L| GEOPOLITICAL REALISM

The arrival of the “New” Institutionalization

As it is known, political systems and governments have converged on one another as a result of changes in their political credos. The number of political ideologies has grown resulting from the exposure to, or permeation of, disparate or diverse social cultures. Governments have become more engaging with each other through trade or politically-driven economic arrangements such as regional trade agreements (RTAs). Engagement through trade has been greatly enhanced by a continually evolving technology as it affects behavioral patterns.

Furthermore, the borderless proliferation of technology has been instrumental to helping increase economic activity among nations that previously may not have had such capabilities. For instance, technology has helped upgrade economies of less developed countries (LDCs) and has allowed them access to markets.

The advancement of technology has given rise to the need to revisit the institutional character of an economy.  In fact, every facet of the political system, has necessitated the formulation of new or reformulation of existing policies, practices and behaviors.

Such institutional transformation is likely to affect political positionings within and outside ethnic borders. For instance, price stability, government debt and annual deficits, currency devaluation, and so on, were the convergence criteria imposed upon the member states of the European Union in the signing of the Maastricht Treaty in 1992.

Political Antagonism 

Political antagonism has grown resulting mainly from differences between nationalistic and globalist positions.  Although political antagonism is an integral part of any national political environment such antagonism has permeated the global political environment.  We will call the former micro-antagonism and the latter macro-antagonism.  

In micro-antagonism populists exchange against the elitists and this gives credence to the existence of oligarchy.  The exchange between such antithetical attitudes seems to underscore the pursuit of each group’s self-interest.  Furthermore, it would appear that as populism increases elitists become entrenched surging their oligarchical positions.  Seemingly, the said opposite positions can be lessened through political tolerance, which inherently is either absent or challenging to achieve, given that populism appears to exhibit more heterogeneous positions within it than elitism.  It follows that populists are less likely to uniformly agree to political tolerance than elitists.

Macro-antagonism concerns achieving hegemonic positions of dominance in world affairs.  This type of antagonism could potentially produce greater conflict, given that different political positions become even more deeply established as a result of different social cultures.  In other words, the greater the gap is between disparate social cultures, the more incongruent their respective political positions are likely to be. Different value systems produce and reinforce divergent political positions resulting in political polarization.  Furthermore, the pursuit of political hegemony necessitates a closer relationship between existing political culture and economic expediencies.  This means that political dominance is made feasible, by and large, through the use of economic capabilities.

Economic Antagonism

Relevant antagonism has proliferated due to political openness and an increase in world economic exchange, and the ensuing free trade.  Strong world economies show a definitive advantage in pursuance of antagonistic positions due to their economic prowess and the advantage of differentiation strategies in opening new markets.  For instance, we know that differentiation is a strategy indicated for building market share and for increasing revenues.

Economic antagonism, in our current global environment, has become an integral part of the overall political and military strife among dominant nations.  This antagonism has become fiercer due to differences in ideology.  For instance, BRICS countries have increased their investment capability, their international trade activity and their contribution to global GDP.  They have elevated themselves, as emerging markets, to become global economic players.  

Τhe global prospects of the U.S. economy are compromised by the proliferation of high technology, which the U.S. no longer controls, as well as, a continually increasing debt-to-GDP ratio of about 123%, as of November 2023.  The threat to these prospects is accentuated by a growing global geopolitical antagonism which presents an opportunity for BRICS economies to challenge the U.S. dollar as the international reserve currency.

BRICS’ effort to challenge the international status of the U.S. dollar is a difficult undertaking given that the hopeful "BRICS’ new reserve currency” will have to mitigate inherent weaknesses of those countries resulting from differences in their international trade and their socioeconomic cultures.  For instance, the currencies of the BRICS countries, i.e., Brazilian Real, Russian Ruble, Indian Rupee, Chinese Yuan and South African Rand, are fixed and not floating.  

Despite China’s quick industrialization and its impressive export trade, the Chinese Yuan needs to first become a floating currency so that the global market can assess the equilibrium of its demand and supply and stabilize its value.  Existing capital controls must be curtailed or even eliminated so that people who trade using the Yuan can increase their trust on that currency.  Yuan’s liquidity risk must be addressed and mitigated.  Reducing Yuan’s liquidity risk will persuade central banks to reserve it as a global currency.  Finally, the Chinese Yuan must show that it is a reliable and trusted global currency.  

The five countries of BRICS seemingly will have to create an economic and monetary system much like the European Currency Unit (ECU) of the European Economic Community (EEC), which was the precursor to the European Union’s currency, the EURO.  

In addition, the promotion of a new currency’s status, as an international reserve currency, will have to be embraced by the powerful central banks of the world through holding such new currency as a reserve currency.  International trade on strategic supplies like oil and gas, rare materials and other critical supplies may embrace a new currency.  For instance, the OPEC countries may decide that they wish to be paid with a currency other than the U.S. dollar.  Also, Chile, known to have the largest reserves of lithium, may elect to accept payment only in Chinese Yuan.  

Overall, China’s noted growth into the global economy and its ambition to compete against the dollar for the status of international currency reserve is impressive.  At any rate, the crowning of a new currency as a reserve currency will be conditioned upon the dollar’s continually increasing weakness and the relevant political decision of foreign governments.

Furthermore, the ostensibly pending introduction of a digital currency and its use, although not yet regulated, will be affected by the popularity and the value of the reserve currency and other major currencies.

"Faith"- An Ingredient In Culture 

The discussion on geopolitical realism would be relatively incomplete if it did not shed light on the issue of faith as, potentially, the ultimately critical core component of culture.  An effective geopolitical policy should look into the element of faith and how it affects cultural positions and cross-cultural behaviors.  

