Michael Every, Rabobank's Global Strategist, delves into the decline of the post-WWII Liberal World Order and the rise of Economic Statecraft. He discusses the historical context of power shifts, particularly the challenges posed by China’s demographic and economic strategies. Every explains the implications of U.S. trade barriers and tariffs as tools to reshape global dynamics. He also highlights the maritime capabilities gap between the U.S. and China, emphasizing how this affects geopolitical tensions and the future of international governance.
The decline of the Liberal World Order is marked by economic statecraft overshadowing traditional liberal policies amid rising geopolitical tensions.
Historical patterns of power dynamics demonstrate that economic imbalances often lead to the fragmentation of dominant world orders like the LWO.
COVID-19 has catalyzed existing socio-economic disparities and prompted a reevaluation of governance models, affecting global cooperation and economic strategies.
Deep dives
The Concept of the Liberal World Order
The liberal world order (LWO) is defined as a complex framework of international institutions and rules intended to facilitate cooperation among nations. Historically, the LWO included bodies like the UN and the IMF, which aimed to provide structure to global interactions, albeit with significant shortcomings. Currently, this framework is perceived as weakening, with evident gaps in its effectiveness and inclusivity, leading to questions about its sustainability in addressing modern geopolitical challenges. The discussion highlights a need to revisit the foundational principles of the LWO and examine why it is perceived to be in decline.
Historical Context of Past Liberal Orders
The historical trajectory of past liberal world orders reveals a pattern of rise and collapse tied to various geopolitical dynamics. Notable periods include the British and American hegemonies, each characterized by specific economic and military contexts that fostered international collaboration. The discussion emphasizes how mounting inequalities and an imbalance of power among states often precipitated the fragmentation of these orders. Understanding these historical precedents provides insight into the current fragmentation of the LWO and the warning signals observed today.
The Role of COVID-19 as an Accelerator
COVID-19 has been positioned as a significant accelerant in the ongoing geopolitical transformations, exacerbating pre-existing challenges such as social inequality and eroding trust in leadership. The pandemic intensified public awareness around governmental responses and highlighted the disparities in economic stability across nations, raising questions about governance and economic policy. It forced populations to reassess the efficiency of their respective political systems, hinting at potential shifts in public sentiment towards different economic models. The ramifications of this crisis have led to predictions regarding the future of global cooperation and the potential re-evaluation of economic strategies.
The Importance of Maritime Power
Maritime power emerges as a crucial factor in international relations, shaping the competitiveness of nations in the global arena. The discussion focuses on the contrasting naval capacities of the U.S. and China, noting that China's growing shipbuilding capabilities challenge the U.S.'s traditional supremacy at sea. The historical significance of naval strength is underscored, given its implications for military and economic power projection. The conversation highlights that reliance on external sources for critical maritime resources can undermine national security, prompting calls for a reevaluation of domestic industrial capacities.
Impacts of Economic Statecraft on Global Markets
The recent shifts towards economic statecraft are expected to reshape the landscape of global trade and market dynamics significantly. The move towards tariffs and protectionist policies indicates a strategic pivot away from traditional free trade ideals, raising concerns about the resulting inflationary pressures. With countries rethinking their economic dependencies and realigning their trade relationships, particularly in response to geopolitical tensions, markets will need to adapt to these new realities. Consequently, the interplay between statecraft and economic policies is anticipated to result in unpredictable market outcomes, emphasizing the importance of understanding these geopolitical strategies.
Welcome to KAOS THEORY — a podcast collaboration between Grant Williams and me that focuses on the intersection of Macroeconomics and Geopolitics in an increasingly disorderly world.
4/1/25: Episode 9 — Michael Every
Joining Grant Williams and me for this episode of Kaos Theory is Rabobank’s Michael Every as we chronicle the decline of the post-WWII Liberal World Order (LWO) and the rise of Economic Statecraft (vs. Economic Policy) as the new paradigm in global affairs.
We trace the historical context of previous such LWOs – Pax Britannica and Pax Americana – and examine how the current LWO is unraveling as the emergence of China as a rival power, the weakening of American hegemony, and the prioritization of economic interests over the liberal rulebook combine to upend everything to which we’ve become accustomed since WWII.
Michael explains the challenges facing China’s rise as a potential hegemon, including Demographic shifts and the need to pivot towards domestic consumption rather than exports and outlines how the United States is leveraging economic tools like Tariffs and Trade Barriers as part of its new “Economic Statecraft” approach to counter China’s influence and reshape the current LWO to better serve its own interests.
