The rise of China and other emerging economies isn’t a new phenomenon. Nor is the rhetoric around the sun setting on the US empire. But is this analysis of a new world order too simplistic? Old orders don’t just die without a fight and emerging powers always have teething problems.
So as the tectonic plates of trade shift and global economic power twists and turns.
Reader in International Politics at Queen Mary University of London, Dr. Lee Jones and hedge fund manager and author, Mitch Feierstein, met up with Renegade Inc. to consider what the transition from a unipolar western hegemony to an interconnected multipolar world really looks like.
As a way of describing current macro trends, Dr. Jones likens the poles in international politics to magnets. “A pole in international relations is a country that is both materially powerful but also exercises a force for attraction that draws social forces in other states to it”, says Jones.
Bi-polarity – characteristic of the division between the United States and the Soviet Union during the Cold War – contrasts with the emergence of the unipolar world following the collapse of the latter. “Some people claim that we’re living in a multipolar age. But I think that’s an exaggerated claim. I don’t think any other state apart from the United States exercises that force of attraction”, says Jones, adding:
“I certainly think US hegemony is waning and has all kinds of problems with it. But people have been saying that since the 1970s and somehow the United States still exercises a very dominant role in world affairs.”
Jones’ analysis is predicated, less on notions around national accounting, and more to do with the actual shape of the global capitalist economy where it remains the case that retail price value of technological goods, for example, continue to be captured by American companies.
Whilst it is the case that China’s position as the ‘workshop of the world’ remains undiminished – and is truer today than it was twenty years ago – Jones believes there are many caveats to that:
“I have to say that the iPhone crystallizes the issue about value chains…But a lot of it is low value-added assembly work that’s been outsourced from Western economies. The control over the patents, technology and other high-end value-added activities, is still mostly retained in the core of the global capitalist economy”, says Jones, who adds that the current trade war between the United States and China is a direct consequence of latter’s attempts to break out of its position at the bottom of the value-added ladder. Subsequently, this is regarded as being uniquely threatening to the rent seeking companies that sit at the top of these global value chains that are mostly located in the United States, Japan and Europe.
The views of the author of Planet Ponzi, Mitch Feierstein, differ from that of Jones in this regard:
“I just purchased the Huawei pro 30 and I also have the iPhone 10 and I’ll tell you the technology in that Chinese phone is 50 times better than the iPhone 10. So if you look at that and you also look at the population and the military growth in China, I think we are moving more towards a multipolar world where they’re going to have more of a say. I think the markets are saturated with technology products that have come from Silicon Valley. Are they stealing technology? Absolutely. Do I think tariffs are part of the solution? Absolutely.”
“The way that conflict starts in the world is first you have trade wars that lead to currency wars that lead to hot wars. And I think we’re at a point where we’ve had a bit of trade war – not really something big… I’ve said that the Chinese are going to devalue their currency, the Yuan, in a meaningful way. And as you see, recently, we’ve seen the stock markets drop over a thousand points in a couple of days. The futures markets were down even further in Asian markets. And I see a continued downtrend because valuations are in the stratosphere…Stocks are in a bubble. Bonds and fixed income markets are in a bubble. The property markets are stratospheric and everywhere and we’re seeing a precipitous decline…The real problem with the next crisis – the driver – will be a lack of liquidity in the credit products and credit markets which are in a bubble as well…I think we’re going to see a shift away from US dollars because the US has to devalue to be competitive with everybody else.”
For Dr Lee Jones, the issue of multi-polarity is tied up with the dominance of particular value systems. So United States hegemony – what’s been called a unipolar moment – has, according to Jones, been very much bound up with the hegemony of liberalism. This, in particular, relates to neoliberal ideas and the way economies have been organized.
“I think those two things are, to some extent, inseparable. So at the moment we’re having a kind of crisis of the neoliberal order that’s been going on since about 2007/8 and is still kind of rolling on and shows no sign of resolution. And the United States, being now run by President Trump is violating certain key aspects of that neoliberal value system itself”, says Jones.
According to the London academic, the binding of US unipolar and neoliberal hegemony is leading to confusion in as much as the public don’t appear to know what direction society is going, nor are they aware as to which value system is hegemonic. This, says Jones, translates into a broader sense of disarray and crisis particularly among ruling establishments in the liberal Western bloc – manifested, for example, in the hysteria about Brexit, Russia or the growing Chinese influence in Australia. Because the United States is failing to fulfil its leadership obligations, a generalized sense of panic has been engendered among liberal elites that have occupied a subordinate position within the US-led global order.