Culture flexibility varies from region to region, from country to country and even within a country.  For instance, the north-western hemisphere is, largely, individualistic, whereas the southern-eastern hemisphere is, mainly, collectivistic.  The complexity of culture is augmented because individualistic environments show collectivistic behaviors and trends, and, vice versa.       

An analogous phenomenon is observed if we look into the various subcultures within a country.  As evident, achieving tolerable uniformity between or among cultures is a challenge that must be addressed in a geopolitical environment if we hope to mitigate conflict and cultivate contrasting cultures.  Elements of culture such as norms, symbols, rituals, language and more may be negotiated.  But, values endure and they are considered to be the last frontier to achieving relative cross-cultural harmonization.   

The core element of values is defined by faith.  Faith is characterized by a relatively infinite number of levels that describe its depth and intensity.  Those levels exist on a continuum from Atheism to Theism.  This continuum includes Agnosticism.  Environments that are dominated by either Theists or Atheists reflect extremely opposite cultural values.  Even among Theists there may be great conflict.  For instance, Monotheists would never accept Polytheism.  Xenophon said: “God is one, Great, He does not resemble either in flesh or in mind with the human, He sees, understands, hears everything.  And, although He remains outside the movement of the universe (that is, outside the genesis and decay of that universe) with His mind moves the universe.”  Aristotle said: “God is one.”  (To the scholars of ancient Greek: "Eνα τόν θεόν προσήκειν εiναι.")

Western thought has been different than Eastern traditional thinking.  Western thought has evolved more rapidly than Eastern thought.  Secularism is far more dominant in Western societies than in Eastern ones.  In terms of faith, secularism promotes separation of State and Religion.  Eastern Orthodox Christian theology asserts that the Source of Faith cannot be separated from earthly existence.  In reality, such separation would result in effective disengagement of the Soul from the Body.  The only optimum choice is both evident and indisputable.

Geopolitical realism is multi-faceted, dynamic and multifarious.  Geopolitical realism requires broad unbiased reflection and analysis.  For instance, a geopolitical analysis of the conflict between Russia and Ukraine must examine the potential origin of the conflict as being the difference in their cross-cultural values as they relate to Faith between the two countries.  In addition to the political, economic, military and social interests, which may be implicated in the geopolitical analysis, the origin of such conflict may be deep-seated, faith-oriented, cross-cultural values. 

 

Cross-Cultural strife

The subtlety of the influence of culture upon relations and relationships should not be ignored or discounted.  Whether social or regulative, cultures exert great influence on behavior and they are hard to change.  A culture is what I call the “last frontier” to relative globalization.  The evolution of culture is a slow process, inhibited by the strength of values and the endurance of, and adherence to, tradition.

Simplistically, a culture may change either by adding to or subtracting elements from it.  The popularity of certain elements of a particular culture would be an important factor to making the culture attractive, contributing to the rate of acculturation.  [Acculturation is defined as learning a foreign culture.] For instance, the higher the level of acculturation of international business managers the greater the success of their business strategies in the foreign market.

American culture has permeated the psyche of foreign societies through the concept of individual freedom, the use of the American audiovisual industry, the rapid spread of the English language and other favorable cultural idiosyncrasies.  In my view, because of the above, the noted global impact of the American culture may offer an alternate name to globalization as Americanization.  

Adapting to a regulative culture is easier and less arduous given that such culture refers to performing agenda tasks.  On the contrary, adapting to a different social culture is painful and hard, and in some cases agonizing.  A change of a social culture may be expedited, and this is seemingly possible within a regulative exchange.  For instance, in a corporate environment, participants in a meeting may represent disparate social cultural values yet they observe the same regulative culture.  The interfacing of two social cultures produces a third cultural environment which I have called transcultural.

[Polychroniou, Constantine G., (2018).  

"Trans-culturalism and its effects on the internationalization of markets: A conceptual framework."  

Journal of Cultural Marketing Strategy, Vol 3, No 2, 

p. 199-215].  

https://www.researchgate.net/publication/329402562_Transculturalism_and_its_effects_on_the_
internationalization_of_markets_A_conceptual_framework

   

Trans-culturalism may be viewed as an effective interim process to promoting cross-cultural integration and

multicultural harmony. 

Author: CGP .+.

K| A SYNOPSIS OF SELECT GLOBAL POLITICO-ECONOMIC ISSUES

Dissecting the Global Environment

Gazing at our world we can readily observe changes that are uncharacteristic of what we observed in the recent past. I am referring to both the quantity and style quality of such changes.  Both of these depict the dynamic character of such changes and the rate at which they are taking place in our world.  These changes are being instrumental in developing a new world environment which is likely to foster global relationships destined to bring forth a different world.

The changes that I am thinking of are in all areas of human development.  I mean in the areas of cross-national permeation, economic development, socio-cultural integration and global governance.  These are complex topics that require in-depth analysis.  I will try to offer a fair yet synoptic review of the above.

The International Political Environment

The collapse of the Soviet Union and Sovietism around the world gave an impetus to the normal evolution of world societies.  The 1990 speech by George H.W. Bush in which he coined the term New World Order (NOW) was indeed predictive of a new world reality.  The end of the Cold War brought about the Russian financial crisis and the collapse of the Ruble. 

The U.S. was the only country with international institutional power with which to influence political systems and promote world peace. However, the New World Order soon became “Disorder” as a result of regional wars.  For instance, the Gulf war, the breakup of Yugoslavia, the emergence of terrorism and international political disarray.  It seems as though the U.S. was unable to institutionalize cross-national relations and mute expedient national interests, achieving a relative optimum balance among countries. 

