New Kids on the Block: Rising Multipolarity, More Financial Statecraft

Abstract

With a rise of emerging market economies such as China, India, and Brazil, the distribution of global capabilities is shifting. In 2011, a newly inaugurated World Bank annual report, Global Development Horizons 2011, began with the following bold assertions:

The inaugural edition of GDH addresses the broad trend toward multipolarity in the global economy … By 2025, the most probable global currency scenario will be a multipolar one centered around the dollar, euro, and renminbi … [In the postwar era,] in exchange for the United States assuming the responsibilities of system maintenance, serving as the open market of last resort, and issuing the most widely used international reserve currency, its key partners, Western European countries and Japan, acquiesced to the special privileges enjoyed by the United States — seiniorage gains, domestic macroeconomic policy autonomy, and balance of payments flexibility … [Today] three conventional pillars [of global economic governance] need to be reappraised: the link between economic power concentration and stability, the North-South axis of capital flows, and the centrality of the U.S. dollar in the global monetary system. (World Bank 2011: xi–xii; 2)

This is quite striking language from the World Bank, suggesting as it does that global inequality might be a source of economic volatility, that major emerging powers might become senders rather than recipients of international investment, and that the U.S. dollar could gradually yield its position as the anchor currency for the world economy.