De-Globalization and De-Dollarization in the 2nd Cold War

The 2nd Cold War between the U.S. and China, as untimely predicted in my essay titled “Why the Coronavirus Pandemic is Accelerating the Remaking of World Order in the 2nd Cold War” (published in April, 2020), is steadily emerging with 2 nascent characteristics, namely, (a) “de-globalization” and (b) “de-dollarization.” 

Photo: akket. com

The current “proxy war” between the West and Russia in Ukraine (since 2022), and the chronic unilateral monetary policies of the Fed in the U.S., further contribute to this 2nd Cold War, which will eventually exhaust both the West and Russia, and will further accelerate the return of China (and later India) to their former prominence in this emerging Asian (21st) Century (as already predicted in my 1999 book titled “The Future of Human Civilization” and my 2007 book titled “Beyond the World of Titans, and the Remaking of World Order”).

De-Globalization as the 1st Nascent Characteristic of the 2nd Cold War

The first steadily emerging characteristic of the 2nd Cold War between the U.S. and China concerns “de-globalization,” which started with the “trade war” initiated by the Trump administration to escalate tariffs on goods imported from China in 2018, and the current Biden administration further intensifies “de-coupling” from China with the “CHIPS and Science Act of 2022” (in August, 2022) and the wide-ranging tech restrictions on China (since then).

The word “de-coupling” as often used in the U.S. differs from the word “de-risking” as recently used in the EU for a less drastic version of “de-coupling,” but this distinction is more “rhetorical” than “real” in practice -- since neither the U.S. nor the EU wants a total break from China anyway, and, in addition, since the EU is not yet wholly unified and not yet powerful enough to achieve what the French President Emmanuel Macron calls “strategic autonomy” from the U.S. to pursue its own (especially military and economic) affairs independently. The most recent decision by Netherlands to yield to the U.S. pressure to ban or restrict exports of chip-making tools and equipment to China -- in spite of strong protests by the Dutch company ASML against unwillingly losing the vast Chinese market, unfairly favoring American competitors (in the short term), and unwisely having to compete with cheap Chinese chips, since China has been forced, and is now able, to produce its own lithographic machines successfully (as Shanghai Micro Electronics Equipment Group just announced the breakthrough news in early August, 2023) -- is a good case in point, though in a narrow sense.

With this clarification in mind, “de-globalization” in the 2nd Cold War aims to disrupt the global supply chains which have linked Western societies with the Chinese one (and others) in the past decades of “globalization,” with the Western “wishful” thinking that this would effectively “contain” the current rise of China and thereby perpetuate Western dominance in global affairs since the 19th century. This “wishful” Western disruption in the 2ndCold War comprehensively targets China in all sectors across the board (namely, in finance, trade, education, culture, civil society, political society, technology, military, and diplomacy) but ends up being “self-destructive” in shooting at its own foot instead (as already discussed in my previous essay titled “The Closing of the Western Mind in the 2nd Cold War,” published on November 05, 2022). 

The Western “wishful” thinking (of “de-globalization”) stems from the logical fallacy that “globalization” increases “dependency” and is therefore “bad” for “national security,” with “de-coupling” (or “de-risking”) as a better alternative. But the logical reasoning here is fallacious, because “globalization” is about “interdependency” (not “dependency”) for a “win-win” outcome, which means that, for example, if “China” can be a “security risk” to the West, the “West” can also be a “security risk” to China, so this pressures “different countries” to mutually cooperate for the production of a “larger” pie to consume, so as to benefit “ALL” sides through “interdependency” (not “dependency”), such that “different” countries on this planet Earth can learn to work together in an interdependent world, so as to yield an “inclusive” (not “exclusive”) or “win-win” (not “win-lose”) outcome (after subtracting from costs). To make this happen (so as to minimize cultural clashes), “globalization” subtly requires a mutual respect among different countries towards each other’s “differences in values and institutions” (by not imposing the values and institutions of one side as “superior” or “good” on the other side, whose values and institutions are trashed as “inferior” or “bad”). 

Precisely here, the die-hard Western “colonialist” mindset since the modern era (to impose “Western” values and institutions on the “Non-West” without respecting “Non-Western” values and institutions on an “equal” footing) makes it easier for leaders like Trump and Biden to kill “globalization” as a “national security risk” to Western values and institutions. In fact, it was this die-hard Western “colonialist” mindset which harbored the first naïve illusion in those early days of “globalization” that China would eventually become a “Western liberal-democratic” society, but this did not happen (because “globalization” does not mean “Westernization”). Now, it commits the second naive illusion that “de-coupling” will contain the rise of China and make “America great again,” but this also will not happen (because “de-globalization” will lead to the “closing of the Western mind” instead and is therefore “self-destructive”). And those with this mindset take so much for granted the widespread benefits (after subtracting from costs) that “globalization” had produced to the world, both in the “West” and the “Non-West,” in the past decades, so they will live to regret the loss of these widespread benefits in their self-destructive path of “de-globalization.”

