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The Shifting Multipolar World

Looking at the website for ForeignPolicy.com, a nexus for foreign policy wonks, there is still much debate about the nature of relative power around the world.  Here is a sample of some of the opinion titles:

      • “Yes, The World is Multipolar;”
      • “No, The World is Not Multipolar;”
      • “America is Too Scared of the Multipolar World;”
      • “The GOP Plan to Bring Back a Unipolar World.”

Emma Ashford and Evan Cooper, senior fellow and research associate, respectively, with the Reimagining US Grand Strategy at the Stimson Center provide some background.

Polarity typically takes on one of three forms: unipolarity (in which one state is by far and away the most powerful), bipolarity (in which two states are about equally powerful), and multipolarity (in which power is more diffused among several states).  It’s a common misconception that multipolarity must involve many states of roughly equal capabilities (i.e., that it must be balanced).  But in fact, multipolar systems are often unbalanced, with two or three big powers and several middle powers all jockeying for position.

For the last 30 years, the United States has been the undisputed global leader.  But today, opinion is divided.  Some argue that the United States will remain the global hegemon for the foreseeable future, others say we’re headed for a new bipolar competition with China, and still others believe that a multipolar era is dawning.

The Stimson Center’s conclusion regarding where we stand: “The United States simply does not hold the level of military and economic power it did during the early decades of the Cold War.  Nor does today’s China match the Soviet Union at its peak.”

In August, the BRICS summit was hosted by South Africa in Johannesburg.  The five founding states are Brazil, Russia, India, China, and South Africa.  While 40 countries expressed an interest in joining BRICS, 23 officially applied for membership (including 7 of 13 countries in OPEC) prior to the meeting in South Africa.  Six of the applications were accepted and will become effective on January 1.  The new members are Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates (UAE).  However, Argentina President-elect Javier Milei who will be sworn in on December 10, plans to withdraw Argentina’s commitment after he takes office.

The current five countries of BRICS represent 42 percent of the world’s population and 33 percent of the world’s GDP on a purchasing power parity basis.  The G7 (Canada, France, Germany, Italy, Japan, United Kingdom, and United States), by contrast, account for 10 percent of the world’s population and 30 percent of GDP.

At the initial summit in 2009, the BRIC nations (South Africa had not yet joined) announced the need for a new global reserve currency which would be “diverse, stable, and predictable.”  While the BRICS alliance has not yet established an alternative global reserve currency, they continue to make progress towards that goal.  At the 2014 BRICS summit, an agreement was signed to create and fund the New Development Bank with $100 billion.  A reserve currency pool was also established with over $100 billion.

Another example of the diminished influence of the United States occurred in Africa earlier this year.  On July 28, the final day of the Russia-Africa Summit in St. Petersburg, Russian President Vladimir Putin announced that Russia had signed agreements for military cooperation with over 40 African countries.  The agreements included a broad range of weapons and technology, some for free “with the aim of enhancing the security and sovereignty of the countries.”  In addition, President Putin reiterated that Russia would continue to be a reliable supplier of grain to African countries.

Ukraine seemed to demonstrate the limits of US/NATO military support.  The US Government has spent $113 billion on Ukraine, appropriated in 4 spending authorizations, since the war with Russia began in February 2022.  In October, President Biden requested a supplemental bill for national security of more than $100 billion, which would include another $61.4 billion for Ukraine and $14.3 billion for Israel.  Congressional negotiations have stalled despite a warning by the White House that the US will “kneecap Ukraine on the battlefield” if funding is not approved.  Colonel (Retired) Douglas Macgregor frequently offers his opinions on a variety of YouTube and Rumble channels.  On a December 4 interview with Cyrus Janssen, he had this to say about Ukraine and US involvement.

The Ukranian nation is destroyed….  I don’t know how many civilians have been killed.  I don’t know exactly how many wounded, but I know that you’re looking at 500,000 dead Ukranian soldiers…. You’re looking at World War I scale of losses on the human side that we just can’t begin to comprehend it.

