On March 19, 2012, at a mission control station in Abuja, the capital of Nigeria, local authorities took control of NigComSat IR, the country’s first communications satellite. Built by China and launched into space by a Long March rocket, the satellite will save African nations $750 million annually. Until now, this money was flowing into the coffers of Western companies.
In the early part of the last decade, South Korean giants Samsung and LG introduced a new line of HD TVs, refrigerators and mobile phones that catapulted them to premium status. It didn’t take long for their Japanese and European rivals to find out what was helping the Koreans leapfrog the rest – Russian scientists. Turns out, hundreds of underemployed scientists and innovators at Russian labs had joined the Korean chaebols, taking with them bleeding-edge technologies that gave the Koreans a decisive edge.
As Europe looks at reducing its dependence on Russian gas, China is going in the opposite direction. Moscow and Beijing are circling around a gas deal that could well be the biggest contract in history. The deal between the world’s largest energy producer and its largest consumer is potentially worth $1 trillion, and would see up to 70 billion cubic metres of gas (almost equal to Qatar’s annual production) piped to China each year from fields in Siberia.
Three years ago Airtel, India’s largest and the world’s fifth largest mobile phone operator, pumped in over $10 billion to build a cellular network across Africa. Nobody expected the company to recover its money but Airtel’s low-cost, high volumes bet on Africa’s exploding middle class paid off. Earlier this year it touched 50 million customers in 16 African countries, in the process checkmating archrival Vodafone of Britain.
A Western investment broker, who recently lost a pile of money betting on emerging market stocks, thinks it’s time to redefine BRICS to mean, “Bloody Ridiculous Investment Concepts”. Well, he’s entitled to his epithets, but the reality is that the rules of capitalism are being re-written in Mumbai, Beijing, Brasilia and Moscow – not London or New York.
Key economic indicators are revealing: in the last quarter of 2011, the advanced nations grew 0.1 percent whereas the leading emerging economies like China and India notched up growth rates of 7-9 percent.
The transformation in the global economic landscape was starkly evident in 2010. That year, when vast swathes in the West were being laid waste by an economic tsunami, world trade grew fastest in the last 50 years. It is not hard to figure where this growth happened – not in Europe or the United States.
What this means is that emerging nations are trading more among themselves while the West is being edged out of the world’s fastest growing markets.
But behind these statistics hides another story – the United States, the flagship of the Western world, is listing and from its shadow is emerging a new world order being drafted by the BRICS – Brazil, Russia, India, China and South Africa. This rainbow coalition is as far removed from the homogenous Western empire as it could possibly be. What brings them together is a common desire to clean up the huge mess created by the current regime.
Western bankers in tandem with their central bankers have spewed financial toxins into the world's markets. Brazil’s Finance Minister Guido Mantega says the United States and other Western countries are attempting to “export their way out of difficult economic situations" by printing money. The BRICS have indicated that this Western way of doing business has to end. They are now exploring the possibility of establishing a South-South Development Bank as an alternative to the existing West-led financial institutions.
Further, China announced last month that it would offer low-cost loans to BRICS members. What wasn’t reported was that some Indian companies are already availing of cheap renminbi loans. Clearly, China is not only eating the IMF and the World Bank’s lunch but also their dinner and breakfast.
Bric by Bric
If you are a London investment broker, you probably are a tad nervous that from March 30, the five members of the BRICS Exchange (created five months ago) will begin cross-listing their benchmark equity index derivatives on each other’s trading platforms.
This is part of the BRICS plan to expand their product offerings beyond their home markets. The leading futures indices from the five countries will be the derivatives to be cross-listed and offered in the local currency and local trading hours of each of the exchanges.
This will soak up excess liquidity sloshing around in emerging markets. Billions of dollars will henceforth stay within emerging economies and create jobs at home. From the West’s point of view, that’s a serious jab into its wallet.
Fuelling a crisis
It is true but somehow hard to believe that in 1998 the world oil price was under $10 a barrel. That’s right, below, not around or over.
Western intervention in Iraq is largely responsible for the ballooning oil price. If oil prices had increased organically (like the price of any other industrial commodity, say, steel or cement) the current price would be in the region of $35-50 a barrel. Instead, oil has been hovering in the $100-$150 range the past few years. This one factor has weakened the global economy, hurting virtually everyone – except the oil sheiks. The current blow hot, blow cold strategy on Iran has only added fuel to the already heated West Asian region.
Task one: Ditching the dollar
Undoubtedly, the dollar is the lynchpin of American power and prestige. John Perkins, who was employed by US agencies to play a leading role in the economic enslavement of several developing nations, elaborates how the dollar achieved its undeserved dominance and how the rest of the world that trades in dollars pays an indirect tax to the United States:
At great risk to his life, he published the explosive Confessions of an Economic Hitman in which he wrote: “During the 1950s and 1960s, credit purchases were made abroad to finance America's growing consumerism, the Korean and Vietnam Wars, and Lyndon B. Johnson's Great Society. When foreign businessmen tried to buy goods and services back from the United States, they found that inflation had reduced the value of their dollars; in effect, they paid an indirect tax. Their governments demanded debt settlements in gold. On August 15, 1971, the Nixon administration refused and dropped the gold standard altogether.