The creation of the European Union (EU), which began with the Treaty of Rome of 1957, seems to have been a notable success because it achieved to bring peace and relative prosperity to the European continent which had been devastated by frequent wars.  Regional integration, like that of the European Union, is not possible unless the member states’ political systems are similar.  For instance, no member state of the European Union could revert to dictatorship or a Marxist rule.  EU’s supranational arrangement, evident in the EU's Charter of Fundamental Rights, is a safeguard of the character of the political system of its member states. 

Also, the Association of Southeast Asian Nations (ASEAN) has been successful with enhancing political cooperation avoiding long-standing conflicts and untrustworthy relations among the various ASEAN governments. 

A “Newer” World Order

If we assume that the New World Order confirmed the U.S. as the world leader, the present status of the world order seems to indicate that the political world leadership of the U.S. is absent. 

Regional tensions, leading to local conflict, have produced migration which has caused political instability and local social upheaval such as discrimination, cross-ethnic disputes, economic strife, and more.  Such conflict has given credence to the lack of U.S. leadership and the evolution of a polyarchic environment. 

U.S. global leadership is being challenged by new countries who have seen the opportunity to dispel U.S.’s historic leadership and become antagonists to the U.S. in all facets of leadership, that is, economic, political and military.  For instance, U.S. sanctions are no longer as effective as they had been in the past.  The reason is simply that unilateralism is not effective in an openly-trading polyethnic environment.

Moreover, with the collapse of the Soviet Union, the internationalization of the U.S. and most of the countries, as well as, the development of technology which has become universal have tested the world supreme influence of the U.S. and its power instituted since the end of the 2^nd World War.  In the days before the collapse of the Soviet Union, before 1989, the world was agreeably divided in East and West. Our polyarchic contemporary environment would not and could not use the above formula with which to govern the world.

The Rise of China’s New World Order

Since 2001, when China joined the World Trade Organization (WTO), international trade has increased from a reported $6.5 trillion to $28.5 trillion to date (2022), according to the United Nations Conference on Trade and Development (UNCTAD).  After joining the WTO China, in an environment of free trade, benefited from a large labor force, reduced tariffs and other barriers to trade and large inflows of foreign capital (FDI). 

During the global recession of 2007-2009 China’s GDP grew nearly 9% as the U.S. GDP declined by about 4%.  This immense economic growth has thrusted China in the world as a global player confirming its geostrategic importance.  In addition, the strategic goal of China to develop and surpass the level of technological prowess of the U.S. has revealed a “Newer World Order” which identifies a new global system in which there are several global players known as Polyarchy. 

This new global environment is likely to create seismic effects in the relationship of those global players.  Although the future evolution of global antagonism is difficult to delineate, we can conjecture that the areas which will likely produce conflict are:

Political systems; Technological systems; Economic antagonism; and, Cultural Value systems. Notwithstanding the collapse of the Soviet Union and the trend toward democratization of former Marxist countries, a number of countries have remained revolutionary socialist characterized by authoritarianism or autocracy. 

Alignment of political thought in the global environment will be long and agonizing.  Advancement in technology and Artificial Intelligence (AI) will be decisive in allocating supreme power to the global player who might achieve a differential advantage in it. 

Economic antagonism will be intense as global players will seek to establish favorable economic position in the global market. 

Global players’ value systems will be tested undergoing refinement, as trans-culturalism will be seen as an effective way to increasing relative cross-cultural integration.  Deep-seated values originating from Faith will likely be the last frontier to increasing relative cognitive cross-cultural integration. 

The question that global policy-makers should be asking is: Are we moving toward a system of global unification?

Author: CGP .+.

J| WHAT IS THE GLOBAL SCOPE OF THE U.S.?

Although the complexities of governance of the U.S. are not easy to decipher, it is compelling to know its current understanding of global issues and how it plans to optimally manage them amidst a multifarious collection of possibilities which have various probabilities of success and various levels of risk.  I am talking about the U.S. ability of managing global relations in a way that would safeguard its global leadership.   

Is there an optimum approach
to Polyarchy

Relevant initiatives should focus on identifying value systems that are similar to that of the U.S.  Specifically, I am suggesting a three-prong strategy with which to address the global governing challenge of the U.S.  For instance, solidifying relations with individualistic socioeconomic cultures, which by definition are in proximity to the U.S., should be the first strategy. 

Second strategy would be to identify, initiate and develop relations with trans-culturalist countries as such environments would be more prone to appreciate and accept the individualistic values of the U.S.

The third strategy would focus on cultivating a symbiotic relationship with countries that embrace collectivistic socioeconomic values.  In the interim, care must be exercised in mitigating ill-effects resulting from transitioning from collectivism to individualism and vice versa.  In an increasingly globalizing environment, antithetical positions will always be present, and those should be accepted and viewed as differentiable.  That is, we can expect and try to encourage similar thinking but we should not hope to homogenize behaviors.

By and large, U.S. global leadership’s goal should be to create encourage and support a global value system that brings dissimilar value systems closer to understanding and accepting each other.  In the future, near or distant, amidst a polyarchic environment, the challenges that the U.S. faced in the days of the cold war with the Soviet Union would pale in comparison to the challenges that ostensibly may be developing in its relationship with China and other developing global antagonists.   

A quick look at the World Economy 

Following the U.S. victory at the 2^nd World War and the Bretton Woods Conference of 1944, the U.S. Dollar was established as the world’s reserve currency.  Under that regime every currency was pegged on the Dollar and the Dollar was the only currency to be pegged on gold.  This system has allowed the U.S. to control the value of the Dollar and trade activity.  That is, the Dollar value is affected by inflation and the level of trade activity is determined by the strength or weakness of the Dollar.  

