The 14thMETU CONFERENCE ON INTERNATIONAL RELATIONS

AREA STUDIES AND INTERNATIONAL RELATIONS: INTERSECTING

DIMENSIONS17-19 June 2015

The New Bi-polar Global Economy, China and the United States

John Weeks

Professor Emeritus

SOAS, University of London

Economic analysis in this presentation is explained in non-technical language in my new book,

Economics of the 1%: How mainstream economics

serves the rich, obscures reality

and distorts policy

Anthem Press 2014

Economic Basis for Global Power

1 Size of national economy

2 Trade/Current account surplus, basis for

- foreign investment

- international reserve currency

3 Foreign exchange reserves, basis for

- currency stability

- influence on/control of currency markets

Institutional basis for global power

Control/dominance of international organizations that manage –

1 International short term and long term lending; (e.g., International Monetary Fund)

2 International finance regulators (Bank for International Settlements, Basel Committee on Banking Supervision, rating agencies)

3 International trade (World Trade Organization)

Review of Major Global Economic Institutions

1 International Monetary Fund

- Keynes/White proposals & outcome

- IMF & the Cold War

- IMF in the age of financialization

2 World Trade Organization

- the GATT

- purpose of the WTO

Shrinking Economic Basis

of US Global Power

USA: Trade Balance/GDP, 1950-2013

-6.0-5.5-5.0-4.5-4.0-3.5-3.0-2.5-2.0-1.5-1.0-0.50.00.51.01.52.0

1950

1953

1956

1959

1962

1965

1968

1971

1974

1977

1980

1983

1986

1989

1992

1995

1998

2001

2004

2007

2010

2013

Major Interventionin Viet Nambegins

US war inViet Namends in defeat

Invasion ofAfghanistan

Invasionof Iraq

Globalcrisis

Rise of New Economic

Global Powers1 Military defeats of the US government

2 Capitalist transition in China

3 Unification of Germany

& introduction of the euro

Three Major Exporting Countriesbillions, 1990-2013

0

400

800

1200

1600

2000

2400

2800

3200

199019911992199319941995199619971998199920002001200220032004200520062007200820092010201120122013

USA

Germany

China

China+HK

Trade Balances, USA, Germany & China-Hong Kong,billions, 1990-2013

-800-700-600-500-400-300-200-100

0100200300400

199019911992199319941995199619971998199920002001200220032004200520062007200820092010201120122013

USA

Germany

China

China+HK

Foreign Investment Outflows, USA, Germany & China/Hong Kong, billions, 1990-2013

0

50

100

150

200

250

300

350

400

199019911992199319941995199619971998199920002001200220032004200520062007200820092010201120122013

USA

Germany

China

China+HK

Net Value of Mergers & Acquisitions of Corporate Assets, billions, 1990-2013

-250-225-200-175-150-125-100-75-50-25

0255075

199019911992199319941995199619971998199920002001

200220032004200520062007200820092010201120122013

USA (-618 bn)

Germany (-120 bn)

China (+53 bn)

China+HK (+122 bn)

Foreign Reserves including Gold, billions,1990-2013

0

500

1000

1500

2000

2500

3000

3500

4000

4500

199019911992199319941995199619971998199920002001200220032004200520062007200820092010201120122013

China

China+HK

USAGermany

Five Largest Receivers of Chinese non-financial foreign investment, 2004-2010

1 $140 bn – Hong Kong

2 $27 bn – Cayman Islands

3 $14 bn – British Virgin Islands

4 $7 bn – Australia

5 $6 bn – South Africa

[First three are conduits and/or tax heavens.]

Change in Institutions of Global Economic Governance & Control

1 Transformation the Euro Zone into a German sphere of influence

2 Marginalization of the World Bank & ambiguous role of the IMF

3 Collapse of the WTO & sphere 0f influence trade blocs

4 Counter measures by the Chinese regime[Beijing-based AIIB, BRICS “Contingent Reserve Allocation” institution, 40% funded by Chinese government]

Conclusions

1 The German government has established itself as the regional power in Europe

[“history never repeats itself but often it rhymes.” – attributed to Samuel Clements]

2 The US & Chinese regimes are competing for global economic & military dominance