Economic Globalisation and the decline of US hegemony?
Globalisation has been described as the process by which the world has become so interconnected that a variety of non-state actors, global trends and events challenge territorial borders and state sovereignty; this can then be broken down into three types: economic, political, and cultural.
According to Francis Fukuyama in his book ‘The End of History and the Last Man’ he argued that the end of the Cold War and the collapse of the Soviet Union meant that liberal democracy had been established as the most universally accepted model of governance. He also stated that there would be a “capitalist creep”, through which great democratic and economic freedoms would be accompanied by greater individual freedoms. This can be seen most certainly in the rise of economic liberalism also known as the ‘Washington Consensus’ which has resulted in the dominance of free-market principles in global trade and the US can be seen as its pioneers are namely the International Monetary Fund (IMF) and World Bank (WB) which are heavily westernised, US-led financial organisations responsible for global financial stability and providing loans to states. The rise of these institutions and free-market principles have certainly facilitated the rise of economic globalisation, whereby states are becoming increasingly interconnected and interdependent, leading to a greater transnational flow of goods, services, and capital.
The globalisation of these financial markets, although has provided for greater economic relationships between nation-states has been the direct cause of financial crises around the globe, for example, the bankruptcy of the Lehman Brothers, a US bank, led to a sub-prime mortgage crisis, which stimulated the 2008-09 global financial crisis whereby stock markets plummeted and the global economy entered into recession, which resulted in a 9% decline of the value of global trade. Now, although, aside from COVID-19’s impact upon the global economy, this can be described as one of the worst economic crises in history for global politics, it shows how at the time economic activity relied on the USA, and arguably still is, with Wall Street still being the world’s central global trading hub, the dependence upon the US dollar as the main form of international currency and the fact that it is still the largest economy in the world, with a GDP of $20.93 trillion as of 2020, not forgetting the fact that it is a major investor in Bretton Woods institutions such as the IMF with an inward direct investment of $4.5 trillion and a total voting share of 15.84% within such institutions.
From this insurmountable evidence, we could claim that the US is still the most powerful hegemon throughout the world. However, we can see from the rise of emerging powers such as China, that perhaps, the US is no longer the only economic superpower, and this should be the paradigm attributed to international relations. Ever since the rise of Deng Xiaoping after Mao Zedong’s death in 1976 and Xiaoping’s introduction of far-reaching market-economy reforms, which opened it to foreign investment and western technology, introducing its workforce to the global economy and opening its borders up to economic globalisation, it has turned China into one of the fastest-growing economies. This can be seen in the fact that for nearly 30 years, China’s growth rate per annum has been between 8% and 10%, decreasing to 6.7% in 2016 and 2.3% in 2020 (despite COVID-19), with its economy now being 90 times greater than 1978. Its economic dominance can also be seen in the fact that it has set up similar institutions to the IMF and WB, by creating the Asian Infrastructure Investment Bank (AIIB) which was established in 2016 as a challenge to the Bretton Woods institutions, investing in Bangladesh, India and the Philippines in 2020 in response to the outbreak of COVID-19. Not only this, but as of 2017, as a result of Chinese lending the US, the USA are indebted to China amounting to $1.051 trillion. Furthermore, as a result of the rise of the Trump administration in the USA and the decline in humanitarian aid ($48 billion in 2017) has led to China becoming the biggest neo-colonial power, overtaking the US as the biggest investor in Africa, which amounted to $200 billion in 2014 alone. However, fact remains that China can still be regarded as a developing nation, with just under 400 million people living on less than $5.50 a day (as of 2016) and although the main cities of Wuhan, Shanghai and Beijing are industrialised with better standards of living, rural areas such as, Suopo and Duoyishu which have worse standards of living and slower economic activity.
Therefore, although we are living in an ever-globalised world since the end of the Cold War, we can see a pattern of the decline of US hegemony over the global economy even before the COVID-19 pandemic hit, the radical free-market reforms and principles adopted by China has seen its rapid and increased growth for the past 3 decades, but will we perhaps see a decline this year due to the damaging effects COVID has had on global politics, or will we see China overtake the USA as the spearhead of the global economy, with its economic and cultural influence spreading throughout the world becoming an increasing rival to the US, liberal democracy and the Washington Consensus, and how will we see Biden approach the fragmented political system left by Trump? Will he pick up the pieces and attempt to restore the USA to its status as a global hegemon?