Prospects of a Multipolar World and the Role of Emerging Economies

By Dr. Kalim Siddiqui

I. Introduction

When we look at economic data on trade and output growth, there seems to be an economic shift gradually taking place from a US-led unipolar world towards a multipolar world. We analyse the long-term trends of capitalist globalisation and the recent globalisation which began in the early 1990s under neoliberal economic policies. It seems that in this context, debate over the ‘decline of the West’ and the ‘rise of the rest’, and the accompanying debate over the historic role of ‘rising powers’, takes on a new meaning. (Amsden, 2001; Hoogvelt, 2001)

Economic development is a concept that attempts to encompass many vast and complex processes of social economic transformation. In developing countries it conveys images of great promise and hope to billions of human beings concerning human betterment, and refers to a long-term historical project for the liberation of peoples and nations from the vestiges of colonialism, poverty, oppression and underdevelopment. Since independence, most of the developing countries’ economies have transformed significantly both in terms of per capita food consumption and incomes. Of course, this development was uneven and unequal between countries and within countries, but compared to their past (i.e. under a colonial regime) there is evidence of positive changes. For instance, there has been no occurrence of major famines, their total contribution to the world’s manufacturing has risen, and economic cooperation between developing countries, also known as ‘South-South’ cooperation, has risen, especially among East Asian countries. These historical changes, through a vision of mutual benefit and solidarity, has moved the region once again onto the centre stage of world politics and economics, leading to a renewed interest in East Asia’s historic promise to transform world order.

The aim of this paper is to examine the relevance of multipolar world order. The multipolar world is defined as a state in which a country’s legitimate interests are respected, and developing countries can influence international development. The main long-term conflict seems to be between the ‘West’ versus the self determination of the people and sovereignty of developing countries. It is about sharing power, influence and acceptance of autonomy in decision making by various countries, with respect for economic diversity. The emancipation of human beings from oppression related to race, class, ethnicity and gender are crucial for establishing long-term peace and harmony.

During the rise of mercantilism in the 16^th century, European traders gradually expanded and finally removed Arab and Turkish traders who for centuries traded Chinese, Indonesian and Indian commodities to Europe. This process was further boosted by the industrial revolution in Europe in the late 18th and early 19^th century. This was the beginning of a new division of labour on a world scale to benefit Europeans, and British domination in Europe, rose in the early 19^th century with the defeat of Napoleon Bonaparte. With European domination over Africa, Asia and Latin America, a new form of division of labour in the capitalist world economy was to allocate industrial production to Europe and agricultural and mineral production to the colonies. In the name of free trade and specialisation these policies were imposed on the colonies.

In contrast to the previous two and half centuries, in the first two decades of the 21st century or so the US has lost its influence in Latin America. The IMF and World Bank have also lost their influence over middle-income countries of the world and most of these economies have done well compared to two decades earlier. (Siddiqui, 2016a)

We should not underestimate the increasing importance of the rising powers of the emerging economies within the global capitalist economy. For the developing world as a whole, Nayyar notes that, in terms of their share in industrial production and the export of manufactured goods, there has been a significant degree of catch-up industrialisation since the 1950s, a process that has intensified since the 1970s. However, this catch-up has been characterised by broad unevenness across the developing world, with many of the gains limited to Asia and Latin America staying roughly constant, while Africa is falling even further behind. China, Brazil, Indonesia and India have seen the greatest gains, followed by Argentina, Brazil, Chile, Mexico, Malaysia, South Korea, Taiwan, Thailand, Turkey, Egypt and South Africa, followed in turn by the rest of the developing world. (Siddiqui, 2016a; also Siddiqui, 2015b) Even within the BRICS (Brazil, Russia, India, China and South Africa) countries, there are considerable inequalities, with Brazil, India and South Africa all running sizeable trade deficits with China. A near-colonial pattern of trade exists within the developing world, involving the export of primary commodities to China and the import of manufactured goods from China, a pattern that can hardly be viewed as conducive to industrialisation, let alone indicative of a partnership for development. The rise of China, Malaysia, South Korea, Singapore, Brazil and India (as growing manufacturing powers therefore poses a threat to the future of manufacturing-based industrialisation elsewhere in the developing world, thereby potentially deepening the international division of labour between China and India and regions specialising in primary commodity production and natural resource extraction.

