Politics and the global financial system used to be two separate factors that have always worked independently from each other, and separately from the rest of the global transitions that lead to long-term changes and challenges affecting the context of development. But the current political dynamics are not as stable as they have previously been, the influence of one, leads to the final outcome of the other. As the rise of one leads to the rise of the other, and the fragility of one, opens the way to the downfall of the other.
The transition concept of war is taking shape in many forms, yet the expenditure on resources for warfare was not one of the expected outcomes and challenges that should have been prepared for beforehand. Currently, every decision making process is studied and taken deliberately as to what kind of changes and adjustments will it have to do to the national and international economy, which will also relate to the global policies and jurisdictions. Especially when the decision makers are as bold as the leading state powers and administrations who can turn tables in regard to what benefits them the most.
As the current global political system is losing its grip on world order, the economic challenges are coming through as an unintended consequences of the aforesaid, which is marking its affects on the power states first, shaking its own economy with the aim of creating the world’s most populace, dependent on the global financial assistance. It’s a scenario that leaders have been and continue to avoid, but it’s a long battle to win over and maintain.
The American economy is an all-encompassing system of economic opportunity and stability for the world. Not only is it a dependable source for wealth, but it’s also considered as one of the most secured assets and forums in the system. But with the recent political events that are being played by other parties around the world, not only was the American economy affected, but it got to the point of tension and fragility too. That have also affected China and Russia, and even France who are struggling to stabilize the situation through economic changes.
The downturn of the global economy is not unpredictable and unexpected, since the war on Ukraine, the expenses in military spending has increased significantly in all their aspects and forms. Leading to a slow domestic growth that started to affect the international economic system through inflation and the rising costs of goods and energy supplies.
In the U.S., there has been a significant shift in monetary policies and disruption in supply chains especially in industries that highly depended on foreign raw materials for their supply. That also added a new element of the economy which led to inflation, and that’s another economic crisis that the administration has been trying to address and solve before any expected recession. The Russian and French economies have also had a similar fate of the former, but having the American economy the most significant and powerful of them all, the effects were contagious to other states who are in high dependency on the dollar and other compositions within the U.S. economy.
And as the economic crisis in this matter is highly influenced by the diplomatic and political changes, some states have been seen to be on a dead end of taking sides while weighing the possibility and probability of the outcome that might have major implications on them for the long-term. For in this current situation, every political decision is tied with the outcome of their economic situation in the context of diplomacy. And China is one of the countries who was seen to be in the middle of it all.
Having strong ties with Russia have always been considered a high step forward towards prosperity and solid relations in regards to diplomacy and military cooperation through engagement and mutual benefit. But the war on Ukraine altered the political calculation and made some states like China reconsider their political positions depending on the their future outlook for their nation’s long-term economy.
China did not use their economic cards to play with, rather, they emphasized on strengthening their ties with Russia while remaining neutral on taking sides. That led to stronger economic relations with Russia which opened the way to a strong bilateral trade that have hit a record of more than $200 Billion dollars in 2023, which was the start of the conflict, and started to increased ever since.
However that deeply changed the political spectrum, as China’s main focus is on the economy and strengthening their economic position in the world that they would eventually be compared to the American economy. Not only that, but through their diplomatic economic efforts and decisions, China is building a new forum of economic policy, that relies on diplomatic stances of influence and support without having and being forced to take a specific side.
As every change comes with picking a side to represent and support, the gap of influence and division gets wider as the context of conflict grows. That leaves one with a question of what does it mean for the rest of the world?. A recession? or an inevitable crisis of the downfall of the global financial system all together?.
It is a hard question to answer, as it’s a hard pill to swallow and realize. But the inevitable is the ultimate truth of the possibility that such a scenario currently taking place would lead us to. And it’s as follows. First, the world will definitely face slow growth and recovery due to the expenses associated with military operations and spending that have been put into effect to create and maintain peace. Second, a global recession that would affect the world economy and market system which will eventually put every business out of balance and reach. Third, geopolitical instability, as the world would be divided into parts, the globalization of economy virus the de-globalization of economy. And that would also lead to a global crisis as every state would be conservative about their supplies. Finally, a major political shift would be the eventual port for the economic and political crisis, as each nation would have its own concerns and supporters that will create new ground rules for a new economic system that might have a probability of success or failure, depending on the political influence if the two have been tied.
Gone are the times of economic independency and political uncertainty being the norm of sovereignty, connected but not influenced by one another. Now is the time where every political decision has its own economic consequences that are in need of being thought about beforehand. And with this connection, a long-term peaceful settlement is the only option to go for in order to have a clear view of what the next phase will be, and what to expect from the transition to sustainable development and prosperity.
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