China adopted economic policies in regards to the crisis with internal as well as external implications. The external aspects which this study is focusing on include new policy drives and visions that are unprecedented in history adopted by a Chinese government. From the present research it is visible that China has a broad vision to create its own Bretton Woods system. The 2008 global financial crisis made it clear to the new ruling elite how vulnerable it is to global imbalances, and that the classical approach of hoarding US dollar reserves served no more its economic and political interests. As a result of the crisis and due to the fact of holding huge US dollar reserves, China incurred big losses with the dollar loosing value in the aftermath of the crisis thereby melting the dollar stock it had accumulated for decades. China has come to realize that a pragmatic policy approach is in its interest when competing with the US. Hence the new policy drives towards a framework resembling that of Bretton Woods.
The Bretton Woods system was a major tool for the US in shaping and dominating the international financial system. Its purpose was to govern and shape the international monetary relations of states. Although the so called Bretton Woods system collapsed in 1971, the institutions it created survived and to this day are the main pillars of the international financial system. China seems to establish a similar system, when looking at the policies adopted. The Asian Infrastructure Investment Bank, New Development Bank, the ‘one belt one road’ initiative, the Silk Fund, and the Internationalization of the RMB. China seems to follow the same path such as the US half a century ago by establishing very similar institutions to that of the Bretton Woods.
Thus the outcome of the Bretton Woods system catapulted the US into a hegemon of the global economic world order. The question to be asked now is whether China is about to follow the US footsteps and create a ‘Bretton Woods’ on its own, by cooperating with other states?
This paper is organized in the following structure. Section 2 is the literature review. Section 3 presents the road to the Chinese Bretton Woods system, Section 4 describes the internationalization of the RMB, Section 5 provides for a conclusion.
Since the developments are very new, and the mentioned institutions and policy drives by China are a recent phenomenon, the literature is very limited on the subject. Duggan (2013) focuses more on the international clearing union (ICU) and the effects it would have on Sino-US relations. According to the empirical results an ICU would have prevented de-industrialization in the US and allowed for Chinese export led growth (Duggan, 2013). Hence there would be no need for the Chinese to seek for alternative initiatives. There are related studies on the Bretton Woods system and China, Dooley (et al. 2003) review the Bretton Woods System, and Dooley (et al., 2011) come up with the notion of Bretton Woods II, and argue that it still rules the international monetary system. Furthermore Eichengreen (2011) elaborates on the possibility of the internationalization of the Chinese renminbi and the subsequent challenge to the US dollar. However to the best of the author’s knowledge, there is so far not a study that is directly assessing the establishment of a pseudo Chinese Bretton Woods system.
The Pseudo Chinese Bretton Woods System
As far as China is concerned one can indeed see a policy shift that is more proactive in international relations. Thus looking at the policies adopted and the active foreign policy drive one can indeed argue that China aims to create its own unique form: a ‘Bretton Woods’ system with Chinese characteristics. Of course the conditions and international situation at the time the Bretton Woods was adopted were completely different to the conditions states’ face nowadays. However, the term ‘Chinese Bretton Woods’ seems to be appropriate when looking at the Chinese policies, they resemble the creation of similar institutions and regimes like that of the Bretton Woods system. Below are the main policy moves that arguably justify this view:
-New (BRICS) Development Bank based in Shanghai -similar to the IMF
-Asia Infrastructure Investment Bank (AIIB) –similar to the World Bank
-One Belt One Road/Silk Fund- A Chinese Marshal Plan
-Internationalization of the RMB: Currency swap Agreements and China International Payment System-
Indeed when looking at these newly established institutions one can see the vision behind these policy drives. Similar to the USA in being the major force behind creating the intuitions of the Bretton Woods system, China also seems to follow a similar strategy by creating institutions and regimes that are vital to broaden its own international sphere of influence with the aim of eventually taking the lead. Now let’s have a closer look at these institutions.
