Worried that the U.S. and E.U. are Losing Economic Ground? Get Used to It

The last couple of weeks have been quite provocative in terms of economic news and the ongoing evolution of a new world order. As background, I did my master’s thesis on what drives a society–politics or economics? While politics certainly address the governance of a society, in the end, economics is the linchpin. It is true that the initiatives of politics do involve economic allocation, and possibly redistribution, but it’s the resources available–and how they are created, dispensed, invested, controlled and manipulated–that drive the body politic and lay the foundation for advancement. 

As I’ve written earlier, democracy and capitalism have led to economic disparity, so maybe it’s time to redress a few things. New societal models may just win in the end. I frequently refer to China’s decision at the end of the Cold War to exert its global power, not through military might, bur rather via its pocket book. China’s current status as the largest creditor of the US, and indeed the largest economy, give the country significant leverage in broader diplomatic legitimacy and participation.

Today, there are missives dedicated to the concern of the West in regards to emerging trade relations between Russia and China, particularly the energy arrangements, which could have a debilitating effect on the EU. In this economic climate, there’s no need for military muscle to add pressure. Instead, just control, allocate and redirect economic resources to those you want to play with. Is there a “defensible” position from the West? The mantra “free market” is the raison d’être of the US and other NATO participants, but if the "environ" doesn’t include or enable the West, do economic influence and free markets become suspect from a Western perspective?

Economic Resources can Legitimize Even the Worst Ideologies

Look at ISIS/ISIL. Whether as a quest to underscore the mandate of Sharia Law, or to avoid inclusion in the Western economic construct, they have launched their own currency, and the growing economic resources of ISIS may force its acceptance, regardless of political persuasion. Even with their egregious and immoral political stance, ISIS understands their economic means avail a fundamental enablement.

Ultimately, will the EU forego purchase of oil from ISIS controlled sites if it’s the only oil that’s available and affordable? Do they acquiesce to get through the winter? Does this default into legitimacy? It’s a prime example of economics versus politics – and economics will always win. In the end, those in need of economic resources will consistently look the other way. Recall the great empires of the past – their sustainability rested on economic achievement and discipline over the long term, keeping the socio-economic framework palatable for all constituents.

Today is no different. In its quest to build economic prowess, Japan aligned with Russia through its JCB bank card initiative, where three million new cards will be issued to the Russian populace. No need to include VISA (V) or MasterCard (MA) in the mix. During the '70s, the West created the all-purpose card to stimulate consumerism. While recognizing stalwart card associations, the recent Ukrainian situation changed the activities of the Western intermediaries in Russia, leading to a huge opportunity for JCB. So what creates the clout? 

The Old Guard Needs to Innovate to Stay Relevant

Simply put, we are witnessing economic evolution. James Wolfensen (formerly of the World Bank) warned over five years ago that economic power, and as such, political might, will shift to parts of the world that have heretofore been the lesser- or undeveloped regions. Population growth, economic growth, ubiquitous technology and the shrinking world give everyone a shot. Now, the old guard – led by the US and EU – seem pissed off. The two old guard is looking at alternate actions to stem the shift in economic power, using politics to change economic free trading. As always, those who have the money control the game. Well, others now seem to have garnered a bit of economic might, and naturally, they want to play and compete – and if need be, exclude the historic major players. All is free game in a free market, and the historic players need to either show up and compete or let new players lead the pack. In a rapidly changing world, maybe the West just needs to get used to it.