On the basis of the above it is plausible to ask: Why is the Biden Administration testing the tolerance of the U.S. economy, the international integrity of the U.S. Dollar, the strength of long-standing politico-economic relations with other countries and, in fact, with other confirmed international partnering relationships?  Haven’t we learned from the Johnson Administration’s experience with financing the Vietnam War and Poverty?  Such experience caused persistent inflation and the first loss of faith in the dollar as well as the subsequent decision of the Nixon Administration to end the convertibility of the Dollar to Gold, and, its resulted devaluation. 

Furthermore, what action could the U.S. government take in order to neutralize and render ineffective the action of BRICS and others to challenge the reserve status of the U.S. Dollar?  Collectively, a quick answer to both would be controlling inflation and heading off an out-of-control debt-to-GDP ratio. 

China is thought, by political experts and economists, to be the most formidable global antagonist to the U.S. on economic, military and geopolitical fronts such as international relations.  

Different prognosticators have made different predictions about the expected growth of the Chinese economy.  Goldman Sacks suggests that China’s GDP will exceed that of the U.S. by 2035.  Likewise, Citi Bank’s institutional research predicts that China’s GDP will outpace that of the U.S. by the mid 2030s.  Regardless, the U.S. GDP in 2022 was $25.5 trillion, whereas China’s GDP was $18.3 trillion.  Above predictions may or may not hold depending on the growth of the respective economies.  However, it is worth noting that, at this writing, the debt-to-GDP ratio of the U.S. is around 123% whereas the debt-to-GDP of China is around 70%.  In addition, according to a report by the Institute of International Finance (IIF) debt is likely to be adversely affected as the growth of the economy slows.  It would be interesting to note how the fluidity of economic growth may be affected favorably or unfavorably.  For instance, the higher the global market share of Artificial Intelligence (AI) the greater the revenues and return to the economy.  Publicized forecasts predict that AI will contribute $900 billion by 2026 and more than $15 trillion by 2030 to the global economy.  

Question: What might the global market share of AI be for the U.S.? 

Cross-cultural Issues 

I would like to discuss select cross-cultural issues that are seemingly pertinent in our day-and-age exchange which either enhance positive relations or augment conflict.  The negative effects dominate in cultures that are rigidly different.

Perception – Behavior

Social psychology suggests that perception affects behavior and that behavior is a reflexive act of perception.  In turn, perception is affected by cognitive analysis of information as it may be impacted by existing customs and cultural values.  It follows that behavior might be influenced by the dynamic exchange between communicative cognition and cultural traits or character as those are thought to influence formation of perception.  By and large, the perception that the American culture is an internationally recognized popular culture is an unspoken advantage which the U.S. must safeguard as it will yield favorable behavior toward the U.S.  

By contrast, knowing that the American culture is not positively viewed everywhere, the U.S. must strive to change existing negative perceptions against it.  For instance, President Putin of Russia reportedly has stated that a nuclear war with America is inevitable.  Such statement accentuates the imperative need of the U.S. to manage and mitigate the above Putin’s perception.

Impact of Communication on Collaboration

In a global context, communication between antagonistic cultures might either help alleviate conflict or even establish and enhance collaboration.  Showing a culture of flexibility, in communications, insufflates goodwill enhancing the level of trust, fostering perception and understanding behavior.  

In antithesis, lack of communication is viewed as helping to increase antagonistic behavior.  This is a valid syllogism since communication is a necessary step to potentially foster collaboration.  By communication I mean observing and developing awareness of the counterpart’s positions and their likely misinterpretation of our relevant positions.  This exercise would establish viable understanding of different positions, creating and increasing trust and ensuring prospects of collaboration.  

Regulative vs. Cognitive-Cultural 

Different cultural environments pose different challenges to the individuals, organizations, or countries in their exchanges with each other.  There are two such distinctly different environments.  Those are Regulative and Cognitive-Cultural.  First, let’s define the idiosyncrasy of Regulative and Cognitive-Cultural.  Regulative contextual essence addresses a standardized organizational cultural environment.  Whereas, Cognitive-Cultural embraces socio-cultural values that are less standardized and more fluid and flowing.  

The context of those cultures has different impact on those who practice or exercise them.  In a Regulative environment different cultures engage in standardized exchange with a unified purpose to achieve a prescribed task or goal.  For instance, the Federal Reserve Bank employs economists of different ethnicities and gender, such as; Black, Asian, White, Male and Female.  

On the contrary, in a Cognitive-Cultural environment people’s cultural values and habits take precedence over organizational tasks or goals.  Now, the interfacing of the above two cultures is likely to produce an overlap in the cross-cultural space known as Trans-culturalism.  Trans-culturalism may increase the cohesiveness between or among disparate cultures.

Politico-Economic Cultures

How do politico-economic cultures differ?  Conflict results from the institutional politico-economic framework.  Countries operate under different sociopolitical structures.  Such sociopolitical structures affect economic development.  Political systems view and practice governance differently.  For instance, the use of regulation may produce or stagnate economic activity.  

Government policy may, at times, have more or less social orientation.  For instance, in Sweden healthcare is funded by public funds.  Regulation may be used to achieve economic ends or effect social goals.  Often, governments use both regulation and deregulation in their search for an optimum position in response to social expectations.  Benefits of economic regulation must not be at the expense of the benefits sought through social regulation.  The desired middle ground of those two would be the theoretical optimum at which the society should derive the highest possible payoffs.  A sustainable long-term policy for the U.S. would be to achieve and maintain an optimum balance between economic growth and satisfaction of social needs.

Author: CGP .+.  