Asian Infrastructure Investment Bank (AIIB)
By many seen as a rival to the World Bank and IMF, its main aim is to provide for infrastructure development in the Asia-Pacific region. The blueprints of the creation of the Asian Infrastructure Investment Bank surged in October 2013, mainly due to the frustrations by the Chinese government with the current international intuitions such as the IMF and World Bank, with little or no room for reforms that would enable greater Chinese input into the respective organizations (Braningen, 2015). Despite major critics by the US that the creation of a new international investment bank is unnecessary, many states and major international institutions disagree. Head of the International Monetary Fund Christine Lagarde as well offered support for the Chinese-led multilateral lender; Lagarde and her counterpart from the Asian Development Bank said at a conference in Beijing that they were in talks with the AIIB for cooperation (Miller and Goh, 2015).
It is obvious that the US is opposing the AIIB initiative on political grounds since it poses a challenge to the US led international economic system that it created decades ago, and with the rise of China as another main actor in the global economy that has a vested interest in pursuing its own developmental goals, we will see such initiatives in the future more.
Thus notably one has to remark that in the immediate aftermath of the Second World War, it was relatively easy for the US to create its own international economic order, since all the major economies of the period were ravaged by war and indebted themselves to the US. The situation is different for China today, basically because the terms and conditions are not the same as faced by the US in the post-World War II period. There is already a global hegemonic order in place through which the US and other major powers are operating and cooperating. Examples include the IMF, World Bank, OECD, OSCE (Organization for Security and Co-operation in Europe), the Asian Development Bank, ASEAN, G7, G20 etc. Furthermore the global economic system is so interdependent and integrated nowadays, that it is not easy establishing new international regimes. Thus China will face a challenge in its endeavor for creating its own ‘Made in China’ Bretton Woods system, but the developments of the AIIB so far show a very positive outcome for China.
The countries joining the AIIB are not just usual countries, on the contrary they are major allies of the US, especially the United Kingdom, the founding member and a country that had such a great impact on building the Bretton Woods system now joins an initiative that is seen by many as an act to counterbalance the role of the IMF and the World Bank. Perhaps the most interesting move besides initial UK membership comes from Israel, a staunch ally of America heavily depending on it for security, economic and regional issues, Israel too applied for membership (Reuters, 2015). A country heavily depending on the US for its security, economy and international support against sanctions from the UN, is bidding to join the Chinese led AIIB despite US opposition marks indeed a shift in the global economic policies of nation states.
The Obama administration made from the beginning its position vis-a-vis the AIIB clear, it is vehemently opposing the establishment of the AIIB initiated by China on the grounds that there is no need for a further lending institution since there is the IMF and the Asian Development Bank and that it has concerns over transparency, procurement practices and environmental safeguards and concerns over lending practices alike (Northam, 2015). Nevertheless, according to Bergsten from the Peterson Institute for International Economics, there is a very big demand for infrastructure projects in most parts of Asia, since the lack of vital infrastructure such as roads, airports and power facilities constitute a big barrier to Asian development. His estimation is that in the coming decade about 8 trillion US dollars are needed for infrastructure projects in Asia, and he argues that the AIIB can fill that gap (Bergsten, 2015). It is projected that China is prepared to provide for half of the initial 100 billion US Dollar Budget. Thus it is seen by many as a move by China to compete for global, economic, and political leadership (Northam, 2015).
These developments indicate that the new policy drive of China after the Global Financial crisis that resemble that of the US leading to the establishment of the Bretton Woods system may not be a far reached goal after all, but a deliberated policy action as a result of the effects that the global financial crisis brought with it along the way. These actions can be seen as a policy response to the crisis, like every country, China suffered from the crisis, and not satisfied with the current international financial system, that led to incur China big losses, it is in the trial of making and developing new structures and institutions, attracting prospective members. This major shift in the Chinese policy drive can be seen as a move by China to develop its own ‘Bretton Woods’ system just like the USA did in the post-World War II period.
Since the creation of the World Bank and IMF in the 1940s the US has dominated these institutions and the major European countries seem to look for a change and position themselves stronger within global finance and trade by joining this new initiative led by China (Mason, 2015).
Chinese Foreign Minister Wang Yi said in an interview that China is trying to foster a “new type of international relations featuring win-win cooperation […]” (CCTV, 2015).
