While the US gets further embroiled in Iraq, economies such as China and Brazil are starting to assert themselves.

While US foreign policy (in Iraq, in Afghanistan and in backing Israel) seems to imply continuing domination of the world by a single superpower, the reality is more complex. The rise of countervailing powers is taking place and offers up the prospect of a more diverse and better balanced global system than has been the case for the past few years.

The trials and tribulations of US forces in Iraq may prove to be, when history finally comes to be written, the last gasp of the old system rather than another example of US ability to run the world single-handed.

Look at what is happening in the Doha round of the WTO where the grouping together of Brazil, South Africa and India has finally wrung concessions on agriculture out of the European Union. The US may be forced to follow suit. If China starts to assert itself in the WTO it is possible to envisage a very different kind of trading system than the current distorted one.

Already Chinese demand is buoying exports and providing an alternative market to that of the US for Brazil and key emerging countries in Asia. China is now Brazil’s fourth biggest export market and the revenues earned will help to pay for Chinese effort to renovate Brazil’s railways. Large emerging markets are starting to work better together.

China’s rise is significant in a global context as much for the new ideas it can inject into development thinking as its ability to withstand US pressure (for example, in revaluing its currency).

The commentator Joshua Cooper Ramo recently coined the phrase “Beijing consensus” for the unorthodox development ideas (in contrast with those of the Washington consensus) that have underpinned China’s spectacular growth: gradual pace of reform rather than big shocks; capital account and exchange controls; use of special economic zones; tight political control and growth with redistribution.

He also picks out India as an example of a country that has defied convention and produced results especially with its successful offshoring industry. With Manmohan Singh as India’s new prime minister it is certain that a more pragmatic route forward will be found than the pure free market approach.

Another example of taking a different road to development is the Japanese experience. Some critics have used Japan’s recent problems as a way of rubbishing its past policies. The imminent recovery of the world’s second largest economy will hopefully allow for a more rational discussion to take place.

Then there is the EU, large parts of which, and especially Germany, have under performed for a long time. The expansion of the EU to 25 countries, however, cannot but fail to bring growth into the transition countries while the news that France and Germany intend to co-ordinate policy in a notably un-American way (promoting industrial conglomerates, common macro and foreign policies) suggests that the world’s third and fifth largest economies have no intention of conforming.

Finally in assessing future economic power bases – and their likely, if not inevitable, translation into political power – do not forget the negative impact that a prolonged Iraq conflict could have on the US economy.

PLEASE ENTER YOUR DETAILS TO WATCH THIS VIDEO

All fields are mandatory

The Banker is a service from the Financial Times. The Financial Times Ltd takes your privacy seriously.

Choose how you want us to contact you.

Invites and Offers from The Banker

Receive exclusive personalised event invitations, carefully curated offers and promotions from The Banker



For more information about how we use your data, please refer to our privacy and cookie policies.

Terms and conditions

Join our community

The Banker on Twitter