Are We Heading Towards Deglobalisation?

The Rise of Neoliberalism: From Intellectual Roots to Global Dominance

The rise of neoliberalism, one of the most influential economic doctrines of the 20th century, traces its intellectual roots back to the 1920s, with the pioneering theories of Austrian economists Ludwig von Mises and Friedrich Hayek. In the tumultuous periods following World War I and during the Great Depression, Mises and Hayek, along with a burgeoning network of economists and capitalists, embarked on a mission to counter the rising tide of nationalism and the growing clamour for state intervention in the economy. Their efforts culminated in the formation of the Mont Pelerin Society in 1947, an organisation explicitly designed to promote and disseminate neoliberal principles on a global scale.

But neoliberalism was never just about market liberalisation and deregulation. Mises and Hayek’s strategy was fundamentally about safeguarding the capitalist order against what they perceived as existential threats: the rise of social justice movements, populism, and increased state control. As historian Quinn Slobodian explains in his book Globalists: The End of Empire and the Birth of Neoliberalism, their vision extended beyond preserving economic freedom; it was about constructing a global framework that could shield capitalism from the encroachments of government intervention and populist demands.

The Mont Pelerin Society was just the beginning. Subsequent gatherings, such as the Bilderberg Conferences, became crucial arenas where international elites convened to strategise the advancement of such ideals. Although these meetings were publicly framed as efforts to promote peace and economic cooperation, insiders like Lord Denis Healey have acknowledged that the discussions also harboured ambitions of a one-world government—a concept that echoed the vision of supranational control proposed by figures like Eugene Staley. This push for global governance, often criticised for its potential to bypass traditional democratic processes, was a hallmark of the broader neoliberal project.

A defining moment in the American context arrived in 1971 with the Powell Memorandum. Penned by corporate lawyer Lewis Powell, this document was a clarion call to the American business community, urging a coordinated response to what Powell saw as an escalating assault on corporate interests. Far from being a mere defensive strategy, the memorandum became a blueprint for an aggressive expansion of corporate power. It laid the groundwork for the intensification of corporate lobbying and set the stage for the wave of deregulation that would dominate U.S. economic policy in the decades that followed. While ostensibly focused on protecting free enterprise, the Powell Memorandum ultimately became a blueprint for expanding corporate influence over public and political life, embedding neoliberal policies into the fabric of American governance.

Increasing US-China Tensions

The escalating trade tensions between the United States and China, combined with a resurgent focus on national industrial policies, signal a seismic shift in global trade. This shift may well mark the beginning of the end for the neoliberal globalism that has defined the international order since the late 20th century. As far back as the 1970s, political theorists like Hedley Bull foresaw this transformation, coining the term "neomedievalism" to describe a world where the dominance of nation-states is eroded by the rise of powerful non-state actors and complex, overlapping jurisdictions.

In the 1980s, a pivotal decade in the rise of neoliberalism, leaders like Ronald Reagan and Margaret Thatcher championed market-driven globalisation as the golden path to economic prosperity. Central to this strategy was the offshoring of production to China, where lower labour costs could be exploited to boost corporate profits and drive global growth. This strategy did not just reshape Western economies—it fueled China’s rapid industrial ascent, embedding it as a vital hub in global supply chains and transforming the country into an economic powerhouse.

Fast forward to mid-2024, and China’s holdings of U.S. Treasury securities stand at approximately $859.4 billion. This figure not only underscores China’s deep entanglement in the global financial system but also highlights its significant role as a creditor to the U.S. government. However, the narrative is shifting. China is gradually reducing its U.S. Treasury holdings, signalling a strategic move to diversify its assets and lessen exposure to American economic policies. Meanwhile, the U.S. continues to finance its ballooning federal budget deficit through substantial annual debt issuance, borrowing an estimated $1.5 to $2 trillion per year. This trend has sparked growing concern among financial analysts about the long-term sustainability of such debt, especially in a context of rising interest rates and an expanding Federal Reserve balance sheet.

Recent volatility in global equity markets—sparked by U.S. employment data, Federal Reserve policy shifts, and interest rate adjustments by the Bank of Japan—highlights the fragility of the current financial landscape. While the U.S. dollar’s status as the world’s reserve currency has historically provided a cushion against global economic shocks, today’s rapidly evolving geopolitical landscape—characterised by the rising influence of Global South nations and shifting power dynamics—suggests we may be on the cusp of a significant realignment reminiscent of the pre-Industrial Revolution era.

History offers a stark reminder of the dangers posed by unchecked corporate power. Consider the United Fruit Company, which once wielded near-sovereign authority over Central America. Today, Chinese firms like Huawei are charting a similar course, expanding their global influence in ways that echo the chartered colonial companies of the past. Huawei’s pivotal role in the development of Kenya’s Konza Technopolis—where it is constructing an extensive surveillance network and data center—exemplifies the intensifying competition between the U.S. and China, particularly in the high-stakes arenas of artificial intelligence and data processing. This is just one instance in a broader pattern of Chinese strategic investments in infrastructure and technology across various regions, all aimed at expanding its geopolitical clout.

