New World Order: The Mantra of Globalization is Being Changed by the Idea of Regionalization

Two years of living in uninterrupted extraordinary circumstances, during which the global economy was broken over the knee (accidentally or intentionally, no one would bet their hand in the fire), certainly leads to a new world order. First, we had a war over vaccines, during which perhaps the most effective one (Astra Zeneca) was thrown out of the race in favor of the American Pfizer, which became almost the exclusive global supplier.

This war showed that ‘local’ billions are indeed very important (just for info, BioNTech, which developed the vaccine for Pfizer, made an incredible profit of 10 billion euros – 67,614 percent more than the year before!). All thanks to sales to the Western world. The poor East and South care little. However, even those empty billions could not cover the crack that turned into a volcanic pit – the broken supply chains have not yet been reassembled, so when the recovering economy started shopping for raw materials, for which energy is of course needed, one country bought up everything that was offered: China.

If someone convinces that the war and Russian gas are to blame for inflation, perhaps we should remember a few things: Trump printed more money in just one month of the first lockdown than was printed in a year during the financial crisis. The EU followed suit. And then the rush for raw materials began, causing the prices of all metals to skyrocket. The industry that consumes metal needed energy, so its price on spot markets also started to rise. And then the war and circus with gas stuck to all of this. Meanwhile, Europe launched the RePower EU project to solve three things – the problem of energy supply, inflation, and a possible recession. Because there is no doubt that in this two-year story, Europe is the biggest victim. The biggest winner? In the short term, certainly the USA, but in the long run, it is China. It will emerge from the war situation as a buyer of reliable and cheaper gas from Russia (the EU will initially have to rely on American liquefied gas, several times more expensive than natural gas), from which the Chinese yuan will certainly profit. America is gaining a more dangerous opponent, as China is (also) an economic power, Russia is not.

That there is indeed too much going on behind the hills is confirmed by Credit Suisse, whose analysts estimate that sanctions against Russia will lead to the creation of a new world order: all this is an unprecedented crisis since the time Nixon pulled the American dollar from the gold standard in 1971. We have a complete global energy crisis, inflation raging worldwide, along with growing uncertainty in supply chains, and major Western central banks have not yet raised interest rates. Why? Inflation in the USA was an incredible 7.9 percent in February, the highest in the last 40 years! American Treasury Secretary Yellen estimates that the USA will face hyperinflation for at least a year (last year she was convinced that inflation would fall in 2022). It is now to be expected that the rhetoric will be that Russia is the main culprit for inflation. Questions arise on their own: how will this repositioning happen and who will reposition, are we really talking about a new world order?

Kristijan Kotarski, a professor of international political economy at the Faculty of Political Science, believes that the contours of the new order are currently very difficult to predict, as the relationships and alliances built over decades are in a phase of fluctuation.

– It is enough to look at the map of the Middle East and see how once sworn enemies become friends, and friends cool their relations. A few years ago, it seemed inconceivable that Israel could establish a Middle Eastern NATO together with its Arab neighbors, while at the same time the UAE and Saudi Arabia would refuse the calls of the president of the still most powerful world power, and at the same time negotiate with China about possible payments for oil deliveries in yuan.

At the same time, while a new line of the Iron Curtain is being drawn in Eastern Europe, a large number of populous countries like India and South Africa are waiting on the margins and trying to balance, without a clear strategic determination at this moment. 141 UN member states explicitly condemned Russia’s aggression against Ukraine, but those countries that were abstained or against during the voting make up half of the world’s population. Western allies have shown extraordinary unity by imposing sanctions on Russia, but the key question is how long they can maintain it if the effects on citizens’ living standards are drastic, without a fair distribution of the burden.

The answer to that question is extremely important for the credibility of the West and its alliances, its projection of power, and at the end of the day, the alignment of those states that have not yet aligned in this situation, but are trying to balance as best as possible between different poles of power – Kotarski specifies, adding that the USA will still be relatively the strongest power, but the gap between China and the USA will decrease in military and technological terms. The American dollar will continue to be the main world reserve currency, but with reduced dominance, especially due to the application of sanctions and the printing of huge amounts of dollars in the last two years.

– However, there are currently no signs that the weakening of the dollar’s position will be compensated by the strengthening of the yuan’s role. So far, all key reserve currencies in the world have been issued by countries with democratic order and developed rule of law and free financial markets. There are no signs that the yuan can overcome those huge obstacles. Therefore, the withdrawal of the dollar that will not be replaced by the strengthening of the yuan’s role will lead to more fragmentation in the international financial and monetary order. All in all, we will see a significantly more fluid and chaotic international order.

Of course, the previous mantra of globalization will increasingly be replaced by the idea of regionalization. The mantra of hyper-efficiency and increasingly stretched global supply chains will be replaced by the idea of resilience and shorter chains. States will increasingly reflect on the concept of national and/or collective security in building commercial and investment relations, especially considering the growing division of the world between authoritarian and democratic states – Kotarski concludes perhaps optimistically, as in these two years even once democratic states have begun to behave quite authoritarily. It is precisely in the sphere of authoritarian control that a crowd could emerge.