While emerging economies like Brazil, China, India, Indonesia, Turkey, Russia and South Africa are likely to grow further in their influence, the US’s economic and political influence is receding. (Siddiqui, 2016b; also 2015c) It is much clearer during -Covid-19, that economic power will accelerate towards the East even as the global economic crisis deepens due to lower investments, and productivity growth. Globalisation will evolve and trade patterns are already altering, where East Asia and China are able to export a larger proportion of manufactured goods, and bilateral trade links between emerging economies such as Brazil, India, Indonesia, Turkey, Nigeria and South Africa will become more important. Urbanisation will accelerate in the world’s most populated countries namely China, Indonesia and India. Of course, there are enormous challenges and opportunities in the decades to come for the developing countries.

II. The debate

Francis Fukuyama’s book The End of History and The Last Man was published in 1992 at the end of the Cold War. He stated that history had come to its logical conclusion because humanity was finally able to deduce the most harmonious world order based on the ideals of liberal democracy and capitalism. However, the subsequent reality showed that the universal spread of these ideals had stagnated and caused underdevelopment in some countries. This led to turmoil in various regions, which clearly demonstrated that the proclamation of the end of history was premature and still remained a distant goal, and that critique and alternative of capitalism were necessary.

In contrast to Fukuyama’s conclusion that there is no alternative to capitalism, it was remarkable that in the early 1990s, when many observers were anticipating a new cycle of ‘Western’ ascendancy, Janet Abu-Lughod viewed the end of the era of ‘European hegemony’ and a ‘return to the relative balance of multiple centres’ that preceded Euro-Atlantic imperial globalisation in the 19^th century. This systemic change must be analysed from a long historical perspective. For instance, the opening of the ‘New Worlds’ Atlantic system that opened the way for European world hegemony, beginning with the colonisation of the Americas soon after the slave trade, plantation and colonisation and plunder of the parts of the world today known as developing countries (Abu-Lughod, 1991).

After the collapse of the Soviet Union in 1991, the West led by the US began to impose ‘free trade’ via the WTO and IMF/World Bank more aggressively. However, most developing countries, rather than totally rejecting the principles of a US-supported global free trade policy, saw themselves as having little choice but to seek membership of the WTO, since to do otherwise would be to risk economic and political marginalisation. At the same time, however, the WTO placed significant constraints on the policy options of developing countries. As such, a feature of the new SSC (South-South Cooperation) is that of seeking the reform of the WTO. At the 2003 WTO Ministerial Meeting in Cancun, the Group of 20 developing nations demanded concessions on agricultural and governance issues. Indeed, it was the failure of the rich countries to meet these demands that played an important role in the collapse of the negotiations of the Doha Round. (Siddiqui, 2018a; also Siddiqui, 2018b) 

During the 1990s, for example, trade liberalisation under the World Trade Organisation (WTO), most notably Doha Round, did not come to a close for over a decade because India repeatedly rejected existing reform proposals. Even in 2008, when there was a large majority in favour of accepting the suggested agreement in the ministerial meeting, India vetoed it on the grounds that it would be too harmful to the large number of Indian peasants engaged in subsistence farming. The India, Brazil, and South Africa grouping has similarly criticised the protectionist policies of the G8 and emphasised the need to push ahead with the Doha developmental round. (Siddiqui, 2018c; also Siddiqui, 2010) Moreover, in contrast to the developing country group solidarity of the past, the argument put forward has been that liberalisation has not gone far enough, and that a world without the WTO and other international financial institutions would only reinforce the West’s policy to extract concessions from the smaller and most poor among the developing countries.

Although the radicalism shown in the 1970s by the NAM (Non-Aligned Movement) via the Group of 77 has vanished, the BRICS grouping has sought to address several of the issues originally raised by the NIEO (New International Economic Order), such as the reform of international financial institutions to give the rising powers more influence in their operations. A key demand of BRICS has, for example, been the reform of IMF governance to increase the quota allotted to developing countries (Bello, 2014; Siddiqui, 2016b) and to end the arrangement whereby the leadership positions of the IMF and World Bank are limited to Europeans and Americans, respectively. This cause was given added legitimacy in 2012 when the BRICS countries bolstered the IMF by contributing to the organisation’s $430 billion bailout. India, Russia and Brazil all contributed US$10 billion each, South Africa contributed US$ 2 billion, and China a massive US$53 billion, creating a total BRICS contribution of nearly US$ 100 billion. Progress in reform was slow, however. Following the G20 Agreement on Quotas and Governance reached in 2012, the IMF Board of Governors drew up a reform package that involved a doubling of quotas, with a shift of more than 6% of quota shares from over-represented to under-represented member countries. China was to become the third largest member country in the IMF, with Brazil, India and Russia to become among the 10 largest shareholders in the Fund. (IMF, 2007)

