Last Thursday evening I was doom scrolling and the phone pinged. A WhatsApp message from my friend Enayet landed with a thud. I kept looking at the message and a dread came upon me. What if other uber-elites think like him and act accordingly. Yes, my friend is an uber-elite and I am proud of him. But, thing is that, in that fat message I could see a decision tree that many otherwise superb people will travel down that may put my doom scrolling to shame. Here is the message in it's entirely, albeit short when you write it out on a Word document. Here goes, "recently during Beijing Olympics, Putin and Xi Jin Ping singed NO LIMITS AGREEMENT, which in my opinion is bound to rebalance the current global geopolitics and geo-economics"! Hmm, this is a bold declaration and knowing my friend I know that his words can move and routinely do move small mountains. I almost feel duty bound to put my two cents in before the rebalance thing gets some wind under its wing.
Initially let us focus on the No Limits Agreement exclusively after that we can look at history and possible trend lines. What the No Limits Agreement (NLA) envisions is an alternative to US hegemony not only in political and security terms but also in economic terms. It envisions an alternative to the Dollar dominated and denominated economic playing field. I think it is quite likely that America will withdraw from being the big bully in the world stage. The ass whopping America got in Afghanistan, Vietnam and even Iraq has made the cost of global empire building quite prohibitive. There is real sentiment in the US not to undertake future military misadventures. No more "Forever Wars" have become part of the lexicon and in it there are seeds of an inward looking US. It is, however, unlikely that a country as big as the US will become a decorative flower pot like say Belgium or the UK. Irrelevant and living in the past glory thru nostalgia and parades, something like Facebook memories pop ups. Since nature abhors power vacuum the question remains, is there any country that can replace the US as world's policeman or resident bully. China comes to mind. However, China has ethos that are not one of empire building. China seems to want to maximize its economic expansion, Wolf Warrior diplomacy notwithstanding. Even in the days of flourishing Middle Kingdom China wanted to be the shining diamond in prosperity and leave the messy business of governing to the vassal states. What with the Wall and other isolationist accruements?
Something or someone will fill the vacuum, the question remains when will that happen. If history is any guide replacing a toothless superpower by an ascending power takes a long time (matter of decades) and many detours along the way. US is fast becoming a toothless paper tiger if it was not one always. There was a little noticed press conference at the White House the other day. A reporter asked Biden, how would the US protect US citizens in Ukraine if Russia invaded Ukraine and US citizens were stranded and were in danger? Biden responded in essence saying, there is no such plan. US soldiers will not fight the Russians because that will be third World War. Never in its history any US official, let alone a President signaled a clearer withdrawal of the US from the world stage. That statement is just sitting there like a big stinking turd and everyone is walking around and avoiding the implications. What it means is this, US has come to a decision not to go war even if that means abandoning its citizens to a hostile power. That is something new. We have come from Manifest Destiny to Nah, No, Nada, Nyet in about a hundred years. We do not want to fight the Russians but the Russians are not the relevant power that may fill the vacuum. Russia's economy is smaller than Italy and wholly based on extractive industries. So, Russia will fill the spoiler role and prevent the US from pivoting to Asia where the great strategic game will be played. America has no strategic patience, it is a land of instant gratification. But, China is all about strategic patience. The Chinese think in terms of the next 500 years and here is the US we are all sweating about the next quarter. So, there is no clear winner in the security and military power game as of now. Just a lot of more muddle for the next few decades.
OK, how about the other objective of the NLA, an alternative to Dollar denominated and dominated world economic structure? This is where I think US has an architectural advantage that neither China nor Russia can match. The essential truth is that money wants to be free and go where it sees return and feel safe. China, Russia and for that matter most of the other countries want to control their currencies, artificially determine the exchange rate and have central banks that are beholden to the political vagaries. China controls Renminbi with an iron fist. Only after the 2009 financial crisis China has allowed Renminbi to float against the Dollar, albeit in a small band. When the Central Bank is a political organization the currency it controls can never be a Reserve currency. So, no matter how much huffing and puffing China does, there is very little chance that Renminbi will become a Reserve currency in the near future. In order to lay the groundwork for some independence from Dollar denominated capital markets China launched Cross-Border Interbank Payment System (CIPS) in 2015. CIPS does not transfer funds, rather it issues payment orders which must be settled by correspondent accounts that the banks have with each other. It is a messaging service, end of story. By agreement CIPS uses SWIFT syntax and payment architecture. The utilization of CIPS is negligible in terms of global trade and capital movement. Admittedly, things could change and China could free up capital markets, exchange rates and set free the Central Bank if that were to happen Renminbi could become a Reserve currency and CIPS could rival SWIFT for capital movement. While that is happening I think I will curl up with trusted SWIFT for a hundred year nap!
Let's dispense with Russia quickly. It is an itty bitty declining economic power with a GDP smaller than Italy. Someone once called it a Gas station with nukes. In reality that is what Russia exactly is, a gas station in the boondocks with some thousands of nuclear weapons. Unless one is willing burn it all down including himself that security profile is not very useful. If someone got on the rooftops and shouted that Italy was going to create an alternative to the Dollar denominated world we would all probably look for the next cappuccino and settle in for the fat lady to sing. That is exactly what is happening with Russia. The NLA is equivalent to shouting from the rooftops about a non-Dollar universe. Unfortunately, it is just that. A heartfelt wish cast. Russia launched something called SPFS as a possible alternative to SWIFT. It is also a SWIFT syntax compliant messaging system. In the truly absurdist fashion the system only works on weekdays during regular business hours, Moscow time. Oh, one more thing the messages are limited to 20KB in size compared to 10 MB Swift messaging. Ah, the joys of trying to control an uncontrollable thing!!!
As I am writing this missive the news reports are saying that Putin has recognized the independence of breakaway Ukraine regions of Donbas and Luhansk. He has ordered Russian troops into these region for "humanitarian" assistance. This is, of course, just a preamble to fully absorb the New Jersey sized chunks into Russia. One thing to notice. Russia has not disconnected from SWIFT. People in the know watch for this development with great apprehension. If Russia does disconnect from SWIFT then it would surely mean a full scale invasion and absorption of Ukraine into Russian Federation. With the current Ukraine GDP of US$156 billion a full absorption will add 8% to the Russian GDP. But, Russia will be in mortal danger of losing US$226 Billion in annual trade with EU and the US. The obliteration of Ukraine will mean that very many precious minerals from Iron Ore, Titanium to Sunflower seeds will become much more expensive. The global inflation rate will sky rocket.
So, where do we stand? We are on the brink of rebalance of the world order. Mainly because the Titans have exhausted themselves and will exhaust themselves even more in the coming months and years. For a country like Bangladesh this should present great opportunity. The key to future is not to get side tracked by what the behemoths are doing but focus on things that will make Bangladesh an indispensable manufacturing and knowledge based economy. Focus and focus and focus on things like, infrastructure build out, meaningful education (not religious rote stuff) for all but especially for girls, fight corruption with more transparency, make wealth formation easier, and make the central bank truly independent. The key would be not get bogged down by what will happen when the US and its enemies square off. The key will be to have Bangladesh as a possible alternative to mayhem. In this moment of global peril Bangladesh needs to be like my dear departed dog Chiquita when she was chasing squirrel. Look straight, smell the blood, fucking run!
Kayes Ahmed is a Bangladeshi American serial entrepreneur, thinker and writer. He lives with his two dogs in Colorado and California.
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