By Jayachandran/Mint

By Jayachandran/Mint

Ourview | Ten years later

Ourview | Ten years later

Received wisdom has it that 10 years ago, the attacks on the Twin Towers in New York marked the start of global terror that emanated from the Lands of Islam. The War on Terror followed and today we’ve manufactured an uncertain world.

A better way to look at 11 September 2001 is to view it as the mid-point between the end of the Cold War (and the start of the latest round of globalization, in 1991) and the renewed danger to the global economy in 2011. These dates are not mere divisions on a calendar, but markers on a trend line that seems invisible today.

The constraints on what the US could do, globally, were suddenly removed at the end of the Cold War. Gone were the defeats in Vietnam and limits elsewhere; its Unipolar Moment was at hand. In reality, it took another 10 years—2001 and later—for the actual exercise of that victory. Four fateful hijacks gave US policy planners a chance to try and make the world safe for markets and themselves. The only zone of threat that was impervious to US cultural charms —the Middle East— could be now rendered safe by exporting democracy. If Iraq could be set on the parliamentary path— however wobbly—could its neighbours, the sources of terror, remain immune? That calculation was made possible after the Cold War had been won, but could only be implemented after what happened in New York. That is the significance of 9/11.

By Jayachandran/Mint

What can be safely said is that while the dominoes may be falling in the Middle East, the threat has now reached Western shores. For the US—and the West at large—the obverse of being rid of its only rival was freedom of another kind: that to export capital and break almost all barriers to its flow. Simultaneous with the political processes was the search for profits and sources of growth, one that looked for for virgin domains— firms, sectors and countries. That led to successive bubbles— inflated by ultra low interest rates that all Western central banks believed in. The first one was pricked in 1998 and the next —and only one after that—in late 2007. That, in a sense, ended the trend that had begun in 1991 and accelerated since 2001.

Merely 20 years later, the greatest power since Rome finds itself in crisis if not decline. All it took was 10 years from 2001 for that power to unravel.

What of the future? Here the field of vision is, naturally, blurred. Some tendencies, however, can be discerned even at this early hour.

At a recent conference of economics Nobel Prize winners in Germany the liberal consensus was that wars in Mesopotamia and the Hindukush have inflicted serious damage to the US and, in turn, the global economy. However much one may dispute this line of reasoning— after all it can be argued that the roots of the crisis lie in homes and mortgages being doled out to those who had no business getting them in the first place— there is no denying that bills worth trillions of dollars have cramped US’ fiscal room for manoeuvre. This imposes severe constraints on propping up aggregate demand. It will have consequences.

In the absence of Keynesian demand management—the US can’t do it and Europe can’t afford it—the other options to keep economies afloat are monetary measures and aggressive currency devaluations to gain larger shares in export markets. Some of these processes are already unfolding.

This seriously hurts the logic of globalization. After all, the argument back in those heady days of early 1990s was that global trade was not a zero-sum game: there was something in it for everyone. Today, the Doha Round of trade liberalization is in a coma; China’s discomfiture at dwindling trade surpluses and unhappiness at US arm-twisting on its exchange-rate management policies are quite evident; Switzerland (of all countries) is toying with currency manipulation. At the same time, East Asia is host to serious geopolitical rivalries and tensions. One can’t say the economics of the situation and its politics are causally linked, but the correlation can’t be ignored anymore.

If it were not for the swim-together, sink-together quality of linkages between countries today, one could be excused for experiencing a sense of déjà vu: the situation today has many parallels with that from the end of the last round of globalization in 1912-1914. And we all know what happened after that.

Unlike the certainties of the Cold War age, the world is much more complicated today. There is no single power (or two, for that matter) that can please or cajole deviant countries into submission. The newer powers that emerged on the wave of globalization don’t believe in it anymore: nationalist competition—the usual condition of the modern world—is back in vogue. The US still remains the only country to project military power on a global scale, no doubt, but that is no longer enough to manage an unruly world. The times ahead are interesting, but quite uncertain.

Was 2001 the beginning of the end of US’ global primacy? Tell us at