In order to understand the depth and seriousness of the international financial crisis, let us explain it our way. One financial market in the United States – the Dow Jones, has lost two trillion dollars in one week. That is more than the US administration spent on the Iraq war in four years, and we have not reached the bottom of the crisis yet, nor do we know how it is going to end. The volcano is still spewing its lava in every direction and threatening to produce changes of all sorts, political as well as economical. It has also become customary to ask whether it is the end of US supremacy, as it sits on the top of the volcano.
Because of the seriousness of the situation, the United States has called upon the leaders of 20 states to discuss the matter. This summit is in itself an admission that the crisis goes beyond and is bigger than the capability of the United States – the superpower and the one most responsible for the financial crisis.
The crisis has evoked many rash conclusions; some of which are scientific and talk about the emergence of new superpowers; others more of wishful thinking and talk about the end of the US as a superpower, more out of hatred than on any scientific basis.
But no one can confidently claim of knowing what the end result is going to be. The volcanic eruption is still continuing, and it will be months, or perhaps years before the real results become clear. But most of what has been written about the crisis was expression of political opinions. Those who hate the United States view the crisis as the last nail in its coffin, while those who believe in conspiracy theories, view the financial crisis as a US ploy to plunder the wealth of China, India and the Gulf. Yet there are those who prophesy that Russia will emerge as the world leader; those who believe that it would be Europe’s decade, and those who see it as China’s decade. Such debate is taking place all over the world and not just in our region – the Middle East. But one has to stress that things are not yet clear; Super-power calculations are not merely economical. If they were just economical, Japan would have been classified as a superpower. Nor is it just military; if they were military Russia would have continued to be regarded as a superpower, as it possesses the second largest nuclear stockpile in the world. The superpower quality is a cumulative effect of a whole range of integrated institutional activities.
Those who prophesy that it is the end of a superpower and the beginning of another, have to define the criteria on which they base their judgment. According to Paul Kennedy, who is an authority on this subject and whose books have been translated into Arabic, power is firstly scientific, secondly economic, and thirdly military. Scientifically, the United States has 17 of the top 20 universities in the world. Economically, it has 200 of the largest 500 companies in the world. As for military, the United States spends 50 percent of world expenditure on manufacturing and development of weapons. Emerging new powers such as China are dependent on US markets; and so is India. Both countries depend on US markets to sell their goods. Consequently, the recession that hit the US markets has immediate effect on industrial production in China and India. Moreover, US Bank losses threaten China’s gains as most of China’s money is in US banks and any weakness of the dollar means a diminution in Chinese financial reserves that are kept in the form of US bonds. Thus, the whole world is tied to the US economic wheel, positively and negatively. If it runs fast the world runs with it; and if it slows down the world suffers recession. The world economy is also tied to the dollar to the extent of domination. The dollar makes up 60 percent of the world’s currencies.
The talk about the world’s helm and who sits at it is a matter of concern for all, including us, as it indicates the wind direction in our region as well. But this will not happen quickly and clearly; it will be slow and at times confusing, because there is no clear successor, given the number of big powers competing for second place.