Rafael Lobo B. da Silva explains how the World Order is running out of order itself
“May you live in interesting times”- Chinese curse
The Davos Deliriums
Imagine you were asked to explain to someone from 1917 how the current geopolitical situation looks today. The dialogue would go something like this: “Of course! Russia and the United States, the latter now run by an ex TV star, are flirting with each other, precipitating a relationship based on protectionism and populism. Meanwhile, Germany arises as the new great defender of a liberal allegiance while struggling to hold Europe together under a supra-national and single market project, and China, a socialist free-market economy, is leading on creating the greatest trading partnership to integrate the Pacific Ocean economies.” After hearing all this nonsense, our time traveller guest would most likely faint and drop dead out of disbelief.
However unbelievable, this is in fact true. And even ten years ago, no one would ever say that one day, the president of China would stand at World Economic Forum meeting in Davos and advocate for free trade, while less than one month later the president of the USA would propose a 20% tariff on Mexican imports and consider extending tariffs to other major trading partners.
As the world stands on the verge of a crisis of conscience and uncertainty looms across the horizon, we must ask ourselves the fundamental question of where is this ship headed, and who are its commanders?.
The Old TV Star and The Sea
Few could have believed Donald Trump stood a chance on the White House run, though as the days passed and a crescent support arose, finally, by a short margin and the graces of the electoral system, the old TV Star was elected to the office of president of the United States of America.
The Mexican peso plunged as the markets watched the unlikely scenario come to reality. During his first week in office, Trump rejected the TPP, raised tariffs on Mexico, apart from many other of his Executive Orders, by the stroke of a pen. Now, he threatens NAFTA, accused of having stolen American jobs.
As the United States turns into itself and embraces protectionism, we have seen the dollar become stronger, Dow Jones reaching the golden 20,000 mark and companies, allegedly, are bringing their plants back to American soil and away from foreign shores. It all looks like a “good deal”, but sooner or later, the hype surrounding protectionism will dampen as the consequences, namely, the leading position America has on and in global markets, falls .
The Merchant of Beijing
One out of every ten companies listed on the top Fortune100 list is Chinese. Relevant and competitive in nearly every sector of the economy, China has shown the ambition to surpass the stage of ‘Factory of the World’ and take the lead in global markets.
Chinese wage and currency strengthening structured the path for developing a dynamic internal economy, achieved through a thriving entrepreneur community and a strong consumer class. Sounds a lot like the American Dream, doesn’t it? The consequences of this shift are already evident. The stock of Chinese investment surpassed the Europeans and Americans in Africa and Latin America. Brazil, South America’s largest economy, reported last year that their largest trading partner is now China, and no longer the USA. Zimbabwe, in the east of Africa, has accepted the yuan for everyday transactions since 2015. In the Eurasian continent, the Peoples Republic proposes the recreation of the Silk Road, connecting different parts of China to the European lands through hyper speed railroads that go across more than ten countries. And as the United States retreats into protectionism, the possibility of a world lead by China becomes increasingly real.
The Adler’s Flight
The European Union crisis is indeed a complicated one. The long-lasting conflict in Syria, and the Middle East more generally, has recently caused a mass exodus of people seeking shelter in Europe. However, their timing is inopportune. Europe is still a continent crawling out of 2008 and stumbling through crisis after crisis trying to navigate a way out. Portugal, Ireland, Italy, Greece, and Spain—the ‘PIIGS’—threatened a debt crisis and witnessed the rise of far-left parties. On another front, the echoes of nationalism from across the ocean encouraged the growth of far-right parties in Eastern Europe and France.
Concurrently, The English Chanel continues to get wider as Great Britain makes its long and uncertain march towards Brexit. At the beginning of February, the House of Commons accepted Theresa’s May plan to trigger Article 50, and when it truly comes to fruition, Brexit could catalyse an Italeave, a Deportugal, Czeckout and even a Frexit, now alarmingly possible as Marie Le Pen of the Front National confirms her run to the Elysée, threatening the very existence of the Union.
And on the Eastern Front, the European Union faces a belligerent Russia, who they fear has the ultimate plan of restoring the Soviet Empire’s influence and borders.
If somehow, the largest economy in Europe, Germany, finds a way to handle extremism from both the left and right, solve the immigration related issues, and preserve the single currency while maintaining peace in the continent, the Adler is set to take the place of the Bald Eagle in defence of the Liberal Order.
Since 2008 the public has continued to lose faith in large public institutions. How could the banks gamble with people savings on dangerous unprotected speculation, only then to be bailed out by the government using the same tax-payer’s money?
Surrounded by these questions and the wavering support of these public institutions, some people started to develop ideas and systems that purposefully go outside of current marketplaces and guidelines.
Arguably, it all began with Bitcoin back in 2009. The idea was to make a digital currency that didn’t rely on central banks, and was transparent—every transaction could be checked and validated in a public ledger, available to every person connected to the network. Since then, the digital currency has been through ups and downs, however, within less than one decade, the value of the Bitcoin currency rose by over 900%.
Furthermore, an interesting development from this technology is the Ethereum Project. The Ethereum Project is an open source environment designed for people to create networks of compromise around a series of “smart contracts” that they can freely join. This means giving the choice to people if they want to be subject to a determined set of regulations or not.
The driving technology behind these inventions is the block chain technology—a decentralized validation process that goes across a network of computers to serve a purpose, as everyday transactions, regulations, ID and much more. The promise is that if it endures the hordes of regulators and bureaucrats, people will no longer have to place their trust on a central authority that has let them down so many times in the past.
The Very Few but Determinant Conclusions
Of ancient Greek origin, the word crisis means “to choose” and could no better describe the current situation.
The series of events that led us to the current state of the world is irreversible. Globalization is going backwards, nationalism is erupting, and frontiers are being reshaped by the power of will. The state of affairs reminds us of the 30’s, and the march back to the past means potentially falling off a cliff towards further instability and even war.
Will the Berlin-Beijing global allegiance be able to stand against the Moscow-Washington compromise? Will the World Order survive the greatest test it has ever faced?
From the ship, many questions float on the horizon at the dawn of this new era. But one thing is for certain: These are interesting times.