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Who will lead the new world?

One area where consensus among nations took time to develop was the conduct of international trade

Shahid Javed Burki May 29, 2023 

The writer is a former caretaker finance minister and served as vice-president at the World Bank

The question posed in the title of this essay needs to explained

before an answer – or answers – are attempted. The world in which
we live in the third decade of the 21st century is new and changing
rapidly. That is happening in part because of the enormous
demographic transformation occurring all around the globe. Most
developed countries as well as China have seen sharp declines in
the rates of growth in their populations. Many have rapidly aging
populations. This has resulted in the migration of people from the
populous south to the demographically stressed north. This has
reversed the demographic trend that in the 18th and 19th centuries
peopled what came to be called the New World. However,
demographic change is paid little attention in the literature on the
changing world.

Also, unlike in the immediate post Second World War, there is no clear leader
– a nation or a person – to which the world can look for guidance. Then the
United States was the clear leader. Although it entered the war after some
hesitation, once it was in the conflict it fought hard and spent enormous
amounts of resources not only to send in a large force into first the European
and then the Asian conflict. It also provided significant amounts of financial
help to other nations who were fighting Germany, Italy and Japan. The first
two were called the “Axis Powers”.

Once the war was over, the Americans could have established themselves as
the clear leaders, laying down the rules pf governance that would be followed
by the rest of the world. Instead of going that route, Washington chose to
become the leading partner in a universal arrangement that included both the
winners and losers of the great war. New organisations were founded that
required their members to follow clearly spelled-out rules.

The United Nations Organization as well as the International Monetary Fund,

or IMF, and what eventually became the World Bank Group opened their
doors to all the nations that wished to join them. The IMF was designed to
stabilise the financial system that had emerged after the war while the
International Bank for Reconstruction , or the IBRD, was designed to provide
the badly needed capital the war-torn European nations needed to rebuild
their destroyed economies. The IBRD was to become the World Bank Group
which raised funds in the capital markets to provide development finance
needed by dozens of countries that gained independence with the withdrawal
of colonial Europe from the colonies they had acquired in Asia and Africa.
Once they were in, they committed themselves to follow the rules of
governance that were based on consensus. The United States could have
dominated these institutions, but it chose to be influential rather than
dictatorial. Washington, along with the countries of Western Europe, played
important roles in governing these institutions. At the very outset it was
decided that the World Bank president would be an American while the
person chosen to lead the IMF would be from Europe.

One area where consensus among nations took time to develop was the
conduct of international trade. Those with large economies with large
exportable surpluses wanted very few constraints placed on the movement of
goods and commodities while those that were big importers were determined
to protect their infant nascent industries. It took 40 years before the world
could agree to establish an institution they called the World Trade
Organization, or WTO .

This consensus- and rule-based institutional structure survived the Cold War
that was fought right after the end of the Second World War. The contestants
were the group of countries that were led by the United States on the one side
and by what was then called the Union of Soviet Socialist Republics, or the
USSR, on the other. This skirmish lasted for close to half a century, from 1945
to 1991; it ended with the collapse of the USSR which had suffered a
humiliating defeat in Afghanistan, a country it had sought to dominate by
invading it in 1979. After waging war for ten years, the Soviets pulled out of
Afghanistan. The Americans went to Afghanistan in 2001 to punish the
Taliban government that then ruled from Kabul for allowing Osama bin Laden
to set up a base in the southern part of Afghanistan. It was from there that the
people they trained launched devastating attacks on two targets in the United
States – one that destroyed the twin trade towers in New York and the other
that hit the Pentagon near Washington. These attacks were carried out on
September 11, 2001. They killed about 3,000 people and the then President
George W Bush promised that Afghanistan will pay a price for this terrorist
activity. In December 2001, the Americans went into Afghanistan and
removed the Taliban government from Kabul. What followed was a civil war
that lasted for two decades and ended on August 15, 2022, when the Taliban
returned to power.

The Afghan episode is one part of the story concerning the emergence of the
new world. It had two immediate consequences: the demise of the USSR and
the emergence as independent states of a host of countries that were once the
southern and eastern flanks of the USSR. This change in the geography of the
state once ruled over by Vladimir Lenin and Joseph Stalin was tolerated by
Moscow until the emergence of Vladimir Putin as the new czar. The new
Russian president made no secret of his extreme distress at the scaling down
of the mighty Soviet Empire. He attacked Ukraine with the ambition to
incorporate it in Russia. The attack on Ukraine created a new world order
which saw America getting deeply involved in European affairs with the
decision to support Ukraine in the war of resistance launched by the country
after invasion by Russia.

It is now recognised in the growing literature on the changing trends in the

makeup of the global economy and political structures that a good part is the
consequence of developing demographic trends noted above. Autocratic
governments in several areas of the world have replaced those that were based
on democratic principles of governance. Religion is also playing a role in
changing the principles of governance. Two good examples of this are Hungary
in Europe and India in Asia. The former is led by the long-lasting Prime
Minister Viktor Orban and the latter by also the long-lasting Prime Minister
Narendra Modi.

Published in The Express Tribune, May 29th, 2023.

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