Calls for a new world order grow

A widely quoted article in China's Xinhua News Agency was headlined: "Washington's political chaos proves it's time for a de-Americanized world." Commentator Liu Chang said the latest crisis revealed that the US is unfit to govern itself, let alone lord it over the rest of us. "It is perhaps a good time for the befuddled world to start considering building a de-Americanized world".

After castigating the US for meddling in the political affairs of countries in its efforts to build a world empire, the writer attacked a self-serving Washington for shifting financial risks overseas, while the debt ceiling crisis "has again left many nations' tremendous dollar assets in jeopardy and the international community highly agonized."

"Such alarming days when the destinies of others are in the hands of a hypocritical nation have to be terminated, and a new world order should be put in place, according to which all nations, big or small, poor or rich, can have their key interests respected and protected on an equal footing. Part of that reform is the introduction of a new international reserve currency that is to be created to replace the dominant US dollar, so that the international community could permanently stay away from the spillover of the intensifying domestic political turmoil in the United States."

As the Xinhua opinion piece indicated, many countries are concerned about the US dollar being the world's dominant currency. Countries holding US Treasuries have been worried about the once unthinkable, that the US would be unable to honor its debt service obligations, thus putting their hard-earned assets in jeopardy.

On the other hand, countries that took loans denominated in US dollars could face punishing terms of repayment if the interest rate on the American dollar shoots up upon fears of a US debt default. Companies, traders and governments that use the US dollar as the medium of exchange would also suffer from chaos in the markets for money, commodities and trade, if there is a massive loss of confidence in the US and its dollar.

Thus, continuing uncertainty arising from feuds in Washington will accelerate the erosion of confidence in the US as the world economic leader.

Financial Times columnist Martin Wolf commented that the US debt ceiling is the legislative equivalent of a nuclear bomb, and that the law needs to be repealed since there cannot be an orderly government under so destructive a threat.

But an editorial in The Independent said that while there is a straightforward case to ditch the debt ceiling law, the same extremists who use it as a weapon of mass destruction will be loath to part with it.

Some Democrat and Republican leaders in charge of budget policy in Congress have been holding talks over the past few days, giving hope that they plan to avoid a repeat of the fiasco when the budget and debt ceiling deadlines re-appear in a few months.

But given the polarization and ideological divide in Washington, chances are that the world will be treated to another round of the battle and the chaos. If that happens, there will be more calls for a new world order.

The author is executive director of South Centre, a think tank of developing countries, based in Geneva.

(China Daily 10/30/2013 page9)