The world may be on the brink of another financial collapse, this time with the Chinese economy as the likely catalyst, and with Britain holding $500 million in Chinese debt, the “sceptered isle” may bear a major portion of the impact.
One thing is certain: The world’s economy can’t continue with an agenda of unlimited development and endless consumption of throwaway goods, given that limits to extractive resources may have already peaked.
British radical economist James Meadway has been tracking the state of the globalized economy, and he sees major shifts already underway as China shifts from its economic roles.
Meadway, formerly an economist with the New Economics Foundation, described his concerns in a September essay for the Guardian:
Has globalisation peaked? Two fundamental factors suggest it may have. First, the financial crisis itself revealed the systemic weaknesses inherent in an over-extended financial system. Major financial institutions, banks chief among them, are now significantly more wary about reaching beyond their home bases. In the event of a future crisis, they will require strong, supportive states ready to back them up. This has drawn banks and states closer together, with weak states and weak banks propping each other up, as in the eurozone’s “sovereign-bank nexus” (the strong links between government debt and banks).
Second, states themselves are acting strategically. Globalisation was associated with a belief in the supreme merits of government inaction on the economy, but governments are increasingly strategic economic actors.
China is attempting an immense shift away from its decades-old role as low-cost exporter to the world, expanding both its domestic market, and seeking to create a new, regional trading block around the new Silk Road. The collapse of its stock market, naturally, necessitated a huge (if deeply flawed) government intervention. Protectionism is on the rise, whilst yuan devaluation has raised the spectre of “currency wars”. The German state, meanwhile, is an assiduous defender of its own interests as a manufacturing exporter.
Failure to address the looming crisis will only make the crisis worse, he explains.
In this, the latest edition of Taiq Ali’s Telesur English series, The World Today, Meadway explains his concerns as well as possible reforms to adjust the world’s economy to the new realities of the 21st Century:
The World Today: The State of the Economy
Tariq Ali talks to James Meadway, radical economist, about the global economy, the failure of world leaders to effectively resolve the financial crisis in 2008, and the probability of another crisis occurring in the future.