GROWING WORLDWIDE CONTENTION
As we go to the press the world is hurtling TOWARDS A CATASTROPHIC SITUATION. Slow growth rates with many an economy in recession, resulting in a hectic scramble for markets, geo-political manoeuvring and even conflagration in some places. Together with this the world is heading for a major new geo-political alignment, with the post WWII unquestioned domination of the only super power on the decline and the rise of a rival in China. While this latter conflict is centre stage, the others (minor conflicts) for spheres of influence and markets are no less. All the signs of the 1920s and 1930s are playing out again – but not a mere repetition, in a far more viscous and aggressive form. Though the US is a declining power, it is not going down without a fight. Economic growth rates are weak but not negative as yet:
The US growth rate this quarter was down to 1.7%, the EU’s is 0.2 % and employment growth is 0.1% , while the world growth rate is 3.1% in 2024 . While these western countries are in decline it is the China Russia Axis that is growing and asserting its power worldwide. According to the National Bureau of Statistic, China’s economy expanded at a rate of 4.6% in the July-September quarter – given it is the second largest economy in the world with a GDP of $ 17 trillion, this makes the growth have a huge impact on the world economy as a whole. The US is at the top in nominal terms, whereas China has been at the top in PPP (Purchasing Power Parity) since 2016 after overtaking the US. As of 2024, both countries together share 43.2% and 34.51% of the entire world’s GDP in nominal and PPP terms, respectively. The GDP of both countries is higher than the 3rd-ranked countries, Japan (nominal) and India (PPP), by a huge margin.
This is also reflected in military expenditure to some extent. But here the US far outstrips other countries. With the United States military having roughly 750 bases spread out across 80 countries, it is sure to flex its muscle to the maximum. After all, in 2023, the US spent approximately $820.3 billion, or roughly 13.3% of the entire federal budget for that fiscal year on the military. In March 2023, the Department of Defence (DoD) requested $842.0 billion for 2024 — a 2.6% increase. And the amount keeps growing. Since 1980, defence spending has risen by 62% in the US, climbing from $506 billion to $820 billion by 2023, after adjusting for inflation. US defence spending is more than the next 10 countries taken together.
On the other hand, China has said that it will spend $231.36 billion (1.66554 trillion yuan) on defence, maintaining its position as the world’s second-highest defence spender behind the United States (though the combined expenditure of Europe is more than that of China). It has 9 bases on foreign lands. Since 2000, China’s defence expenditure as a share of its GDP has hovered at or below 2 percent. In comparison, U.S. military spending has averaged about 3.8 percent of GDP since 2000. Japan’s military spending has remained set at approximately 1 percent of its GDP, but this is set to change. In 2022 Europe had a combined expense of 235 billion euros (or $ 258 billion) on defence . Russia’s official 2022 military budget was 4.7 trillion roubles ($75bn), or higher, and about $84bn for 2023, 40% more than the initial military budget announced in 2021.
The defence budget of India was increased to ₹621,940 crore ($75 billion) in 2024-2025, roughly equal to that of Russia. The bulk of the population have nothing to eat but we can spend such a gigantic sum on defence – a boon for the defence contractors.
The US growth rate this quarter was down to 1.7%, the EU’s is 0.2 % and employment growth is 0.1% , while the world growth rate is 3.1% in 2024 . While these western countries are in decline it is the China Russia Axis that is growing and asserting its power worldwide. According to the National Bureau of Statistic, China’s economy expanded at a rate of 4.6% in the July-September quarter – given it is the second largest economy in the world with a GDP of $ 17 trillion, this makes the growth have a huge impact on the world economy as a whole. The US is at the top in nominal terms, whereas China has been at the top in PPP (Purchasing Power Parity) since 2016 after overtaking the US. As of 2024, both countries together share 43.2% and 34.51% of the entire world’s GDP in nominal and PPP terms, respectively. The GDP of both countries is higher than the 3rd-ranked countries, Japan (nominal) and India (PPP), by a huge margin.
This is also reflected in military expenditure to some extent. But here the US far outstrips other countries. With the United States military having roughly 750 bases spread out across 80 countries, it is sure to flex its muscle to the maximum. After all, in 2023, the US spent approximately $820.3 billion, or roughly 13.3% of the entire federal budget for that fiscal year on the military. In March 2023, the Department of Defence (DoD) requested $842.0 billion for 2024 — a 2.6% increase. And the amount keeps growing. Since 1980, defence spending has risen by 62% in the US, climbing from $506 billion to $820 billion by 2023, after adjusting for inflation. US defence spending is more than the next 10 countries taken together.
On the other hand, China has said that it will spend $231.36 billion (1.66554 trillion yuan) on defence, maintaining its position as the world’s second-highest defence spender behind the United States (though the combined expenditure of Europe is more than that of China). It has 9 bases on foreign lands. Since 2000, China’s defence expenditure as a share of its GDP has hovered at or below 2 percent. In comparison, U.S. military spending has averaged about 3.8 percent of GDP since 2000. Japan’s military spending has remained set at approximately 1 percent of its GDP, but this is set to change. In 2022 Europe had a combined expense of 235 billion euros (or $ 258 billion) on defence . Russia’s official 2022 military budget was 4.7 trillion roubles ($75bn), or higher, and about $84bn for 2023, 40% more than the initial military budget announced in 2021.