Evolving Capital Mobility and Payment Systems: The Dawn of a New Financial Era

The global financial landscape is undergoing a profound transformation as nations seek alternatives to the U.S. dollar for international trade. This shift, driven by escalating geopolitical tensions—particularly the U.S.-China rivalry—and the growing desire to reduce reliance on U.S.-centric financial systems, signals a potential overhaul of global finance as we know it. At the forefront of this movement is China’s aggressive promotion of the yuan, alongside the meteoric rise of digital currencies like Bitcoin and Central Bank Digital Currencies (CBDCs), which are rapidly reshaping the contours of global trade and capital flows.

However, the road to dethroning the dollar is fraught with significant challenges. Transitioning to new financial systems, especially those grounded in decentralised finance, is a complex endeavour. Regulatory uncertainties surrounding digital currencies and assets further muddy the waters, casting doubt on the feasibility of a swift shift. The IMF and the FSB have both underscored the urgent need for robust regulatory frameworks to mitigate the risks associated with digital assets, which complicates global adoption and creates friction in the transition process.

Despite these formidable obstacles, the pivot away from the dollar is already gaining momentum in several key regions. The Global South, in particular, is leading this strategic realignment, increasingly engaging in trade with sanctioned nations and exploring alternatives to the dollar. A prime example is India’s strategic use of the yuan to purchase Russian oil, a move that highlights a broader trend among BRICS nations as they actively seek to build a new financial architecture that diminishes the U.S. dollar’s dominance.

The development of alternative payment systems to SWIFT, spurred by Western sanctions, underscores the growing demand for financial sovereignty. China's Cross-Border Interbank Payment System (CIPS) represents a significant advancement in this arena, offering a viable alternative to SWIFT and facilitating international yuan transactions, thereby bolstering China’s influence in global finance. While SWIFT remains the dominant global messaging system for cross-border payments, CIPS is steadily gaining traction, particularly in transactions involving the Chinese yuan.

Despite these disruptive trends, the U.S. dollar remains deeply entrenched in global trade and finance, making a complete transition to another currency or system improbable in the near future. The dollar underscoring its continued dominance. However, the dollar's once-unquestioned supremacy is increasingly under scrutiny. The surge in gold acquisitions by governments and financial institutions worldwide—led by countries like China, Russia, and Turkey—is a clear sign of mounting global anxiety. This trend reflects a cautious yet deliberate move towards securing stable reserves in uncertain times, signalling the early stages of a potential shift away from dollar dependency.

The Future: Competing in a Changing World

The migration of wealthy individuals to pro-business environments like the UAE signals a significant shift in global economic dynamics. This trend underscores the urgent need for adaptable economic policies in a world that is evolving at an unprecedented pace. Traditional economic powers, including Europe, now face stiff competition from emerging markets that are increasingly attractive to both capital and talent. The United Kingdom, once a bastion of entrepreneurial activity, is now contending with these new challengers on the global stage.

As the influence of neoliberalism wanes, a new era defined by regionalism and nationally oriented policies is emerging. This shift offers nations a pivotal opportunity to prioritise the needs and interests of their own populations. By focusing on cooperation and forging sensible bilateral agreements, countries can counterbalance the influence of mega-capitalists and an elusive global elite. The potential dissolution of the globalist agenda may indeed herald the dawn of a more balanced and equitable future.

As ethicist Nigel Biggar reminds us, our understanding of right and wrong evolves over time. Judging the past solely by contemporary standards can be misleading; instead, we must strive to understand historical actions within their context. It is this ongoing process of learning and adaptation that the West must harness to thrive.

Robert Musil’s observation in The Man Without Qualities resonates strongly in today’s global context: "However well-founded an order may be, it always partly relies on a voluntary faith ... once this unaccountable and uninsurable faith is exhausted, collapse soon follows; epochs and empires crumble no differently from business concerns when they lose their credit."

In this rapidly changing global environment, the resilience of nations will depend on their ability to adapt and prioritise their own interests while remaining engaged with the world. As we transition from globalisation to a more fragmented, regionalised order, it is crucial to remember that the future is not predetermined. The decline of neoliberalism presents a unique opportunity for a more balanced approach—one that respects national sovereignty while fostering cooperation and mutual respect among nations. The true challenge lies in crafting a future where economic growth is pursued without compromising social justice or ethical responsibility. Within this delicate balance lies the potential for a sustainable and equitable global order.

Bibliography

1. Biggar, Nigel. Colonialism: A Moral Reckoning.
2. Provost, Claire, Kennard, Matt. Silent Coup.
3. Slobodian, Quinn. Globalists: The End of Empire and the Birth of Neoliberalism.
4. Touchard, Jean. Histoire des Idées Politiques - Part I.