ALLIED forces had launched an offensive against the Germans in France, and the Soviets were busy fighting the Germans on the Eastern Front. Paris was yet to be liberated when delegates from the Allied countries in July 1944 started gathering in Bretton Woods at the Mount Washington Hotel — a hotel that was closed in 1942, and was bought by a Boston syndicate in 1944 — for a monetary conference that would later reshape the international financial system, resulting in the hegemony of the US and creation of institutions like the IMF. Front-line soldiers in the British VIII Corps were busy threatening the Germans, while leaders of the Allied nations were penning down a new financial world order.

By the time the Bretton Woods conference was called, Britain was already emerging as a debt-ridden nation, and the stage was set for the US — with its huge gold reserves and a gold-backed currency — to take the role of a global leader.

Some 75 years later, the world is facing a pandemic that is nothing less than a financial apocalypse. The coronavirus pandemic may appear to be a pivotal matter for many policymakers — but that, for sure, is not the only crisis looming. US politicians as well as the intelligence dossier from the Five Eyes network are blaming China for negligence or a cover-up of Covid-19 to the “endangerment of other countries”, while Chinese state-run media is asking the US to explain, inter alia, the reasons behind the sudden closure of its Maryland bio-weapons lab. What’s troubling is that while some US politicians are pointing to the Wuhan Institute of Virology as the possible point of origin of SARS-cov-2, the National Institute of Health in the US is now being investigated for previously providing funding to the same Wuhan institute in excess of $3 million.

Amid this exchange of accusations, the situation in the South China Sea is also getting serious as Beijing is flexing its muscles on the one hand, while the US and Australian navies have been conducting joint military exercises on the other.

It’s time to rethink the global economy.

The age-old question, ‘Quis custodiet ipsos custodes’ (who will govern the governors) could not be more befitting.

The peace situation in the Middle East, North Africa and South Asia region is also far from ideal. The uprising of Libya’s ‘Don Quixote’, Haftar, against the UN-recognised government; escalation of tensions in Syria; and Israel’s rush to annex the West Bank are doing little to contribute to global peace in these sensitive times. In South Asia, friction between the arch rivals — India and Pakistan — is growing.

These separate events, if viewed concurrently, do have the potential of turning into major conflicts — or even a war in the medium term — which may result in increased oil prices and could take a devastating toll on human population and economies.

Major armed conflicts, coupled with such a pandemic, may also result in shifting the balance of power.

The US economy is estimated to contract by some -6 per cent this year, while that of China is projected to grow around 1pc, according to the IMF. Unemployment in the US has hit record levels, and the Committee for a Responsible Federal Budget is projecting the US budget deficit to exceed $3.8 trillion this year. China, in an effort to circumvent the dollar as a payment system, is moving to roll out its sovereign digital currency, according to China Daily. China may also let the yuan appreciate against the dollar at the ‘right’ time as the yuan is widely believed to be undervalued, something that gives Chinese exports a competitive advantage.

Whether some digital or asset-backed version of Renminbi, or some other digital currency, will emerge as a transcontinental payment-settlement method remains to be seen, but the global confidence in the dollar as the reserve currency is on the decline. As Joseph Stiglitz, a Nobel Laureate and former chief economist at the World Bank, put it in his UN speech in 2009: “The system in which the dollar is the reserve currency is a system that has long been recognised to be unsustainable in the longer run.”

History tells us that Rome was not built in a day; nor was the sterling dethroned as global currency in one day. According to an IMF estimate, in the early years post-World War II, the official sterling reserves were four times the value of official USD reserves. By the 1960s, as Prof Catherine R. Schenk argues, the US dollar was not a strong rival to the pound, but rather the lesser of two evils.

Amid this pandemonium, there lies an opportunity for the global leaders to reconvene and contemplate redesigning an inclusive and sustainable monetary system — a system that does not favour a particular country — because only an equal world can be an enabled world.

The writer is a specialist on global migration matters.

Twitter: @DrHussainFarooq

Published in Dawn, May 16th, 2020