The defence budget of India was increased to ₹621,940 crore ($75 billion) in 2024-2025, roughly equal to that of Russia. The bulk of the population have nothing to eat but we can spend such a gigantic sum on defence – a boon for the defence contractors.
THE US/EU vs BRICS
The BRICS Summit is taking place in Russia on Oct 22 -23 2024. Reports are yet to come in; but at this Summit, BRICS will be expanded from the original 5 members (Brazil, Russia, India, China & South Africa) to also include Egypt, Ethiopia, Iran Sudi Arabia and the UAE. It represents over 40% of the world population. Argentina, at the behest of the US, refused to join BRICS. The headquarters of the BRICS Bank (New Development Bank) is situated in Shanghai. BRICS is pushing for trade in their local currencies resulting in the de-dollarisation of international trade. It is the de facto counter to the G20 promoted by the rich western countries.
Though the US is far ahead of China-Russia in both GDP and military terms, the latter is fast challenging the hegemony of US domination worldwide. They are quietly weaning countries away from the US sphere of influence and drawing them into the BRICS ambit. Besides one of the strongest US allies, the EU countries, are not only economically weak, many are breaking away forging closer ties with China – like Spain, Norway, and even Germany. Many are eyeing the huge Chinese market where nearly a billion people have been lifted out of poverty.
It is predicted that the global growth rates for the next five years will be the lowest in decades. Together with this the high inflation rates (5.8% in 2024) are pushing central bank interest rates to unsustainable levels. With the global debt at $36 trillion the interest amount is larger even than defence expenditure.
The US economy is caught between a rock and a hard place. If it reduces the interest rate, it will sink the dollar. If it increases interest rates, servicing the huge debt will be unsustainable and will sink the economy. With the stock market heating up as never before, a crisis is in the making (called a correction) – it is predicted to be a banking crisis, a crash in commercial real estate prices, coupled with the toxic debt burden. Earlier crashes were accompanied by just one of these; now for the first time ever the three are likely to strike together. Its implications are obvious. Much suffering is at hand for the world’s people.
The Chinese economy was cushioned by a big stimulus package in the last few years. Fearing a major social upheaval, it has been intervening in the economy in a big way. Though the geo-political face off, worldwide, at present, is more between the US and Russia, in the long run the actual conflict will be between the US and China – the two major economic powerhouses. Of Course even in the present geo -political situation, Russia is closely aligned with China. Also, China is evolving an alternative to the SWIFT currency system and the use of the dollar in international trade has come down to 59% of all international transactions from 89% earlier. De-dollarisation is proceeding apace, though the dollar is still the major international currency. The massive trade between Russia and China is already in their local currencies and not in dollars.
Even though the world economy is not yet in crisis there are many geo-political conflict zones breaking out – as in the Middle East (Israel -Palestine); Ukraine (a defacto proxy war of the US against Russia); Taiwan and the South China Sea; and North Korea. Also, as China’s clout increases it is promoting the New Development Bank to counter the IMF/World Bank, the BRI (Belt and Road Initiative) which is extended to over 100 countries; and the Trans Asian Railway Network. Also, the so-called Axis of Evil is evolving with an alliance between China, Russia, Iran and North Korea – opposing the West, led by the US. Cracks are also appearing in Europe with a number of countries tilting towards China – including the latest in France. A further problem the West faces is that its major TNCs have their manufacturing units in China – not only to avail of the skilled cheaper labour but positioning themselves close to the huge Chinese market. Look at the car market for example – one in three automobiles manufactured in the world are in China. Chinese cars are everywhere flooding the world markets (100 countries); the EU, Canada and US have recently put huge tariffs on Chinese vehicles to prevent their entry into their markets; China has hit back by imposing restrictions on agricultural imports from the EU and on goods from Canada and the US.
US PROXY WAR AGAINST RUSSIA
Meanwhile as the US wages its proxy war against Russia, using Ukraine; 6 lakhs Ukrainians have been killed since 2022. Earlier only third world countries were used as cannon fodder for imperialist wars; now for the first time Europeans are being used. The US has been weaponizing the dollar – freezing $300 billion of Russian assets. Earlier it had frozen assets of Venezuela, Iran, Afghanistan, etc. The US is aggressively provoking Russia for war by – stationing its missies and bases on its borders; destroying the nuclear arms control framework earlier agreed on; trying to banish Russia from Crimea – its only warm-water port; and provoking Ukraine and arming them to the teeth though Russia has made no territorial claims on the 4 Russian speaking regions of Ukraine.
The US is pushing Russia to the wall; but its sanctions regime is not working. In Spite of sanctions, it is growing faster than Europe and is the 4th largest economy in the world in PPP. Geographically Ukraine can be the main entry point into Russia as it is the only place with plains; all other regions have mountainous divides. So, NATOs threat to expand to Ukraine can have serious repercussions for Russia.
Even without a serious economic crisis geo-political tensions have heightened; one cannot imagine what would happen once the economic crisis breaks out – possibly by 2026. It would result in a third world war; which no one wants due to the existence of nuclear weapons. The main source of these continuing global tensions and war is US imperialism (and their agents worldwide), against which the entire world’s people and governments need to unite. Only such a unity can prevent any catastrophic outburst in the future.
Kobad Ghandy
Editor of the Journal
D D Kosambi Research Foundation
October 21st, 2024
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