In the early 1970s the G77 and the Non Aligned Movement (NAM) challenged the post-war liberal capitalist system through collective action at the UN to establish a NIEO. The aim was to improve socio-economic conditions of the people in the developing countries and full fill the dream of anti-colonial movements. It also means sovereignty of both political and economic of the former colonies by redistributive mechanisms correcting historically constructed core – periphery disparities. It failed due to the rich countries refusal to accept even their modest demands. However, at present, the economies of the developing countries are able to grow faster in the last two decades compared to 1990s. And some of them have emerged stronger economically and increased their share in the global output. The developed countries, which still have control over global institutions like the UN, IMF, World Bank and WTO, are centred in Europe, North America and Japan, also known as the ‘West’. After the collapse of the Soviet Union in 1991, and with the end of Cold War, the advanced capitalist countries had formed unipolar world under US leadership, and NATO military alliance was strengthened to attack outside Europe, such as in Afghanistan, Iraq, and Libya.

Moreover, the collapse of primary commodity prices in 2014, which seemed to have underpinned much of the progress made in the developing world, it created economic difficulties for the developing countries. In terms of their impact on global governance, BRICS may have more success in influencing the UN, the World Bank, the IMF and the WTO. The BRICS have failed to coordinate their actions, and their relationship with each other is characterised more by rivalry, economic or political, and less by unity. (Siddiqui, 2016b) In fact, the spirit of solidarity among developing countries should be expanded, and the approach of BRICS must be to facilitate cooperation among themselves and solidarity with others through mutual economic interests and consultation.

III. Struggle for Development and Autonomy

Since the collapse of European colonialism in Asia and Africa after World War II, the key global challenge for the former colonial countries has been how to achieve real autonomy as shown by the US, nearly a century and half ago, with its struggle against British colonialism and finally independence in 1776 and de facto rather than de jure equality. Initial conditions varied considerably country to country between the colonies, with greater or lesser levels of industrialisation and differing levels of institutions. The postcolonial states, including the states of Latin America that had achieved independence in the early 19thcentury, but remained locked economically with the US and Europe, found it difficult to overcome developmental hurdles rooted in historically constructed patterns of economic dependency, inequality, malnutrition and poverty. In general, between 1950 and up to 1970, the living standards in the ‘peripheral’ world have improved compared to the first half of the 20^th century. This was positive development in contrast to 1950, when their average income as measured by per capita output was on average no better than they had been in 1800, while their relative share of world manufacturing (6.5%) was five times lower than it had been in 1860 (36.6%). By 1970, their share of the world’s output had increased to 9%, which was remarkable.

This was due to the economic policy of the state taking the lead in promoting domestic industrialisation i.e. state-led industrialisation strategies also known as ISI. Nonetheless, most developing countries were less successful compared to the East Asian countries, which were able to expand their manufacturing sector to a greater extent, and were also able to sharply increase their share in global export. By the early 1980s, the largest gains were concentrated in a small region, South Korea, Taiwan, Singapore, Hong Kong, Brazil and Mexico accounted for nearly a third of industrial production outside of China, in the developing countries. This means that independence has not translated into a fundamental improvement of the relative economic position of most developing countries, especially, South Asia, Africa and Latin America.

Dependency theorists have argued about the existence of asymmetries and constraints that reproduced international hierarchy, which undermined the economic independence of countries that were kept in subordinate positions in the world capitalist economy. Dependency relations constructed in the colonial era continued to operate through world-level mechanisms, global market forces, production, and monetary structures. Unequal terms of trade and exchange, which created structural vulnerabilities and inhibited the possibilities of sovereign economic development, also kept them out of any successful development, as happened in the case of late developing countries in the late 19^th century, e.g. the case of Germany and the US. As a result, the former colonial countries were trapped in a global division of labour largely benefitting the needs of the West. For dependency theorists this situation implied that autonomy could only be achieved outside the dominant system, through exit and revolution. (Dos Santos, 1970)

The post-World War world order became the central concern and aim of the constellation of postcolonial leaders, theorists and activists who initiated the drive for an NIEO in the late 1960s, which culminated in the adoption of the Declaration on the Establishment of a New International Economic Order at the General Assembly of the United Nations in May 1974. The aim of this programme, which grew out of the 1955 Bandung conference of non-aligned states, was far more ambitious and intellectually coherent than earlier non-aligned efforts: to create and institutionalise a global redistributive order founded on new binding rules that would ‘correct inequalities and redress existing injustices…eliminate the widening gap between the developed and the developing countries and ensure steadily accelerating economic and social development and peace and justice for present and future generations’ (UN General Assembly, 1974).

