Birth of a new financial world order

by Guy Mettan,* Geneva

(30 May 2023) The war in Ukraine triggered the shift of the world towards Asia and the Global South. Since February 2022, events have been accelerating, both politically and economically: an increase in trade agreements in national currencies, a peace plan between Saudi Arabia and Iran under the auspices of China, an increase in the number of BRICS membership applications, a project for a common currency between Argentina and Brazil, etc.

The debate is fierce, in the West as well as in Asia and the Global South, as to whether this is just an insignificant flash in the pan or, on the contrary, the initial phase of a profound and irreversible movement. Last April, two leading figures in the American economic world gave an interview in the most prestigious mouthpiece of the Anglo-Saxon empire, “Foreign Affairs”, to assert that the hegemony of the dollar and the supremacy of the Bretton Woods institutions, the IMF and the World Bank, backed up by the absolute dominance of North American arms and military spending, were in no way under threat. No worries, there’s nothing to see, they sullenly advised the worried and the critics, the United States will not lose its financial, monetary and military leadership any time soon.

That same month, other equally astute economists, such as Radhika Desai and Michael Hudson (in their latest Geo Economical Report) and Credit Suisse’s star analyst Zoltan Pozsar (ten days before the bank’s collapse), wrote well-argued papers claiming that China was seeking, not without success, to “break Western financial colonialism” and that we were witnessing “the birth of a new world financial order”. Nothing less!

Who is right? Both sides, actually.

Of course, nothing is more unpredictable than the future, but experience shows that once a phenomenon has become manifest, it can no longer be denied or dismissed. Its advent, as a major historical event, is only a matter of time. Yet both sides fail to think in terms of time, of duration. The former, noting that it took decades to establish the dominance of the pound sterling or the dollar, think that the American currency is designed to reign for centuries and centuries, while the latter, in a hurry to put an end to this domination, would like to see it disappear tomorrow.

However, the dollar is not the only factor in this struggle. The political will, which is now decisive, but also the means of payment (Western Swift or Chinese CIPS), industrial development, access to energy and natural resources, or debt management are all decisive factors. Let us look at the case of debt.

Until now, international lenders, primarily Western private banking institutions, always managed, thanks to the IMF and its austerity conditions, to get Southern indebted countries to pay for the burden and systematically deny them remissions. These countries, like Ghana recently, are also deeply indebted to China, which is disposed to grant rebates, but only on condition that Western banks and institutions do the same, something that has hardly ever happened since 1945, as Greece learned the hard way in 2015. Conclusion: The West no longer has a monopoly on debt management (and its huge profits).

This short example should make us more modest: in the long run, a new, multipolar financial order is emerging.

* Guy Mettan is a political scientist and journalist. He started his journalistic career at the “Tribune de Genève” in 1980 and was its director and editor-inchief in 1992–1998. From 1997 to 2020, he was director of “Club Suisse de la Presse” in Geneva. Nowadays he is a freelance journalist and author.

(Translation “Swiss Standpoint”)