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‘World becoming more multipolar’, Western hegemony declining, admits European Central Bank

European Central Bank President Christine Lagarde acknowledged “the tectonic plates of geopolitics are shifting faster” and “we may see the world becoming more multipolar”, with the decline of US dollar hegemony, war in Ukraine, and rise of China.

Europe multipolarity Lagarde ECB

(Se puede leer este artículo en español aquí.)

The president of the European Central Bank, Christine Lagarde, gave a speech acknowledging that “the tectonic plates of geopolitics are shifting faster” and “we may see the world becoming more multipolar”, with the decline of US dollar hegemony, war in Ukraine, and rise of China.

“We could see more multipolarity as geopolitical tensions continue to mount”, Lagarde added.

Geopolitical Economy Report editor-in-chief Ben Norton analyzed Lagarde’s speech with Radhika Desai, professor in the Department of Political Studies at the University of Manitoba and director of the Geopolitical Economy Research Group:

In the April 17 speech, titled “Central banks in a fragmenting world”, the European Central Bank (ECB) president cited the “growing rivalry between the United States and China”.

Lagarde stated:

So I decided to accept the idea, and I do that reluctantly, because I don’t think that it’s necessarily a pretty picture, but to accept the idea that we are moving towards a fragmented or a more fragmented world than we’ve had it, and that we are not necessarily in a completely bipolar situation, but that we might move in that direction.

We are witnessing a fragmentation of the global economy in two competing blocs, with each bloc trying to pull as much of the rest of the world closer to its respective strategic interests and shared values. And this fragmentation, as I have mentioned, may well coalesce around two blocs led respectively by the United States of America and by China, the two largest economies in the world at the moment.

In her presentation, Lagarde hinted that the European Union could potentially try to pursue an independent path, mentioning the “strategic autonomy agenda in Europe”.

This was a clear reference to a concept that French President Emmanuel Macron has promoted. This April, Macron visited China and publicly criticized US dominance of Europe, arguing the leaders of the region cannot simply be “vassals” and “followers” of Washington.

Lagarde is one of the most powerful people in Europe. She was France’s former finance minister, before later serving as director of the International Monetary Fund (IMF).

The current ECB president gave this speech in New York for the Council on Foreign Relations (CFR), a powerful think tank with a close relationship with the US government, which essentially acts as the link between the State Department and Wall Street.

The politically connected Rockefeller oligarchs cultivated the CFR in the early 20th century, funding its influential War and Peace Studies Project during World War Two and collaborating with Washington to help plan the First Cold War against the Soviet Union.

Lagarde addressed the CFR just one day after the former Federal Reserve chair and current US secretary of the Treasury, Janet Yellen, admitted in an April 16 interview with CNN:

There is a risk, when we use financial sanctions that are linked to the role of the dollar, that, over time, it could undermine the hegemony of the dollar.

Of course, it does create a desire on the part of China, of Russia, of Iran to find an alternative.

Rising wages for Asian workers fuels inflation in Western economies

Professor Radhika Desai noted that much of Lagarde’s speech was about inflation.

“This point about inflation goes to the nub of the issue of multipolarity, which, ultimately, what is it but is diminution in the power of imperialism?” Desai said.

In her speech at the CFR, Lagarde acknowledged that, following the end of the First Cold War, the world was “under the hegemonic leadership of the United States”.

Lagarde said:

In the time after the Cold War, the world benefited from a remarkably favourable geopolitical environment.

Under the hegemonic leadership of the United States, rules-based international institutions flourished and global trade expanded.

This led to a deepening of global value chains and, as China joined the world economy, a massive increase in the global labour supply.

As a result, global supply became more elastic to changes in domestic demand, leading to a long period of relatively low and stable inflation.

That in turn underpinned a policy framework in which independent central banks could focus on stabilising inflation by steering demand without having to pay too much attention to supply-side disruptions

In these comments, Lagarde was clearly indicating that the exploitation of low-paid Chinese workers by Western companies was a significant factor in reducing consumer price index inflation in the core of the imperialist world system.

Lagarde’s remarks were reminiscent of a confession by EU foreign-policy chief Josep Borrell, who admitted in Brussels in October that “our prosperity was based on China and Russia”:

So our prosperity was based on China and Russia – energy and market.

