1. The Three Pillars of the Liberal World Order
What we have come to think of as the Liberal World Order (LWO) came into being after the second world war as a result of a collective resolve on the part of the western powers that nothing as costly in human lives and suffering should ever happen again. To this end, three main principles then emerged as the pillars upon which a new world order would be based.
The first of these was a commitment to the promotion of democracy, partly because it was generally accepted that, in one form or another, autocratic regimes had been responsible for both the first and the second world wars – Nazi Germany being the worst offender – but also because it was widely believed that, because it was ordinary people who had to fight and die in such wars and who most suffered the economic privations of their destructive consequences, ordinary people did not want war and would not therefore vote for politicians who brought war upon them. If more of the world’s governments were democratically elected, therefore, the belief was that they would be far less likely to go to war, especially with each other.
The second main pillar upon which the LWO was founded was the belief that free trade not only tended to make nations wealthier but led to a level economic interdependence between neighbouring states which made war between them more or less unthinkable. In fact, it was for this express reason that the European Coal and Steel Community – the forerunner of the European Common Market and the European Union – was created: to make it impossible for France and Germany to ever go to war with each other again.
In this respect, in fact, a commitment to free trade and economic interdependence could also be said to have comprised a major element of the third pillar upon which the LWO was based: the partial subordination of nation states to international institutions such as the EU and the General Agreement on Tariffs and Trade (GATT), which later became the World Trade Organisation. The most important of these new international institutions, however, was quite obviously the United Nations, which, through its charter and the international treaty obligations of its members, was intended to provide both a forum for conflict resolution and a framework of international law which it was hoped would make war a thing of the past.
Today, of course, we take all of this for granted and have more or less forgotten that it took two world wars to get us to this point. Even more significantly, adherence to these three main pillars of the LWO is generally considered to be an essential condition of what it means to be civilized, both as a nation and as an individual. Any nation or individual that does not subscribe to democracy, for instance, is regarded as in some sense fascist, while any nation or individual that does not believe in free trade or, indeed, the international order, itself, is regarded as small-minded, xenophobic and dangerously nationalistic. Indeed, a belief in the LWO is now at the very heart of Western values, having very probably replaced Christianity in this regard, such that anyone who does not subscribe to it or dares to criticise it is regarded as beyond the pale.
The problem with this absolute acceptance of the LWO as representing everything that is unequivocally good in the modern world, however, is not only that all three of its pillars have their inherent faults but that, taken together, they are often inconsistent. Worse still, these faults and inconsistencies have caused the LWO to develop in ways which, over the last seventy-five years, have not only made the world increasingly unstable but have not been entirely in the interests of the majority of its inhabitants. If one takes off the rose-tinted spectacles and looks at the LWO more objectively, in fact, it explains a lot of what is going wrong in the world today. No matter how unacceptable to modern sensibilities criticism of the LWO may be, therefore, it is probably about time we took a more honest and open-minded view of it, starting with a critical analysis of its three main pillars.
2. Democracy
After seventy-five years of being taught that democracy is unequivocally good, at this point, of course, you may be wondering how anyone could possibly find fault with it. There is, however, a great deal to find fault with.
The first set of problems to which democracy clearly gives rise concerns the often very negative consequences of its various different electoral systems. In countries with an electoral system in which members of the legislature and other ruling bodies are elected by a simple majority, for instance, the electorate has a slight but statistically significant tendency not to vote for third parties they do not believe have any chance of being elected, even if that third party might otherwise have been their first choice. This is especially the case if they are strongly opposed to one of the two leading parties and are therefore disposed to ‘lend’ their vote to the other leading party in order to prevent the opposed party being elected. This can then give rise to a negative feedback loop in which a third party’s poor electoral performance makes people even more reluctant to vote for them in future, with the result that they are gradually squeezed out, effectively creating a two-party system of the kind to be found in both Britain and the USA, which, under certain circumstances, can become highly polarizing and divisive.
Throughout most of the 1970s and early 1980s, for instance, when Britain was in steep economic decline and its two-party system was still largely based on distinct and opposing ideological principles, the supporters of its two main parties, Labour and Conservative, became locked in a tribal war so bitter and hate-filled that it almost tore the country apart. With both sides believing that the other was not just wrong with regard to what the country needed in order to recover economically but morally wrong with respect to its entire political philosophy, at some point their opposition ceased to be about economics at all and became, instead, a battle for the nation’s soul.
Fortunately, we survived this period of extreme polarization and eventually came back together again as an only slightly disunited people. There are some countries, however, in which the polarizing effect of multi-party democracy would be so calamitous that it should never even be contemplated. Syrian political philosophers Michel Aflaq, Zaki al-Arsuzi and Salah al-Din al-Bitar recognised this, for instance, when they created Ba’athism, which not only advocated a return to traditional Arab culture after years of foreign rule, but rejected western democracy on the grounds that, in countries like Syria and Iraq, political parties would inevitably form along sectarian lines, pitting Shi’ites against Sunnis in a way that would lead to civil war and the breakup of each of the countries in question. Instead, they therefore advocated a one-party system in which a strictly secular Ba’athist party would provide a non-discriminatory means of political expression for Sunnis and Shi’ites alike. It is for this reason, for instance, that President Bashar Assad of Syria always wears western style suits rather traditional Arab dress, which would mark him out as an Alawite in a country whose population is predominantly Sunni.
