Yahoo Finance America can lead the multipolar world — if it chooses: Gordon Brown
“[America] is now in a multipolar era where it must act multilaterally.”
It is in every country’s interest to have multilateral cooperation. This is becoming even more pertinent in a multipolar era, says former UK Prime Minister Gordon Brown, where the US is no longer acting unilaterally and China is becoming more significant on the world stage.
“Europe needs multilateral cooperation because it needs a trading economy. Africa needs multilateral cooperation because clearly, the resources it needs to be able to develop industrially must come from outside Africa, as well as inside Africa,” says Brown at the Amundi World Investment Forum on June 13.
Speaking at the Carrousel du Louvre in Paris, Brown says this view extends to middle powers like India and Indonesia. “When you think about the middle powers, [they] don't want to end up being squeezed between China and America; it would be far better if we could work with both in a multilateral system.”
America must recognise that it was in a unipolar era, where they could act unilaterally, says Brown, who was PM between 2007 and 2010. That has changed. “It is now in a multipolar era where it must act multilaterally. But the great thing for America is it is the leader of the multilateral system, if it chooses to work it, which is something which is an issue in the American election.”
Politics dictating economics
Ruminating on the state of the global economy today, Brown struck an almost nostalgic tone at the close of the first day of Amundi’s two-day conference. “Why is it that in the 2020s, we've got the lowest growth decade of any time since the end of the Cold War, with countries now having high levels of debt, trying to deal with inflationary problems quite successfully?”
He muses: “Why are all these things happening? Now, the obvious thing to say is politicians have failed us. Of course, there is some truth; we used to say there are only two kinds of leaders: those who failed, and those who got out just in time.”
Brown says economics dictated politics around the globe when he was Chancellor of the Exchequer from 1997 to 2007. That is no longer the case. “There are three seismic shifts happening in the world today that are determining that geopolitics, or politics, is dictating economic policy more than previously when I was Chancellor.”
The first is the changing balance of economic power, as the “centre of gravity” has moved towards Asia, he says. “You see the rise of a global middle class, which will be majority Asian in a few years time.”
The second is a shift from free trade, or neoliberal economics, towards more protectionist economics, he adds.
Finally, the third is a shift from “hyper-globalisation” of the past three decades to what Brown calls “constrained globalisation”, where security, fiscal and environmental considerations are vital to the decisions that governments are making.
Together, these three seismic shifts “help explain why we’re all facing problems” around growth, trade and the workings of our individual economies, says Brown.
China’s ‘two traps’
Brown recalls meeting President Xi Jinping, where the Chinese leader revealed “two traps” that China must avoid.
The first is the “middle-income trap”, says Brown, seen in some Latin American economies that have achieved middle-income status but are unable to advance further. “[Xi] has got to get China to be a high-income country.”
The second is a more dangerous scenario, where a rising power challenges an entrenched power, resulting in open conflict, he adds. “For the rising party, it should [either] wait [for] its time or it should simply not challenge the entrenched party.”
Brown believes Xi is more concerned about the former. “Believe it or not, I still think China’s biggest problem is its economy and delivering high standards of living. I think for Xi, it is still the middle-income trap that worries him most, not the invasion of Taiwan and not other issues related to America.”
According to Brown, the Chinese economy is “over-invested in property”, “under-consuming” with high levels of savings because “there is no proper safety net” and it “over-politicises economic decisions”. This has led to China’s growth rate being “much, much lower than it could be or should be”, says Brown.
Hence, China has now decided to return to being an export-dominated economy, according to Brown, through “flooding” Europe with electric vehicles and solar panels. “China has decided on an economic strategy that is necessary for its prosperity; that is actually going to cause greater confrontation in the next few years with the West because it is about challenging markets and market domination in a whole series of different areas.”
‘One world, two systems’
Along with India, Indonesia is of interest as a rising middle power, says Brown. “Indonesia is a middle power that is benefiting from the resources — particularly nickel — that it has, and it’s able to sell to the world and take the terms of which it sells, free from the American straitjacket of hegemony and unipolarity. Indonesia can dictate some of the terms, nationalising its nickel industry.”
Meanwhile, India and Africa — which Brown terms the “capability centres” — are trying to develop centres for new technologies like AI.
These middle powers are able to play the big powers off against each other, says Brown, and they are growing. “The interesting thing is that they’ve got growth rates of 4% [to] 8%, whereas the growth rates in Europe are 1% on average, America 2% on average [and] China 4% more or less. These are the growing economies in the world benefiting from this new multipolarity.”
The way things are today, the biggest risk in the coming years is a potential shift to a “one world, two systems” future, says Brown. “If we move to a ‘one world, two systems’ future, then you have real problems because you have separate institutions for finance, like the [International Monetary Fund] and Asian Monetary Fund; separate currencies; separate trade agreements; separate regulatory systems — and you start to see the polarisation of the world.”
This will put the middle powers in a spot, says Brown. “The middle powers get squeezed and have to make a choice. Mexico, choose — America or China? Vietnam, choose — America or China? Asian countries dependent on China for trade [and] America for security [will be] forced to make a choice. And you have, obviously, Europe, squeezed between America and China. That is something we must not allow to happen.”
The current state of affairs are not yet irreversible. “If I’m right, China’s biggest problem is its economic development. And if China’s economic development is going to proceed, it needs to be part of a trading system running around the world.”
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