You, US, takes care of our security. You, China and Russia, provide the basis of our prosperity.

This is a world that is no longer there.

Our prosperity has been based on cheap energy coming from Russia – Russian gas, cheap and supposed[ly] affordable, and secure and stable, which has been not the case.

And the access to the big China market for exports and imports, for technological transfer, for investment, and for having cheap goods.

I think that the Chinese workers with their low salaries has done much better, much more to contain inflation than all the central banks together.

So our prosperity was based on China and Russia – energy, a market.

Desai stressed that it is not true, as Lagarde claimed, that “the world benefited from a remarkably favourable geopolitical environment” under US “hegemonic leadership”.

“No, the First World benefited”, Desai countered.

How the hegemonic US dollar system hurts the Global South

Desai noted that this system of US hegemony, which was never really stable, was based on two things: “US military power on the one hand, but also equally importantly, the US dollar system”.

“And if we look a little bit more closely at it”, Desai said, “in practically every major respect, the dollar system has not been good for the Third World, not good for the vast majority of countries in the world, that are not Western, that do not have a place in the G7 where they can coordinate macroeconomic policy and make sure that US allies don’t get too badly burned by the US dollar system – although they have been badly burned by it as well, as we saw in 2008”.

Desai explained:

First of all, the dollar system systematically undervalues the currencies of the Third World.

And when you undervalue a currency, what you are doing is you are undervaluing the resources and the labor of those countries.

Precisely, this is the mechanism by which the West has managed to get access to the resources and the labor of these countries cheaply.

And that also means that the rest of the world has to sell their resources for a song and to work doubly hard, triply hard in order to sell – they have to sell a massive volume of goods, export a massive volume of goods to Western countries, in order to earn Western hard currencies, including the dollar, because their money is systematically undervalued in relation to this.

So that there has always been a big discrepancy between the volume of exports and the value of exports, which of course is artificially lowered by the bad exchange rate.

Secondly, the dollar financial system has given the world nothing but a series of crises after crises, a great deal of volatility.

An international medium of [exchange] ought to have a stable value, but the dollar’s value keeps fluctuating.

Another problem, and a large part of the volatility, and the tendency to crisis, comes from the fact that, whereas a proper monetary system should be based on sort of a balanced environment, the dollar systematically has required imbalances.

The chief among them, of course, being the vast US current account deficits, which the rest of the world has to finance.

But also the imbalances that are created by the US dollar-centered financial system, which has been on the one hand creating vast amounts of unsustainable dollar debt, indebting households, indebting businesses, and indebting governments around the world.

And, on the other hand, blowing up asset bubbles so that US financial institutions and high-net-worth individuals can make a killing with the inflation of asset values.

But this, of course, only leads to the crash of these, or the bursting of these bubbles, and this has created more problems.

Further, the Third World is told that the US has a very sophisticated financial system; it’s great, it’s going to provide you with the capital you sorely need for development.

But of course, in reality, the US-focused financial system offers the opposite of that, because capital for productive investment – which indeed the Third World and the rest of the world really needs – needs to be stable, long-term capital that is able to invest for a long period in infrastructure projects and projects that have long gestation periods, but eventually are very important and good for the economy.

But this is not the sort of capital that the US financial system offers. Instead, the US financial system offers short-term capital that only goes to inflate the value of existing assets, rather than investing productively in the creation of new goods and services.

So the rest of the world is told, you know, ‘Lift your capital account restrictions, allow free capital flows and you will get the capital you want’.

In fact, what the Third World gets is the opposite of that: the capital they don’t want – hot money that comes stampeding in when these investors, who are not particularly knowledgeable, think things are good, and hot money that stampedes out at the slightest sign of a problem, thanks to equally ignorant investors leaving behind financial crises, credit crises, currency crises, and, of course, economic crises.

A couple of other points that one should also add to this: Number one, this system, particularly debt crises, from the Third World debt crisis onwards, has enforced a system of debtor responsibility, completely ignoring that any credit relationship has two relatively equal parts, and if things go sour, if things go wrong, if a debt cannot be paid, both debtor and creditor are co-responsible for the problem.

