It was Time founder and publisher Henry Luce who in the 1940s, described the 20th century as America’s to have or lose. With the exactitude of a prophet, Luce in a 4 500-word column, foresaw the dominance of US values on the world’s stage.
Titled “20th Century is the American Century,” Luce’s piece placed economic dominance at the centre of Washington being leader of the free world.
“It is for America and America alone to determine whether a system of free economic enterprise — an economic order compatible with freedom and progress — shall or shall not prevail in this century,” he opined.
“We have to decide whether or not we shall have for ourselves and our friends freedom of the seas — the right to go with our ships and our ocean-going airplanes where we wish, when we wish and as we wish.”
And as Luce foretold, the US would go on to do a lot of great things, many of them in the advancement of science and civilisation. The pinnacle of Washington’s dominance in world affairs was crowned by the collapse of the Soviet Union in the 1990s, ushering in a unipolar universe where the US graduated from superpower to hyperpower.
But like a good party, the music at some point has to come to an end, even if it is to the chagrin of the dancers.
The rise of China, still reeling from its “century of humiliation”, where it bowed to world powers, has made things interesting in the 21st century. China’s past suffering at the hands of foreign powers continues to exert great influence on its foreign policy and burning desire to have a new world order, with it at the centre.
And progressively, Beijing is staking a claim in leading the chorus of a multipolar world.
Russia, still bitter about the collapse of the Soviet Union, is more than willing to lend a verse to the unfolding reprise. Some parts of Europe want in on the action.
What has been the US’s retort to the rise of China and other world powers? We have seen the Yankees use every economic and military tool at their disposal to exert the US’s influence and bend “hostile nations” to its impulses.
The year 2018, with Donald Trump as the helm, the dollar’s hegemony was augmented. Washington that year put measures in place that prevented Rusal, a strategic Russian aluminium firm, from accessing the dollar-based financial system. This of course had crushing effects for the company, which is the world’s largest aluminium producer outside China.
Iran also learnt a bitter lesson when Trump, to the incredulity of US allies, unilaterally pulled out of an agreement stitched by his predecessor, Barack Obama, to mend fences with Iran — an attempt by the Middle East country to abandon its pursuit of nuclear weapons.
The sanctions, some targeting Iran’s financial services sector did considerable economic harm on its economy.
In this and other instances, the sanctions by the US sting primarily because of the primacy of its currency. Many nations, both its friends and foes, hold their reserves in the dollar. In this instance, the greenback and its hegemony become a potent reprisal to any nation Washington deems rogue.
While actions by the US has served a short- to medium-term objective, it has weakened the country’s standing in many parts of the world. The US’s abuse of its currency’s dominance is increasingly causing capitals around the world to believe it’s not in their national interest to be so reliant on the dollar and by extension, the whims of the White House.
This is where Brics, and its main actors, China and Russia come in. Beijing and Moscow have aggressively and meticulously pushed for a multipolar world where the US is not the dominant player. And to do this, the dollar’s hegemony must be undermined.
Brics, of which SA is a member, is already entertaining thoughts of introducing a new reserve currency. The idea is that a common currency will not just boost intra-Brics trade but also eliminate the high dollar conversion costs of international transactions.
It will be foolish for Xi Jinping or Vladimir Putin for that matter to think they can scupper the dollar’s hegemony in their lifetime. Their eyes are on the future, and the US also understands this.
The dollar will continue to be a dominant player in world trade for years to come. A lot of things work in the US’s favour. For example, it will be difficult in the short to long term to find alternatives to dollar-denominated reserves. The depth and liquidity of the US financial market is gigantic.
Data from Bank for International Settlements shows nearly 50% of global payments currently are in dollars, while 88% of foreign-exchange trading involves the dollar. Central banks across the globe hold 62% of their reserves in dollars.
Former French finance minister Valéry Giscard d'Estaing was correct in the 1960s when he described the dollar’s pre-eminence as an “exorbitant privilege,” which allows the US to effortlessly finance its trade and budget deficits.
The prospect might seem a distant one, but should the US carelessly relinquish leadership of the global multilateral order, the dollar might eventually lose its long-standing supremacy. And this is not a fallacy.
The battle for dominance of the next century will not be settled any time soon, but the US’s supremacy is being challenged. And the Yankees are aware of the marauding rise of China.
In an interview with Face Nation this week, former Trump national security adviser Herbert Raymond McMaster made a clarion call for Republicans and Democrats to diagnose the rapid rise of China and what it means for the US.
“Let’s have a rational view of the challenge to future generations of Americans and recognise that this is a competition we across the free world have to prevail in,” he cautioned.
This is the achilles heel of the US’s foreign policy — the obsession to police the world. The US must welcome a multipolar world where its leadership is not through coercion, through the might of its army or the size of its economy, but by persuasion.
Washington needs to know that not every century will be its to do as it wishes.
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