Because we do not understand this, however, and believe that multi-party democracy is the only acceptable form of government, not only have we unfairly demonised President Assad, himself, but we have continually attempted to impose multi-party democracy on a country in which it would be as disastrous as it has been in Iraq, where, just as the Ba’athists predicted, the country has become subdivided into a Sunni west, a Shi’ite east and a Kurdish north, with multiple armed militias, including ISIS, governing different parts of each region. All we have done, therefore, as a result of our misguided attempts to impose this particular pillar of the LWO on the rest of the world, is demonstrate both our own ignorance and our arrogance.
Of course, in countries where such additional polarizing factors are absent, the general polarizing effect of a two-party system can be avoided by adopting an electoral system which favours multiple parties. This usually entails some form of proportional representation, which makes it much easier for new parties to form and win seats in the legislature rather than be forced to coalesce into two party groupings. This also has the added benefit of avoiding a concentration of power within party machines. I say this because, within a two-party system, it is very often the case that one party tends to dominate within a particular region or state, such as the Democrats in Illinois, for instance, or the Labour Party on Tyneside. When this happens, it is therefore the party managers – those who control who goes on the ballot – rather than the electorate, who actually choose who is going to run the state or region in question.
If electoral systems based on proportional representation not only avoid some of the polarizing effects of two-party systems but also give more power to the electorate, they are not, however, without problems of their own. The most obvious of these is the fact that if there are more than two parties in an election, and if seats in the legislature are assigned on the basis of each party’s share of the vote, then there is seldom an outright winner, making it necessary for two or more parties to come together to form a government. What’s more, this problem is made worse the more parties there are. For the more parties there are, the more fragmented the results tend to be, making the formation of a coalition that much more difficult due to the fact that all the participating parties will want something in return for their cooperation.
This can also make the coalition’s programme for government rather incoherent, containing contradictory elements on which different parties have insisted during the negotiations. This, in turn, can then make the government unstable. For while party leaders may agree to contradictory policies in order to secure a deal, it may be quite a different matter when they then have to get all their party’s elected representatives to deliver on their promises. What’s more, the agreed programme for government may be very different from what the electorate thought they were going to get when they voted for the parties now comprising the coalition.
An even more fundamental problem, however, is the tendency of proportional representation systems to promote centrist parties, which, due to their moderate views, may be asked to form a government with either socialist or conservative partners, as long, that is, as the latter moderate their own views. Due to this flexibility, in fact, a politically astute and accommodating centrist party may never be out of government: a rather happy consequence of this versatility which may well appeal to many career politicians but has the rather obvious effect of causing what were once even the most radical of parties to gradually gravitate towards the centre, with the result that, eventually, genuine socialist and conservative parties cease to exist.
Of course, to many people, this may also seem like a ‘good thing’. After all, it was the polarization of politics based on strong political convictions which nearly tore Britain apart in the 1970s. What’s more, it was partly the abandonment of old-fashioned socialism by Tony Blair’s reformed New Labour Party in the 1990s, which helped reunite the country after this period of crisis. Even more significantly, it is what enabled the Labour Party to actually win the 1997 election: a feat so impressive that it convinced David Cameron, a later leader of the Conservative Party, to follow Tony Blair’s example and abandon Thatcherite conservatism in favour of a more centrist position, a move which probably won the Conservatives the election in 2010.
Thus it would appear that, even in a two-party system, both voters and politicians gravitate towards the centre ground. There are, however, two very serious problems with this. The first is that, if both parties within a two-party system move towards the centre, eventually they become indistinguishable. Indeed, if one looks at the policies of the British Labour and Conservative parties today, on all the big issues, their positions are virtually identical. Both parties support a ‘Net Zero’ energy policy, they both supported ‘lock-downs’ during the Covid pandemic, and they have both supported the war in Ukraine. Although they continue to attack and ridicule each other in the House of Commons, the issues on which they differ have consequently become increasingly marginal and trivial, with the result that the electorate is being asked to choose between two versions of essentially the same thing.
Worse still, because both sides have left all their principles behind, what they have actually become is simply a reflection of ourselves: the electorate. For without a principled political philosophy on which to base their policies, the only thing on which either party can now base their programme for government is whatever their pollsters and focus groups tell them would be electorally popular.
Again, of course, some people might see this as a good thing. After all, it would certainly be democratic. The problem is that what the public wants is not always what is good for it or the country.
Nowhere is this more clearly demonstrated than with respect to public expenditure and the amount of money successive governments, both Labour and Conservative, have been prepared to borrow in order to finance it. Since the Conservative Party came to power in 2010, for instance, the UK’s national debt has increased from £1.03 trillion, or 65.81% of GDP, to £2.55 trillion or 101.69% of GDP. With UK Treasury bonds currently yielding around 4%, this means that we are now paying more than £100 billion a year in interest on the debt, thereby adding significantly to the annual budgetary deficit. In fact, without the international institutions of the LWO, this could easily cause our national finances to spiral out of control, with financial institutions demanding ever higher interest rates on UK bonds to compensate them for the increased risk. This would then increase the debt still further until, eventually, the UK Treasury could easily find itself unable to sell its bonds at all, thereby triggering the very default which financial markets fear.
