Current Affairs

In an interview with the Hoover Institute, Niall Ferguson argued that Cold War 2 had begun. In the interview he quoted Henry Kissinger, who three years ago argued that the technical arguments that had evolved meant that the West was in foothills of a cold war, but today, because of the war in Ukraine and the worsening relationship with China, he views that historically there is a Cold War.

But of course the current situation does not seem to be at the depth of the previous Cold War. But there are comparisons that can be made, which is the socio-economic differences that have emerged. There are political arguments and most of all there are territorial disputes between the allies of the West and the East. There to a degree is gunboat diplomacy in the South China Sea and territorial dispute in Ukraine. But it is the concern of the West, especially in the field of technology and military usage of that technology that has caused most concern.

Russia through proxies has expanded their influence across North Africa, and been rewarded by mineral contracts. The argument of how Russia has become an influence is also an argument of socio-economic argument, climate change and population growth. In many ways it is Russia’s lack of concern with these arguments that has led to mercenary groups such as Wagner sharing the spoils of war in countries that have problems with high unemployment, growing birth rates and the failure to develop that has enabled civil wars in these regions. The facts of corruption and bankrupt governments that are unable to unlock resources has led to civil war and migration from conflict zones and it is the Wests failure to come to qualitive arguments that has failed to bring these arguments into a more resource fed argument.

In a speech before the withdrawal of French forces from Mali, Emmanuel Macron argued that the problems in North Africa were attributable to poverty and development. He argued that the poverty affecting North Africa collided with arguments of underdevelopment and that the course of North Africa could not be determined through military intervention alone.

Countries need development, but they may have debt caused through wars, drought or growing populations that require health care, which has to a degree been a reason for development being slow to come. The Belt and Road initiative has brought growth to Africa, but also new debt that has led to the question whether debt that will be generational, has been worthwhile politically.

The geopolitical argument itself is being transformed by China making its voice heard, not just in the global south but also in the Middle East, which has enabled China to become a transformative power and change the world through its initiatives, peace plans and the Belt and Road initiative. China’s influence on the world stage is growing and it is building significant influence over the countries that it has invested in.

Countries such as Zambia have been forced to approach the IMF, because they have over spent on the belt and road programme. There have been fresh rounds of IMF negotiations because of new Belt and Road developments, which has led to questions about whether the economy can ever be dynamic enough to afford the progress that has been made through building new roads, football stadiums and airports.

Can the West build a new relationship with the countries that are struggling with Chinese debt, especially as a number of these countries have turned to the International Monetary Fund for debt relief. Biden has stepped in with initiatives, but countries that are debt poor have been forced to sell their resources to Chinese companies in order to meet the obligations of the Belt and Road debt and are not looking for further loans to manage their indebted economies, which are struggling.

But of course debt is not only confined to Africa; countries such as Laos, Pakistan and Sri Lanka are debt heavy from the Belt and Road initiative. All have good reason to question whether the debt they have taken on is fair or not. Chronically indebted countries have turned either to the IMF or China, and have asked for extended facilities and time to manage their loans.

In an article in the Interpreter, Mariza Coorey argues that debt in Laos has reached 100% of GDP. She details the dangers that Laos is facing, it has already devalued its currency and due to its isolation is finding it difficult to turn to external markets to gain debt relief. Laos has already sold the majority of its stock in the projects that it has been involved in and sold the majority of the companies that provide it with the finance it gets from taxation to service its debt to China.  She argues that this is an opportunity for China, to provide Laos with debt relief.

Pakistan and Sri Lanka have turned to the IMF for debt relief, Sri Lanka is in a much more chronic position than Pakistan. The money to pay civil servants and the cost of rising inflation has had an enormous effect on the poor and middle class. The debt has built up because of the belt and road initiatives, poor management of the economy, Covid 19 and a civil war, which has depleted the governments resources.

Pakistan could argue that a lot of their problems are due to natural disasters brought on by climate change, but endemic corruption and an inability to pay for the belt and road investments has led to Pakistan having to go to the World Bank and IMF to help manage its finances before it defaults.

Of course these countries need to question their political elite that have taken on the debt, but the initial development of debt was determined by the need for growth. In Pakistan, Sri Lanka and Laos, the investment in infrastructure is still a core element to the economy , but the question is how much longer will these projects go on before governments have the assets that they wanted. The level of debt has exceeded these countries ability to service their debt, even with the help of devaluing their currency and the IMF and World Bank providing debt relief. So the assets that China has built through the Belt and Road initiative has been returned to China, whether it is a sovereign asset or not.

Is the answer to influence the global South through debt relief provided by the West, or is it a question of allowing these economies to sink and manage the debt as well as they can. The Belt and Road initiative is being rolled back, except where a country has resources to pay for the infrastructure changes. But the development needed by these smaller economies is still significant and the resources necessary to drag a country into the 21st Century have turned nations that were managing their finances well, into indebted economies.

The argument is really about whether the West can build on the debt these countries have accrued and bring about change, before the influence of China is all pervading and the economies are more dependent on China than just the Belt and Road initiative. Is it a form of colonial subjugation if the West pushes on and forces these nations to adhere to Western arguments of fiscal responsibility or is the argument of development at all cost the winner in this argument. But if it is a question that the world is entering a new cold war, is it a question of an argument that it is imperative that countries are helped in order to manage outcomes at a later date and within institutions that matter.

Niall Ferguson believes the West needs to play for time, because China’s birth rate is falling and argues that Kissinger’s policy of rapprochment gave the West ten years for their economies to build up the resources necessary to confront the Soviet Union. He argues that we are in this position today because the West needs to rebuild and refocus its resources for a second cold war.

 The reality is that the geopolitical argument is part of the structure that will determine the outcome of the second cold war. But it is the economic argument that is key to the West’s ability to confront the war of influence. It is a matter of time before there will be a serious default, which will destroy the future of a nation, so the question is whether the West should forgive some of the debt, because of the way that the Belt and Road initiative has made so many lives that bit poorer.

If Kissinger is right and we are in a cold war, then can the West sustain the pressure that will be placed on it and has the West ten years before it can truly challenge China and Russia. The argument of influence itself has been contained through the high levels of debt and influence in Africa and elsewhere, nations have had to go to the IMF and world bank, but China itself is not compromising on debt repayments and that will challenge the resources of countries across the global south. But if push comes to a shove will the nations with the highest exposure to debt approach China or just renege on paying their debt, that is a question that seems central to the struggle of these nations, especially if the IMF and World Bank fail to come to an agreement with these nations.  But it is a hook that the West has and if the worst comes to the worst and there is conflict in Taiwan, then China has some tough arguments that it will have to confront, with not only the West, but also the global South.