The emerging New World economy

Four major developments can illustrate the contradictions of the emerging new world economy and underscore their interactions, Richard D. Wolff, an American economist, writes.

First, the neoliberal globalizing paradigm is now the old.

Economic nationalism is the new. It is another reversal of their previous positions. Driven by its celebrated profit motive, capitalism in its old centers (western Europe, North America, and Japan) invested increasingly elsewhere: where labor power was far cheaper; markets were growing faster; ecological constraints were weak or absent; and governments better facilitated rapid accumulation of capital. Those investments brought big profits back into capitalism’s old centers, whose stock markets boomed and thus their income and wealth inequalities widened (since the richest Americans own the great bulk of securities). Even faster was the economic growth unleashed after the 1960s in what quickly became capitalism’s new centers (China, India, and Brazil).

That growth was further enhanced by the arrival of the capital relocated from the old centers. Capitalism’s dynamic had earlier moved its production center from England to the European continent, then on to North America and Japan. That same profit-driven dynamic took it to mainland Asia and beyond during the end of the 20th and beginning of the 21st centuries.

However, neoliberal globalization proved disastrous for most employees in capitalism’s old centers. In the latter, the employer class not only grabbed rising profits, but also offloaded the costs of the decline of capitalism’s old centers onto employees.

Rising labor militancy across the U.S., like mass uprisings in France and Greece and left political shifts across the Global South, entail rejections of neoliberal globalization and its political and ideological leaders. Beyond that, capitalism itself is being shaken, questioned, and challenged.

Second, over recent decades, the intensifying problems of neoliberal globalization forced capitalism to make adjustments.

As neoliberal globalization lost mass support in capitalism’s old centers, governments took on powers and made more economic interventions to sustain the capitalist system. In short, economic nationalism rose to replace neoliberalism. Instead of the old laissez-faire ideology and policies, nationalist capitalism rationalized the state’s expanding power. In capitalism’s new centers, enhanced state power produced economic development that markedly outgrew the old centers. The new centers’ recipe was to create a system in which a large sector of private enterprises (owned and operated by private individuals) coexisted with a large sector of state enterprises owned by the state and operated by its officials.

Instead of a mostly private capitalist system (like that of the U.S. or UK) or a mostly state capitalist system (like that of the USSR), places like China and India produced hybrids. Strong national governments presided over coexisting large private and state sectors to maximize economic growth.

The state-private hybrid in China achieves remarkably high and enduring GDP and real-wage growth rates that have continued now over the last 30 years. That success deeply influences economic nationalisms everywhere to move toward that hybrid as a model. Even in the U.S., competition with China becomes the go-to excuse for massive governmental interventions.

Third, over recent decades, the U.S. empire peaked and began its decline.

It thus follows every other empire’s (Greek, Roman, Persian, and British) classic pattern of birth, evolution, decline, and death. The U.S. empire emerged from and replaced the British Empire over the last century and especially after World War II. Earlier, in 1776 and again in 1812, the British Empire tried and failed militarily to prevent or stop an independent U.S. capitalism from developing. After those failures, Britain took a different path in its relations with the U.S. After many more wars in its colonies and with competing colonialisms across the 19th and 20th centuries, Britain’s empire is now gone.

The question is whether the U.S. has learned or even can learn the key lesson of Britain’s imperial decline? Or will it keep trying military means, ever more desperately and dangerously, to hold on to a global hegemonic position that relentlessly declines?

The days of the U.S. dollar as the supreme global currency are numbered.

Fourth, the U.S. empire’s decline raises the question of what comes next as the decline deepens.

Is China the emerging new hegemon?

Will it inherit the empire mantle from the U.S. as the U.S. took it from Britain?

Or will some multinational new world order emerge and shape a new world economy?

The most interesting possibility and perhaps the likeliest is that China and the entire BRICS (Brazil, Russia, India, China, and South Africa) grouping of nations will undertake the construction and maintenance of a new world economy.

The war in Ukraine has already enhanced the prospects of such an outcome by strengthening the BRICS alliance. Many other countries have applied or will soon apply for entry into the BRICS framework. Together, they have the population, resources, productive capacity, connections, and accumulated solidarity to be a new pole for world economic development, stresses Richard D. Wolff.

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