(LifeSiteNews) – In part three of this series (click here to read parts one and two), we look at the end of what Charles Krauthammer called the Unipolar Moment – his assessment of the opportunity for the United States to be the sole hyperpower following the fall of the Soviet Union.
We shall see how the neoconservatives have driven the former allies of the U.S. into moving off the dollar, and how their actions have considerably strengthened both China and the new BRICS bloc that it leads.
What is the argument for a new multipolar world?
We may apply Charles Krauthammer’s argument for the supremacy of the United States in world affairs to this question. He wrote the seminal piece on the unique opportunity for the United States to lead the world.
Written in 1990 for Foreign Affairs, Krauthammer’s piece follows swiftly on the collapse of the Soviet Union. The peaceful dissolution of the Warsaw Pact saw the subsequent absorption of many of its former members into NATO:
American preeminence is based on the fact that it is the only country with the military, diplomatic, political and economic assets to be a decisive player in any conflict in whatever part of the world it chooses to involve itself. In the Persian Gulf, for example, it was the United States, acting unilaterally and with extraordinary speed, that in August 1990 prevented Iraq from taking effective control of the entire Arabian Peninsula.
Krauthammer cited the examples of Germany and Japan to gainsay the idea that economic might alone was sufficient to elevate a nation to major power status.
Whether the United States still wields these powers to the same degree, and remains the stable and credible force that it was in the 1990s does not suggest the emergence of a global peer. It could be the case that the U.S. has weakened, even in all these key areas, but still remains supreme.
Whilst the United States remains a colossal power, it is important to consider the magnitude of the challenges it now faces, to see whether it remains peerless.
These considerations do much to establish that a global competitor has emerged, in a bloc with China and Russia at its center.
The managed decline of U.S. industry
Neoconservatism has a counterpart in economics, which relies on the production of miracles. Where economies “liberalize,” their money is miraculously transferred away from their populations and into the hands of people of an international – and globalist elite.
Neoliberal reforms are enacted in every nation “liberated” by neoconservatives, and the United States is no exception. In the decades either side of the turn of the century, American industry went into a decline from which it has not recovered.
The manufacturing base of the United States was exported in large part to China in the mid-1990s to create an “economic miracle.” The policies enacted under Clinton led to “spiralling deficits and job losses,” including the loss of six million jobs in manufacturing in the first decade of this century.
According to Singer and Bonvillian, economists writing in 2018 for The American Interest (emphasis added):
The U.S. manufacturing sector experienced a devastating decade between 2000 and 2010, from which it has only partially recovered. All manufacturing sectors saw job losses between 2000 and 2010, with sectors most prone to globalization displacement, led by textiles and furniture, suffering massive losses.
What is worse, this decline may be permanent: “When these complex value chains are disrupted, it is hard to put them back together. That’s why, historically, once the U.S. economy loses an economic sector it tends not to come back.”
The policies of offshoring U.S. industry to China dramatically reduced U.S. manufacturing capacity, whilst contributing enormously to the acceleration of Chinese economic development. The economic miracle has impoverished many ordinary Americans.
The massive trade imbalance in manufacturing hit many industrial communities especially hard. Those areas that faced direct impacts from Chinese imports sustained an average income loss per adult per year of $549 between 1990 and 2007. This was offset by per capita Federal adjustment assistance of only $58.
Job loss to trade with China [alone] was 2.4 million between 1999 and 2011.
The Chinese overtook the U.S. in manufacturing in 2011. In 2000, U.S. manufactured exports were three times those of China. By 2021, China’s manufacturing output was almost twice that of the U.S.
As a result, China now has the largest industrial manufacturing base in the world, and it continues to expand. Coupled with Russian mineral wealth, it leads a faction whose economic power and attendant global trade networks looks set to outcompete that of the United States and its allies.
The plan – or hope – for China was that it would develop in line with neoconservative thinking. That is, with rapidly expanding consumerism a more Western-style democracy would develop in tandem. This was a fantasy.
As with every aspect of neoconservative ideology, there was never any basis in reality for this expectation. The Chinese Communist state has remained resilient in its retention of authority, which has been bolstered and not weakened by its delivery of massive economic advances. What is more, it now leads two global strategic alliances.
Building BRICS for a new multipolar order
The first of these, known as BRICS, the Chinese and Russians also lead a rival economic alignment of nations including Brazil, South Africa, and India.
BRIC was the initial name given to the countries deemed most likely to catch up with – or overtake – the West. The name was made up by a former Goldman Sachs banker, Jim O’Neill, in 2001.
It became a reality in 2009, with South Africa joining a year later. Set to expand, and fueled by the extraordinary economic power of China, it is projected to control 50 percent of global GDP by 2030.
Whilst relations remain fraught between some members, and therefore the durability and degree of allegiance in this bloc is unproven, it is set to expand with 16 nations having expressed interest in joining.
BRICS has its own development bank, and is a parallel structure to the Shanghai Cooperation Organization.
Currently, eight countries enjoy the status of the SCO full members: India, Kazakhstan, China, Kyrgyzstan, Russia, Pakistan, Tajikistan and Uzbekistan; four countries — Afghanistan, Belarus, Iran and Mongolia — have an observer status with the SCO, and six countries — Azerbaijan, Armenia, Cambodia, Nepal, Turkey and Sri Lanka — have a dialogue partner status.
