Beware the simple solution. It could all end in tears.
There was a period in history when the West’s international identity and institutions were strongly forged. This intense high-energy crucible of collaboration was fuelled by three fires that ran into each other – the bad peace of the Treaty of Versaille, the Great Depression and subsequent World War.
The emergence of USSR geopolitical power provided motivation for continued cooperation. US leadership was aided and assured by its global deputies – NATO, UN, IMF, the elitist and Atlanticist annual Bilberberg meeting, the European Steel and Coal Community (which would ultimately become the EU) and Japan.
After the USSR’s dissolution in 1991 the US became the unrivalled global hegemon. Victor’s ego was a partial catalyst for the subsequent wars into which the West would throw energy, unity and credibility. Mirrored by waste and hubris from an economic and financial perspective. The absolute apex of Western hegemony was the unquestioned pre-eminence of globalised financial markets. A regime powered by vast invisible waves of financial data generated by mysterious flux in the infinite magical balance sheets of banks. The wizard behind the curtain making this awesome machine function was the US dollar, dominating and patrolling all significant global economic nodes.
“The absolute apex of Western hegemony was the unquestioned pre-eminence of globalised financial markets.”
All other Western institutions kneeled before its power. For example, the IMF was nothing more than an intellectual hoodlum for it. Those that corralled the dollar, including the mighty and opaque Eurodollar markets and investment banks, were the high priests of the faith. We all kow- towed and paid tribute to the seemingly insuperable dollar and its keepers.
The rapture of full Western enlightenment at the end of economic and political time (1991- 2008) meant that the West believed it lived in a state of full grace. Everything ran free in this Nirvana – free markets, competition, movement of capital, services and people. The machine appeared divine. Wealth and technology advanced and globalised apace. All was good, all was light….unbearably so…
“We could not accept the fall from grace that devotion to the dollar delivered.”
In 2008 the curtain was abruptly drawn open and the great financial wizardry was seen to be a chimera. So shocking was this revelation that we pulled back the curtain and sought to reanimate the wizardly myth rather than face up to our failings. Our esteemed international institutions with their high status professional sherpas were dumbly dazzled in the headlights like soon-to-be-roadkill rabbits.
We could not accept the fall from grace that devotion to the dollar delivered. Instead, we clicked our red shoes together and dreamed we were back in the wonderous upwards spiral of private debt-money creation and import driven consumption. Our elite global institutions fully complicit in the fudging clueless madness. Chinese action really saved the day which Chinese history will tell.
The euro was originally conceived as ballast and competition to the dollar. 2008-12 revealed the nonsense of this project. Without massive and unconditional dollar swaps from the Federal Reserve the Eurozone financial system would have collapsed.
The euro is a revelatory tale that shows even if Western institutions did not start their journey as dollar supplicants that is where they ended up. A catastrophic misapprehension of the extent to which EU Europeanism is nothing more than an indulgence of the US hegemon. Will the US risk its own fragility to extend a helping dollar hand to the euro in the next crisis?
The EU crisis rumbles on due to lack of backbone to share fiscal resources and political risks. The end is nigh for this shabby wannabe global power player yet feelings of cultural superiority and entitlement blinds the EU to reality.
The euro, US fiscal deficit or dollar will be the first domino to fall and bring down all the international institutions of Western hegemony. This history will be written in the next decade.
Since 2008 an in-denial West has been slowly melting under the heat of an external fire lit a couple of decades before: Capitalist China. The great realist, strategic and mercantilist cuckoo. We left our nest egg unguarded for it to dislodge so it has trashed the modest talents and dreams of too many ordinary westerners.
“The euro was originally conceived as ballast and competition to the dollar. 2008-12 revealed the nonsense of this project.”
The intellectual and governance sherpas to the West provided many sophisticated reasons for why China’s rise was benign and why this new Sinocentric growth-shoot of globalisation was good for us all. However, this was abstract narrative conceit rather than reality and the initial losers, the proles, have commenced sustained irreversible rebellion.
“All our international institutions will wither, some replaced by sinocentric alternatives.”
The West has outsourced its capabilities to China and others for the great financial benefit of a few and subsequently struggled to keep its polities balanced and healthy for the many. Our international institutions have been fully complicit in this robbery. Putting the blame on capitalism, as is the vogue amongst populists of left and right, is mistaken. Capitalism is merely an engine of societal motion that hums in whichever way we politically tune it.
Our witches brew of incompetence and extremism would inevitably bubble over. On balance, the heat and stramash that is Brexit looks more like a messy and painful realisation and resolution process than continued denial. Could the UK be at leading edge of renewal in the West? Elites and beneficiaries of globalism would never see it like this of course and will fight to reanimate their status quo.
A klepto-professional class of super savant sherpas in our elite institutions will work to keep us blind until it is too late, making out with as much status and loot as they can in the meantime. As the inevitability of a Sinocentric reality dawns many, no doubt, will find their way to high status positions in Sinocentric institutions or aide their exclusively-educated offspring into new high status Sino-global roles.
Our great danger is that we are slow to recognise the implications of the end of Western hegemony as our politics increasingly mirror the Argentine political disease of Peronism, a destructive nationalist populist movement derived from decline denial and a reliance on emotional thinking. Peronism leans both left and right over time, often simultaneously blending the two.
A Western form of Peronism is taking root in Western politics aided by the intense feel-first-think- later of our hypermedia times. The sort of good versus evil simplistic two-campism that runs through our politics today is a Peroning that eviscerates our complex, tolerant and fragile blend of liberalism, individualism, welfare and capitalism.
Trump’s “Make America Great Again” is a manifestation of this destructiveness. But so is Corbynism’s knee jerk “for the many not the few” mantra, quick to call out the evil of the other. The new bastard Peronism echoes all around Europe too. Pragmatic liberalism that seeks to reach across divides is passé and eschewed.
The cohesion of the West, is being blown apart and with it, its hegemony. All our international institutions will wither, some replaced by Sinocentric alternatives. Each individual Western country must choose its own path to a new place. It’s a difficult path to national renewal, and remaking new partnerships with those countries that also reanimate. Nevertherless, we will all need to make our accommodation with Sino-power.
The alternative? Enfeeblement through chronic Peronisation of which Modern Monetary Theory is probably the enabling intellectual pathogen. Administered with help from our befuddled elite international institutions.