The developing countries called for a reform of the Bretton Woods institutions and to correct terms of trade imbalances between the developing and developed countries, and supervision of transnational corporations to secure the sovereignty of every State over its natural resources; the right of states to nationalise foreign firms and to exercise control over resource exploitation; (Siddiqui and Armstrong, 2017a) the facilitation of technology transfer and the promotion of endogenous technological development; and the strengthening of mutual economic, trade, financial and technical cooperation among the developing countries.

However, the very sharp rise in oil prices by oil exporting countries (OPEC) in 1973 constituted a major challenge to most of the developing countries, and oil importers were obliged to finance their imports through debt. The US had strategic leverage over the Middle-East absolute monarchies and dictatorships, which accounted for 75% of total OPEC money surpluses, who deposited most of their surpluses in US banks and US treasury bonds. Only relatively small volumes of ‘petrodollars’ were actually channelled back to the least developed countries, whose balance of payments problems augmented their vulnerability. The result was a tightening of IMF control, and hence, US structural influence over the economies of the energy-dependent developing countries. Neither the USA nor Europe seriously entertained the idea of a redistributive grand bargain responding to the core concerns of the framers of the NIEO. While the USA actively sought to divide the developing countries, the Europeans responded with some conciliatory measures, such as the 1975 Lomé Convention, which gave former African, Caribbean and Pacific colonies preferential access to the European market. But these actions were not designed to stimulate development or correct historical disparities; they were to maintain the precarious control by the former imperial states over the parts of their former colonies.

Two important changes took place in the late 1970s which effectively ended the challenge to the liberal capitalist hegemony. The first, which matured slowly, and the effects of which only became fully apparent in the 1990s, was the decision taken in 1978 by the Chinese Communist Party to launch a programme of gradual adoption of a pro-market policy and economic liberalisation and to integrate its economy with the West. The second was the decision taken by the US Federal Reserve in 1979 to raise interest rates. As a result, the Latin American debt crisis in the early 1980s accumulated a large dollar denominated debts.

This sweeping conclusion has, of course, been thoroughly disconfirmed by more recent growth evolutions but it had some pertinence at the time it was formulated, coinciding with the spread and ascendancy of neoliberalism and the ‘Washington Consensus’. Having neutralised the NIEO challenge, in the 1980s and 1990s the USA and the Europe along with a constellation of public and private international actors, set and enforced a global liberalisation regime that was directed against state-led developmental models also known as ‘import substitution industrialisation’(ISI) (Siddiqui, 2012a; see Siddiqui, 2010), which tightened constraints on most, though not all, post-colonial states during the debt-crisis in the 1980s and 1990s, the West exerted intense political pressure on developing nations to open their economies and as a result national economic regulations and tariffs were removed in the name of efficiency and competition.

IV. Growth of Regional Economy

Although a significant share of East Asia’s trade is in intermediate manufactured goods for final destination export to the USA, Europe and Japan, it has allowed for technology transfers and has stimulated endogenous growth factors in East Asia region. The other dimension is regionalisation and the intensification of transnational trade and investment flows among the developing countries. Regionalisation has been an important feature of East Asian re-emergence. Initiated by the relocation of Japanese manufacturing capacities in the 1980s, which generated a concatenated division of labour in East Asia, regional economic integration has deepened over the past decade and a half. Intra-regional trade as a share of total trade has thus risen constantly over past decades by 20% in 1970, 32% in the early 1980s, 47% in the early 1995, 54.8% in 2000 and nearly 60% in 2012.

The Chinese government appears to be only focusing on building its economy and the living conditions of its people. China has become the world’s largest economy, but it has a population of 1.4 billion, which is more than four times larger than the US. Having an economy the size of the US means that average living standards are far lower than in the US and at present, per capita income is one-fourth than of the US. It means that China still has a long way to go to become a rich country.

