Emerging economies need a say in new world order

Apart from the shifts in geopolitical power centers, there is a parallel realignment at the global economic level.

This is gradually reorganizing economic power centres and deepening the periodic economic crises, which will in turn lead to long-lasting social repercussions. The changes are likely to affect the structure of societies, most notably in wealth distribution and economic frameworks that may struggle to adapt, particularly in the financial sector.

Despite growing expectations that countries might unite to address the challenges of the past five years, the opposite has occurred. Competition and economic conflicts have intensified, with punitive trade measures followed by countermeasures leading to low to lowered growth rates, disrupted supply chains, and high inflation.

The conflict between China and the West represents the peak of these economic tensions. For the past five years, Western protectionism has targeted Chinese goods and products, particularly EVs, which have gained significant traction globally, including in the EU and the US.

Despite high tariffs and taxes imposed on these products, Chinese goods, including cars, have continued to dominate markets outside of the Western world. Their success is attributed to competitive pricing, quite high quality, and advanced tech embedded into them.

In addition to China and the West, the economic impact on other countries is obvious, although it is most severe between the two competing superpowers due to various factors, including legacy commitments, wars and conflicts in which they have engaged.

For evidence, look to the projected growth rates for the leading economies this year. The IMF forecasts a 2.6 per cent growth for the US, 0.9 per cent across the EU, and a negative 0.9 per cent for the Japanese economy, compared to 5 per cent growth in China and 8.4 per cent for India.

US’s never ending debt pile

Additionally, the US national debt has surged to over $35 trillion this year, representing 121.6 per cent of GDP, far exceeding the 60 per cent safety threshold for economies.

This surge in debt, which is advancing rapidly beyond initial forecasts, hints at potential future crises. The Congressional Budget Office projects US debt to exceed $56 trillion by 2034. Although currently mitigated by generous dollar printing, the sustainability of this practice is questionable. Significantly, several influential economies are gradually moving away from a dollar reliance, a trend that has started slowly but is expected to continue.

On the other hand, global economic rankings are shifting as China races to be the world’s largest economy. India’s growth has surpassed all European countries except Germany, securing the fifth position among the largest global economies. Additionally, some G20 nations are rapidly advancing towards the Top 10 biggest economies.

Given the rapid pace of these changes, numerous repercussions are likely, including intensified conflicts, some of which may be devastating and full-scale. This situation necessitates a reassessment of current economic and trade policies.

Ditch legacy economic frameworks

Managing the global economy with outdated methods and regulations is no longer feasible, as each historical stage has its own systems, laws, and influential power centres.

The global situation is at a crossroads with only two options: either continue to manage the global economy in the current manner, which clashes with new power centres. Thus leading to inevitable conflicts between traditional and emerging powers with serious losses for all involved.

Or acknowledge the extent of current changes and address them pragmatically. This involves considering the interests of emerging powers that are gaining influence through their comparative advantages. This strategy could pave the way for more cooperation based on newer principles of fairness and justice in global economic relations.