That this is unlikely to happen is because, before matters got that far out of hand, the IMF would intervene, both by providing the UK with an emergency loan and by forcing the government to cut public expenditure, something it should have done already but cannot do because it would be extremely unpopular with the electorate. Far from demonstrating the value of the IMF, however, both in preventing government bankruptcies and in forcing governments to take the necessary but unpopular steps to put their financial house in order, what this actually demonstrates is just how seriously the IMF undermines democracy. For without its existence as a backstop, no British government, especially no Conservative government, would have ever borrowed £1.52 trillion in just thirteen years, more than doubling the national debt. Instead, the very prospect of national bankruptcy would have forced it to act responsibly, taking tough but unpopular decisions for the good of the country, which, in turn, would have forced the electorate to act more responsibly by considering what was really in their interest: a sound, functioning economy or lavish public services and uncontrollable debt.
What this really means, however, is not just that, for democracy to work, both politicians and the electorate have to act responsibly, but that we cannot just take democracy for granted as an unequivocally ‘good thing’. On the contrary, we have to understand its inherent flaws in order to guard against them: something which Winston Churchill clearly understood when he quipped that ‘democracy is the worst form of government except for all the rest’, but which we, in our blind allegiance to the LWO, have just as clearly forgotten.
3. Free Trade
Apart from creating economic interdependence and hence lessening the likelihood of war, there are, I believe, just two main arguments in favour of free trade. The first and probably most important is that a lack of foreign competition can lead to domestic producers becoming inefficient and uncompetitive, producing goods of a lower quality and higher cost than goods produced in countries where foreign competition is allowed. This may not always be the case, of course, especially in countries large enough to generate sufficient domestic competition to keep everyone on their toes, but it certainly applied to the British car industry during the 1960s, for instance, which was protected from foreign competition by a host of impenetrable trade barriers that made foreign cars a rarity on British roads. When Britain joined the European Common Market in 1973, however, British car manufacturers were suddenly exposed to German, French and Italian competitors who had been competing with each other for more than a decade and whose products were far superior to most of the cars made in Britain. By the early 1980s, as a consequence, most of the indigenous British car industry had simply gone out of business.
Of course, this may actually sound like an argument for continued protectionism in that once a domestic industry has enjoyed protection from foreign competition for any length of time, it is very hard for it to make the transition to a free trade environment. The fact is, however, that, throughout the 1960s, British consumers had to pay more for inferior products and were that much poorer than their neighbours as a result. Indeed, it is this that is the real point of this whole argument: that while protectionism causes countries to become backward, free trade makes everyone wealthier.
The second main argument starts from the premise that countries that erect extensive trade barriers then have to produce all the protected goods they need themselves, even though they may lack the necessary resources to do so on a scale sufficient to make domestic production efficient. By each country specialising in those products it can produce efficiently and exporting its surpluses, while importing the products it cannot produce efficiently, overall global efficiency is thereby increased and all countries, or so it is argued, are made wealthier as a result.
There are, however, two main problems with this argument. The first is that there are clearly some countries which have very little they can efficiently produce themselves or for which there is a sufficient export market to offset the products they are forced to import. In order for countries in this position to avoid a ruinous trade deficit – which would eventually lead to them being so poor they would not being able to import anything at all – they therefore have to produce at least some of the things they need themselves – however inefficient this may be – and erect trade barriers to prevent this inefficient domestic production being undercut by foreign competitors. Even more commonly, some countries may need to produce things inefficiently for a period of time in order to eventually become more efficient.
Unless the architects of the LWO wanted to create a two-tiered trading system such as that which prevailed during the 18th and 19th centuries, in which those countries with highly efficient industrial bases exported their manufactured goods to largely colonial markets in exchange for the commodities their factories needed as raw materials – something which very few developing countries in the post-war era would have found acceptable – then some additional mechanism for equalising productive efficiency therefore had to be found. The problem was that the only obvious way of doing this was for developed countries to abandon capital controls: something which, under normal circumstances, would have met with strong political opposition at a national level.
I say this because, while the free movement of capital is attractive to businesses, allowing them to invest in productive capacity in low cost countries from which they can then import goods back into their home markets at lower prices than their competitors can match without resorting to the same strategy, in the days before globalisation became accepted, there were still a good many old-fashioned, nationally-minded politicians – including many trade-unionists – who would have rather seen their country’s major corporations invest their money at home, thereby creating jobs locally, than have them building factories abroad and create jobs there. Nor were they too keen on the idea that, once these factories had been built and foreign workers employed, whatever they then produced would be imported back into the home market to undercut domestically produced goods, destroying local jobs and very probably worsening the country’s balance of trade. It therefore required a highly concerted effort to make this happen: one which not only played upon the post-war spirit of internationalism but used some fairly contrived arguments to fool the public into going along with it.
The most specious of these was the idea that by buying relatively low value-added goods from developing countries, these developing countries would then have the money to buy higher value-added goods from Europe and America. Not only did this argument rely on the west remaining more technologically advanced than their developing competitors, however – something which was very unlikely given the fact that it was western corporations and banks that were making the investments in these developing countries – but it also assumed that once low cost countries had equalised their productive efficiency, they would not remain low cost and that trade between the developed and developing world would eventually balance out. What they did take into account was the fact that, for this to happen, it was essential that all countries sold their goods in their own currencies.