I| On Preserving and Maintaining American Global Leadership

American leadership has infused in the world not only a differentiable culture but also it has disseminated and promoted the criteria which other countries may use to simulate the results that the U.S. has achieved. Its world-wide leadership, which was manifested since the 2nd World War, promulgated a new era of leadership which promoted “freedom”, “choice”, “individual decision-making” and a culture of relative autonomy.  The culture of American leadership promoted economic reforms, mass industrialization, productivity, competitiveness, raising the standard of living, mass consumption, and solidifying economic growth.

American world-leadership capabilities

The incipient environment that the U.S. faced, following the 2^ndWorld War, was one of conflict because of ideological differences between different actors.  I am referring to the conflict between Socialism and Capitalism.  These two different politico-economic models embrace and promote different behaviors and expectations. 

Leadership required by these two models has different challenges.  Capitalism, adhered to by the U.S., largely focuses or should focus on permeating socialist environments and imbue the socialist politico-economic culture with the differential advantages of a capitalist model, as it defends against penetration of socialist values.  Socialism’s challenge, on the other hand, is largely attempting to defend against Capitalism’s penetration and influence, as it tries to promote socialist values.  These two antithetical models and their individual challenges interface with each other as they try to maintain and preserve their own value systems.  The character of the socialist model would seem to exhibit a more polemic behavior than that of the capitalist model.  This seems to be the case as those models’ core strategies are different, with the capitalist model’s strategy being offensive and the socialist model’s strategy being largely defensive, given the well-known pervasiveness of democratization.  The criteria of leadership used in applying the offensive strategy would include identifying the differences between the two models, the advantages of capitalism’s market orientation, the relative advantages of capitalism vis a vis those of socialism, the long-term impact on cultural values that seem to be congruent with the innate moral and ethical human self. 

New challenges to
American global leadership

Global leadership requires a multidimensional leadership model.  The preeminent reasons for requiring a multidimensional leadership model are the existing polyarchy and technology.  The leadership practiced prior to 1989, the collapse of the Soviet Union, had different challenges than those present in today’s global environment. 

During that era, the world was divided in two, the West and the East.  The leaders, i.e., the U.S. and the Soviet Union, had a well-defined agenda resulting from either philosophical positions or negotiated agreements, for instance, the division of Germany in four sectors, U.S., British, French and the Soviet Union.  The return of Kuril Islands to the Soviet Union, the Yalta conference that allowed Joseph Stalin to make Poland, Hungary, Romania, Czechoslovakia and Bulgaria communist countries and further understanding exchanged between the West and the East, such as, agreeing not to interfere in each other's region of control. 

In the present era in which the global environment is delineated by polyarchic exchange leadership challenges are complicated and their complexities have not been measured or weighed.  In fact, their implications are hard to foresee and assess given the presence and growth of technology.  The new challenges to contemporary global American leadership can be categorized in two dimensions: quantitative and qualitative.  Quantitative would address the number of polyarchic actors and qualitative would focus on the level of political, economic and military capabilities of those polyarchic actors.
                            

Designing and Empowering the
“New” American global leadership

It has been established that Polyarchy characterizes the new global environment.  Polyarchy requires a new approach, a new process to managing the contemporary global leadership.  Looking at the structure of polyarchy we can identify actors with specific leadership goals but variant competencies.  For instance, China’s global goals and competencies are, or may be, different than those of the EU, Russia, Germany, UK, France, Japan and others.  One of such required competencies would be flexibility.  Flexibility in a polyarchic environment would be a great mitigating asset providing a unique advantage as global actors attempt to navigate their relationships. For instance, the U.S. should have shown greater flexibility in the recent dispute between Russia and Ukraine.  The advantage of such level of flexibility would have helped avoid the war between Russia and Ukraine.  Recognition and Pragmatism are indispensable qualities which a global leader should embrace.  That is, the recognition to readily see changes and tendencies in the global environment and the pragmatism to develop creative strategies not only to fend off conflict but also to create viable conditions for eliciting actors’ transformative behavior.  Leadership in a polyarchic environment must be integrative so that actors’ individual concerns should be openly communicated and the risk of conflict be alleviated.  Individual partnering, among the global actors, should be pursued and that may be a differential advantage that the U.S. may enjoy, due to the broadly accepted world-wide popularity of the American politico-socio-economic culture. 

The proliferation of technology, which will continue free of meaningful restraint, changes the calculus of traditional international relations and demands a new strategy by which to manage the new global challenges.  The new global environment will be a new experience for all actors, each of them potentially pursuing global leadership.  The rudimentary, yet visionary, skill required in the new global environment will be that of managing transformation.  Those global actors who wish to pursue global leadership will need to embrace a policy of transformation, knowing the dynamics of the new environment and the capabilities needed to help effectuate the said transformation. 

Knowing the dynamics of the new environment would mean, understanding the actors’ strategic goals, their capabilities or lack thereof and their negotiation idiosyncrasy.  Then, actors would need to identify the strategies by which they can get there.  That is, what are the means that would help us get there?  The U.S. has developed a powerful arsenal of capabilities which can help it achieve, maintain and preserve global leadership.  For instance, its political culture which is, by and large, designed to follow the democratic rule, its economy which promotes innovativeness, its financial rigor with an international reserve currency that continues to galvanize trust and confidence, an advanced industrial base which benefits from high efficiencies, a high-tech industry which shows protagonist skill, an advanced defense industry, and, an American culture which enjoys popularity world-wide.

Author: CGP  .+.  

H| Contemplating the ACHILLES HEEL of the U.S.