Chinese annual GDP growth averaged over 9% between 1997 and 2019 and, in the aftermath of the East Asian crisis, trade and investment flows between China and the rest of Asia grew significantly. Since the late 1990s, regional trade with China has been growing faster than with the US. For instance, Japan’s imports from China already exceed those from the US, and Japanese exports to China have been steadily rising. This same trend is apparent in South Korean, Thai, Malaysian and Singaporean trade flows (Amsden, 2001; Siddiqui, 2020a).

Chinese leaders thus interpret the 1997 East Asian financial crisis as a turning point: ‘The process of the East Asian cooperation has been consolidated day by day since then [and is now] based on a multi-layered, multi-faceted structure’. Recent moves to gradually internationalise the Renminbi and use it in regional transactions, such as the June 2012 Japanese–Chinese accord to trade in their currencies rather than the dollar, represent a further step in this direction. (Siddiqui, 2020d)

Trade between China and all other developing countries grew significantly over the past two decades. While the share of South America, Africa and South Asia in China’s total trade remains relatively small, it is steadily growing, but China’s share in their total trade has become strategically important. The space is not available for a comprehensive review of the new transcontinental flows, but the pattern is clear even when we look at the data. Over the past two decades Asia has become Brazil’s main trading partner, accounting for 30% of its exports and 31% of its imports. Exports to China, as a share of total exports, have risen from 0.9% in 1992 to over 17%. China has thus become Brazil’s second trading partner, just behind the European Union (21%) but well ahead of the US (10%). Argentina’s exports to China, as a share of total exports, have likewise risen from 1.1% to 9.7%. Similar patterns are apparent for Africa, where South Africa’s export share to China has risen from 1.8% in 1998 to over 12% in 2018, while imports rose from 3% to 15%, and Nigeria’s exports from 0.5% to 6.9%. In South Asia the share of Indian exports to China has risen from 2.9% to over 10%, and imports from 2% to 12% during the same period.

V. Restructuring Global Capitalism

It seems that the historic pendulum, which had swung to the ‘West’ in the late 18^th century, is swinging back to Asia, which is reclaiming the leading economic role it held for a very long period before the Age of the Western Empire. The movement towards a polycentric and plural world system has indeed quickened over the past quarter century, as major Asian regions have consolidated their position as a dynamic growth region of the world capitalist economy, developing regional and transcontinental linkages that are reconfiguring global trade, investment and financial flows.

First in the 1960s, economic changes began in the East Asian region and later on in the 1990s, growth spread to other developing countries like Brazil, China, India, South Africa and Turkey. The systemic restructuring has primarily been driven by East Asia, which has experienced a process of economic expansion, the duration of which have been remarkable by historic standards. Beginning with Japan’s rapid economic transformation in the 1950s and 1960s, a regional development dynamic was set into motion that spread successively, in wave-like formations, to the Newly Industrialised Countries and moreover, over the last four decades, to spectacular growth in China. Varying initial conditions, historic pathways and a combination of both state and markets have produced positive results in East Asia. There are uneven country-to-country developmental outcomes, distinguishing first and second wave industrialising from third and fourth wave countries that are climbing the ladder but are not far from catching-up with the most developed economies. (Siddiqui, 2020c) 

Nonetheless, a coherent process has been at work, unfolding over time and space to most of the region, with global effects. East Asia’s aggregate share of constantly increasing world GDP (in PPP), which was negligible in the 1950s, has thus risen from around 10% in 1980 to 30% in 2015. China’s share has grown from 2% to over 18%. Over the same time period PPP per capita GDP in current international dollars was multiplied by 14 in South Korea, by over seven in Singapore and Thailand, by six in Malaysia and Indonesia, and by 39 in China (from US$250 to US$9380 in 2019)–a spectacular increase that reflects the intensity of growth and its cumulative impact. By the end of 2020 East Asia’s share of world GDP (in PPP) is expected to reach 32%, with China accounting for nearly two-thirds of the total. In South Asia, India’s world share has risen from 2.5% to 5.5%, and per-capita GDP has increased by a factor of 14, from $419 dollars to $3800 dollars today (in current US dollars). Asia’s aggregate share of world GDP (in PPP) is thus projected to approach 46% in a few years. When other major re-emerging countries and world regions – Brazil, India, Turkey, Mexico, and South Africa are taken into account, despite the Covid-19 setback, their world output share in 2020 is expected to exceed 55%.