Mitch Feierstein bluntly points the failure of the neoliberal experiment over the past four decades underpinned by, what he claims has been “too much debt, too much credit and too much leverage as a result of bigger and bigger and bigger government.”
For Feierstein, neoliberalism has reached a cul-de-sac with little resolution of the problems that emerged in 2007 insight. “We haven’t yet seen a clearing from the original credit crisis of all the debt that’s been accrued. In the banking crisis, the bankers were bailed out instead of being jailed…There were crimes committed during the financial crisis that should have been prosecuted and they weren’t. So instead of bankers being punished, they were given bonuses.”
Feierstein asserts that negative interest rates are on the horizon, which if implemented, will be concomitant to an extended banker bailout. “It’s really a default in disguise. It’s punishing savers and benefiting reckless speculators because the government has bailed them out. So the central banks have played a large role in the neoliberal world in creating the financial mess that we’re in right now. We’re just beginning to see it fray”, says Feierstein, who points to Zimbabwe and the Weimar republic as examples of failed states that were pumped full of money.
“I think that there is massive asset inflation”, says Feierstein, who adds:
“Now if you go back and you look from 2000 or even before that from like 1981 to where we are now, interest rates have been on a downward slope to zero. And the most debt that’s been accrued has happened in the past seven years. And real wages from the 1980s or late nineteen eighties to current day – when you inflation-adjust – are flat to lower. This is a problem, because you think real estate prices and tuition prices are up in some places up over 2000 percent. So how do you justify tuition and house prices going up hundreds of percent and real wages being stagnant? So you can’t. Everybody who needs to have a home, buy food for their family, it’s a problem because the government tells you that inflation is very low.”
What Feierstein is arguing is that inflation is out there and it’s very real. But the bottom line as far as the author is concerned is that the ideas associated with neoliberalism will never work. Ultimately, “you need revenues to be generated, profits to be generated by a company and then you sustain the company. You don’t lend zombie companies money because they’ll spend more money and lose more money. And eventually there is a clearing mechanism called bankruptcy. If an insolvent company is insolvent you just let them go bust and deal with it that way”, says Feierstein.
Lee Jones also picks up on the zombification theme in relation to China, an intrinsic aspect of late capitalism that’s not unique to the West:
“The funny thing is that zombification is well entrenched in China. So the problems of debt, overcapacity and zombie companies are terms that characterize the state-owned sector in China which dominates the commanding heights of the economy. Since 2007, China has been responsible for something like two-thirds of all the new money supply created globally. That’s in the context of massive quantitative easing (ie printing money and basically giving it to the banks in the West). That is what the Chinese government has done, domestically. And it is propping up zombified companies in the state-owned sector and indirectly the private sector as well.”
“If we look at the way that things are going in the West with us declining, we think the way things are going in China, we think it’s rising. You extrapolate into the future that it’s a more multipolar world. There’s no reason to believe that the Chinese system can go on the way that it’s going any more than there is to think that the West can carry on the way that it’s going. And in fact I think there’ll be a financial crisis in China within the next, say, 10/20 years.”
In taking issue with Jones, Feierstein posits that the actions of China is conducive to more of a multipolar world. In support of this assertion he says that China “have been going to all the developing countries and they’ve been accruing commodities everywhere. They actually own the rare earth metals markets.”
Feierstein points to the example of Tesla and their batteries:
“The most valuable thing in all these electric cars and the most expensive part is the batteries. And there are rare earth metals that you can only get in China that are components in all of these heads-up displays and all of the fighter planes and rare earth metals that China controls. And what China has done is they’ve been very smart about it. I agree that there’ll be defaults in China. But China has obtained a lot of these governments’ debt chits and they’re going to call them in. They’ll say, ‘well look we’re going to take the commodities from you in your country’. That’s what they’re doing around the world. And they’ve been doing that pretty strategically for the past 20 or 30 years.”