A quick synopsis on the critical aspects of the development and growth of the United States

Colonialism is the underscoring condition for achieving superpower or world power status.  In our contemporary times, this was the case with the British empire which, as of the early 1930s, maintains its influence over the Commonwealth which numbers 54 countries.  Based on the generic theory of the Cycle of Life empires ascend and descend.   The 2nd World War catapulted the United States into the position of a world power.  Its status as an economic world power was affirmed by the Bretton Woods System of 1944 and the institutions it created then.  This System set the U.S. Dollar as an International Reserve Currency with every other currency to be pegged to the U.S. Dollar.  The U.S. Dollar was pegged onto Gold at $35 per troy ounce.  This was masterful as it defined and solidified the indispensability of the U.S. Dollar as the one and only international reserve currency.  One of the institutions created was the International Monetary Fund (IMF) whose mandate was to safeguard the stability of exchange rates and help countries that were running short-term trade deficits to restore their trade balance without having to use policies such as Tariffs, Quotas or Competitive devaluation.  To achieve this mandated goal the IMF offered short-term Special Drawing Rights (SDRs) to those countries that ran a trade deficit, thus discouraging them from engaging in a policy of Competitive devaluation.  This design was effective for a regime of Fixed Exchange rates.  In a regime of Floating Exchange rates, the supervision of the IMF is not relevant because in a "floating" environment exchange rates are determined by demand and supply of currencies.

Incipient challenges to the U.S. Dollar - The era of the 70s and 80s

The Bretton Woods System collapsed in 1973.  This collapse was caused by the 1965 to 1968 macroeconomic policy decisions of the U.S.  At that time the U.S. was financing extensive welfare programs and the Vietnam War by increasing its money supply, causing high inflation.  Other economies, knowing that as inflation increases the value of the currency decreases, speculated that the dollar would have to be devalued relative to other currencies.  They began to increase the value of their currencies by reducing their dollar holdings.  In essence, the Bretton Woods System collapsed because of macroeconomic mismanagement such as, increasing the money supply, running high trade deficits and persisting high inflation.  In August 15, 1971, following President Nixon’s policy to discontinue trading gold for U.S. Dollars, the Smithsonian Agreement was signed through which fixed exchange rates were to be maintained but with no gold as a currency-backer.  In 1976, the IMF’s Articles of Agreement were revised to reflect the new reality of Floating Exchange rates.  That was the Jamaica Accord of 1976.   The U.S. Dollar, vis a vis the gold, was devalued from $35 to $38 per troy ounce.  Following these initial setbacks, in September 1985, the Plaza Accord was signed by France, Germany, Japan, UK and the U.S. which aimed to drive down the price of the U.S. Dollar because the U.S. was experiencing a large trade deficit.  Two years later the goal of the Plaza Accord, having been realized, was abandoned through the signing of the Louvre Accord.

 

The U.S. Dollar - The Imperial Character and Future of the U.S.

As discussed earlier, the U.S. Dollar is the world’s international reserve currency which is widely held by central banks and financial institutions for guarding and securing international trade and other transactions.  So, the U.S. Dollar is in demand and its value is determined by the demand for it and its available supply.  Now, the U.S. economy supports the U.S. Dollar through its economic infrastructure meaning its productivity, competitiveness, international trade dominance, financial innovativeness, technology, level of education, level of industrialization, and an optimum politico-economic environment.  At this writing, the economic infrastructure of the U.S. is challenged given that the sovereign debt of the U.S. has increased to $31.4 trillion, its GDP is about $24 trillion, and its debt-to-GDP ratio is around 124%.  These figures are prohibitive for any economy.  For instance, the EU’s debt-to-GDP ratio is around 95%, when the Maastricht Treaty specked a ratio of no more than 60%.  A plausible question would be, "What is going on?"  The central banks of major foreign countries, the military power, a supranational leadership behavior, and, an internationally popular socio-politico-economic image of the U.S., keep safeguarding and sustaining the continuing dominance of the U.S. Dollar.  However, dark clouds are beginning to gather in the horizon.  I am talking about the current inflationary environment in the U.S.  The issue is a bit complex.  At this writing, inflation is around 8.5%.  The Federal Reserve’s (U.S. Central Bank) continued increasing of the interest rates, in order to curb inflation, threatening to put the economy into a recession. 

It is widely accepted that the COVID virus has been the pivotal reason for this inflation, but not only.  First, the Virus affected the supply chains, causing an imbalance between Supply and Demand.  This has been exacerbated by an erroneous policy decision of the Biden Administration to distribute “free” money to Americans, and, a liberal monetary policy to increase the money supply, a decision implemented by the Federal Reserve.  But, inflation always comes back to “bite” the people through sustained price increases.  Inflation is an orderly economy’s social enemy because it changes the character of institutions and poses a direct threat to the society.

In the current global polyarchic environment the U.S. Dollar will likely face a greater challenge to maintaining the international reserve currency status. As a result, it must be more disciplined with the growth of its money supply.  Certainly, the current global environment being inflationary, supports and even enhances the dominance of the U.S. Dollar because foreign investment pours into the U.S. given that foreign investors view the U.S. Dollar as the safest currency in the world.  Nevertheless, the U.S. should keep in mind that inflation must be curbed and that such action may bring about recession.  Furthermore, such exchange may produce stagflation, which is defined by lower employment hiring, persistent inflation and therefore low economic growth because of low demand.  The downing of past powerful countries has been the result of mismanaging inflation. For instance, the Roman Empire lost its economic rigor and international trade because it failed to control inflation.  In addition, the global economy may be threatened due to an uncontrolled global-wide inflation.