This is because the price of a currency is largely determined by the demand for it, which, if a country sells its goods in its own currency, is largely determined by the demand for its goods. The more of its goods its sells, the more demand there consequently is for the currency with which to buy them. This then causes the price of the currency to rise which, in turn, makes the goods more expensive, causing the demand to decrease. The overall effect of this is that trade conducted in the seller’s own currency is more or less self-balancing, with the result that no country ever builds up a massive trade surplus or deficit.
In the post war era, however, the new world order was initially conceived as having a fourth main pillar, that of sound money, which was to be achieved by a return to the gold-standard, with the USA guaranteeing that it would always maintain sufficient gold reserves to exchange dollars for gold at a rate of $35 an ounce, thereby allowing other countries to hold dollar reserves instead of gold. By the mid-1960s, however, the war in Vietnam, the US space programme and the country’s attempt to create a more equal society by means of an extensive welfare system meant that it was forced to print many more dollars than it could redeem with gold at the official price. What’s more, other countries around the world knew this, especially in Europe where gold was being traded on the London Metals Exchange at around $60 an ounce. Even some of America’s staunchest allies therefore started demanding that the US redeem whatever dollars they were holding with gold at $35 an ounce, which effectively meant that they made a profit of $25 on every ounce of gold they bought. Naturally, this couldn’t go on, not least because Fort Knox was rapidly running out of gold. In August 1971, therefore, President Nixon was finally forced to suspend America’s redemption of dollars for gold on what was said to be a temporary basis but which inevitably turned out to be permanent, not only thereby bringing an end to the gold standard but actually putting the dollar at risk as a reserve currency. For if countries could no longer redeem their dollars for gold, they no longer had any reason to hold dollars as part of their reserves.
This not only led to a fall in the price of the dollar but could have resulted in the currency’s total collapse, as countries rushed to offload their dollar reserves before the price dropped even further. In 1972, therefore, President Nixon despatched Henry Kissinger to Saudi Arabia to negotiate a deal wherein, in exchange for America guaranteeing Saudi Arabia’s security, the Saudis undertook to sell their oil in dollars for as long as this arrangement held. This meant that, even if other countries could no longer exchange their dollars for gold, they could always exchange them for oil, thereby not only giving the world a reason for holding dollars once again but creating what gradually became the universal currency for trading in just about all the world’s commodities, from oil to copper to wheat.
This meant that the demand for the dollar was now as high as ever, which not only forced up its price but made trading in dollars extremely beneficial for developing countries. For if they sold their goods and commodities in dollars, not only was no one having to buy their own currencies to pay for these purchases – thereby keeping the price of their own currencies low – but they could also keep their highly valued dollar profits in their reserves and borrow against them. More to the point, because the price of their own currencies was kept permanently low, they remained low cost economies, attractive to inward investment even as they grew steadily richer.
The problem was that the reverse was true for the USA. Because other countries were using dollars to buy commodities from third parties, the price of the dollar was kept much higher than would have been the case had dollars only been used to buy US goods. This made US exports much more expensive and foreign imports much cheaper, which led to a permanent trade deficit. Worse still, the uncompetitiveness of US produced goods forced US corporations to continue offshoring their production to low cost countries which were now effectively hollowing out the US economy, taking all the high paying manufacturing and engineering jobs and leaving the majority of Americans with only low paid jobs in service industries such as retail and hospitality which consequently had to be subsidised with government welfare payments. This, in turn, led to a massive fiscal deficit, which has steadily caused the USA’s total national debt to rise to over $34 trillion, more than 122% of US GDP, which is even worse than the UK.
So massive and unrepayable is this debt, in fact, that its existence is only possible due to the dollar’s role as a reserve currency: an apparent contradiction made all the more ironic by the fact that it is precisely the dollar’s role in world trade that has caused it to be overvalued and led to the devastating effects this has had on the US economy, resulting in so much government borrowing. The reason its status as a reserve currency has made all this borrowing possible, however, is because, when foreign governments hold dollars as part of their reserves, for the most part they do not actually hold them as dollars on which interest is not paid, but rather as dollar denominated US Treasury bonds on which interest is of course paid.
This, however, has created yet another problem. For the amounts involved are not trivial. In fact, about a third of all US government debt is held by foreign governments which means that were these governments inclined to offload this debt, in the same way they were inclined to offload their dollar reserves in 1971, not only would the US treasury not be able to fund its deficit, causing many parts of the government and, indeed, the country’s welfare system to shut down, but it would not be able to sell new bonds to redeem old bonds when they fell due, causing the US to default.
The fact that this would be absolutely devastating for the entire global financial system may, of course, lead one to suppose that no one in their right mind would actually do it. But there is a very good reason why they might. And it is more or less the same reason they started doing it in 1971, not because, today, they cannot redeem their dollars for gold, but because, tomorrow, they may not be able to redeem them for oil or, indeed, any other commodity.
This is because there comes a point at which, for one reason or another, it ceases to be in the interests of developing countries to keep the value of their currencies low, thereby making imports more expensive. It may be that they want to reduce the cost of imported capital goods necessary for the development of their infrastructure. It may be because, with a healthy balance of trade, they want to make imported goods cheaper for their consumers. Or it may be just a matter of national pride. Whatever the reason, the fact is that, unless they are artificially held back, at some point all developing countries will feel the need to start selling their goods and commodities in their own currency, with the result that the demand for that currency, along with its usage and value will all rise at the expense of the dollar.
