Thursday, June 9, 2011


Paradigm shift in economic systems and the new world order

Post the end of the cold war, the world has undergone a considerable change. The world today is not simply divided into capitalist and communist blocks. The world today is more fragmented than what it used to be during the cold war. The growing polarisation of the world is undoubtedly changing the erstwhile power-equations. Besides challenging the power equilibrium, the emerging blocs are also on a perpetual evolution and that too quite radically.

A couple of decades back it would have been a dichotomousto even think of an socialist America, capitalist China and a capitalist and democratic Middle East. Who would have ever thought that markets would weigh so heavy on the American economy that President Obama would have to bail it out with a staggering $787 billion stimulus package. The very concept of market being able to regulate itself with government’s meddling with it was challenged upside down. Aft er decades of market-driven prosperity, the Wall Street went through its worst crashes, forcing the government to put the economy on track. For the first time, the Americans observed a concept (alien to them) of their money being used for bailing out companies worth multibillion dollars – a practice that is customary in socialist nations, where the State intervenes to support its ailing companies through mobilisation of financial resources.

What happened in the US is totally non-American in its way and similarly, what has been happening in China is not Chinese in its ways. Post the 1998 financial crisis, China adopted free market concept to fortify their economy. In 2006, China lift ed its IPO suspension and world’s second largest IPO was offered $21 billion by the Industrial Bank of China. And eventually in 2007, the Shanghai Exchange appeared out as the second largest stock exchange. Today the private sector in China owns more than 60 per cent of total industrial production. China’s market revolution has conceptualised a completely novel model that is a hybrid of socialism and capitalism, albeit with Chinese characteristics.

Amidst all this, the recent uprising in Middle East has brought a paradigm shift in the region. With the social networking sites, Internet and modern thinking being the cornerstone of the revolution, the region which was akin to autocracy has been increasingly adopting modernity. The rising new middle class, the capitalist mindset, and the spirit of freedom are not only bringing about a new wave in this region but is also transforming the cultural legacy of this region. Turkey, for that matter, is a living example of correctly striking a balance between cultural and religions values and modern business-friendly environment. The reasons for the ongoing radical transitions could be anything but the agenda is to consolidate positions in the new world order. The nations who are not directly a part of this process are increasingly forming a strong bilateral allegiance with either of these blocks.

There is a clear and distinct line that has been evolving between the American, Chinese and the Middle East blocks. Though the idea is to retain/attain economic supremacy, it has been instrumental in causing this tectonic shift . The new world order or say the three emerging blocks are not only changing the political landscape of the world, but are also impacting bilateral trade and geopolitics to an extent. Although it's early to predict whether it is a move in the right direction or not, the poles are moving, and the world is becoming increasingly tri-polar.


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