The Bretton Woods system created tailwinds for the developed countries outside the Soviet bloc and headwinds for the rest. A reconfiguration would involve the creation of tailwinds that would propel growth with equity across the world.
NEW DELHI: A year before World War II ended in 1945 with the atomic bombing of Hiroshima and Nagasaki, the North Atlantic alliance of the US and the UK were putting together a framework that came to be known by the location of its origin, Bretton Woods. The International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (World Bank) were created as part of the plan to ensure dominance by the US and its European partners of the global financial system. That same year, the United Nations Organisation (UN) and its affiliate bodies were set up, tellingly headquartered almost exclusively in the US and Europe, despite the much higher cost of living in both as compared with countries in Asia, South America or Africa. The heart of the UN was the UN Security Council, but the provision of five (out of 15) members being veto-wielding Permanent Members made the UNSC unworkable except in matters where the interests of the Great Powers (as even the UK and France were at the time) did not collide. Since 1945, the People’s Republic of China took the place of the Republic of China (Taiwan) in 1971, while the Russian Federation replaced the defunct USSR in 1972, both with the active backing of the US, France and the UK. Although there are still several policymakers who remain prey to the delusion that global geopolitics is fixated in the era of Cold War 1.0 between the West and Russia, realists accept that from the close of the 1990s, the world had entered the era of Cold War 2.0 between the People’s Republic of China and the major democracies. Even after Xi Jinping took over as CCP General Secretary in 2012 and abandoned Deng Xiaoping’s policy of speaking softly and hiding power, Cold War 2.0 deniers have continued to dominate policy across both sides of the North Atlantic to the detriment of the overall security of the democracies, especially in the Indo-Pacific. Earlier, policy missteps from Presidents Clinton to Obama had ensured the US steadily lost ground to China economically and even in diplomatic terms. From the close of the 1990s, Washington had been joined by Beijing as a superpower, just as it had been with Moscow from 1945 until 1992. China was generously assisted in its ascent by the EU, Japan, the US and Taiwan in particular, from where investments flooded in together with technology, while markets opened up to Chinese manufactures and later services, even as India was denied such privileges. With the 1997 handover of Hong Kong by the UK to the PRC, the CCP began to believe that the PRC could displace the US as the most powerful country on the planet. From the time Xi Jinping took charge of the CCP in 2012, China began acting on that assumption in a largely transparent manner, although Cold War 2.0 deniers continue to look away from this reality. In the US, the assumption of the Presidency by Joe Biden has in several fields of policy resulted in Cold War 2.0 deniers having the decisive voice in policy, to the detriment of the democracies, including the US. Had the Cold War 1.0 True Believer Joe Biden been bested by Donald Trump in the 2020 US Presidential elections, it is unlikely that the Ukraine war would have become as much of a US-led totem “for the very survival of western civilisation” as the Vietnam War was in the 1960s “for success against Communism engulfing the whole of Asia”.
2023 is witnessing a world that has been defined by the rise of China and the weakening of US influence as a consequence of a series of policy errors ranging from flooding China with US investment and technology to getting entangled in treasury busting wars in Afghanistan, Iraq, Libya, Syria and most recently Ukraine. And it is in this year that India under Prime Minister Narendra Modi has taken over the Presidency of the G-20. Despite the daunting nature of the challenge, Modi is determined that the year will end with the putting in place of the elements of a global architecture that can in brief years replace the Bretton Woods structure that was created during a period when the US and Europe dominated trade and commerce. Both the Bretton Woods constructs as well as the UN system have remained anchored to the 1940s, and as a consequence, have lost their credibility and therefore their effectiveness even as sales boosters for western influence and commerce. The lineup of countries during the conflict in Ukraine that began on 24 February 2022 has revealed that only eight of the 19 countries that form the G-20 (with the EU as an add-on to boost western numbers and influence) back what may be called the Biden-Johnson strategy in the conflict, in honour of its two principal thought leaders. Whether the entry into NATO of (what remains of) Ukraine will boost western influence remains undetermined, but what is clear is that almost the whole of Asia, Africa and South America have freed themselves of the past habit of reflexively following the lead given by the North Atlantic powers in matters of global policy. The lineup during 2022 in the matter of the war in Ukraine made that obvious. At the same time, there is no appetite among emerging powers to replace the primacy and in some segments the hegemony of the West (or of the USSR in the pre-meltdown era) with that of the PRC. It is into such a situation that India under Prime Minister Modi has entered upon a year’s Presidency of the G-20.
India has around 300 million citizens who speak some form of English and an unbroken tradition of democracy (save for a dilution during the 1975-77 Emergency) as well as several hundred millions of young minds trained or trainable in the mastery of 21st century jobs. When such assets get coupled with a stable democracy and a determined leadership, it becomes obvious that 2023 could herald the year when India boosts its own prospects by doing what it does best, helping other countries to grow along with it. The framework for this could be worked out first within a “Coalition of the Willing” within the G-20, subtly leaving out recalcitrants who would be reluctant to witness any country other than their own grow in GDP and in influence. This would require deft diplomacy of the kind seen in Ukraine last year, when tens of thousands of students were rescued as a consequence of the good relations that PM Modi has with both President Zelenskyy and President Putin, or in the drafting of a unanimously adopted G-20 communique at Bali just weeks ago in a meeting that included both the US as well as Chins, and both the EU as well as Russia.
2023 has dawned in an era where the US dollar is proving as geopolitically risky to hold as a store of value as are bank deposits in NATO member states. These are addicted to swift and unpredictable financial and commercial sanctions that expropriate private assets with the drafting of a joint statement or a joint press conference of NATO powers before television cameras. Trusting western insurance companies or other financial institutions in countries addicted to slapping sanctions on a miscellany of grounds is becoming a gamble, the extent of which has been shown by the disappearance of the hundreds of billions of US dollars that are “missing” from the assets seized by NATO member states from Iraq, Libya and Russia in particular. If there is a country that is relatively unaffected by such risks, it is India with its clear focus on partnering with other democracies to ensure a free and open Indo-Pacific, absent recent illegal seizures by a particular country in the South China Sea and soon most likely in the East China Sea. Within the G-20, there needs to be a Coalition of the Willing that has the capability of deterring such expansionism, a task that Prime Minister Modi has adopted as a priority. If the UNSC, the IMF and the IBRD are to be rescued from irrelevance, they need to be much better representative of the world in the 21st century than has been the case since 1945. A start, indeed an example, could be made during 2023 in the G-20 with the addition (to the already existing membership of the EU) of similarly representative bodies in Asia, Africa and South America.
The Bretton Woods system created tailwinds for the developed countries outside the Soviet bloc and headwinds for the rest. A reconfiguration would involve the creation of tailwinds that would propel growth with equity across the world. Setting out the outlines of such a transformation represents a task that is eminently doable in 2023 itself, with the G-20 Presidency under Prime Minister Modi as the platform. If 2022 witnessed the paralysis of global institutions and a return to the past rather than preparing for the future, this year needs to be different. The G-20 has the potential to demonstrate this in a spirit of Vasudhaiva Kutumbakam. The few countries who continue to act in a self-obsessed expansionist manner in what Modi terms the need for an Era of Peace need to be deterred from such a path by those countries with leaders who are committed to a Win-Win world as a necessary change from the Zero Sum calculations of previous centuries that have continued even into the third decade of the 22st century, even into 2023, the year when India under Prime Minister Modi holds the Presidency of the G-20.