He continues:

What’s clear is it’s over because the United States government, and American media, and finance committees have all changed the topic.  It reminds me of what happened in Vietnam.  What happened at the end of Vietnam?  We left.  People stopped talking about it.  It was over….  We are preeminently a maritime and aerospace power.  We are not a land power anywhere in the world except in the Western hemisphere.  So, what this means is at the end of the day, if things don’t go our way, we don’t like what happened, it doesn’t suit us, we fly away, we sail away.  We’re finished.  But for the Chinese, the Russians, the Iranians, for the Arabs, for whomever, the Africans, wherever your go – they live in the region.  They’re stuck with it.  And they’re stuck with the consequences of our intervention.  And our interventions have always distorted the dynamics of the region.

Israel has always relied on US support.  Perhaps in deference to the United States, countries such as Turkey, Jordan, Saudi Arabia, and Egypt maintained a peaceful coexistence with Israel.  However, after the Hamas attack on October 7, the Israeli response has united Muslims around the world.  Yemen is the only country to declare war on Israel and so far, their attacks have been limited in nature.  But there is now popular support in many Muslim countries for military action against Israel.

How the conflict in Israel/Palestine resolves itself remains to be seen.  But the decline of US economic and military power, and influence in recent decades is clear.

If you have any questions or comments, please contact me.

Sincerely,
Robert G. Kahl
CFA, CPA, MBA

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Recession Incoming?

Economists are not particularly good at predicting recessions.  In June 2022, Fortune magazine reported that more than two-thirds of economists expected a recession in 2023.   READ MORE

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Don’t Underestimate BRICS+

For more than 20 years, international organizations have been evolving that serve as an alternative to the US-led organizations such as G-7, G-20, and the World Bank.  The Shanghai Cooperation Organization was first created in 2001 as a security and defense organization.  It includes Russia, China, India and five other countries.  In addition, many other countries participate as “dialogue partners,” observers or guests.

The BRICS nations (Brazil, Russia, India, China, South Africa) represent a group of nations with the same core group that seek intergovernmental cooperation.  BRICS is headquartered in Shanghai and its five core countries have a combined population of 3.21 billion people with a total GDP on a purchasing power parity (PPP) basis of US$ 56.65 trillion or 32.5% of global GDP-PPP.  It is responsible for the creation of the New Development Bank, which is an alternative to the World Bank and funded with $100 billion of initial capital.

Since the war started in Ukraine, a US-backed global task force claims that $300 billion of assets owned by Russia’s central bank and $30 billion of assets owned by sanctioned Russians have been frozen.  The actions by the US government and its allies did not go unnoticed by other countries.  Since then, more international transactions have been paid for with national currencies and central banks have been diversifying their reserve assets.  There are now 41 other countries that are interested in joining BRICS, so the core countries plus the 41 potential new members are often referred to as BRICS+.

BRICS+ will have their annual summit in Johannesburg, South Africa on August 22-24 this year.  While there has not been an official announcement yet, there have been recent posts by Russia and Iran regarding a new gold-backed currency for international trade.  On July 5, RT News, the English language news agency sponsored by the Russian Government, announced that the BRICS group of countries is set to introduce a new currency backed by gold.  Some other headlines posted on RT.com during the last three weeks include:

    • July 16 – Italian businesses want to switch to rubles in Russia trade
    • July 15 – Taking the dollar down a peg
    • July 12 – Russia seeks to expand de-dollarization drive
    • July 10 – China and Russia should lead “global governance reform” – Xi
    • July 6 – Russia proposes alternative to EU clearing houses
    • June 30 – Central American country (Nicaragua) wants to ditch dollar in Russia trade
    • June 30 – BRICS diplomat comments on what is drawing countries to the bloc

Since 2010, central banks around the world have been net purchasers of gold, after being net sellers for the years 1989-2009.  The pace of central bank gold acquisitions has accelerated in 2023 in anticipation of a new gold-backed currency.

The remainder of the year promises to be an interesting time for the international monetary system and precious metals.  If you have any questions or comments, please contact me.

Sincerely,
Robert G. Kahl
CFA, CPA, MBA