In summary, the weakest link of the U.S. is its currency and its international reserve currency status. Losing such status will be catastrophic for the U.S. economy, the internal socioeconomic functioning of the U.S. and it will deprive the U.S. of its global economic power.  How likely is that?  There must be seismic events in the world such as, long-term persistent high inflation, drastic loss of economic competitiveness, withdrawal of support for the U.S. Dollar by the major Central Banks and/or refusal to use the U.S. Dollar in international trade transactions resulting from global polyarchic conflict.  Such conflict has given rise to an attempt by other countries to refuse the reserve status of the U.S. Dollar and replace it with their own currencies.  The dominant move is being attempted by the countries of BRICS (Brazil, Russia, India, China, South Africa).  If and when the U.S. Dollar loses its international reserve status the U.S. will be at a “free fall.”  Moreover, the advantage that the global reserve currency status gives to the dollar creates the responsibility to safeguard such reserve currency and protect the integrity of the global economy.

Question: Under the doctrine of economic fairness, what moral grounds allow the U.S. to print money without control; thereby, adversely affecting foreign economies’ export/import activity, their foreign exchange policy of competitive devaluation, their monetary policy, and broadly, the global economy?

Author: CGP .+.

 

G| Democracy and Capitalism: Disequilibrium

An X-ray of the Evolution
of Globalization

Recognizing that Democracy and Capitalism are systems that have governed the behavior of humans and have impacted the relationship between societies this article will revisit systemic and rudimentary highlights of the above-mentioned systems. Democracy has an indirect effect on economic growth. For instance, greater civil liberties contribute to higher GDP and increased investment.  A democratic political system “potentially” can have positive effects on economic development, if and only if, people have full information and their environment and their behavior is rational.  The interlocking structure between democracy and capitalism is depicted in the following dictum that describes the relationship between “efficiency” and “equality”: “Democracy needs efficiency to put some rationality into equality and the marketplace needs equality to put some humanity into efficiency.”  Democracy and Capitalism are an interfacing and intertwining institutional structure that attempts to bring harmony to efficiency and equality which are inherently in conflict.  Equality is promoted by democracy and efficiency is promoted by capitalism.  So, a political system that is democratic must integrate the harmonious functioning of both seemingly antithetical pursuits, that is, democracy and capitalism and achieve a relative symbiotic optimum. The level of economic efficiency varies among economies, organizations or humans.  Such variability in efficiency creates different inequalities which must be managed judiciously.  This judicial task has been undertaken by the given country’s government whose expediencies must not be influenced by capitalist pursuit of efficiency maximization.  

Evolution of Contemporary
Capitalism in a Democracy

Theorists such as Max Weber who coined the term “protestant ethic” and described capitalism, suggested that hard work and frugality are essential to creating material wealth which gave credence to the concept of capitalism.  

However, the continuum of capitalism has different levels of adherence to it.  For instance, strict wealth accumulation is different than producing acceptable levels of comfortable living.  Wealth accumulation has increased at the expense of the functioning of Democracy.  The Congressional Budget Office of the U.S. Congress reports that wealth inequality has widened significantly between 1989 and 2019, "with the wealthiest 1% getting $29 trillion richer as the average working family saw only a negligible increase.”  "During the same 30-year period, the bottom half of Americans saw their share of the nation’s wealth drop from 4% to 2%.”  

The Austrian Joseph Schumpeter coined the term “creative destruction” which describes the tendency of entrepreneurship to speed up the demise of existing products by replacing them with newer better ones. Indeed, this is what we observe in studying the theory of Product Life Cycle (PLC).  That theory suggests that before a product enters its maturity stage other new product versions come in to replace the older one and contribute to its demise.  Critics might suggest that capitalism is directly responsible for such an event.  Schumpeter correctly identified it as “creative destruction.”  The supportive argument here is that entrepreneurship, which pursues product development, would perhaps, not exist if business organizations or people did not look to improve existing products and maximize revenues.  

Democracy mandates the people’s legal entitlement to participate in policy formulation with regards to the development of a capitalist economy or markets. Milton Friedman suggested that a free market and the development of Capitalist institutions are a necessary condition of political freedom.  Moreover, he said that economic freedom is correlated with political freedom.  

What is the current status?

It is well-established that capitalism needs and supports democracy and democracy needs and supports capitalism.  But, is the mutual support reciprocal?  If we observe the evolution of the international economy in the past 30 or so years we may resort to infer that the relationship between democracy and capitalism is in disequilibrium.  I will offer examples as evidence of the veracity of the above thesis:

• The evolution of neoliberalism or Hyper-Capitalism.

This is described as a fierce orientation toward lowering international trade barriers and protectionism, promoting unrestrained international competition, undermining national protective regulation.

• National market privatization.

This has as a goal the promotion of efficiency, which is a profit-oriented strategy.

• An unfettered Global financial sector.

The advantages include absence of regulatory interference, less stringent disclosure requirements and favorable tax status.  The implications for international business include: borrowing at a lower cost; more flexibility due to less regulation; more risk from currency fluctuations; and, more investment diversification (less systematic risk).

• Shareholders' preeminence over workers.

This is a subtle strategy by which to attract the workers into investing in the growth of companies and for profit.

• A growing imbalance between classes.

Income concentration is growing at the expense of income redistribution.  The richest are getting richer faster.  Income inequality in the U.S. has increased since 1980 and it is greater than in peer countries. (Pew Research Center)

Capitalism and Democracy are the outcome of composition of classes and class interests driven by political credos.  Capitalism and Democracy should be in balance and converging.  The new reality, however, is that Capitalism and Democracy diverge.  If Capitalism overwhelms Democracy it will result in unfettered wealth concentration which in turn will overpower political models and render national governments captive of capital.  On the other hand, if Democracy overwhelms Capitalism it will have adverse effects on Capitalism's efforts to maximize economic returns.  So, the choice is between Efficiency and Political demand.  That is, “economic interests” vs. “political interests.”  This means that Capitalism is not Democratic and, vice versa, Democracy is not Capitalist. These are the two sides to the same coin which are inseparable but antithetical.  A harmonious integration between the two would seemingly be Democratic Capitalism under which markets produce income resulting from a given level of Efficiency while the government redistributes income on the basis of Political demand.  