In fact, the USA has been aware of this danger for at least thirty years and has made it the country’s top foreign policy priority to stop it from happening, especially in the case of major commodity exporters. When, in the year 2000, for instance, Saddam Hussein switched from selling Iraqi oil in dollars to selling it in euros, he more or less signed his own death warrant, which was executed just three years later. A similar fate befell Colonel Gadhafi who, prior to his overthrow and death in 2011, had been actively discussing the creation of an alternative pan-African reserve currency based on gold with fellow African leaders and had already amassed an estimated 150 tons of gold to this end. In neither case, of course, was it ever publicly admitted that these violent regime changes were perpetrated purely to preserve the petrodollar. In both cases, in fact, the resultant wars were sold to the general public as both necessary and just in order to remove brutal dictators and establish western style democracies. The real reason, however, was almost certainly to prevent the collapse of the dollar and, as a consequence, the whole international financial system.
The same is true with respect to the war in Ukraine, which was engineered entirely because, over the last twenty-five years, under the stewardship of Vladimir Putin, Russia has been transformed from an economic basket-case into the largest supplier of commodities in the world. Before February 2022, for instance, it was the world’s number one supplier of both ammonium nitrate fertilisers and the natural gas from which they are made. It was the world’s second largest exporter of wheat, fourth largest producer of nickel, fifth largest supplier of oil and was also among the world’s top ten exporters of iron and steel, uranium, aluminium, corn, soybeans and copper.
It was its exports of natural gas to Europe, however, that really got the USA worried, especially its exports to Germany, which, prior to February 2022, received 150 million cubic metres of gas a day – around 50% of its daily consumption – via the Nord Stream 1 pipeline. Had the Nord Stream 2 pipeline ever been turned on, in fact, it would have been receiving 100% of its daily consumption from Russia: something which the USA simply could not allow. For had Germany ever become that dependent on Russia for its primary source of energy, it would only have been a matter of time before it bowed to Russian pressure to pay for its gas in roubles, thereby opening the door, not just to buying other Russian commodities in roubles, but to other countries doing the same, and not just with respect to Russian commodities. In fact, it would have almost certainly broken the petrodollar stranglehold on global commodity trading, thereby causing the price of the dollar to crash and the mountain of US government debt to collapse.
The irony is, of course, that it could therefore be argued that the principle of free trade, which was adopted as a pillar of the LWO in order to prevent war, has now become one of the biggest causes of war. Of course, it first had to undergo two enormous distortions to achieve this amazing inversion of the original intention. Firstly, it had to be augmented with the free movement of capital and then the USA had to make the worst mistake in history by allowing the dollar to become the universal currency for the pricing and payment of commodities. Given, however, that the free movement of capital had to be imposed upon the developed world in order to avoid some form of neo-colonialism and that the dollar’s status as a reserve currency was built into the LWO from the outset, it could still therefore be argued that the danger of this pillar of the LWO becoming a cause of both war and financial collapse was inherent in its design and hence utterly predictable.
4. Subordination to International Institutions
Another utterly predictable consequence of this combination of free trade and the free movement of capital was that multinational corporations would gradually free themselves from the dominion of national governments. For if a business can move its capital and operations from one country to another at will, while registering itself somewhere where it cannot be investigated, audited or taxed, it is essentially free of governmental control.
That’s not to say, of course, that national governments and even some supranational governmental bodies, such as the EU, do not constantly do battle to assert some sort of control over these gypsy corporations of the globalised economy. The odds, however, are heavily stacked against them. For not only are large corporations an essential feature of most national economies, they are also major donors to both political parties and individual politicians, the latter of whom may also find themselves rewarded for supporting of a particular business interest with a seat on that business’s board of directors when they are eventually voted out of office.
Even more importantly, multinational corporations are also able to employ a whole array of different tactics to avoid both regulatory restrictions and taxes. One much favoured such tactic is the construction of supply chains between different subsidiaries of a corporation, in which the subsidiary based in the lowest tax location makes most of the profit. Take an international chain of coffee shops, for instance, where the shops themselves, in places like London, Paris and New York, make hardly any profit at all, while the corporation’s own coffee wholesaler, based in South America, makes a fortune.
Then there is the ploy, notoriously exploited by tech companies in the EU, of incorporating their European subsidiary in the member state with the lowest rate of corporation tax and registering most of their revenues there while selling their goods and services throughout the single market. Naturally, the EU has tried to combat this by harmonising corporation tax rates. Not only has this been opposed by those member states which benefit from low rates of corporation tax, however, but it has also been resisted by many member states in general on the basis that tax policy is the prerogative of democratically elected national governments and is one of the few real issues over which elections are still fought.
My point in raising this issue, however, is not just to demonstrate how multinational corporations can run rings round even such notoriously tenacious and unrelenting organisations as the EU, but rather to draw the reader’s attention to the fact that this combination of free trade and the free movement of capital has not only created a new class of corporate entity but a new class of people, many of whom have made vast fortunes from the freedom from governmental controls which their gypsy-like existence has given them.