Instead, all the weight of adjustment, the weight of repayment, etc. has been on the debtors.

And, as you know, this is the chief mechanism by which so much money is being drained out of debtor countries, which are the vast majority of countries in the Third World, and goes into the coffers of the rich countries.

And finally, one final point: Given that this system has been so awful, naturally, countries have wanted to leave it.

And what has the US done historically to countries that have wanted to leave it? It has essentially waged war against them.

Think of Saddam Hussein. Think of Moammar Qadhafi. What was crucial about these two leaders? It was the fact that one of their key projects in each case was a project to leave the dollar system and try to create an alternative to the dollar system.

And this is why they were essentially deposed and killed, in gruesome ways, in the case of Qadhafi.

And, of course, their countries have been left essentially prey to all sorts of military, political, financial, and economic instability.

So this is not a [stable] system.

And so, naturally, finally now, the rest of the world has alternatives. And the United States can’t even wage a war to force the Third World back to the dollar system.



  1. Eric Arthur Blair

    2023-04-21 at 06:14

    Ben Norton and Prof Desai do a good job ripping Lagarde a new one.
    Lagarde is a ventriloquist dummy, a shill, a useful idiot of the neoliberal, neocolonial, neoconartist establishment. She and her “elite” cronies are laser focused on one thing and one thing only: how to secure their cushy, generously remunerated tax-free retirement packages after their working lives of furiously plundering and exploiting the “jungle” – not just the Global South but also the PIIGS countries (yes, the jungle includes Spain too, Mr Borrell). As such, before her final flourish, Lagarde needs to stay on message, her main priority is to reinforce tired old absurd discredited tropes: that the USD as global reserve currency was the bees knees, that the Euro was the second best hymenopteran articulation and the biggest lie of all: that the so-called Pax Americana (better termed Pox Americana – as far as most of the world was concerned) was better than sliced bread.
    Unfortunately rapidly unfolding reality is slapping Lagarde across the face like a slimy wet mullet (the fish, not the hairdo, although the latter would be equally disturbing). In order not to look like a complete fool, she is now forced to acknowledge the bleeding obvious: that the “Global South”, some 85% of the world’s population, are now furiously decoupling from the USD.
    Let us frame the Hemingway quote she cited, in its proper context:
    “How did you go bankrupt? ….Gradually then suddenly.”
    This is a classical description of the Seneca Cliff, or the proverbial straw on the camel’s back, or a sudden tipping point. There are innumerable examples in Nature and in human systems when the slow accumulation of bad events finally leads to sudden collapse. The population collapse of deer on St. Matthew’s Island, or yeast in a vat or bacteria in a petri dish when they run out of food. The overnight run on a bank when depositors suddenly realise it is insolvent. The Minsky moment of a Ponzi scheme when subscribers realise that a tulip bulb may not actually be as valuable as a house (who woulda thunk it?), or that shale oil projects in aggregate have NEVER turned a profit – they have, from the get go, been Ponzi scams engineered by previous NIRP, quantitative easing ( = free money for venture startups and CAPEX) and corporate fraud (their high share prices were propped up by company stock buybacks).
    The EROEI of ALL native energy sources of the USA have fallen to uneconomic levels (ie. they are NO LONGER economic to extract). The US extraction of unconventional fossil fuels were acts of desperation that were fraudulently portrayed as “energy revolutions”. Students of Peak Oil and Lewis Carroll will know what I mean when I say that it is worse than the “Red Queen” effect – running furiously and not only failing to stay in place, but actually going backwards.
    This is in contrast to Russia, Saudi Arabia, Iran, Iraq, the littoral states around the Caspian, Brazil and Venezuela, where (although all are past peak production) the EROEI still remain relatively high and energy still remains relatively cheap to extract. What do these oil nations all have in common? A realisation that the USA is not agreement capable, it is a bullying, fork tongued Mafia State which sows mayhem, funds terrorists, bombs pipelines and steals foreign assets.
    Gradual rot followed by sudden loss of “exorbitant privilege” as the global reserve currency is the fate of the US dollar. When that happens the entire US economy will suddenly collapse: a shunned, worthless USD means that the USA will be unable to import foreign high EROEI fuels. US agriculture will collapse and their remaining parlous industry will be starved of fuel. There will be widespread starvation and horrific Hobbesian conflict. Are mass shootings a problem in the USA today? You ain’t seen nothing yet.
    These events are dictated by simple Physics, as undeniable and irrefutable as the second Law of Thermodynamics. Wake up and smell the turd blossoms.

