A world exasperated with the West may well seek leadership elsewhere

Recent UK and French election results and US turmoil are creating an impression of political and societal instability

Anthony Rowley

Published: 4:30pm, 13 Jul 2024

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Is Europe shifting politically right or left, and how far will the pendulum swing towards extremism in either case? Is the United States headed for a political gridlock – or even civil war? These are serious questions in the light of recent developments on both continents.

An even bigger question, however, is how much the world cares, if any more, about the irresponsible antics of these so-called great powers, or whether it is ready to cry a plague on both their houses and look elsewhere for leadership.

The erosion of confidence in a nation does not usually happen overnight. It tends to be more of a glacial process that finally accelerates into a meltdown. We are arguably at this point with regard to global perceptions of the US and Europe.

Leaders on both continents are brawling publicly and challenging one another’s integrity, which hardly serves to reassure cynical electorates that anyone among them is fit to lead – a situation that invites anarchy and extremism.

This nascent chaos is manifesting at the political level and it cannot be much longer before it breaks into the open at the economic level too, affecting global trade, investment, currencies and the financial markets. The dollar is under a uniquely serious threat from all this, which in turn poses a threat to the multitude of countries that use the US currency as their principal foreign reserve asset or store of value, not to mention as a currency for international trade transactions.

What we are seeing in the US – and are almost certain to go on seeing at least until the presidential election in November – is a threat to the credibility of the dollar of a different magnitude to the periodic threats by Congress to “shut down” the government over deficit spending spats.

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The ability of America to govern itself effectively is on the line and that could erode the world’s faith in the dollar much faster than any budget or current account deficit on the US balance of payments.

A cracking in the perceived solidity of the dollar ice sheet would have massively disruptive effects on global trade, investment and the capital markets as well as on the global bond markets and stock markets that are already perceived as overvalued and prone to a crash.

The seriousness of this situation does not seem to have dawned on many commentators or the financial markets where the prevailing view seems to be that the world can continue to do business as usual despite rents in the fabric of political stability.

It is not so much that the world appears to be sleepwalking towards war (a situation that some have likened to the run-up to World War I) as that the West appears almost eager to embrace conflict. As became obvious during the recent Nato summit in Washington, the powers in the transatlantic security alliance are seemingly happy to lengthen and exacerbate the conflict in Ukraine that serves as a proxy war against Russia.

Criticism of and enmity towards China (as well as North Korea) continues to build in America and much of Europe, and the dangers of all this creating two massive world war theatres receive less publicity than Israel’s war on Hamas.

British Prime Minister Keir Starmer (left) and Ukrainian President Volodymyr Zelensky (right) look on as US President Joe Biden speaks, at the Nato 75th anniversary summit in Washington DC, US, on July 11. Photo: Pool via Reuters

Generations too young to have personal memories even of World War II can perhaps be forgiven for failing to take these threats seriously, but political leaders cannot be forgiven for playing war games with people’s lives.

Unfortunately, we cannot expect any major change in this dismal situation after the outcome of the general elections in the United Kingdom and France. In both cases, leaders are too preoccupied with domestic issues to act as world statesmen.

In Britain, Prime Minister Keir Starmer is likely to be content, for now at least, to remain broadly within the foreign policy framework and institutional arrangements set by his immediate predecessors within the defeated Conservative Party.

If this proves to be true, it would see Britain bolstering its defence and economic ties with Japan, supporting the Aukus alliance – the trilateral security partnership it agreed with the US and Australia in 2021 – and becoming a dialogue partner with the Association of Southeast Asian Nations, better known as Asean, as well as becoming an active member of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

It would also see the UK maintaining a somewhat arm’s length economic and diplomatic relationship with China, while continuing to warm towards both Nato and “Indo-Pacific” initiatives pushed by the US and Japan, among other allies.

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General election outcomes in the UK and France, along with election turmoil in the US, have created an impression of political and societal instability in the key countries of the West and that is not conducive to wider stability.

So, where can countries that seek not to lead the world, as they are sometimes accused of doing by Western alliance powers, turn to in a coming storm?

I recently noted the significance of the rapid expansion of the Brics bloc of Global South countries, but we need Western leaders to come to their senses to underpin true global stability – and to stop behaving in such a bellicose fashion. The alternative is too awful to contemplate.

Anthony Rowley is a veteran journalist specialising in Asian economic and financial affairs