Fortune News | Feb 05,2022
March 12 , 2022
By Christian Tesfaye ( Christian Tesfaye (firstname.lastname@example.org) is a researcher and Fortune's Deputy Editor-in-Chief whose interests run amok in the directions of political thought, markets, society and pop culture. )
There are events in world history with consequences far-reaching into decades, and we may be witnessing one unfolding in the aftermath of Ukraine’s invasion by Russia.
In more ways than one, we may be witnessing the crumbling of our dreams for the “end of history.” When Francis Fukuyama first published his best-known work, “The End of History and the Last Man,” many of us saw it as a confirmation that the Soviet Union did not fall because of its internal failures, but because people around the world, at least in Eastern Europe at least, finally understood and accepted the value of liberal democracy. It now seems that some believed this not after true reflection and analysis but a desire to believe in such a utopia.
Many years from now, someone may read what I wrote here and think I was being dramatic. This is the best-case scenario because the Russia-Ukraine crisis would not have transformed into an anti-globalisation movement that paved the way for a second Cold War, or a hot one. I would be glad about this as well. But there are some reasons why it may not turn out that way unless Russia, the US and China come to their senses.
‘History’ is not being made today because Russia is invading Ukraine, which is reprehensible whatever the former’s rationale about NATO may be (war is never the answer). Powerful nations have been terrorising smaller ones over the past three decades. Look no further for proof of this than the United States and Iraq, first with cruel sanctions and then invasion.
‘History’ is being made because of the response to the Russia-Ukraine crisis. Start with the security implications. Europe is now significantly arming itself, with NATO as a spear-point. The US is likewise arming Ukrainian resistance, indirectly fighting a war with Russia. Even Germany, whose military adventurism caused two catastrophic world wars, is beefing up its defences, while the Russians have issued nuclear threats. The chances of blundering into another superpower conflict have been raised. The world is a much less safe place now, with Europe a potential focal point for a nuclear war.
It is ironic that this ‘civilised’ part of the global, as touted by some reporters, cleared the way for two world wars and is threatening to do so for a third one.
Another reason that ‘history’ is being made is as a result of its economic consequences. This is two-pronged. One is in how globalised supply chains can no longer be relied upon for the economic wellbeing of nations. COVID-19 made us realise this, and now the Russia-Ukraine crisis emphasises it. As the prices of commodities such oil, wheat and fertiliser sky-rocket, the case for economic self-reliance of nations is becoming stronger. It is detrimental to a globalised world, where nations intensely trade and rely on one another.
The other economic consequence is the desecration of the global financial system, which is dominated by the US, especially as the dollar is the undisputed currency of exchange and measure of value. The US has done this by weaponsing global finance, launching an economic war against Russia using its hegemony position. One of the tools for this has been the SWITCH system, which banks worldwide use to share financial information, and from which major Russian banks have been booted.
The other is the freezing of Russian central bank assets held as securities in the US and the EU. If the US is willing to basically expropriate the national savings of other countries as punishment (this has also been done to Afghanistan after the Taliban’s takeover), it calls into question financial liberalisation as this will also pose national security challenges.
Many other countries have significant exposure to the US security market, including China. Are their national savings safe? What about the benefits of holding foreign currency reserves? Does it matter a nation builds up vast reserves, as Russia did to the tune of 600 billion dollars, through trade surplus if other countries that print these currencies can make them valueless with the stroke of a pen? Can trade and economic cooperation with nations that are not political allies be sustained for long?
Russia is no challenger to US financial might. Russia will lose out economically. The US will win the battle. But it will likely lose the war. If it is willing to weaponise its privileged position in global finance, de-dollarisation will only be a rational step for most countries whose relationship with the US has always been uneasy.
This may not be a bad thing in itself. Why should the US be given such economic influence over every other country? The US, a democratic republic, may be less likely to abuse its power but it is not incorruptible. In fact, from its history, from its original sin of enslaving Africans to its illegal invasion of Vietnam and Iraq, it is clear that the US, although better at reflection and self-criticism, will still misuse power. The possible expiration of its global financial hegemony over the rest of the world could be democratising.
The problem is that what follows may not be any better. Competing financial centres and currencies could be beneficial. But, it could also entrench a multipolar world order where superpowers are jockeying to annihilate one another and unable to prioritise endeavours such as addressing climate change or eradicating poverty.
Christian Tesfaye (email@example.com) is a researcher and Fortune's Deputy Editor-in-Chief whose interests run amok in the directions of political thought, markets, society and pop culture.
PUBLISHED ON Mar 12,2022 [ VOL 22 , NO 1141]
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