    • Olsen

      2023-04-21 at 15:26

      hear, hear!

  2. Maricata

    2023-04-21 at 10:20

    “Strategic autonomy” means allowing other national entities in Europe to devise their ‘own strategies’ for relying on imperialism.

  3. Neil

    2023-04-21 at 16:47

    There’s a major puzzle here that nobody is addressing.
    Clearly, most European leaders, e.g. in the UK, Germany, Netherlands etc take their orders from Washington. For example, escalating the war in Ukraine serves US interests, not European; on the contrary, Germany replacing cheap Russian gas by expensive US LNG makes German industry uncompetitive and thus benefits US industry. The question – the puzzle – is: why? Why don’t European leaders adopt independent policies that benefit their own countries?

    • Eric Arthur Blair

      2023-04-21 at 18:54

      The answer is twofold. First is the slick propagandistic brainwashing the US cultural establishment have perpetrated on the minds of the European sheeple since birth. This capitalises on European pre-existing racism and xenophobia against “the other”, whether it be the snow n*gger Russians or the yellow peril Chinese. It can be seen not only in the form of Hollywood movies but in the total infiltration of European academia: it is impossible to graduate in economics/finance and get a job without being steeped in Chicago school Straussian economics.
      Second is the defacto colonisation of the European governments by the USA. Only candidates who do the entire bidding of the USA can be installed into positions of power after going through the Kabuki theatrics of bogus democratic processes. This was exemplified by the political destruction of Jeremy Corbyn on the basis of bald face lies, in favour of a procession of frauds, crooks and useful idiot proxies of the USA.

      • JonnyJames

        2023-04-24 at 10:33

        Also, EU zone politicians are most likely bribed and/or coerced. Former “intelligence community” officials have said so. There is also the memory of Operation Gladio

      • Rubicon

        2023-05-15 at 15:47

        Perfect response to Neil from Eric. Thank you. Of course, for several years, the US has been bringing bag loads of $$ to politicians and the super wealthy in Latin American, Africa, Indochina and parts of the Middle East. End result: pauperize most of the population of those nations.

    • Energieerhaltungssatz

      2023-04-24 at 15:03

      What is the purpose of the European parliament & why do they need so many members? What is their job? A German MEP was once confronted with these questions, she could not answer them right away, so the reporter said: “But you are an MEP, you should know!” She replied with empty phrases in order to distract from the facts. Typical reaction of a con-artist.

      I think the European parliament is just an unnecessary & parasitic middlemen & an extension of Washington, just like NATO which imitated UN forces or the ICC which imitated the ICJ. They are even imitating or hijacking human rights & environment protection movements & organisation. It can also be compared with PayPal or useless consultants who steal knowledge from one company to sell it to another. During the scam process they usually try to eliminate or infiltrate any structures which or any people who can uncover them, e.g. the quality department.

      Remember how China treated Ursula von der Leyen during her & Macrons visit, who… ♬ changes his mind like a girl changes clothes. ♬ Like a US-lapdog who shouldn´t have any authority in Europe.

  4. Muhammad Shaheer Mahmood

    2023-05-07 at 02:21

    The major issue with the United States is that it does not want to adapt with the changing circumstances; rather, it wants to maintain status quo. This stubbornness is limiting the available options not only for the United States but also for its allies. It is an undeniable fact that geo-economics is non static and the global dynamics would eventually change with the emergence of new economic giants. Meanwhile, the United States which was once the flag-bearer of liberalism has restored to realism in order to maintain its supremacy and keeping the greenback as a the dominant currency. The United States, by following this approach,is becoming a Frankenstein’s monster. Thus, a comprehensive and tolerable approach must be drafted and implemented by the United States to provide breathing space to other players around the globe while safeguarding its interests.

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