In any event, “de-globalization” has so far produced two drastic consequences affecting world peace and development. First, it divides the world into 2 main power blocs, namely, the U.S.-led bloc (e.g., NATO, AUKUS, etc.) and the China-led bloc (e.g., the RCEP, the Belt and Road Global Initiative, the AIIB, etc.). Second, it forces the rest of the world to forge a “new” non-aligned movement to save them from being dominated by either one of the 2 blocs (comparable to, but also different from, the “original” non-aligned movement in the 1st Cold War).

But there are three major differences between the 1st Cold War and the 2nd Cold War. 

The first difference is that there was “bi-polarity” (dominated by the U.S. and the U.S.S.R. whose members were mostly “whites”) in the 1st Cold War (in the 20th century), but the 2nd Cold War in our time (in the 21st century) heads towards a “more inclusive” world (which allows mostly “non-white” countries -- like China in the China-led bloc and mostly “non-white” developing countries in the “new” non-aligned movement -- to have more say in world affairs). 

The second difference is that the U.S. in the 1st Cold War was much more “open” than the U.S.S.R. – but, in the 2nd Cold War, it is China, not the U.S., who acts like the new champion of “globalization” for a “more opening-up” to the outside world (with “a shared future for mankind”), while the U.S. and its allies are withdrawing in a xenophobic, isolationist retreat in the name of “de-coupling” (or “de-risking”) -- as already discussed in my previous essay titled “The Closing of the Western Mind in the 2nd Cold War,” published on November 05, 2022).  

The third difference is that the memberships in the 2 power blocs in the 2nd Cold War are not as tight (or rigid) as they used to be the case between the “Western” bloc and the “Soviet” bloc in the 1st Cold War, since the EU will continue to strive for its “strategic autonomy” from the U.S. dominance (even if the former is not yet powerful enough to break from the latter), and China does not want to repeat the “Western colonialist” legacy in global affairs (with its alternative principle of “non-interference” for a more humanitarian, more inclusive “win-win” world order).

In this sense, the current expansion of the BRICS (under negotiation) is an excellent example of this emergence of a “more inclusive” world, which is shifting away from the now receding Western dominance in world affairs (by the increasingly “obsolete” G7 group), with different (at times even conflicting) societal and cultural formations. The BRICS currently consists of five countries (viz., Brazil, Russia, India, China, and South Africa), but 25 countries (as of July, 2023) had already showed interest in joining it, as shown below:

• Africa -- Algeria, Tunisia, Egypt, Nigeria, Senegal, Sudan, Zimbabwe
• Central Asia -- Kazakhstan
• Eastern Europe -- Belarus
• Latin America -- Argentina, Mexico, Nicaragua, Uruguay, Venezuela
• Middle East -- Saudi Arabia, the United Arab Emirates, Bahrain, Syria, Turkey, Iran
• South Asia -- Afghanistan, Pakistan, Bangladesh 
• Southeast Asia -- Indonesia, Thailand

Unlike the relatively homogenous G7 group (with its elitist or exclusive, often colonialist, history -- dominated by the U.S.), the BRICS in expansion (under negotiation in our time) reveals an amazing diversity for the inclusion of the Global South, which aims to prevent any one of them (like China or India) from dominating the rest too much, because it is much harder to govern a “diverse” group of 25 (or more) than a “small” group of 5. 

De-Dollarization as the 2nd Nascent Characteristic of the 2nd Cold War  

The second steadily emerging characteristic of the 2nd Cold War between the U.S. and China concerns “de-dollarization,” which reflects the widespread resentment and indignation around the world towards the U.S. chronic misuse of the U.S. dollar as an international currency in the past decades. This abuse is clearly shown once again when the U.S. and its allies currently impose sanctions on countries (like Russia, China, Iran, Cuba, North Korea, Venezuela, etc.) which do not agree with U.S. policies and to unilaterally engage in monetary policies which negatively affect the capital accounts of many countries around the world (with the recent financial collapse in Sri Lanka, partly due to the repeated interest-rate hikes by the Fed in the U.S., as a good case in point). Back in the 1960s (during the Vietnam War), the French Minister of Finance Valery Giscard d’Estaing (who later became the President of France from 1974 to 1981) criticized this abuse of the U.S. dollar as the “exorbitant privilege” of the U.S., with detrimental effects on the rest of the world. But John Connally, the U.S. Treasury under President Richard Nixon, later replied: “The dollar is our currency, but it's your problem.” 

