KAMPALA – The rising inward-looking sentiments and decisions by countries are being seen even in this post-economic coronavirus stimulus efforts. Germany has announced its own package of US $ 814 billion, France has announced about US $70 billion, Italy has announced its own. These countries would have been doing this together! But they appear to be doing it on their own, meaning that the state of affairs as it has been known are no longer the same. The European Union (EU) President Ursula Von Der Leyen extended a heartfelt apology to Italy for not being there for it during the pandemic challenge. This was an initiative to mend fences. While Germany has announced US $ 814 billion, EU as a group has announced a much smaller package of US $ 550 billion! It came after realizing there was need to act as Europe, not individual countries. Is this a sign to the end of Europe? (Too proud to unite, I wrote in 1992)
As this happened in the US and Europe, India was threatened by the American president Donald Trump about the supply of the Hydroxychloroquine drug and India had the guts to respond saying ” look here Donald Trump you can’t dictate to India” something, maybe, they would have not done or said before. Donald Trump wanted the drugs from India and he said if they don’t give the drugs the US would retaliate! India was very clear, “why do you preach to us? Why do you dictate to us?” No country, especially India, would have done this to the US. India has been very good at balancing relationships between Russia and the US. Traditionally India has hostilities with China, as a result they usually go into alliance with anybody who is against China and in this case, India would ally with the US. But this kind of statement tells you about India’s position and India’s changing view about the US. The US can no longer call the shots. India just needs to assert itself like China, not lick any other country’s boots. These, therefore, are indicators that there’s a new world order emerging. There are new rules as to how the world is going to be run.
In my earlier article, on stock I talked about China buying American companies on the America stock markets. While I cannot verify this, it is now reported (www.wio news) that China has been scouting around the world to buy companies in Europe that are in financial difficulties, companies that need money now. As the companies go through the coronavirus crisis, they are short of cash. China has money!
To block this, the European countries have initiated laws to preserve Banks, Insurance, Health care, Energy, Transportation and cybersecurity sectors. Italy, Spain and Germany have strengthened the law that makes foreign takeover of companies harder. Before the coronavirus, companies from Western countries would scout for investments in other countries, this was okay as long as the West called the shots. Now that it’s China, it’s not okay! Restriction of buying or taking over of companies’ means restrictions in the financial markets and international transfer of capital. This spells doom for capitalism.
Are we seeing the end of capitalism? Or simply the rise of China as the world leader. China has a big challenge. The latest act by the US Federal Reserve (The US Central Bank) has been to deny Chinas’ Central Bank dollars to allow Chinese companies operate outside China. The Fed (As it is fondly known) would like China to cash in its huge reserves to get dollars. By denying China dollars, China companies are restricted in their activities outside China. But this can only be temporary, China will find a solution. When Japanese imports were restricted in the US and Europe in the 1980’s, the Japanese found a solution and continued to sell! Important, China may press for its currency to join the dollar as a currency of international trade! True the west will not go down without a fight. Definitely not. The west controls the world media, China should be ready for negative publicity about it. China’s goods will be targeted for boycott, but with its market, will China care? Countries will try to get their companies out of producing in China, but this distorts free market and puts a nail in the coffin of capitalism. If capitalism pursues profit, consumers will prefer cheap products, producers will choose Chinas’, then China may prevail.
The world is now in a recession. Excluding China, but who is more resilient, China, Japan, Germany are. For reasons of maintaining production facilities rather than making fortunes in financial markets. Still the west is at a disadvantage. One, they no longer have the money, two, they don’t control the technology (5G), three, they don’t have the numbers in population. Asia has about two thirds of the World’s population, four, these cycles in life are inevitable. Probably it’s time for change. Whoever knew the sun would set on the British Empire. It did.
The writer, Prof. Waswa Balunywa, is the Principal of Makerere University Business School