by Zafar Bangash (Editorials, Crescent International Vol. 44, No. 5, Ramadan, 1436)
The US has maintained its dominance of global affairs through militarism and the dollar. If the dollar were retired as a global currency, US militarism and aggression would be dealt a severe blow.
While a waning superpower, the US has maintained its global hegemony primarily due to its overwhelming military power as well as supremacy of the dollar as global reserve currency. Washington assumed its dominant role after Britain was weakened by the bloodletting of the Second World War. Until then, the British pound held sway in much of the world. The US has been dominant far too long for its own good, not to mention the havoc its hegemony has wrought on the rest of the world. Even the World Bank and the International Monetary Fund (IMF), created as financial instruments to control the rest of the world after the Second World War, have failed to contain America’s global slide.
America’s self-proclaimed exceptionalism and, therefore, unilateralism have not been well received. Rival powers have emerged to challenge the US-led unipolar world. Far from adhering to any principles of civilized behavior, America’s conduct has been scandalous. Ample evidence of American misconduct is available in such places as Afghanistan, Pakistan, Iraq, Libya, Syria, Somalia and a host of others. Interestingly, despite the preponderance of fire power, the US military has failed to subdue either Afghanistan or Iraq. In fact, in both places the US has been exposed as a paper tiger. It is clear the US can be defeated. This has also had a direct bearing on the role of the dollar as global currency. True, emergence of the euro has contributed to the dollar’s decline but that alone does not explain the momentous changes underway.
China’s emergence as a leading financial power has dented the dollar’s clout. Its decision to launch the Asia Infrastructure Investment Bank (AIIB) with a start-up capital of $50 billion has sent shockwaves in the corridors of power in Washington and on Wall Street. Even America’s erstwhile allies — Britain, Germany, France and Italy — have made a beeline to join the AIIB along with 30 other countries as founding members, much to the chagrin of the Washington cowboys. There is more bad news for the Wall Street robber barons: China is flush with cash and has announced plans to invest in infrastructure development with total amounts reaching some $150 billion ($46 billion of this have been earmarked for the Pakistan-China corridor alone!).
This was preceded a year ago by the BRICS (Brazil, Russia, India, China and Russia) group of countries’ decision to establish the New Development Bank. Several countries led by Iran have also entered into barter agreements or trading in their own currencies with Russia, Turkey, India and Iraq bypassing the dollar and euro. In the past, the US reacted harshly to any government’s attempt to bypass the dollar. Saddam Husain of Iraq had tried to use euros instead of dollars and paid the price with his head. So did Muammar Qaddafi when he floated the idea of establishing the African Monetary Fund. Today, however, the US is in no position to take on China, Russia or a combination of countries that are determined to go their own way.
China has given no indication that it wants its currency, the yuan to replace the dollar as global reserve currency. Events, however, may ultimately move in that direction. The world does not need another hegemon given the bitter experience with the now-declining one, the US. It is definitely time to retire the dollar, and with it, US mischief so that the world can heave a collective sigh of relief.