This is an organization which again has its own banking system, and includes cooperation to combat terrorism, extremism, and separatism.
The new bloc is also proposing a parallel reserve currency to promote and secure a move off the U.S. dollar:
In June, Russia proposed at a BRICS-related meeting that it is advancing the development of a reserve currency based on the BRICS basket of currencies. As early as 2019, Germany, the UK, and France established the INSTEX system to help European companies bypass US dollar settlements, and now more and more countries have joined the system.
It is dedicated to cooperation with the United Nations – a position which reflects the renewed Chinese and Russian commitment to “uphold the UN-centric world order…to promote global governance on a more just and rational track.”
BRICS and the SCO amplify both Chinese and Russian means to project economic power. The SCO secures Chinese dominance in its region, whilst the faster paced expansion of BRICS looks set to absorb the main oil producing nations outside the U.S.
Chinese and Russian dedication to the United Nations-based order may be nothing more than a power play to wrest control of the UN agenda from its antagonists in the West. Yet it bespeaks of a broader and deeper commitment to supra-national bureaucratic governance, which we will consider later in this piece.
Chinese – and Russian – manufacturing and mineral dominance may well be promoted by their competitor networks. Yet following Krauthammer, economic might is insufficient to raise any nation beyond regional influence.
De-dollarization
The United States’ economy is underwritten by the use of the dollar as the world’s reserve currency. This means it is used by nations to make major trades – in oil, gas, and other major commodities.
The use of the dollar by the rest of the world gives it much of its value. The United States economy would be dramatically reduced, and may even collapse, if the dollar loses its reserve status.
Foreign states hold U.S. dollars in reserve as well as having major stakes in U.S.-issued debt bonds.
Last year the largest holders – Japan and China – began selling off their U.S. liabilities. This year, moves away from the dollar have been much more dramatic.
A March 29 report on financial news site kitco summarized these changes, described as historic departures from the dollar based norm:
Recently, China has stepped up using the yuan as a trade settling mechanism. The yuan-denominated trade flows between Russia and China surged last year. And last week, Russian President Vladimir Putin said he supports using the Chinese yuan for trade settlements between Russia, Asia, Africa, and Latin America. That statement came after the Chinese leader visited Moscow.
Another historic move by China was the completion of the first yuan-settled LNG trade, which was done between the Chinese national oil company and France’s TotalEnergies through the Shanghai Petroleum and Natural Gas Exchange.
China also struck a deal with Brazil to trade in their own country’s currencies, AFP reported this week, citing the Brazilian government. China has been Brazil’s largest trading partner since 2009.
The loss of a major strategic ally in the Saudis to China is also underlined by the deepening economic ties between these nations – which are no longer taking place in dollars alone.
“Saudi Arabia appears to be turning towards Beijing and away from the West,” said Capital Economics deputy chief emerging markets economist Jason Tuvey. “That has fueled talk of Saudi accepting [Chinese currency] for its sales of oil to China; the so-called ‘petroyuan’.”
The loss of the dollar’s reserve status signifies a weakening of U.S. influence which may have devastating effects on the U.S. economy. It is a strategic weapon, which explains the enthusiasm of the Chinese in promoting it.
This is a development which has long been rumored. Last year both the Atlantic Council, a U.S foreign policy think tank, and the Chinese communist party Global Times agree that a coordinated strategy of moving off the dollar is quietly taking place – with the Chinese calling in October for it to accelerate:
Ending dollar hegemony is not an easy goal, but the process has already begun, and momentum will become more obvious and stronger over time.
Can BRICS De-Dollarize the Global Financial System?, a 2022 study asked. Published by the University of Cambridge, and completed well before the significant moves taken above, it concluded (emphasis added): “Strengthening global coordination for de-dollarization is fundamentally a political decision, not an economic one, for many economies.”
That is, moving nations off the dollar is a deliberate move to undermine the U.S. That countries such as former U.S. allies Saudi Arabia are considering this is a further sign of diplomatic failure by a management in crisis. This is not a move motivated by profit, but “rather a reaction against the dollar hegemony.”
This means that nations are choosing to move away from the U.S. in order to avoid the ruinous consequences of its foreign policy.
We have illustrated the alternative financial infrastructure that enables BRICS members such as Russia to signal immunity to US sanctions and access global markets via a nondollar financial system.
Already there are far fewer nations within the sanctions system than there are outside it. U.S. power is declining with these off dollar moves, and they have been provoked by the neoconservatives into making them.
While Russia may be a unique strategic adversary, its behavior reminds one of former US Treasury Secretary Jack Lew’s warning in 2016 that “the more we condition the use of the dollar and our financial system on adherence to US foreign policy, the more the risk of migration to other currencies and other financial systems in the medium-term grows” (Reference LewLew, 2016).
This is the reason this study concludes that “the risk of global finance migrating to an alternative financial system is real.”
The effects of this migration extend far beyond the undermining of sanctions. It may in fact lead to more – and not fewer – neocon wars.
…the long-term challenges are immense, as sanction power is a critical tool that strengthens US leadership without the use of military force. Furthermore, it raises questions about US ability to advance its political and economic values in the global system and preserve a soft power edge.
This is a global power play, and though it is in its infancy, the process of de-dollarization has now begun to walk the walk.
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