More than 6 decades later (after Giscard’s criticism), the war in Ukraine since 2022, and the chronic unilateral monetarist policies of the U.S., have exacerbated this worldwide resentment and indignation when the U.S. and its allies ruthlessly imposed massive sanctions on Russia, illegally confiscated more than 600 billion dollars of Russian financial assets in Western institutions, and greedily passed new laws to unilaterally allow Western powers to spend this massive amount of confiscated money as they see fit (like the proposal to use the confiscated money to compensate Ukraine for war damages). But many countries around the world (outside the Western alliance) are shocked of this state-sponsored “theft” or “robbery” on such a grand scale, at a time when many of them have already suffered from financial crises over the decades, partly due to chronic unilateral U.S. monetarism.

The response from these countries around the world is loud and clear: “Enough is enough” – and therefore, there is now a worldwide momentum to de-throne the U.S. dollar as an international currency, so as to avoid all these endless “sanctions” and chronic “unilateral” monetary policies which have so much hurt economically the rest of the world for so long, ever since the 1st Cold War (with Giscard’s criticism as a good rallying point for “de-dollarization” in those early days, but to no avail at that time).   

But there are 2 important clarifications.

The first clarification is that there is currently a misinformation campaign in Western mass media to dissuade others from de-dollarization by scaring them that “de-dollarization” simply means the attempt to replace the U.S. dollar as an international currency with the Chinese yuan (which has been “demonized” in Western mass media as unreliable). But “de-dollarization” ONLY means the wisdom to not depend on the U.S. dollar in international transactions so as to avoid its abusive hegemony but does NOT mean the replacement of it by the Chinese yuan. On the contrary, the world is moving towards a “more inclusive” world order, with “multiple” (not “one dominant”) currencies in usage for cross-border transactions (including the U.S. dollar, the Euro, the Chinese yuan, the British pound, the Japanese yen, gold, e-currency, local currencies, regional currencies, etc.), without the need at all to replace the hegemony of the U.S. dollar by the Chinese alternative (which is a “false” narrative in Western misinformation campaign). 

And the second clarification is that “de-dollarization” is a long process which will take “decades” to complete -- and therefore, just because “de-dollarization” is not a “fait accompli” overnight does not mean that the hegemony of the U.S, dollar is here to stay forever. In fact, the call for “de-dollarization” has been ongoing for decades since the 1st Cold War, but the massive sanctions on Russia in the Ukraine crisis, coupled with the recent chronic interest-rate hikes by the Fed, have reached the “tipping-point” for “de-dollarization” to become a worldwide phenomenon. Thus, many countries around the world, both foes and friends of the U.S., have proposed new measures the counter the oppressive hegemony of the U.S. dollar. 

In my earlier article titled “Why the West is Anti-Western in the Russia-Ukraine Crisis” (published on May 23, 2022), I had already illustrated this with some examples: “Russia now demands the EU to pay for its gas imports in ruble [not dollar or euro]. Russia and China are now discussing the need to accelerate the use of yuan and ruble [not dollar or euro] in bilateral trade, and China and Saudi Arabia are coming close to an agreement to trade with their local currencies [not dollar or euro]. In addition, India and Russia start the talk for a rupee-ruble payment scheme to avoid future Western sanctions, and other countries [like Iran, Cuba, Venezuela, North Korea, etc.] have already tried different mechanisms to fight Western sanctions. In particular, China is ahead in the game by promoting digital currency denominated in yuan [‘digital yuan’] and has already run ‘public trials’ of digital yuan in major cities like Shanghai, Beijing, Shenzhen, and others, before institutionally implementing it across the board soon.”

By now (August, 2023), many of these proposals are already being implemented.

More recently, the 42nd ASEAN summit, urged by Malaysian Prime Minister Anwar Ibrahim, called for an “Asian monetary fund” to allow members to trade in local currencies (without depending on the U.S. dollar). France and China already conducted LNG trade in Chinese yuan. Brazil and Argentina announced the creation of a joint local currency (without depending on the U.S. dollar), and the BRICS considered the creation of new currencies to trade among its members (also shifting away from the U.S. dollar). Argentina and Bolivia announced the use of Chinese yuan to trade with China. In Africa, there are now different measures and proposals to trade with local currencies in cross-border transactions, so as to avoid monetary control by Western powers (in regard to the French franc and the U.S. dollar, in particular). 