That’s not to say, of course, that there weren’t some very wealthy people in the world before the dawn of the LWO. During America’s period of rapid industrialisation in the 19th century, for instance, founders of business empires such as Cornelius Vanderbilt, Andrew Carnegie, Andrew Mellon, Leland Stanford and J. D. Rockefeller were so rich and came by their wealth by such questionable means that they were known as ‘robber barons’. By internationalising today’s business empires, however, not only has the LWO given today’s billionaires almost unlimited licence to make money but, through such international institutions as the UN and its subordinate agencies, it has provided them with power and influence on a scale greater than that enjoyed by almost anyone else in history.
This is because very few international institutions have any tax raising powers. While their member nations may be partially subordinated to them through international treaty obligations, they therefore rely on these same member nations to finance their operations: an asymmetrical division of power which can give rise to some very serious tensions. Many international institutions are therefore extremely grateful for any private donations they receive, which are almost invariably gifted to them by the charitable foundations of famous billionaires, and are just as invariably reciprocated by granting the said billionaires a great deal of influence over the institution’s policy.
A good example is the Bill & Melinda Gates Foundation (BMGF) which, as of December 2022, had an endowment of $67.3 billion and is primarily devoted to reducing extreme poverty around the world by means of enhancing healthcare, particularly through the funding of vaccination programmes. From 2009 to 2015, for instance, it spent $5.6 billion on infectious disease control, $1.5 billion on controlling malaria, $1.3 billion on STD control and $1.1 billion on controlling tuberculosis. It did this through various organisations, including the Global Alliance for Vaccines and Immunization (GAVI), on which it spent $3.2 billion, the Global Fund to Fight AIDS, Tuberculosis and Malaria, on which it spent $0.8 billion and, most notably, the World Health Organisation (WHO), to which it gifted $1.5 billion, making the BMGF the WHO’s largest single contributor.
The reason why the WHO is such a notable avenue for BMGF funding is, of course, the WHO’s new convention on fighting pandemics, which is due to be finalised in 2024 and will give the WHO significantly more control over how national governments work to contain the spread of infectious diseases than it had during the Covid pandemic. This doesn’t mean, of course, that, as the WHO’s largest contributor, Bill Gates will be able to dictate to the British government what measures it should take in this regard. But while democratically elected governments will have their scope for independent action severely curtailed, it is highly unlikely that one of the most prominent proponents of vaccination during the Covid pandemic will find his influence diminished.
Another good example of this reciprocity between billionaire philanthropists and international institutions is the interconnected network of Open Society Foundations (OSF) founded by George Soros, which has the avowed aim of advancing justice, education, public health and independent media around the world and has an annual expenditure of around $1.2 billion. This is mostly used to fund a whole raft of NGOs (non-governmental organisations), most of which can either be described as supporting human rights or helping refugees, either by campaigning for open borders and immigration reform or by providing actual assistance to migrants. In 2016, for instance, Soros pledged an extra $500 million to help refugees crossing the Mediterranean from Africa and was also highly influential in framing the Global Compact for Safe, Orderly and Regular Migration (GCM), which was passed by the United Nations General Assembly in December 2018.
None of this, of course, is intrinsically objectionable. In fact, Soros’ supporters would argue that his internationalism and support for human rights places him firmly on the right side of history, making him the living embodiment of the LWO, especially when set alongside those countries in which the OSF has been banned. These include both the Russian Federation and Victor Orban’s Hungary, which has consistently refused to admit illegal immigrants into the country and has even built a fence along its border to keep them out. If challenged on this issue, however, Orban would almost certainly argue that the only people with the right to decide who should o live in Hungary are the Hungarian people themselves, not some self-appointed billionaire – even if he is of Hungarian descent – and certainly not the United Nations. Given, moreover, that Orban won the last Hungarian election with more than 60% of the vote, it would be hard to argue that he doesn’t have a point.
The real issue here, however, is one of principle. For if international institutions, controlled by billionaires and unelected bureaucrats, have the power to foist measures on democratically elected governments which their electorates have clearly indicated they oppose, this is not much of advertisement for democracy and clearly demonstrates a flaw in a system of which international institutions and democratically elected governments are both supposed to be pillars.
5. The Threats Posed by a Deluded Global Elite
Of course it will be argued that the architects of the LWO could not have possibly foreseen that the international institutions they created to prevent further wars would be hijacked by billionaires in pursuit of their own agendas. Nor could they have imagined that these international institutions, which were intended merely to counterbalance and place restrictions on national governments, would ever get the upper hand. The problem with this argument, however, is that it fails to understand what should have been understood from the outset: that unforeseen consequences are an inevitable consequence of any attempt to design a system which involves human beings. For no matter how rational, honest and essentially good we may idealistically believe people to be, they will always find ways to subvert the system to their own ends, especially when that system is primarily about wealth and power, as all systems of government essentially are.
Nor is this fundamental law of human nature confined to the super-rich, who merely comprise the top tier of a pyramid in which hundreds of thousands of people are engaged in scrambling for places. The next tier down, for instance, includes both national politicians and international technocrats whom it would seem the LWO has made oddly interchangeable. Just recently, for instance, we witnessed Donald Tusk go from being President of the European Council to being Prime Minister of Poland, while the career of Christine Lagarde, in contrast, has tended to go in the opposite direction. I say this because she reached the pinnacle of her national political career as Minister of Finance in the government of Nicolas Sarkozy. In 2011, she then moved sideways into the technocratic domain when she was elected Managing Director of the IMF before finally being appointed to her current job as President of the European Central Bank in 2019.
