The current organization of the global economic system is a direct legacy of the political and economic balance of power between the great powers from the end of the 19th century until the end of the Second World War1.
British economic hegemony was gradually challenged and then replaced by American domination2, with a gradual transformation of the rules governing the global economic system.
The global economy has moved from the use of the pound sterling as an international currency, to the gold standard system, to the hegemony of the US dollar, initially based on a fixed rate of exchange with gold, then, following the end of the Bretton Woods agreements, on a deregulated global economic system where aggressive competition on all markets is the norm and where the State remains at a distance from rivalries between private economic actors.
A systemic rival of the United States of America during the Cold War, the USSR served as a political, economic and ideological alter ego, without ever being able to challenge the outrageous American domination of the global economy.
The fall of the USSR and the Soviet socialist alternative left the United States and its European allies in a situation of domination without competition or potential rivalry, thereby marking the advent of capitalism as the last economic model for humanity.
This was without taking into account, from the beginning of the 1980s and the arrival of Deng Xiaoping to power, the emergence of China as a competing industrial economy, quickly taking the place of the so-called “factory of the world”.
After joining the World Trade Organization, the Chinese economy became more integrated into the global economic system, seeing its place on the international stage strengthen considerably over the last 20 years.
The creation of the BRICS3 and the consolidation of the alliance between China, Russia, India and Brazil, and later South Africa, established the status of emerging countries of these regional powers.
Integrated into the global economic system, these countries initially positioned themselves as dynamic players within the institutions of the Western capitalist order, then created, first with the BRICS, then with the Shanghai Cooperation Organization, alternative institutions aimed at proposing a new world order in the long term.
While participating in existing international institutions, a direct legacy of the balance of power of the Second World War, emerging countries are trying to propose a new global economic governance more adapted to the forms taken by their national capitalisms.
However, they find themselves facing a dilemma with, on the one hand, a powerful and growing integration into the global economy and its institutions based on the organization of Western transnational capitalist classes and, on the other hand, the establishment of an alternative system more corresponding to their state capitalism.
In this ecosystem, China appears as the natural potential leader of this new global economic and political order since it enters into direct competition with the American economy in several key sectors at the heart of the power of the US “hegemon”.
Several obstacles currently prevent China, through its currency, the yuan, from becoming the reference of the international monetary system and replacing the United States and its dollar, which currently occupies this position.
The non-convertibility of the renminbi is the main obstacle to this replacement of the dollar as the international reference currency, serving de facto as a blockage to the opening of Chinese financial markets to foreign investors.
But this situation is by no means fixed.
Current international conflicts, particularly those taking place in Ukraine and the Middle East, can be read as illustrations of the uncertainties of the ruling classes regarding the current transformations in the global economic and political order4.
The coronavirus crisis that began shortly before the outbreak of the conflict in Ukraine had acted as an accelerator of the decline of the current capitalist world economic order5.
Whether in the United States or in China, it is not certain that the sectoral leaders at the forefront when it comes to economic competition have an interest in a unipolar domination of the global economy, which comes with its share of advantages and disadvantages6.
The deepening of economic relations between Russia and China, resulting from the long-term conflict in Ukraine, is creating a situation in which the Russian economy is increasingly dependent on its Chinese neighbor, whether in the context of its hydrocarbon exports or its military-industrial imports.
The neutral or even hostile positioning of a large number of countries in the “Global South” to the continuation of hostilities in Ukraine and the Middle East reinforces the credibility of a potential economic, political and monetary alternative to the current Western order.
The progress and consolidation of this alternative in no way signal the end of American, and to a lesser extent Western, economic, military and political power.
The United States continues to play a key role in the reproduction of globalized capitalism7.
The current restructuring suggests that we are heading towards a redefinition of international economic relations with the new deal of multipolarity and a potentially less liberal world under pressure from non-Western countries.
A transition from the dominance of liberal, Western capitalist economic systems to the rise of illiberal neo-mercantilist state forms8 is one of the potential scenarios that seems to be reinforced in light of the unfolding of current global conflicts, whether in Ukraine or in the Middle East.
The future will tell us what the concrete consequences of the current upheavals will be on global political and economic systems.
Given the increase in the number of conflicts in the world and the increase in economic instability reflected in the trade war between China and the United States, it is likely that current political systems will undergo profound transformations that call into question concepts previously taken for granted.
After the 40-year neoliberal period from 1973 to 2013, there is a growing demand from the grassroots to the elites and from the elites to the grassroots for a significant return of the strategic state.
In the case of the European Union, a strong supranational entity, capable of great political efficiency and having the virtue of reassuring citizens in this period of considerable instability could be the point of arrival of this uncertain period in which we find ourselves.
History will tell us…
- Barry Eichengreen, Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International Monetary System, New to this Edition: (Oxford, New York: Oxford University Press, 2012). ↩︎
- Arvind Subramanian, ‘Renminbi Rules: The Conditional Imminence of the Reserve Currency Transition by Arvind Subramanian :: SSRN’, 2011, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1928138. ↩︎
- Brazil, Russia, India, China, South Africa ↩︎
- Christopher A. McNally, ‘Sino-Capitalism: China’s Reemergence and the International Political Economy | World Politics | Cambridge Core’, 2012, ↩︎
- Radhika Desai, Capitalism, Coronavirus and War: A Geopolitical Economy (Taylor & Francis, 2023) ↩︎
- Eric Helleiner and Anton Malkin, ‘Sectoral Interests and Global Money: Renminbi, Dollars and the Domestic Foundations of International Currency Policy’, Open Economies Review 23, no. 1 (February 2012): 33–55 ↩︎
- Leo Panitch and Sam Gindin, ‘The Making of Global Capitalism | 30 | v2 | Power and Inequality | Leo’, 2012 ↩︎
- Matthew D. Stephen, ‘Rising Powers, Global Capitalism and Liberal Global Governance: A Historical Materialist Account of the BRICs Challenge – Matthew D. Stephen, 2014 ↩︎
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