The role of the US in the global economy
In recent times, the American dominance is severely vulnerable to the attacks from perceived enemies and rivals who are hostile to American ideologies. This situation is because of the information from the international community and her allies especially from Europe. Watson argues that this state must turn around by the Obama administration if he is to make a new American age. Obama’s foreign policy in mainly focusing on the multilateral approach with more emphasis put on the American leadership globally. He has also maintained that Obama has successfully maintained the Bush ideology of pursuit for dominance (Watson, 2010, pp242).
United States is using her dominant state of a powerful and credible superpower to engineer its influence in the whole world. Though hegemony is not easy to maintain, Obama’s administration has been able to preserve American global leadership especially where many nations like Russia, China try to challenge her global dominance. There are also smaller nation like Iran, Venezuela and North Korea which face the Americans in regional matters.
America’s, just like other nations’ credibility is evaluated in several ways. These are when they stand up when they are challenged; where it keeps its promises with her allies or even whether they remain consistent and predictable or whether her policies reel from one another. This is also a major challenge to the US as it is being consistently watched, especially during transition period (Watson, 2010). The fall of the American dominance in geopolitics began during the Bush administration and extends to the present situation and it is difficult to change the American policies to be more open, multilateral and collaborative. The US dominance in military is threatened by the current financial crisis which forced the US economy to rely on constrained diplomacy and foreign investment (Watson, 2010, pp.242).
China is becoming a ‘formidable global power’
Over the last two decades, The Chinese and South Eastern economy’s growth rate was attached to the dependency of the American economy. Likewise, the American and the western developed economies hugely depended on the Chinese domestic market. The Chinese cheap imports have helped in sustaining the thin economic growth of both the US and the European economies. On the other hand, China’s economic boom has not been able to stabiles the world capitalism. Moreover, the arrival of China a key economic power has further complicated things by increasing the volatility and uncertainty of the world economy.
With the opening up of the Chinese economy to the world market, there was optimism that the western capitalism will gain tremendously from the large consumer market. However, this prediction was only a mirage as the Chinese government excessively controlled the economy by imposing certain measures. Later, with the Chinese entrance in the World Trade Organization (WTO) in 2001, remove many restrictions on imports. With the removal of these restrictions, a boom in imports was also predicted. A recent survey shows that there are no major prospects to the Western business in China that Chinese economy has proved to be a hard nut to crack (Hoare, 2008, para.28). However, interpreting China as an upcoming super power is a complex task. The country itself is an extremely complex and often an internally incongruous society. It is highly likely that China’s emergence as an upcoming global power will significantly challenge US interests in the global political economy, especially in East Asia. Nevertheless; China has traditionally maintained a defense-minded strategy, has a volatile political system-vulnerable to internal conflicts accompanied by pervasive corruption, and is experiencing increasing energy demands, sided increasing environmental degradation as well as health problems. Thus, a robust China does necessarily present a significant threat to the US and the global economy. As a result, the Chinese growth will be sluggish enough to allow the US and other major global powers to work together with China to manage the growth process.
The increasing power of the BRICS is a challenge to existing world powers
Even though the BRIC (Brazil, Russia, India and China), are considered as a major economic force in the world, the four countries do not have similar international goals, challenges, domestic political institutions and governance as well as economic structures. Rather, the four economies have the same economic implication in the overall world political system, i.e. the international political economy (Armijo, 2010, pp.10).
Analysts predict that the domestic markets of the BRIC economies are likely to grow rapidly as they experience tremendous rise of the middle class which create new consumers for the markets. This is expected to create excellent investment opportunities for both local and foreign investors. The rapid growth in demand will be experienced in the demand for electricity, automobiles, as well as the local capital markets. Most BRIC economies depend heavily on trade especially China and Russia. These BRIC nations will be potential competitors for the US and the other developed economies. According to Subhash C. Jain, the US have enjoyed to be a world superpower alone for quite a long time and sooner it may lose the title to the BRICs and urges the American companies to prepare for a stiffer competition from the companies from the BRIC economies by training their current and future managers to compete with them. However, the significance of the BRIC economies in the financial and business areas rely on the size of individual economies both now and in future as well as that the large size of their economies refers to dynamic economies (Armijo, 2010, pp.14).
The main reason behind the BRIC’s categorization is for a sheer economic size and not for the rate of growth or in opportunities for investments. The BRICs represents about 12 percent of the overall world’s output. Using purchasing power parity to measure the GDP, most BRIC states are among the biggest with China leading with about three quarter of the American size. The four biggest economies are the US, China, India and Japan. Further, the economies of Russia and Brazil are the same with those of France, Germany, Italy and Britain (Armijo, 2010, pp.14).
According to a survey conducted by the United Nations in 2006 The US is the largest military financier of the 192 nations. It has approximately 46% of the world’s military spending compared to Britain, the second largest shareholder with about 56.1%. Other members of G-5 i.e. France, Germany and Japan account for more than 2%. Three BRIC nations, i.e. Russia, India and China accounts for 4.3, 3.0, and 2 percent respectively. The total number of shares held by all these economies is about 27% of the world’s military expenditure. Economically, analysts argue that wealth of nations can be used to manufacture and purchase weapons. Other analysts have also argued that best measure of national power is by considering the country’ GDP. Evaluating the GDP of economies, the BRIC economies are ranked among the top fifteen largest economies depending on the measure employed and are likely to improve in the ranking in the future. If the economic size is the measure of the state power, then the BRIC nations will be the world’s major powers (Armijo, 2010, pp.16).
With the continued environmental crisis and the issue of global warming, access to the natural resources is an important, factor in major economies and powers. One of the most important endowments in access to water i.e. both for industrial and domestic use especially as global warming continues. Most of the G-5 economies are not well endowed with natural resources with the exception of Japan, Russia and Brazil, while India and Chile can meet the severe shortages as global warming continues. Of all the major economies such as the US, Russia and China produce huge amounts of energy while other such as France, are huge importers, importing more than half other of their domestic requirements. The BRIC nations pose a lot of pressure to the US and other developed countries and may force them to reduce their consumption and its carbon emissions because the developed countries are not energy efficient (Armijo, 2010, pp.10).
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Haynes, M, 2008, the Return of Russian Power: International Socialism Journal vol.116, pp.1.
Hoare, C, 2008, ‘China’s growth pain’: International Socialism Journal, vol.118, pp.1.
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Watson, A, 2010, ‘US Hegemony and the Obama Administration: Towards a New World Order? Antipode, Vol.42, no. 2, pp. 242-247.