overturned, often violently. The question is whether this is one of those times.
Today, there is a sharp division between the 'West' -- the USA and its Anglosphere acolytes (Canada, Australia, New Zealand) supported unenthusiastically by Europe and Japan --- and the rest of the world. Positions on the Ukraine conflict highlight the schism. Support for Ukraine is primarily Western, representing less than 20 per cent of global population. The vast majority of nations have refused to condemn Russia's actions or profess neutrality on the matter. China professes cautious support of Russian grievances.
While couched in bromides about shared values and unity, European and Japanese support of the Anglosphere is self-serving. Both have benefitted from American military protection and lower defence spending which has been diverted to more productive activities. It reflects the reality of geographic proximity to Russia and China as well as greater economic connections.
The non-Western position reflects caution about great power conflicts, economic factors, often complicated colonial pasts and experience of Western hypocrisy and self-interest. There are legitimate questions about the support for Ukraine, especially the provision of generous financial and humanitarian aid. The favoured treatment of white, Christian refugees relative to victims of conflicts and disasters in the Middle East, Asia and Africa has not gone unnoticed.
This division threatens the current global order overseen by America.
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complete deglobalisation and a retreat to autarky are unlikely due to intricate connections and more importantly the effects on availability and cost of products. Instead, increased re-, near- or friend-shoring may separate the world into trading blocs reinforcing divisions.
The combination of the identified stresses has set up feedback loops which will reshape the current economic and power relationships.
Winners and Losers
All nations are affected by these changes but not equally. A drift to more closed economies may not favour the West.
Functioning as an isolated entity or bloc requires a sizeable population, resources (food; water; energy; raw materials) self-sufficiency, necessary technologies and skills and the ability to defend your interests. Alternatively, you must be able to access these elements from within your trading bloc or from partners.
One reason that trade restrictions and sanctions have had less effect to date than expected is that Russia possesses many of these characteristics. In addition, absence of universal compliance reduces the effectiveness of these measures. Non-West countries, such as China and India, benefit from sanctions, being able to purchase oil and gas at significant discounts. Attempts at enforcement, such as a proposed oil price cap, may not be successful without excluding violators from global payments, insurance or sanctions which would widen the divisions substantially.
The US is substantially self-sufficient in food and energy. However, it has outsourced large components of its manufacturing and would have to re-skill its workforce to re-shore activities. It also requires export markets for its advanced products -- 40 per cent of S&P 500 companies’ revenue originates outside the US.
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Europe and Japan are oriented to manufacturing but reliant on imported raw materials, especially energy. Japan also has a growing reliance on imported foodstuffs. They are large exporters, with significant reliance like the Anglosphere on the Chinese market.
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