Lee Jones, on the hand, claims that there’s been a huge push-back against this process:
“It’s very much associated with the Chinese Belt and Road initiative that people have started to brand that ‘debt trap diplomacy’. So you come in you offer attractive infrastructure deals exchanged for debt and that debt is unsustainable. And I think it’s not actually a grand strategy of China to lure people into it. There’s no evidence for that actually”, says Jones.
The idea that China is engaged in debt trap diplomacy is straight out of the IMF and John Perkins Economic Hit man playbook – an idea, says Jones, that has been “pushed by India. But in reality it’s very poorly regulated Chinese banks and enterprises that are going out and doing these deals and leaving China on the hook.”
That China is also in a debt trap in these countries, is not, according to Jones, part of a kind of grand strategy. However, there is now growing concern among the countries that would potentially partner with China. “The preferences of those governments is not to get onto the Chinese hook. They want to go entirely into the Chinese camp. And I don’t think that’s really what this outbound investment is all about anyway. But there’s a geopolitical aspect to this. And countries are peeling back from engaging with Belt and Road”, says Jones.
Fundamentally, irrespective of any stated economic path a nation like China professes to go down, ultimately it’s the ‘there is no alternative (TINA) idea at the heart of neoliberalism that they feel like they are only one degree away from.
Jones continues with this theme:
“Until some systematic alternative to neoliberal capitalism emerges that is a really serious challenge to the establishment, people will keep going back to these architects of the existing regime because there is nobody else to listen to. And the real difficulty that we’re in now I think is, people are rebelling against that system which they find alienating, oppressive and impoverishing in many different ways. But what’s the alternative? The alternative is still not quite on the horizon. We inhabit a period that Gramsci would have called the interregnum where the old is dying and the new cannot yet be born and a variety of morbid symptoms appear. The trade war, the rise of populist forces – these are all symptoms of the interregnum. Until there can be real political leadership that can get us out of this mess, we are going to be, I think, in this period of the interregnum for a good 20 years.”
The academic adds some more flesh to the bones:
“In the end change has to come through politics. What is needed is a radical democratic transformation of Western countries to bring power back towards the people. This involves the radical decentralization of power, the abolition of undemocratic authorities, the resourcing of power away from unelected technocracies like independent Central Banks.”
These institutions then need to be placed under democratic control that involves embarking on a completely new economic strategy focused on the raising of productivity, growing the real economy and reining in the power of finance capital. Fundamentally, the problems relating to inflation and massive bubbles Mitch talked about, result from the radical class transformations from the 1980s onwards where there was massive amounts of surplus capital floating around the international financial system looking for profitable outlets – not finding it in the productive economy but in assets instead. That’s the nature of contemporary capitalism. The only way we can shift to a different model is to radically control the power of global capital, rein-in the financial markets and place them under democratic control.”
Not in the view of Jones, who posits that the influence of the big tech companies of Silicon Valley in helping to shape radical political change, have been greatly exaggerated:
“The fundamental problems of politics cannot be resolved by tweaking Facebook or tackling fake news or something like this – it’s flight into the virtual realm. Most people live in the real world, not in the virtual world. But I think broadly speaking, to have these companies exercise such monopoly power over, for example, searches (98 percent search online by one company, 2 billion users using Facebook platform). That is very unhealthy. It’s always unhealthy to have monopoly forms of capital and either of those companies should be radically broken up and restructured or they should be placed under Democratic control”, says Jones.
Feierstein – who has the last word – agrees with Jones, only in part:
“I disagree to a large extent about the influence that Google, Twitter, Facebook and Amazon have. If Google doesn’t like you, they can bury anything you say and it can disappear from the Internet. The same thing with Twitter. They shadow ban everybody. So there is no free speech. If they don’t like what you say, nobody can see it. There is no oversight for these companies. They are monopolies. Nobody in politics wants to do anything because they are too fearful for the ramifications of losing their job. They talk about the paranoia of Russia, Russia, Russia. They should be going Google, Google, Google, Twitter, Twitter, Twitter, and Facebook, Facebook, Facebook, because they can directly impact elections and that’s been proven mathematically through what they put out and what they don’t put out. So I think that that is a major danger to democracy.”
What does the latest American bombing campaign in the Middle East mean for the region?
Less than 100 days into his presidency and Joe Biden is already angling for war with Russia.
Will the US oligarchy remain unsatisfied with its successes and continue to push for the failure of other countries in the insatiable quest for so-called exceptionalism?