New order — or disorder?

What has gone wrong with the world? There is chaos everywhere — from Europe, Asia and the Middle East to Africa. The economic order established after World War II, with a strong institutional setup led by the World Bank and the International Monetary Fund (IMF), is now on the brink due to multiple factors.

The main factors leading to the erosion of the current international financial system are the emergence of new forms of currency, including cryptocurrencies and digital currency, as well as the digital capitalisation of the world market backed by artificial intelligence (AI). There is already widespread speculation in the power circles of capital markets that the dollar may no longer remain the world’s dominant reserve currency for much longer. Cracks are already beginning to emerge in the system. An economic disorder is unfolding, one that urgently requires the attention of world powers to be transformed into an opportunity for a more refined global economic order.

The crisis in the Middle East may also undermine American influence in global affairs, especially its economic reach. The rise and fall of great empires is an old but time-tested concept in history. Apparently, the time is ripe for that theory to repeat itself, as many of the policies currently being pursued by the powerful are flawed. Hence, decline seems imminent.

Noam Chomsky offers his own perspective: he argues that the inherent contradictions and self-destructive tendencies within imperial systems like capitalism ultimately lead to internal decay and external resistance. This process is accelerated by the pursuit of narrow, short-term economic and political interests, often at the expense of long-term stability and the well-being of both the imperial power and its subjects. This is exactly what appears to be unfolding in world affairs today.

The financial system is directly linked to the political system. Political systems are shattering all around due to multiple factors, especially the disorder that followed the collapse of the former USSR. The unipolar world under US supervision is no longer functioning effectively, and rule-based, principled politics has changed altogether. The UN and its functioning are already under an existential threat. A timeline for creating a new, principled, balanced world cannot be given, again due to multiple factors, particularly the aggressive policies of powerful nations pursuing their own priorities.

The long-enduring capitalist system was once the most effective, delivering efficiently. However, the rapid pace of technological revolution has begun to outpace this old, archaic model. The system could have continued to deliver effectively if it had been calibrated to incorporate new AI-based internet applications.

Now that digital currency is overtaking the cash-based economy, whether in the form of paper money or credit and debit cards, the world is rapidly shifting toward crypto and mining-based digital assets. As for the ultimate shape of the new economic order, one thing is certain: multipolarity will emerge within this new and unfamiliar system of economic governance and policymaking.

In fact, the future lies in non-centralised or decentralised digital currencies, which help avoid tariff and non-tariff barriers by bypassing dollar transactions. China has already taken the initiative to forge alliances through platforms such as BRICS and the SCO and has begun conducting trade with some countries, including GCC nations, using digital cash for imports and exports. Currency swap agreements are already in place as alternatives to ease trade restrictions and reduce dependence on dollar-based payments. This represents a real change and threat to the dollar, which has ruled global transactions for decades. Once digital payment systems are fully functional, the global economy will become significantly more independent. Cryptocurrency is already making strides to overtake other formal currencies.

China has begun building a new parallel economic system to challenge the international economic order dominated by the dollar. Initially, it started making payments in Yuan (RMB) through currency swap arrangements and has now moved toward digital RMB transactions, bypassing the dollar in the Middle East and with other trading partners. The Asian Infrastructure Investment Bank (AIIB) is one of the main infrastructure lending institutions and the Asian Monetary Fund (AMF), serving as alternatives to the IMF.

Recently, China has established a Conflict Mediation Council to resolve international disputes — an attempt to create an alternative to the powerful UN Security Council for countries within its sphere of influence. China has also significantly strengthened BRICS, the Shanghai Cooperation Organisation (SCO) and the Regional Comprehensive Economic Partnership (RCEP) to advance trade and commerce more effectively. It is widely believed that the global economic order has already tilted in favour of China.

It is quite interesting to note that the tariff turmoil began shortly after President Trump took office and began targeting both allies and non-allies with new tariff lines under the banner of ‘new deals’, disrupting the entire international trade system. In fact, the global economic system historically favoured the capitalist paradigm, with the US as its main beneficiary.

Institutions like the IMF and World Bank enabled the US to exert global financial influence, resulting in a dollar-based economic alignment that replaced the old Bretton Woods system. The World Trade Organization (WTO) emerged as the most potent force regulating trade in favour of developed countries. It was a more refined form of the General Agreement on Tariffs and Trade (GATT) and, in fact, succeeded GATT in liberalising global trade by establishing a highly effective supply chain mechanism.

President Trump's new tariff policies are believed to have acted as a catalyst for the formation of new economic alliances, even while staying within the framework of WTO rules. As China remains the world's leading supplier of goods and services — especially in the rapidly advancing AI-powered electric vehicle (EV) industry — global trade is increasingly tilting towards China due to its cost-effective offerings. US tariff policies under Trump, aimed at securing better deals, have ironically accelerated the shift toward trade mechanisms favouring China.

The neoliberal economic model, which advocates free trade and liberal economic principles while often sidelining welfare concerns, has suffered a setback due to Trump’s tariff and trade policies. While the current US administration does not actively promote welfare economics, it is also no longer aggressively pushing the neoliberal agenda.

It is widely believed that the 21st century belongs primarily to Asia. New economic alliances and policies are increasingly aligned with a decentralised financial system that favours digital assets and transactions. AI-empowered systems are expected to eventually replace the old, centralised system regulated by institutions like the World Bank and the IMF, where dollar-backed currency ruled the world.

We are heading into a different era, one in which AI-driven technologies and applications will operate and regulate the economic system. It remains to be seen how long-standing institutions like the IMF, World Bank or even the SWIFT payment system will continue to call the shots. Only time will reveal how the new system unfolds its influence and governs the old economic order with a more refined mechanism.

The writer is a former additional secretary and can be reached at: [email protected]

Disclaimer: The viewpoints expressed in this piece are the writer's own and don't necessarily reflect Geo.tv's editorial policy.

Originally published in The News