The move by China to tunnel its massive currency reserves into infrastructure investments in Asia has led to a lot of debate, long had Western countries asked China to use its trade surplus in the development of transport, energy and telecommunication in developing countries, only they expected it to be done through US dominated institutions such as the World Bank and Asian Development Bank (Taylor and James, 2015), an alternative model, i.e. the AIIB prevailed at the end detrimental to the US and Japan. Conversely one has to acknowledge the US share in the lead to the establishment of the AIIB.
The fact that Congress did not ratify in 2010 an agreement that would increase the voting rights of China and other emerging economies within the IMF literally pushed China and alikes to seek for alternatives. Members of Congress openly started to acknowledge this situation. However the United States is not watching bluntly to the current events that put a drift between itself and major traditional allies, as a counter movement the US initiated the Trans Pacific Partnership (TPP) trade pact with eleven Asia-Pacific states excluding China (Taylor and James, 2015). It aims to boost US export to the region, but also to help gain the US a foothold in the Asian markets, but mainly it’s a move to limit growing Chinese influence in the region. President Obama made this clear in his address to Congress; he stated that without the active involvement of America, “China will be free to ‘write the rules of trade in the 21st century’ ” (Brodbeck, 2015).
For sure we will see a steady competition among the two major global players on the international economic system, the former the hegemon the latter posing serious challenges to the status-quo.
For instance this cleavage became visible as soon as China announced its plan for the creation of the AIIB. The US response was prompt warning its allies and any potential member states that there is no need for another multilateral lending institution, expressing concerns over the transparency of the Bank, good governance, and concerns over corruption and abiding to environmental standards among other things. Although the IMF generated much criticisms with its structural adjustment programs, as well as the World Bank with some major projects conceived environmentally questionable, with more and more public scrutiny in the last decade minor reforms were undertaken to satisfy public concerns as well, which led to some best practice operational conduct in the mentioned institutions, but still many scholars find these steps not far reaching enough.
Thus indeed the strategic policy move of China establishing the AIIB, upset many decision makes and led to new formations and the adaptation of positions by major players of the international financial system such as Europe and some Asian countries. It led to the shift away between the US and its traditional allies such as the UK, Germany, France and Italy and even Israel. It seems the European countries want back the ‘golden age’ period of the early Bretton Woods system and join a similar initiative that has the prospect to deliver on those promises.
The developments are stunning on the one hand the hegemon (America) tries to undermine the participation of other states in the Chinese-led AIIB, and on the other hand we have witnessed unexpected moves by Western powers belonging so far to the US-led international economic order. It becomes visible that the 2008 global financial crisis shook all the existing relationship between states, since like China, the European countries are also not contend anymore with the status-quo of the system and aspire change. The AIIB could be regarded as being one of the main pillars of the new policy drive initiated by China to create its own Bretton Woods system, thus the success of this institution will play a major role for the other mentioned pillars.
The membership looks promising, with 4 of the 5 permanent UN Security Council members aboard, 17 out of the 34 OECD members, and all ten countries of the ASEAN. The only major global economies abstaining from joining the AIIB are the USA and Japan (Olsen, 2015).These developments already indicate that the new policy initiatives by China managed to attract attention around the globe, and pave the way ahead for the establishment of a pseudo Chinese Bretton Woods.
Abstention by both countries comes to no surprise, since the US views the AIIB as a challenger to the US dominated Bretton Woods institutions and has possible fears over a spill over that gradually a rising China might challenge its dominant position in the global system. For Japan under the leadership of Prime Minister Shinzo Abe the reasons are similar, it fears that the AIIB will be a competitor to the Japanese dominated Asian Development Bank (ADB) in the region and undermine Japanese economic interests in Asia.
As opposed to the other traditional US allies Japan does not want to jeopardize its relations with the US, especially not in times when it has disputes with China over some islands in the Pacific Ocean, and the fact that Japan leads the ADB is another vital factor for its abstention. Its customary that the Manila based ADB is led by a former senior official from the Bank of Japan or the Japanese Finance Ministry (Kajimoto, 2015).
Although the AIIB is an Asian Infrastructure Investment Bank, its reach is indeed global as seen by its membership, it managed to attract members from diverse regions of the world reaching as far West as Latin America and North as Sweden or Denmark, per capita rich countries such as Switzerland and poor ones such as Nepal, all are on board. Moreover it has shown the increasing rift between the US and its traditional allies, perhaps it is unprecedented in the post-World War II period where the US was not able to convince or force its allies from a policy move that it vehemently disapproves of. Major staunch allies that have been so reliable in the past such as the United Kingdom and even Israel did turn its back on the US. For the first time in the century was the USA so alone on its position, leaving it isolated from a major global initiative.
