In the vortex of disruptions in Geopolitics have institutions like the UN, WTO and ICJ been undermined because of unilateralism, protectionism and isolationism? Jayant Sinha, MP and Chairperson of Standing Committee on Finance, spoke during Synergia Conclave-2019 on, India Shaping Role in the New World Order.
Global shifts happen rarely and are even less often peaceful. The transfer of power from west to east will dramatically change the context of dealing with international challenges. In the early 20th century, the imperial order and the aspiring states of Germany and Japan failed to adjust to each other. That led to wars that devastated the better part of the world. The coming shift in power will have a greater impact globally and will require the assimilation of diverse political and cultural systems. Today's rising powers seek redress of past grievances, are proudly nationalistic and want to claim their rightful place in the comity of nations. Asian rise in economic terms will translate into greater political and military power, thus increasing the potential damage from conflicts. In this international scenario, India needs to stand up and be counted, or it will be another lost century for India.
Jayant Sinha, a member of the Lok Sabha, was a key minister in the Indian government between 2014 and 2019. As someone who has worked in the upper echelons of global finance and management consulting, he has a unique vantage point to look at the forces shaping the new 'disorder'.
The entire perspective of business and trade- how we foresee the market progressing, how we ensure prosperity and synchronize our economic efforts-is changing due to the flux in the business world. This has led to tensions which threaten to spill over into conflicts.
According to Sinha, the fall of the Berlin wall in 1989 was an epochal movement. "In 1989, I was in Berlin. We really felt the dawn of a new era. It felt that Pax Americana had taken a firm hold. Pax Americana was backed up by the willingness of US and its allies to go to war to maintain it, and for the sake of unfettered globalization," he said. Post the collapse of the Soviet Union, the US was able to shape the global economic order almost single-handedly. That open markets were the only path to prosperity, turned into an infallible truth. Globalization worked wonders for emerging markets. It heralded the peaceful rise of China as an economic powerhouse. India post-1991's economic liberalization also started to benefit from open markets. "The global elite or the quintessential Davos man thought they could fix everything through free-markets. That held sway up to the 2008 financial crisis," said Sinha. The engine of free-market global economy purred so that there wasn't much economic disorder on account of the 9/11 attacks or the two Gulf wars.
This period also saw the strength of WTO as a global enabler to open markets, the peaceful rise of China as the world's leading manufacturer spurring world growth.
Then the 2008 crash happened. It was unthinkable that financial giants such as Lehmann Brothers and Bear Sterns would evaporate in a matter of days. The new world order was born. The new order is actually the 'new disorder'. Some four or five factors are ensuring we don't know where we are going to land at the end of this disorder. What is it that India must do?
Predicting a dire future, Sinha said, "The world the global elite placed all its faith in, is collapsing right in front of our eyes. These forces are boundary-less. We have global terrorism. We have entire countries that have fallen prey. US-China trade war is rolling financial markets again- is not looking like ending anytime soon. There is bipartisan consensus (In US) that China has to be dealt with on the trade front. It has serious consequences for the world. Rise of extraordinary tech platforms like Amazon, Facebook, are creating new national and cybersecurity challenges. Policymakers around the world are struggling with them."
Technology has created its own set of demons which if not managed, can lead to devastating consequences. Platform-based businesses pose a very serious challenge. Where does the data belong? Should it sit in Idaho or should it sit in India? What is the nature of access to that data? What happens from a security and competition point of view? Data security is an important challenge that has to be considered in India, especially since there is an extraordinary amount of data being generated in India with anywhere between 400 to 500 million active mobile users.
Climate change too is a big deal and India is one of the most affected countries.
India would have to content now with a multi-polar world from a trade perspective. The country is trying to forge appropriate agreements with all major trading blocks. However, there is a need to strengthen and reform existing world institutions like WTO and World Bank to suit the new world and in order to effect the new balance of power.
With regard to his view of the new world order, he said that while India intends to play a shaping role, it recognizes that it faces many challenges in the pipeline. The government would take the lead in addressing them while looking forward to an equitable and fair global economy.
On its part, India has embarked on three major initiatives. "We realized it's a multi-polar world. There is no Washington consensus anymore. India is seeking to work with all major economic powers".
First, India recognizes that business and trade perspective in a multi-polar world is defined by different strategy for every player. "RCEP discussions are on with ASEAN. We are trying to define our own bilateral trade treaties. We need to negotiate customized agreements with different trading partners".
Second, existing multilateral institutions- UNSC, IMF, WTO- are faced with dysfunctional bottlenecks and need to reform in conformation with present-day realities. "Reforming all major institutions is vital. India is playing a proactive role in their reform," said Sinha.
Third, India is working towards forging new institutions which are balanced and rule-based-Cop21, Solar Alliance, Global Taxation regime, OECD are few who are being pursued by India.
As regards neighbourhood initiatives, India is trying to win over its friendly neighbours. With Bangladesh, most boundary disputes have been resolved, and talks on transportation links (highways, aviation, railways), trade, tariff barriers are being discussed. With Nepal and Bhutan, apart from traditional areas, hydro-power is a major issue for joint consultation. Sri Lanka also has many economic ties.
- India's role in the international system will not be a random occurrence but a function of its power position in the international hierarchy. To have a cardinal role in international politics, India will have to advance itself to be a part of the power structure that makes vital decisions.
- As the United States withdraws, middle powers like India need to step up to sustain the world order in which they are stakeholders. Without clear rules, middle powers are lost in a Thucydidean world in which the strong do as they can, and the middling do as they must. Fate and destiny of the international system and the nations within it depends upon action on part of all.
- The rise of self-driving cars will see oil demand plummet and price drop sharply. Oil producers will be left without the political heft or financial capital they have today. Oil demand is likely to peak in 2021-2020 and is likely to slide down thereafter to 70 million barrels within 10 years. This would mean that the new equilibrium price is going to be around $25 a barrel. The Indian economy will be a significant beneficiary being one of the largest importers of oil in the world.
- A global digital currency backed by several nations could dethrone the dominating U.S. dollar as the world reserve currency, a scenario that would significantly help to improve global trade and reduce the volatility of capital flows in emerging markets. It will help to unlock the USDs reserved as an insurance policy in times of economic turbulence.