Ali’s blog

Mostly quant stuff with occasional digressions

Geopolitical trends — and how the financial crisis is accelerating them

Posted by alifinmath on October 6, 2008

Geopolitics is the only real game in town, and has been since, oh, the time of Columbus (I guess). A tectonic shift has been underway for a while, with the US gradually losing its financial and industrial hegemony. This decline the US has attempted to thwart during the last eight years with unilateral military action and a doctrine of full spectrum dominance. The financing for this has come from abroad. But this financing looks increasingly problematic now, as the deregulated financial house of cards — which so many foreigners got suckered into — has come tumbling down. It’s becomingly increasingly clear that USA’s days as global hegemon are numbered, and tht the country is going to have to live in reduced circumstances — economic and military — in a multipolar world. In this connection there’s a well-written piece in today’s FT:

It is not too early to assess the first geopolitical lessons of the current financial maelstrom. As the crisis unfolds, trends are emerging. The near collapse of financial capitalism both confirms and accelerates a revolution that was already under way in international politics…

First, the shock reinforces the relative decline of the US and the passage from a unipolar to a multipolar world. Whoever is its next president, America will not only have to face more diverse and complex challenges but will have fewer means with which to confront them. The interaction between the infectious greed of its financial class and its politicians’ dereliction of duty has impoverished the country. The torch of history seems to be passing from west to east. It is true that China and India are also affected by the financial turmoil; less so Japan, a country whose financial conservatism is the product of bitter experience 20 years ago. But to paraphrase French President François Mitterrand: growth is in the east and debts are in the west. Furthermore, fear is in the west and hope is in the east, so we are equipped in very different ways to face this crisis.

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