Over the past two decades, East Asia region has thus been the main source of world growth and has emerged as increasingly trade and investment linkages. Growing financial power derived from cumulative surpluses is another important feature of the rebalancing of the world economy, which has been accentuated by the deepening economic crisis in the European Union, Brexit and in the USA. We are witnessing the end of the long historical cycle during which wealth and power were concentrated in the hands of a small number of countries in Europe, North America and Japan. (Siddiqui, 2019a; also Siddiqui, 2012b) The hierarchical international system constructed in the last three hundred years, that was centred in Europe, and which instituted a global division of labour dividing the world into dominant cores and dependent peripheries, is giving way to a multi-polar world.

In fact, the USA’s Cold War strategy required a few regions of secure and prosperous states in Northeast Asia to contain the Soviet Union and China, until the late 1960s Sino-Soviet border tension, and to minimise any possibility of radical movement in the region. (Siddiqui, 2017b) This is also true of China, which, because of its scale, nonetheless constitutes a special case. Gradual integration into the world capitalist economy and export-led industrialisation modelled on the neo-mercantilist strategies of earlier East Asian developmental states has generated intense growth and real GDP gains over long periods. The capitalist transformation has simultaneously led to spatial polarisation, large-scale continental mass migrations, sharp new social stratifications and major problems of environmental sustainability linked to energy use and urbanisation. Sustained growth, fuelled by transnational investment flows, has been made possible by the mobilisation and exploitation of a vast subordinate labour force, notably women concentrated in low value-added activities, raising crucial issues of gender and class.

While they highlight the need for vigorous corrective measures, without which a country’s development is likely to be compromised, these problems do not call into question the fact that the strategy followed since 1978 has been broadly successful. China’s pathway bears some analogies to US economic expansion in the 19^th century, which was fostered by transnational flows and relied on the exploitation of slave labour until the mid-19^th century, and of low wage immigrant labour in the latter part of the century. This comparison is not meant to justify disciplinary Chinese labour policies, although there are currently some signs of relaxation, much less the authoritarian regime that is engineering capitalist transformation. It merely points to the fact that China, through the exploitation of its rural and most backward regions, is following the path of earlier successful European Capitalism.

Soon after the communist revolution in China in 1949, the country faced enormous challenges, seeking to overcome severe underdevelopment, widespread malnutrition and illiteracy, and the Western monopoly over technology. It promoted reforms to encourage growth and economic development such as the government’s introduction of radical land reforms, compulsory primary education, and the availability of primary health care for all its citizens. Deng Xiaoping, the chief architect of the ‘open policy towards the West’ expressed this as: “Our country must develop. If we do not develop then we must be bullied. Development is the only hard truth.”

China’s political orientation has been shaped by its history of subjugation by foreign powers since the mid-19^th century, also known as the “century of humiliation”, and anti-imperialist struggles for national liberation. In the 1950s and 1960s, China extended support to developing countries due to the collective struggle of formerly colonised and oppressed nations against global inequality brought by the West.

Four decades later, the success of the Chinese economic reform is undeniable, and it is even noted that such a rapid economic transformation has never happened in human history in such a short period. According to the World Bank, China has lifted nearly 800 million people out of poverty, more than ever happened in human history, and generated “the fastest sustained expansion by a major economy in history”. China’s GDP growth has averaged 10% annually for over forty years, without crises, with the country becoming a world leader in manufacturing, technology and innovation. In mater of just two life spans, from being extremely poor to an international power, China is now predicted to overtake the US in GDP terms in the next fifteen years. Measured in terms of PPP, China’s economy already surpassed the US in 2018.

Since the last decade, the US-China trade imbalance has been rising against the US as shown in Figure 1. The US has blamed China and claimed it is due to the Chinese policy of currency manipulation. (Siddiqui, 2020b) After Donald Trump became President of the US in 2017, he initiated a rise in tariffs against certain Chinese products and also threatened more trade sanctions against China and Russia. However, a number of studies have pointed out that the US trade deficit rose not only with China but with Europe and Japan as well (see Figure 2). Therefore, the persistence of trade imbalances trends must be seen as a US domestic policy, rather than putting the blame on others. I argue that a disparity in real costs is the root cause of the US-China trade imbalance.

Figure 1, which shows the trade in goods between the US and China, indicates that the US has had trade deficits in goods with China since the early 1990s, which has grown substantially. For example, the deficit was only US$10 billion in 1990, but by 2000 had reached US$100 billion; by 2005 it had risen further to US$200 billion, by 2012 it was US$ 315 billion, and by 2017 it had reached US$376 billion. The sharpest rise was since 2001, which also coincided with China joining the WTO. For example, China’s exports to the US increased from US$125 billion to US$505 billion, while US exports to China increased only US$19 billion to about US$130 billion for the same period.

