As a bemused bystander to the current global financial turmoil (“GFT”, being a close cousin to the more familiar “GFC” or Global Financial Crisis), have you ever paused to consider just what the very big picture may be telling us about the times we live in?
Given that this is a very broad musing, it may be best to make a cuppa and relax before reading on… Here is my thinking…
Since the fall of the old USSR, many commentators have wondered what would happen in a world dominated by only one superpower? For those who have been happily and quietly enjoying their own corner of the planet and therefore failed to notice, that superpower is the United States of America. What balances and power struggles would this bring about? Russia has utilised its oil and commodity-strengthened economy to rebuild its global powerbase and promote its influences. China has increasingly engaged in active investment around the world to lock in access to the resources required to accommodate a massive urbanisation programme.
It is interesting that the USA’s fall from economic superiority has been as rapid as it has been. After many years of expansion and growth, it was beginning to seem as though the non-US world would lift itself up to the USA’s level of development even as the US continued its incredible increase in wealth. The reason i find it interesting is that this assumes that there is more and more of everything for everyone, even though the number of people wanting what is available has increased dramatically. And so along comes the GFC, bringing with it big, fat dollops of GFT, and all of a sudden, it seems that there really wasn’t more of everything. It seems that a dramatically increased number of people wanting access to a particular level of lifestyle in a finite resource world actually does mean that there is less to go around.
And so we have all sorts of very technically complex and hard to comprehend actions being taken around the world, as Governments and Central Banks struggle to allocate the (now acknowledged) scarce pools of capital in the most efficient manner. A pragmatic analysis would suggest that this is actually a good thing, and it is my guess that it is. However, a loss of money in a capitalist world is the equivalent to a loss of power. The outcome is the same whether you take the obvious, practical perspective of a lack of purchasing power necessarily resulting in less ability to buy the stuff you want or whether you take a more philosophical approach and consider the loss of capital as the equivalent of a loss of ability to control and dictate terms to the masses (whether your local masses or on a more international scale).
i am not going to set out the mathematics of it all in this note. It is my thought that we of the developed world have been so inundated with financial jargon and inane restatement of economic figures, that it has all ceased to have any real meaning. It is now just “recession porn” (a quote i read in the Crikey.com.au newsletter and one that brilliantly categorises the overwhelming regurgitation of meaningless figures – the new equivalent of the traditional porn spam). It will not actually add much to my argument to set out the relative positions of each country in terms of who is in surplus and who is in deficit, who has how much foreign reserves and how they hold them. In any event, those holdings are now so intertwined that such a comparison really throws little light on the situation at all.
What we can see is that European countries are generally looking to raise money to help finance their difficulties. The US is embarking on a mammoth fundraising exercise, involving not just billions but trillions of dollars. Even here in little Australia, we are seeking to put our hand up for a relatively large pool of funds. If we look around at who is going to provide those funds then from a country basis, we can see that the primary investors have to be China, Japan and Russia as they hold the largest pools of foreign reserves. However, as mentioned above, a lot of those reserves are actually already invested into the US or Europe. So where is the rest of the money going to come from?
Frankly, i do not know the answer. What does seem apparent to me is that the GFC has taken the financial power out of the hands of the US and placed it firmly into the hands of those who have the capital (whoever that turns out to be).
And so the apparent conundrum of how Planet Earth moves from a single-superpower-domination to a broader spread of power is now solved (at least, in part). If we are all very, very lucky then we will see this power rebalancing occur in the economic arena, and not in the military arena. Many people have lambasted George W Bush for leading the USA on a redneck rampage through the world, demolishing US economic power and destabilising entire regions along the way. We won’t know how history will treat George Bush’s Presidency and the multitude of calls to dismiss his time in the Oval Office could turn out to be cries in the wilderness, should the far more popular, and ostensibly more reasoned efforts of Barrack Obama become mired in the embroglio that often enmeshes the world around a failing superpower.
An interesting fireside study could arguably evolve around the case for the United States to continue to hold substantial global power through its position as the biggest debtor nation. Strange as it may seem, the surplus wielding creditor nations may be forced to pander to the US more than they would like to, simply to retain their own economies and the value of their US holdings.
On this basis, the power to watch would quite possibly be India. It does not have China’s dependency on exports, and does not have massive quantities of US Treasuries and the like that would give it any requirement to pay special attention to the United States.
These are some of my ponderings on the balance between money and power. Feel free to argue, disagree, pour scorn or praise with much praise. Or not.