Perhaps no one said it more bluntly and more forcefully than what Brazil’s president Luiz Inácio Lula da Silva commented in April, 2023: “Every night I ask myself why all countries have to base their trade on the dollar. Why can’t we do trade based on our own currencies?”  

Conclusion: The Return of China and India, and the Exhaustion of the West & Russia in the 2nd Cold War

The U.S. president, Donald Trump, started the 2nd Cold War with China to “make America great again.” His successor, Joe Biden, now doubles down on “de-coupling” from China (and other rivals) for the chauvinistic goal of “America is back.”

Contrary to their “feel-good” intention, “de-globalization” has instead led to “the closing of the Western mind” (as already discussed in my previous essay titled “The Closing of the Western Mind in the 2nd Cold War,” published on November 05, 2022). Instead of “making America great again,” the process of “de-globalization” contributes to “making America small again” and is therefore “self-destructive” (as already discussed in my previous essay titled “Why the West is Anti-Western in the Russia-Ukraine Crisis,” published on May 23, 2022).

Worse, this self-destruction is further compounded by the process of “de-dollarization,” which shows how much the U.S. is trapped in the isolationist “box” of Trump’s “Make America Great Again” or Biden’s “America is Back,” without understanding how much their policies have instead led to the steady rise of a “more inclusive” world in the 21st century, when the global dominance of Western powers since the 19th century is ending in our time, so these powers are fighting for their last days of dominance in distress.

However, the Sino-American rivalry in the 2nd Cold War is only temporary in the history of the human world, since, further down the line of global history will be the Sino-Indian rivalry for global influence after the 2nd Cold War (when the U.S. and the EU will not be in the top tier of world powers or “hyper-empires” any longer and will fall to the second tier of “meso-empires” to be ranked as #3 and #4 instead, as already predicted in detail in my 2007 book titled “Beyond the World of Titans, and the Remaking of World Order”).

When the 2nd Cold War ends one day in the future, there will be a new rivalry between China and India for global influence, as the next chapter of global human history. In this light, the U.S. is now repeating a mistake that it had made near the end of the 1st Cold War, when it helped China to counter the Soviet Union, without the long-term vision that China would become its rival in the long term. Now, by the same logic, the U.S. is making the same mistake once again by helping India to counter China, without the long-term vision that India would become its rival in the longer term too.

Regardless of who will come on top in the Sino-Indian rivalry in the longer term, or to what extent the world has enough room for both of them to share their global influences, one thing is clearer: This coming age in the 21st century will mark the historical return of China and India to their former global prominence in history, as the two civilizations had occupied the top 2 spots of global power hierarchy for millennia prior to the rise of Western dominance in world affairs since the 19th century. 

But this is something that neither Trump nor Biden would like to hear, just as many contemporaries in the Western alliance refuse to accept. So, the war in Ukraine will continue, de-globalization will continue, and de-dollarization will continue. In short, the 2nd Cold War will continue -- until the West and Russia exhaust themselves in the process, further benefiting China (and later India) to rise in the new world order. When this finally comes, it will then be the dawn of the Asian century as a new chapter of human history, until the next one to come in the more distant future.

In the end, old powers exit the world stage of dominance, and new powers enter. So the world moves on, like different scenes on a theatrical stage.

About the author:

Dr. Peter Baofu is an American visionary and author of 180 scholarly books and numerous articles (as of July, 2023) to provide 146 visions (theories) of the human future in relation to the mind, nature, society, and culture -- and had been in 132 countries around the world (as of May, 2023) for his global research on humanity, besides knowing 10 languages with different degrees of fluency. His books are listed in top university libraries and national libraries around the world (including the Library of Congress in Washington, D.C.). He was interviewed on television and radio as well as by newspapers around the world about his original ideas and visions of the human future. He was a U.S. Fulbright Scholar in the Far East and had taught as a professor at different universities in Western Europe, the Caucasus, the Middle East, the Balkans, Central Asia, South Asia, North America, and Southeast Asia. He received more than 5 academic degrees, including a Ph.D. from the Massachusetts Institute of Technology (M.I.T.), was a summa cum laude graduate, and was awarded the Delta Sigma Pi Scholarship Key for being at the top of the class in the College of Business Administration, with another student.