International Economics

Listening to The Language of Change

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By Prof. Bulent Gokay | 01 April 2010

The economic downturn and recession, which spread across the globe following the US sub-prime mortgage crisis in September 2008, has become the dominant news topic of the past year.  The latest statistics reveal that 2009 experienced the first worldwide drop in output since the Second World War. Today, one and a half year after Lehman Brothers’ sensational collapse, the entire world economy is in the grips of the most severe synchronised global recession since before the Second World War. Despite the euphoria that gripped the markets in late 2009, the global crisis has yet to bottom out.


This truly global economic (and financial crisis) has not come out of blue. It is the outcome of deep-seated contradictions and historical shifts within the structure of global economic system. At this moment of acute systemic crisis, great shifts are taking place in the balance of economic strength among the global powers. Modern world system has gone through several rounds of hegemonic shifts and several cycles from unicentric to multicentric organisations for centuries. In the 17th century, the Dutch were hegemonic in the European world economy. Then the British rose to hegemony in the 19th. The shift from British to American hegemony in the 20th century was spectacular and significant, but it was a routine change. All indications point out that the current financial   crisis, and economic downturn, is going to confirm, and possibly accelerate another major shift in economic power to Asia, in particular to China.


Above all else, what the present crisis has done is remind us that we live in a dynamic world where empires and systems come and go according to history’s dictates. If the US-dominated Bretton Woods system is in eclipse, and I think it is, and that the world is moving toward a multi-polar political economy, which I argue it will, whose voices will be important in these times of change?


One voice is Chinese, and Zhou Xiaochuan, the Chair of the Monetary Policy Committee of the People’s Bank of China, speaks of  structural reform of the international monetary system, with his call welcomed by Russia, India, and Brazil, based on their view that there are “inherent weaknesses” in the current international monetary system.


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