In fact, it is this interchangeability of national politicians and international technocrats that is partly responsible for national governments having become so weak. For if one is a national politician who covets a place on the world stage, the last thing one wants to do is stand up for one’s country’s interests in any international forum in which one might be seen by the international community as ‘not one of us’. It is why Victor Orban, for instance, will never become President of the European Council or Director-General of the World Health Organization or, indeed, anything other than what he is: a nationalist politician looking after the interests of his own country and hence a dinosaur and barbarian. For, as all right-thinking people know, anyone who does not support the LWO and its institutions and puts national interests first is the enemy of the free world.
So blinded by this idealist dogma are we, in fact, that we do not realise how divorced from reality we have become. I say this because when a country continually expands its population by taking in a constant stream of foreign migrants, for instance, the problems it creates for itself are not limited to simply providing sufficient housing. For if one builds more houses, one also has to expand the water supply and sewage systems. New schools and healthcare centres have to be built and more teachers and doctors trained to man them. In fact, the country’s whole infrastructure has to be expanded, including its social services, something which not only takes time but a great deal of money.
Nor is this solved by the country’s central bank simply printing more money and lending it to the government: the solution on which our politicians have been effectively relying for the last forty years, ever since we started exporting our productive industries abroad, resulting in the mountains of debt that have now become so large that they will soon become, not just unrepayable, but unserviceable, as we are very likely about to discover.
This is because, this year, for the first time since I started predicting this eventuality, there is likely to be at least one trigger event of sufficient magnitude to start the dominoes falling. This is not an absolutely certainty, of course, not least because the event most likely to have this effect is the end of the war in Ukraine, which has already dragged on for much longer than I thought it would and may drag on for a good deal longer yet.
This is due to the fact that, unbeknownst to most people, the Ukrainian war has radically changed the nature of modern symmetrical warfare, by which I mean warfare in which both sides are able to deploy more or less the same advanced technologies, the most important of which, today, is something known as ISR (intelligence, surveillance, recognisance), which employs both satellites and drones to pinpoint targets on the battlefield with a very high degree of accuracy. The GPS coordinates of these targets are then transmitted to the laptops of battlefield commanders which are directly linked to the targeting systems of precision strike weapons. The result is that, within seconds of a target being identified, it is destroyed, making it very difficult for vehicles or significant formations of troops to move about openly. This makes all offensive operations extremely costly in terms of both men and equipment in that deeply entrenched defensive forces always have the advantage. This is why Ukrainian battlefields look more like those of the first world war, with trenches and underground bunkers etc., than second world war battlefields, where warfare was more open and mobile.
What this means, therefore, is that, although the Ukrainian army has been severely depleted by politically necessary but militarily reckless summer offensives in both 2022 and 2023, if it were to desist from all such offensive operations in future, strategically withdraw to more defensible positions, and concentrate purely on defence, theoretically, it could still hold out for some significant period of time, perhaps even into next year.
In practice, however, this depends on NATO continuing to supply it with the arms and ammunition it needs to keep the Russians at bay, particularly 155mm artillery shells, 155mm artillery pieces having been the predominant and most important strike weapons of the war to date. During some phases of the war, for instance, the Russians have fired up to 60,000 155mm shells a day. To give you some idea of the magnitude and intensity of this onslaught, during the first Gulf War, the American army fired less than 60,000 155mm shells in the entire campaign. This very fact, however, has caused NATO something of a problem. For based on this history and unaware that the nature of warfare was about to change, it had not anticipated that so many 155mm shells would be required. At the outset of the war, as a consequence, the USA was still only manufacturing around 19,000 155mm shells a month, while the EU was producing even less. Even though the Ukrainian army has consequently restricted itself to firing just 6,000 155mm shells a day – a factor which has contributed significantly to its defeat – the inevitable result has been that NATOs stockpiles of these munitions have not just been depleted but exhausted. It’s why, in fact, NATO has been sending cluster bombs to Ukraine – which are fired using the same 155mm calibre shells – instead of the standard high explosive rounds.
What this means, therefore, is that even if the Ukrainian army were to now adopt a purely defensive posture, without sufficient artillery shells to fight off Russian offensives, it is highly unlikely that it will be able to hold out much beyond the summer. Even more significantly, it also means is that, even if it wanted to, NATO could not intervene directly in the war.
What should really concern people in the west, however, is the fact that, even after this disparity in fire power between the Russians and the Ukrainians had become apparent, America and the EU did nothing to ramp up the production of 155mm shells: a failure to adequately respond to the reality on the ground that suggests either a lack of political will – along with a cynical abandonment of Ukraine even while we continued to encourage Ukrainians to sacrifice themselves for a cause that had already been lost – or an incapacity on the part of a deindustrialised west to turn words into deeds, either of which would represent yet another example of the disconnect between the world inhabited by the global elite and reality.
Whereas in other such cases we have been able to paper over this disconnect simply by printing money, however, in the case of the war in Ukraine, it is to be doubted whether the delusions of our leaders will be quite so easy to conceal. For assuming that the war in Ukraine does, in fact, come to an end this year and that, no matter how hard our governments and their associated media try to spin it, it is seen by the public as the humiliating defeat it already is, then cracks are almost certain to appear, not just within the NATO alliance, as some European allies start to blame the USA for dragging NATO into a senseless and unwinnable war which has merely highlighted the alliance’s military shortcomings, but within the EU, as some member states, severely weakened by sanctions imposed on Russia, start to demand a restoration of normal relations with the Russian Federation, while others, fearful of alienating America, try to cling to the existing status quo.