What role has Globalism played?

Globalism has inhibited the ability of democratic governments to govern, threatening Democracy to transform into Oligarchy which can become legitimate by general elections.  Globalism has accentuated and given rise to neoliberalism.  In the interim, institutional initiatives from WTO, IMF, Global corporations and other supranational organizations have supported and promoted the concept of Globalization.  Neoliberalism has transformed Democracy and has given birth to four distinct threats.  Those are:

• Asymmetric political participation.

The political process is dominated by wealthy segments of the society at the expense of lower classes characterized by poverty.

• Failure to forestall the rise in economic inequality.

The inability to stem the rise in economic inequality.

• The increasing leverage of global financialization upon national governments.

National governments are forced to accommodate global economic interests.

• Political decision-making powers have been transferred from national parliaments to corporate executives.

This gives credence to the new character of the global corporation known as “global capitalism.”  For instance, in 2016 TransCanada corporation sued the U.S. government for $15 billion, under the Chapter 11 of the NAFTA accord for protecting investors and their profits and for cancelling the U.S. Keystone XL pipeline.

NOTE: Global Capitalism was discussed in the author’s article:

“Global Capitalism: A Perspective of Convergence” International Review of Modern Sociology;

Vol. 20, No. 2 (Autumn 1990), pp. 239-251 (13 pages).

https://www.jstor.org/stable/41421569

The Anti-democratic
character of Globalization

Globalization has made Democracy subservient to Capitalism.  This is an aberration analogous to that of Marx who held that the Legal system should be subservient to the Economy.  Moreover, globalization has made it difficult for a marketer to market their product because it is difficult to stratify and/or use customization.  Globalization’s adverse effects upon Democracy are described below:

• Trade Liberalization.

It has not accounted for differences between developed economies (DC) and less developed economies (LDCs), producing asymmetries, resulting in inherent advantage of the DCs over the LDCs.  For instance, developed economies demand that the less developed economies open up their market even if they are not ready for it.  For instance, in the case of the EU, Germany demands that its superior products be sold in the Greek market, competing against Greek products that may be of lesser quality.

• Capital Liberalization.

Foreign Direct Investment (FDI) is mostly unregulated.  Capital inflows exert upward pressure on the local currency which directly hurts the country’s exports and market competitiveness.

• Trade Protectionism.

Developed countries (DCs) use subtle methods to protect their economies.  DCs use lower tariffs but they increase non-tariff barriers.

• Trade Agreements.

They increasingly reflect corporate interest first.  Such trade agreements give foreign corporations the right to sue a government.  

What next?
Where are we going from here?

It is self-evident that the above discussion confirms the imbalance between Democracy and Capitalism, with Democracy having become captive to Capitalism. Before we continue let’s establish the relative values of Democracy and Capitalism.  Democracy has an important indirect effect that contributes to growth. Democracy offers greater political stability, civil liberties, economic freedom and reduced social conflict.  Capitalism offers economic development and growth in the standard of living.  Capitalism focuses on Efficiency, Effectiveness and Technocratic development.  Democracy can optimally contribute to economic development, if and only if, it functions under a well-designed legislative and judicial system of laws.

The imbalance between Democracy and Capitalism has brought about a convergence of two antithetical systems.  I am talking about Capitalism and Socialism. Such convergence is progressive and it is imposed upon the two systems that are distinctly different.  The State of Affairs, in which this contemporary world exists, is that of degradation and corruption of governments and the political parties.  Global Capitalism is promoted by Corporate Capitalism.  What lies at the bottom of the entire concept of Capitalism is the human thirst for wealth and socioeconomic power. It follows that looking at the politicians for support is not the right target.  The right target, to mitigate the conflict of Capitalism and Democracy, is Economic Power Centers.  

How to defend Democracy
against a frenetic Capitalism

The Great Recession of 2008 and the increasing concentration of wealth directly point to the undisciplined behavior of global capitalism, fueled by neoliberalism.  There is a common agreement that Democracy, as difficult as it is to function, is the best-known political system.  In order to preserve this system, we need to promote and defend its survival.  The following fundamental and select strategies are thought to offer sustainable value to achieving its survival, recognizing that the pursuit of pure Democracy is asymptotic:

• Restructure the trade agreements so that transnational companies do not have an edge over national governments.

This would require changing select stipulations of the World Trade Organization (WTO) and Regional Trade Agreements (RTAs) such as the EU, the Trans-Pacific Partnership (TPP), the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), etc.

• Eliminate the use of money or financing.

To abolish influence upon antidemocratic political positions and legislation.

• Promote government-led initiatives.

In order to redistribute GDP income among the poor or poorest segments of the population.

• Restrict asymmetric influence of wealthy political actors.

The said influence is practiced by socioeconomic actors upon government policy.

• Avoid politicization of public institutions

Public institutions should not be politicized or have political party affiliation.

• Protection against Oligarchic Democracy.

Oligarchic Democracy may be promoted as a democratic political system although it does not embrace the strict criteria of democracy.

• Government economic policy should be held in check.

The political system should allow for frequent referenda which are credible in ensuring that Democracy and Capitalism are in tolerable balance vis a vis their social and economic pursuits.

                                                                                                                                                                                                                                                                          Author: CGP .+.