During World War II, the United States played a central role in its victory by financing the war efforts of many European countries, including the United Kingdom. Thus, the US dollar not only became stronger against other currencies of the time, but also against the British pound, the undisputed global currency of that time.
After the war, to help rebuild the devastated European economies of seventeen (17) nations, on April 3, 1948, US President Harry Truman launched the “Marshall Plan” which was originally called the “Program of European revival”. It was named after the Secretary of State, George C. Marshall, who originally proposed it in 1947.
As the United Kingdom was also devastated by war and borrowed money from the United States, the British pound lost its dominance and the US dollar became the preferred currency for international transactions and grew. soon after positioned as the dominant global currency replacing the British pound. . Over time, the US dollar has become more resilient and stronger against all currencies in the world.
This monopoly created a lot of wealth (gold and silver) and further boosted its value, resulting in stronger purchasing power compared to other currencies. Funding for the war and post-war reconstruction of devastated Europe continued to further increase its treasury.
With its enormous surplus of wealth, the United States began to reach out to other countries in Europe, Asia, Africa, the Middle East and South America to help them by offering financial assistance to modernize their agricultural practices, help build basic industries and infrastructure. This was the beginning of soft diplomacy.
Later, the United States also began to offer military assistance to its friendly nations. The combination of the two approaches created the US block of nations which was originally designed to counter the USSR and its block of fifteen (15) satellite nations. As such, there were two (2) recognized superpowers, the United States and the USSR. After the fall of the USSR in December 1991, the United States became the undisputed superpower and has retained that title to this day.
Although the United States was well recognized as the undisputed superpower by the world, it desperately wanted to assert its position on the world stage. This desire has led the United States to become involved in regional and Middle Eastern conflicts, first as a peace broker between warring factions, then directly in battles alongside its allies and partners on the front lines of wars.
While the United States was occupied with conflicts, China aggressively pursued foreign direct investment (FDI) to become the cheapest producer of consumer goods and transformed itself into the most desirable destination for investment. multinationals, entrepreneurs and industrialists.
Against this backdrop, China’s economy took off and later in 2001, its inclusion in the global village through the platform of the World Trade Organization (WTO), it accelerated its economy at an unprecedented pace. precedent in the history of nations. As a result, China has become the “global factory” for global consumers. Products made in China were found in all corners of the world, from advanced economies to developing countries, including very low-income and sub-Saharan countries.
This landscape has created huge trade imbalances in all economies. While the United States and its allies (Western countries) were busy in the Middle East conflicts, China shifted its strategy from low-cost manufacturing to higher value-added products.
Emphasis was placed on advanced technologies, such as digitalization, Ai, ML, robotics, telecommunications, connectivity, satellite imagery, space exploration, aeronautics, mobility, rail high-speed, consumer electronics, home appliances, semiconductors and upgrading its defense capabilities.
Attention in these areas was further accelerated when Donald Trump came to the White House and began talking about decoupling the two closely linked economies by creating trade barriers, imposing tariffs and sanctions on products. Chinese.
The Trump administration’s continued aggressive rhetoric and flamboyant remarks about China’s trade practices have also been echoed by right-wing EU governments, their politicians and they have also started raising trade barriers against Chinese imports. .
However, as the trade war raged, the United States and other nations realized that even after imposing tariffs and heavy taxes on products made in China, their trade deficits were still growing instead of shrinking. reduce.
Digging deeper, it was discovered that the US and EU economies were so dependent on Chinese raw materials and unfinished goods that it was impossible to stop or reduce their imports.
In the end, all the unprecedented duties and tariffs were passed on to consumers, and deficits continued to widen like never before. As a result, China continued to benefit from rising prices for its goods and services and continued to accumulate foreign currencies, especially US dollars, at a much higher rate than before.
As part of its long-term industrial policy, China has begun to use its accumulated reserves of wealth to heavily subsidize identified strategic core technologies and trade sectors in order to jump into the race against the United States and its allies in the EU.
As a result, in a very short time, China has surpassed its competitors in advanced technologies, like Ai, ML, 5G, robotics, e-commerce, digital currency, digital payment system, bullet train , networking, connectivity, consumer electronics, consumer devices, upgrading its defense capabilities, space exploration, just to name the main ones.
With the deployment of the Belt & Road Initiative (BRI), in 2013 under the vision of China’s current leader, Xi Jinping, and later with the design of its own financial system, China is working to create a new bloc of nations to establish itself as an emerging superpower, parallel to the United States, the existing superpower. According to some estimates, as of March 2022, more than 145 nations have joined the BRI and presumably they all belong to the emerging superpower bloc.
The bloc does not exclusively represent Asian nations, but it also includes European, African, South American nations, and covers over 65% of the world’s population! With the Covid-19 pandemic and so-called vaccine diplomacy, China has further strengthened its relations with BRI member countries despite the “debt trap” rhetoric of the United States and its allies.
It seems that the Russian-Ukrainian war is paving the way for a permanent division of the world into two blocs, each dominated by a single superpower. This became very evident in the recent US-sponsored condemnation of war resolution, which supported it and abstained.
China’s rise as an emerging superpower to share the world stage with the current superpower (the United States) is in the phase of intense rehearsals. Once the rehearsals are perfected, the new superpower will be accepted onto the world stage and when it performs it will define the new world order and a set of new standards, in many cases these will be quite different from the current ones.
China’s leap forward in the technology sector is subdued by the digital infrastructure and its core processing architect (semiconductor) for digitization, Ai, ML, robots, communication, connectivity (5G), IoT, power grids, space exploration, satellite technology, rail broadband, mobility standards (electric vehicles, self-driving cars), nuclear technology, cybersecurity, banking, payment system, to name a few -ones. The two systems will operate independently of each other and will not be easily adaptable by either member of the bloc.
For layman’s understanding, the two superpowers will use systems that will be fundamentally very different like macOS for Apple computers and windowsOS for (non-Apple) PCs. Or 110 volts in the USA and 220 volts in most countries around the world! Once that happens, we will all be living in two entirely different worlds, the Eastern Bloc dominated by China as its superpower and the Western Bloc dominated by its superpower, the United States.
Since the blocs will be entirely based on two different standards, the current “Cold War” will further escalate between the two superpowers, and it will be more noticeable in people’s daily lives compared to the Soviet era.
The most dominant battleground will be cyberspace, and applications that migrate to cloud computing will be the most vulnerable. Attacks on each other’s infrastructure could be more deadly, destructive, devastating and crippling in nature.
In other words, the superpower that will have the most advanced encrypted digital technology, firewalls and safeguards for AI and ML, will have the upper hand on the world stage and dictate the new world order and a contender to establish itself as the irrefutable superpower for the foreseeable future!
Copyright Business Recorder, 2022