Figure 2 indicates that China is an important trading partner for the US, but that China still has less than half of the US’s overall trade deficits. For example, in 2017 the US’s trade deficit with China was US$ 375 billion; however, its overall trade deficit was US$ 775 billion. This means that even if the US were to eliminate its trade deficit with China, its trade imbalance problems would still exist.

The US trade deficit and also external payments kept on rising as shown in Figure 3, and has grown remarkably over the last two decades. This was coincident with the period when China joined WTO, which appears to have given the US an excuse to blame China for raising its trade deficits. The US trade deficit with China and other countries are shown in Figure 2. Since 1990, the labour and total factor productivity in the advanced economies has witnessed negative growth, while in the emerging economies including China it has grown steadily, as indicated in Figure 5.

The US-China trade war has facilitated the establishment of Russia as China’s top strategic partner. This also led Russian oil to be redirected from European countries to China. Chinese President Xi Jinping announced in Russia in 2019 the Belt and Road Initiative (BRI), both countries signed to develop bilateral trade and cross-border payments using the Rouble and Renminbi, bypassing the US dollar. (Siddiqui, 2020d)

As China overtook the US as the worlds’ largest economy, a multi-polar world could be a welcome development for all, especially the developing countries. According to Fortune 2018, among global 500 top businesses, the China has moved into second position only behind the US (see Figure 4). The IMF has said that in 2019 China displaced the US as the world’s largest economy. The IMF’s estimation is made on a purchasing power parity (PPP) basis, meaning that it takes into account the differing prices in both countries. Therefore, if at present 1 US$ is worth Chinese 6.1 Renminbi on the foreign exchange market, it means that 6.1 Renminbi can buy much more in China than one dollar can buy in the US market. Hence, the PPP comparison makes adjustments for this, and this is why the Chinese economy is much larger than the measure most commonly used by international organisations and media, which simply converts China’s GDP to US dollars at the official exchange rate.

China is playing a very assertive and leading role in global affairs. It has launched the trillions of dollars on ‘Belt and Road Initiative’ – called “the largest single infrastructure programme in human history.” The BRI involves over 70 countries and 1700 developmental projects, connecting Asia, Europe, Africa and Latin America (Siddiqui, 2019c), while the US is facing economic stagnation and decline, and is losing international control. The US President Donald Trump in 2019 increased military spending rapidly to US$ 716 billion and has brought into his cabinet extreme hawks and anti-China hardliners such as Mike Pompeo and Peter Navarro.

For US policy makers and elites, rather than accepting this new challenge, they see it as a threat to their world domination, and have formulated a recent policy known as the “containing China” policy. Similarly, three-quarters of a century earlier, the US took over as the leader of the capitalist world, declared the Soviet Union as its main enemy, and began an arms race with the Soviet Union. However, at that time the Soviet economy was one-quarter of the size of the US. But now the situation is very different, the Chinese economy is currently bigger than the US and also has huge amounts of trade and a current account surplus. Even after the Covid-19 set back, the Chinese economy has not only recovered, but began growing into the fastest economy in the world. Moreover, China has emerged as the top investor country in the world in recent years. China is a rising power, but they do not seem to be interested in building an empire. For example, China’s billon US dollar investment commitment to ‘one belt one road’, and it becoming the largest investor in Africa, while the West has still not recovered from the 2008 financial crisis and the more recent Covid-19 epidemic.

It seems that due to the long-term consequences of the COVID crisis, public debt in most developed economies will rise sharply. In fact, the 2008 financial crisis increased government debt in the US and EU. (Siddiqui, 2020c; also Siddiqui, 2019b) We think of the financial crisis as a temporary shock that the developed economies barely recovered from, but as we look at the current crisis, it will increase government debt greatly compared to the GDP. This is a legacy that will remain for a long time and will pose very pressing policy questions. As we think about the future of developed economies, in the US and EU, we have to ask ourselves how we will be dealing with a level of government debt that will exceed, as a share of GDP, the amount we had at the end of World War II. The management of this new massive debt through the policy response in the aftermath of the crisis will shape Western society, determining the economic balance between generations, the actual opportunities for future generations, and the technological disruption and transformation that was already in place before this outbreak.

