The great paradigm shift

Untimely Thoughts

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Peter Lavelle's blog

10 April, 2009, 08:57
The great paradigm shift

Over the past week, the makings of the new world order crossed paths with the dying ancien regime. The G20 gave us a glimpse of what is coming into being - a truly multilateral global order - and NATO demonstrated on its 60th anniversary that is no longer up to the job of ensuring global security. The world as we have known it is coming to an end before our very eyes - and this is for the better.

The G20 meeting was a micromanaged success. Participants wisely signed up to a number of initial compromises to deal with the global financial crisis. Much more needs to be done, but there is at growing awareness that the financial order called the "Washington consensus" has run its course.

The liberal Anglo-Saxon economic philosophy that has ruled the world for over 60 years is slowly, but very surely being put to rest. In London, the Ame­ricans and the British fought to keep government and international regulation of financial markets off the agenda. They failed. The writing is on the wall - unfettered Western-style capitalism is on the wane. The real winners in London were China, what is called "Old Europe," and actually most of the world.

Government fiscal injections - and in the case of the U.S. simply printing money - is not the best way out of the slump. The world doesn't really need financial stimulus packages; it needs a major overhaul of how financial markets are run. This means the reckless, irresponsible and greedy bankers and financiers should no longer be able to call the shots.

We will see the start of a process that will finally democratise the international financial system, which of course will benefit the many over the traditional few in the West. Expect to see the interests and demands of the BRIC countries and others to play stronger leadership roles on the international stage. This process won't happen overnight, but it has started and there is no turning back.

Two other issues that came out of the final G20 communiqué are noteworthy, but largely misunderstood or purposely underplayed: individual countries' nationalisation of their banking sectors and a real attempt to start and manage globalisation.

Currently, nationalising banks may be one of the pillars of casting the new world financial and economic order. For some, this is a radical step and a sign of embracing "socialism."

Well, old Cold War taboos like this do not belong in the present or the future. Privately owned and outrageously de-regulated banking got us all in this mess and for a certain interval individual states and international bodies should oversee how our money is used (to make sure it is not abused) and invested. How long is a "certain interval?"

This is unclear at this point. However, until there are assurances the irresponsibility and the greed of the few have been mandated out of this banking process, and states and internationally transparent bodies should be given a wide berth to run the global financial system.

The global financial crisis has also - albeit unexpectedly - created an opening to manage globalisation. Under globalisation, states have lost control of exports, production, and labour. This was because the financial system and its regulation were essentially privatised to serve the interests of the few. Once money flows are controlled and made more transparent, there is some hope that globalisation can be harnessed for the benefit of all; particularly the world's poorest and least able to protect themselves.

The current international security arrangement is on its last legs. NATO's 60th birthday was an embarrassment - the dust and growing mould of a dying alliance was easy to spot.

Alliance members, including U.S. President Barack Obama, made a big deal of inducting Albania and Croatia into NATO.

Hello! Reality check: how in the world can Albania and Croatia help fulfil NATO's greatest challenge of stabilising Afghanistan?

What does NATO stand for? There is no clear answer to this question. NATO countries sup­ported Oba­ma's "surge" agenda, but at the same time they wished the U.S. the best without signing up to their own troops to fight the cause. So much for the coalition of the willing.

NATO has grudgingly reengaged Russia after its very critical stance over the Georgia conflict. But it also understands that any positive movement in Afgha­nistan (and Pakistan) cannot happen without Russia's cooperation. Russia has its security interests when it comes to the post-Soviet space, but at the same time is in agreement that something has to be done to stabilise these two countries. NATO looks weak and without direction - since the end of the Cold War, NATO can't figure out what it wants to be.

NATO came into being in a different era with a very specific mission: defend Western Europe and the North Atlantic space against Soviet aggression. It achieved this goal. Since 1991, the alliance has rendered itself as unhelpful and basically useless. NATO should accept the paradigm shift and transform itself into something new and useful, which should include Russia as a real and trusted partner.

The era of using other people's money for profit is coming to a close. And the time of security for the few at the expense of others is almost over. These are the basics of the paradigm shift. Getting used to this won't be easy, but at the end of the day both will create a fairer world order.