The Decoupling Game

30.5.09 by King

Time was when the world was a biddable place. Birds of a feather, it was felt, so we all flocked together. With very few exceptions. Myanmar was one, Cuba and North Korea two others. Otherwise, we all lived in each other’s pockets until a very strange thing happened.

The west, on the flimsiest of pretexts, which they didn’t even bother to make somewhat credible, attacked one of the poorest countries on God’s earth, Afghanistan. The outrage was carried out at the time on a whole host of obscure grounds: because they could get away with it, to put to the test the premises of the vile Great Game theory or the no less vile PNAC, to try out their tremendous stash of modern armaments, out of sheer high spirits. Logic was absent from the act as was common sense. And even today no motive based on reason has suggested itself. But, then, the Americans are notoriously incapable of going beyond first consequences in their mental processes and like their own cinema industry, they indulge in wishful thinking with the ease of five-year olds. Afghanistan was of course followed by an equally horrendous attack on Iraq and both countries are even today in the midst of a merciless, endless war.

But even out of evil some good might arise and that has turned out to be the case for the Af-Iraq wars. They have bled the invaders dry, thus contributing their fair share in bringing about the present economic crisis plaguing the west. As the unraveling started, the more perspicacious of analysts spotted straight away that what was happening was not necessarily bad for the world as a whole. While the west plunged ever deeper into debt and monetary distress, other countries, they argued, the first tremors over, might benefit from the situation and improve their own financial standing. West commentators, the status-quo people, refused to take the idea, often termed decoupling, seriously. “De-coupling is a myth that has been thoroughly shattered,” intoned one of them most recently. Yet little by little the thick-skinned, too, have begun to reconsider and bow to the inevitable. Countries geographically or politically situated outside the west sphere are finding their feet and getting on with consolidating their newfound freedom to bend their economies to their own will.

Decoupling has come in all shapes and sizes, heralding changes in the global balance of power which will no doubt be of a permanent nature. Despite desperate efforts to convince us of the contrary, it is has grown obvious over time that neither Russia, the biggest country in the world nor China, the world’s most populated area has succumbed to the ills besetting their erstwhile rivals. Oil prices have been held down artificially, yet Russia has eased itself out of the initial crisis. Today, it holds the whole of Europe in its hand in terms of oil and gas. And much of the rest of the world is also willing to follow where Russia leads. China, with its usual discretion, has begun to divest itself of the shaky dollar by using the greenback to acquire vast reserves of natural resources from all parts of the world or by instituting trade with various partners in local currencies. We feel confident enough to predict that within no time now, the loss of the legendary US markets and the insatiable consumers of the west will have ceased to make much difference to the Chinese economy. It will continue to act as the powerhouse of manufactured goods at competitive prices, and these goods will be snapped up by people elsewhere with money in their pockets.

Brazil and South Africa both have resilient currencies to offer and growth economies. The long-respected axiom: when America sneezes, the world catches pneumonia has taken on a new twist, namely when America sneezes the world remains germ-free. No symptoms of swine or bird or any other exotic animal flu are to be discovered in the economies of the non-west or Freeworld countries. In China, Brazil and South Africa are assured of having a partner who will steadily absorb massive quantities of the iron ore and soya produced by the one and the platinum and coal mined by the other. Brazil is also establishing trading relations from countries round the globe, the latest to date being, surprisingly enough, Turkey with which it has just concluded an important oil deal. The growing prosperity of Venezuela and other South American countries provides an equally enlightening model of taking off and going one’s own way economically.

Similar instances of the phenomenon emerge from the Islamic world. Iran, firstly, which has begun playing a very active role in South American economic activities, adding Bolivia to its list of most recent partners. Iran has just brought off the coup of a successfully completed gas pipeline project with Pakistan. To top it all, Iran’s bourse has also been shielded from stockmarket mayhem and is faring well. Turkey has been doing well and is edging away from an IMF loan which is almost being thrust down its throat. Even the Lebanese economy is in the plus territory. Furthermore, Islamic banks in general have shown themselves insulated from the current financial crisis. Not one Muslim bank has failed during this time and applied for a government bail-out to restore its finances. The reason of course is that operating funds for these banks are deposit-based and do not result from borrowing in interbank markets. Toxic collateralized debt obligations are unknown to Shariah-observing banks since the possession of interest-bearing securities is strictly prohibited. The Islamic finance industry thus restricts itself to retail and investment banking, insurance, fund management and the issuance and trading of Shariah compliant securities. In these hard times of a surfeit of toxic assets, such sound balance sheets are refreshing indeed. Decoupling has now been taken so far that even Dubai has decided to remove its considerable gold reserves from London and lodge them henceforth on its own territory.

As for Africa, no one should think the mighty continent will be ignored in the upheaval. It, too, has begun turning its back on western interests and working more closely with the other major powers. Instead of lifestyle civil-war imposed upon them by the west, plain work and the rewards thereof now appear the desirable alternative. Soon, Chinese-built roads, hospitals and schools will dot both urban and rural areas. And renewed job opportunities will absorb unemployment.

So instead of falling by the wayside one after the other and pathetically calling the penurious IMF to the rescue as west powers had hoped, countries round the world are forging their own blueprint for survival and revival. Even a state like Pakistan, with its considerable military expenses, ongoing low-key warfare and a newly acquired crisis of internally displaced persons from the valley of Swat, has applied for IMF funds out of habit rather than any real necessity. The economy on the whole is sound and will no doubt improve over time. Pakistan has also known the good luck of harvesting bumper crops this year, which should make feeding the population that much and cutting down on food bills.

The decoupling game, as the early seers predicted, was held on schedule. The weaker side financially come out the winner, and the world can now go about its business with a lighter heart. Naturally, the west has gloomier prospects ahead of them. Willfully, west countries ignored all limits of reason and decency in their desire blindly to wage war, hoping thereby to ensure a further limitless period of unchallenged hegemony over the world and its resources. Things turned out otherwise. In fact, they turned out so badly, they have reduced the future for themselves to a negative growth path from which they will not be wandering off any time soon. The false prosperity the west had built upon for the past thirty years is at an end. The amount of western wealth destroyed over the last two years alone is beyond comprehension. Their neighbours-client states no longer look to them as to the rising sun.

To sum up all of the above in three one-syllable words, easily retained: west is toast.