Whether or not this actually leads to the kind of fundamental change many people in Europe are already demanding, however, will largely depend on Germany, whose economy has suffered more than any other from the loss of low cost Russian natural gas, with many of its more energy intensive industries having to close plants or relocate them elsewhere. In February 2023, for instance, BASF announced the closure of its fertilizer plant in its home town of Ludwigshafen, while at the same time announcing a new $10 billion investment in a state-of-the-art chemical works in China. Because of Germany’s highly integrated supply chains, however, it is not just the big firms like BASF and Volkswagen that are suffering, but the many thousands of small- and medium-sized firms that form the backbone of the country’s economy, with the result that in May 2023, after seven straight months of declining output, industrial production fell by a record 10% in a single month.
Needless to say, if this goes on much longer, Germany will be in dire straits, as will the whole of the EU, which relies on Germany as its principal driver of economic growth. Once the war in Ukraine is over, therefore, the pressure on the German government, both by the country’s large industrial corporations and by the public at large, to mend its fences with Russia and restore the flow of natural gas will be immense. The cost, however, will almost certainly be that Germany will be forced to pay for its gas in roubles, the failure of American policy in Ukraine thereby bringing about the precise state of affairs the war was intended to prevent. Instead of decoupling Europe from Russia, indeed, it is far more likely that Europe will be decoupled from America, as Europe pivots east for its own survival.
Even if this doesn’t happen, however, and Europe remains within the US sphere of influence, the days of US hegemony and the LWO are clearly coming to an end, with a new world order already beginning to emerge based on principles agreed by the BRICS nations, whose original members, Brazil, Russia, India, China and South Africa were joined by Saudi Arabia, the UAE, Iran, Egypt and Ethiopia on 1st January this year. These principles differ markedly from those of the EU, for instance, in that countries do not have to be democracies in order to be members. In fact, one of the main principles of BRICS is that of non-interference in the internal affairs of other countries. As a result, the world’s largest democracy, India, a one-party communist state such as China and the Kingdom of Saudi Arabia can all be members of the same organisation, the second most important principle of which is that each member should respect the sovereignty, culture and political constitution of all that others.
The second major difference between BRICS and the EU is that, rather than being governed by a set of rules to which all members must adhere, such as those which govern the EU’s single market, trade deals between BRICS members are bilateral and individually tailored to suit the trading partners concerned. In 2023, for instance, the UAE agreed to sell oil to India in rupees, the currency of the buyer rather than the seller. This is because the UAE currently sells oil to India in dollars which it then has to convert into rupees in order to buy manufactured goods from India, the cost of the currency conversion making Indian goods that much more expensive. As a result, the UAE currently runs a massive trade surplus with India. By agreeing to sell oil to India in rupees and using those rupees to buy Indian goods, not only will this make Indian goods cheaper, but it will also induce the UAE to buy more from India in order to avoid the expense of converting its rupees into other currencies, thereby closing the trade gap and benefitting both countries.
Whether or not Germany ends up buying gas from Russia in roubles, what this means, therefore, is that the BRICS paradigm of tailoring trade relations to suit the trading parties rather than the USA will eventually put an end to the petrodollar. It won’t happen overnight, of course, not least because countries holding dollar reserves will not want to unload them too quickly and cause the price to crash while they still have significant holdings. What’s more, there is the problem of finding alternative assets in which to invest the proceeds. As a result, de-dollarization is a very gradual process. China, for instance, which has been de-dollarizing for about a decade, has only been doing so at a rate of about $100 billion a year. This may sound a lot but in 2014, when its de-dollarizing programme began, it held $3,993 billion in dollar denominated assets. As of 2023, this was down to $3,101 billion, a total reduction of $892 billion over nine years. At this rate, therefore, it will still take another 31 years before it has fully de-dollarized, if it ever does so.
In fact, it is far more likely that the dollar will collapse while it still holds more than two trillion of them. For as the US debt mountain grows and more and more countries join BRICS and stop using dollars in their bilateral trade relations, the attraction of holding dollar reserves will decline ever more rapidly. The all-important question, therefore, is not what will happen ‘if’ the dollar collapses but what will ‘when’ it eventually does.
Again this is very difficult to predict but one of the most likely consequences is the breakup of the USA. For when the US federal government defaults on its debt, as it eventually must, individual states or groups of states will have very little choice but to secede from the union in order to disavow the debt and print their own currencies. The same will happen with respect to the EU when the euro collapses. Then democratically elected national leaders will be forced to start doing what they are supposed to do, which is to put the interests of their own people first, thereby bringing the LWO, with its inherent flaws and inconsistencies, to its inevitable end.
Of course, many people will see this as a retrograde step and fear a return nationalistic wars. It is to be hoped, however, that being at least partially outside the petrodollar system, the BRICS economies will survive and that, based on their example, other national leaders will adopt the BRICS principle of refraining from interfering in each other’s countries. For this to be the case, however, a new breed of national leader is almost certainly required: men and women who are not in politics for the status it confers on them but simply to serve, an idea which, today, under the Liberal World Order, seems all too quaintly old-fashioned.