VI. Conclusion

As we have discussed, the new globalisation cycle that began in the late 20^th century has led to an unexpectedly rapid, albeit still incomplete, rebalancing between emerging and advanced economies. East Asia has been the main driver of a systemic change that is leading to new transnational linkages between Asia, Africa and Latin America. These new patterns of interaction are part of a broad process of gradual decentring and restructuring of the world economy that, at the political level, is leading to a diffusion of power. Domestic or international events, for instance a hypothetical but not unthinkable Chinese overreach in the South China Sea leading to sustained inter-state tensions, might slow but are unlikely to halt a transformation that is embedded in globalisation and has become one of its driving forces.

The rapid economic development in the emerging economies has been dynamically restructuring world capitalism from within. It conforms to one of the historic aims of generations of anti-colonial leaders and thinkers, gaining upward mobility and achieving sovereign equality, the way in which it is occurring represents a rather sharp break with the past. But unlike the first generation of postcolonial leaders, who aimed for revolution or sought to invent a ‘Third Way’ between capitalism and communism, and the framers of the NIEO who challenged the intellectual and material foundations of the post-1945 world order, the actors of the current shift in global power relations are claiming a central competitive place in the world capitalist system that their predecessors had attempted to either reform or supplant. (Dos Santos, 1970) The success of that claim, and their consequent implications for current and future global system management, has dampened and in some cases entirely submerged the broader emancipatory or universalistic dimensions of the long struggle for independence, equality and justice.

It has now been sixty-five years since the historic Bandung Conference of 1955, rightly regarded as a milestone in the formation of SSC as a global political movement. The SSC as a movement intended to challenge the Northern-dominated political and economic system and, from the 1950s to the present, has been through a series of starts and stops, surges and retreats. As expressed at the Asian-African Conference held in Bandung in 1955, the newly decolonised countries of the global South emphasised economic and political cooperation, human rights, and the promotion of world peace. This emergent movement of solidarity among the developing countries thereby sought to challenge global power relations. The ‘Bandung Spirit’ henceforth came to encapsulate policies of non-interference and developing economic cooperation among the former colonies to end global inequality while lessening their economic and political dependence on the West. While Bandung and the NAM embodied the political dimensions, the Group of 77, named after the number of countries present at the founding of the United Nations Conference on Trade and Development (UNCTAD), called for the establishment of a NIEO. The NIEO was to be achieved through tackling structural unequal exchanges through ‘a just and equitable relationship’ between the goods exported by developing countries and the goods imported, with an emphasis on sovereignty over natural resources and the right to nationalise key industries and to formulate their own domestic economic policies as sovereign nations.

By the 1980s, however, the developing countries’ debt crisis and the rise of neoliberalism had served to eclipse the NIEO project. The retreat of developing countries’ solidarity was given no clearer indication than at the 1992 UNCTAD summit, when UNCTAD dropped its demands for the adjustment of the international patent system to the developmental needs of the global South, and adopted a statement expressing the belief that the adoption of adequate and effective International Patent Protections and related efforts in the World Intellectual Property Organization and the General Agreement on Tariffs and Trade (GATT) would facilitate technological transfers to developing countries. Henceforth, UNCTAD had been sidelined by GATT, and its successor the WTO.

The study finds that people have nothing to fear from a multi-polar world. And today it seems that the time is ripe for emerging economies to stand up and demand a greater role in the international arena related to the formulation of politics and economics, and in support of its historic promise to transform the world order. There has been a historically significant global shift in production and manufacturing from the advanced economies to the emerging economies, altering the economic geography of the world. The tendency over the past several decades to greatly intensify the globalisation of production, trade and financial flows was advocated primarily as a systemic solution to underlying structural problems in the international political economy, including growth, terms of trade, and productivity. But these same globalising tendencies have also enhanced the historical potential of economic growth and industrialisation in the emerging economies, although currently limited to only a few regions, but expected to spread in the coming decades.

About the Author

Dr. Kalim Siddiqui is an economist, specialising in International Political Economy, Development Economics, International Trade, and International Economics. His work, which combines elements of international political economy and development economics, economic policy, economic history and international trade, often challenges prevailing orthodoxy about which policies promote overall development in less developed countries. Kalim teaches international economics at the Department of Accounting, Finance and Economics, University of Huddersfield, U.K.. He has taught economics since 1989 at various universities in Norway and U.K.

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