“Washington scrambled to convince the world to continue accepting the dollar as standard currency. Under the Saudi Arabian Money-laundering Affair (SAMA), the royal House of Saud committed to selling oil for only US dollars. Because the Saudis controlled petroleum markets, the rest of the Organization of Petroleum Exporting Countries was forced to comply. As long as oil reigned as the supreme resource, the dollar's domination as the standard world currency was assured – and the indirect tax would continue.”
Considering that much of global trade takes place in dollars, the American exchequer benefits hugely from this indirect tax windfall. Therefore, the demise of the dollar as the international currency will well and truly end the era of American prosperity. How the rest of the country will cope in the post-dollar era is anybody’s guess. Perhaps a one-third reduction in American incomes would be the most likely scenario. This is not a projection – it is as inevitable as tomorrow.
The US Government is aware of this. The interventions in Iraq, Afghanistan and Libya and the threat of action against Iran and Syria are not just moves on the geopolitical chessboard, they are also desperate attempts to shore up the empire through military means.
Gunning for cash
From America’s point of view, the empire yields one huge benefit. Simply by keeping NATO alive – long after the Warsaw Pact breathed its last – the United States is assured of a long line of customers for its armaments industry. For instance, up to 1000 American F-35 Lightning fighters costing nearly $200 million each will be bought by several American allies, including Japan and Israel. And because the United States produces little else that the world wants, this empire is crucial to its exports. (The Russians on the other hand enjoy no such luxury; they have to sell their fighters on performance alone.)
To keep this military ponzi scheme going, new countries have to be brought (or rather trapped) into the American ambit. Iraq, which was Russia’s leading weapons client, now buys American helicopters, fighters and M-16 rifles. Afghanistan’s military is totally American equipped. And the good money is on Libya following suit.
Cracks in the coalition
A uni-dimensional superpower like the Soviet Union lost its hold on its empire because it ran out of money. The United States is faced with a similar conundrum. The so-called global economic recession is in fact a Western economic recession. And as the recession bites deeper, there will be coalition members who will bail.
Both Germany and France have been mulling a European security alliance based around their militaries. Unlike the UK or Australia, Germany has no “special” ties to the US. It is an industrial powerhouse and as the world’s leading exporter its economy needs export markets to maintain the much vaunted German standard of living. Germany, which pioneered Ostopolitik or the look East policy, is also Russia’s largest investor and wants Moscow to supply even more oil and gas to feed the European economy. Where Germany leads, Europe follows.
Under such circumstances, the Anglo-American empire despite its rock solid unity (which has endured two world wars, the Korean War, Vietnam, Afghanistan and Iraq) may itself split.
The UK is downsizing its military and preparing for a life after NATO. Minor members like Australia and New Zealand are faced with the difficult decision of choosing between local warlord China or the US, which may be unable to come to their rescue if Beijing rattles its sabre.
But make no mistake, the empire won't be fading into the sunset soon. Despite the BRICS surge, the 400 million Anglo-Americans will remain a key player in world affairs for several more decades. What will change is that their military adventurism will be clipped by the rise of the BRICS.
Empire strikes back
It is extremely likely the West will try to cushion the impact of its fall by linking up with entrenched oligarchs in the emerging nations.
In February 2011, Mukesh Ambani of India's Reliance Industries, one of India's most controversial monopolies, announced a multi-billion oil exploration deal with British Petroleum. (BP was exposed by Wikileaks as a mover of the Iraq war.) The US-educated Ambani, who is worth $22 billion, said he was delighted to partner with “one of the finest deep water exploration companies in the world”.
There are other weaknesses the West might exploit. In India there is a tiny – but dogged – Delhi based elite that is intensely Anglophile. The current Oxbridge educated Prime Minister, an un-elected and accidental elevation to India's top job thanks to dynastic politics, is one such example. This gentleman has gone to the extent of saying British rule was good for India.
Factoring in elements such as Eurocentric Russians and Anglophile Indians, it would be impossible to write off the West totally.
The West is by no means the only game in town. Growing Islamic imperialism in a crescent stretching from Turkey to Indonesia will be a huge challenge. The large Muslim minorities in India, Russia and China are also getting radicalized, spawning terrorist movements.
When the first BRIC summit was held in 2009, in Ekaterinburg, Russia, Yevgeny G. Yasin of Moscow’s Higher School of Economics, said: “Between the BRIC countries, there is really little in common. Each of them has its own destiny, its own special character, and it will be much more difficult for them to agree among themselves than separately with Western countries.”
Their interests often conflict – Brazil and India want to enter the UN Security Council, but Russia and China are not exactly keen about it.
The first Ekaterinburg summit produced a lot of bland statements and at least one conspiracy theory. It was near Ekaterinburg the last czar and his family were killed, ending the line of the Romanovs. Therefore, speculation was rife that the Russians, the ideological provocateurs of the group, had deliberately chosen the city to portend the end of imperial America.
Just three years after Ekaterinburg, the momentum is irresistible. BRICS institutions are being established, and a compelling alternative to the Western model of capitalism is being drawn up.
Building a new world order is an epic exercise. In this backdrop, mutual jealousies will appear to be minor irritants. India and China, for instance, may sort out their decades-old border dispute in the larger interest of cohesion.
How the BRICS deal with such issues will test the fabric of their alliance more than any confrontation with the West.
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