For example in the follow up of British negotiations to join the Bank, the White House has accused Great Britain from constantly accommodating China, showing its disapproval and posing as threat to other potential candidates.
Besides the voiced critics to the AIIB related to transparency, environmental standards, good governance and so on; there is the concern that China does not have enough experience to lead a multilateral infrastructure investment bank due to its lack of experience and it would be advised to seek help from peer institutions, i.e. the institutions of the Bretton Woods: the IMF and World Bank, or Asian Development Bank or Western member states that have the necessary know-how. However, the critics seem to fail to mention the China Exim Bank; which is already operating for almost more than a decade in these regions, already undertaking infrastructure projects not only limited to public sector projects but also the private sector. Former Chairman of the China Exim Bank Li Ruogu highlighted in an interview that they have been doing projects such as city rail systems, ports, railway systems, and power facilities among other things on the ‘belt way’ for decades and to his accords countries in the region started to favor the China Exim Bank over the competitors of the World Bank and Asian Development Bank (Li Ruogu, 2015). That indicates that China not only has the financial resources in place to pursue the creation of its own brand of the Bretton Woods system, but also the required international experience in gradually getting closer step by step to its envisioned grand strategy of the creation of the ‘Chinese Bretton Woods’ system. One has to understand that this is a long term project; China does not have the luxury the US enjoyed in the 1940s when it emerged after the War as a Superpower, which enabled it to act fast and impose its will relatively easy creating the Bretton Woods. Since we live in a different world than in the late 1940s, with different conditions and different global power structures, China’s choice is to adopt a gradual long term approach in getting there. It seems to have found its way, since it is not taking the classical confrontational way that the former colonial powers as well as the US did in the past, but it’s taking the way of diplomatic conduct.
New Development Bank
Also called BRICS Development Bank is one of China’s latest initiatives on the way to establish its own version of the Bretton Woods. Like the AIIB the New Development Bank (NDB) is also a multilateral development Bank, only limited in its membership compared to the AIIB. It was set up with the aim to foster greater financial and development cooperation among the BRICS (Brazil, Russia, India, China and South Africa). This is another important step, a milestone in development since the original BRIC states excluding South Africa together comprise more than 3 billion people; 41.4 % of the world population, cover about a quarter of the world’s land area spread over 3 continents, and account for about 25 % of global GDP as of 2014 (NDB, 2015). One can easily see why it is of such high importance.
It’s headquartered in Shanghai, and as opposed to the World Bank and for the matter the IMF, where votes are based on capital share, in the New Development Bank each participating state has one vote and there is no veto power in its structure (NDB, 2015). The mere fact that member states have equal voting rights regardless of capital share and no veto power is an indication that the emerging economies of the BRICS countries want to go a different way than the orthodox international financial institutions of the IMF and the World Bank of which most participating states are voicing their complaints about. In a way it’s a show off of the soft power China projects in the 21st century, since in this establishment it’s the biggest economy.
Like its counterpart the AIIB, the NDB is also focusing on infrastructure projects, with authorization of up to $34 billion annually. The initial founding members agreed that any member cannot increase its share of capital without the agreement by the other 4 founding members, the Bank also allows for new members to join but the BRICS capital share cannot fall below the threshold of 55 percent (NDB, 2015). Again this arrangement does not allow the institution to be dominated by one member country. Perhaps the reason why many see the NDB as a competitor to the IMF lies in the major detail, that this new initiative also has a ‘Contingent Reserve Arrangement (CRA).
The CRA was designed with the intent to support countries with liquidity in response to actual or potential short term balance of payments pressures. Thus the mentioned reserve has the objective to protect states against global liquidity pressures, including cases of member countries where national currencies are being negatively affected by global financial pressures or in times of crises. Due to the exit by the US from its expansionary monetary policy the Bank also aims to provide for assistance to other states as well(NDB, 2015).Thus the NDB is another vital pillar of the Chinese response to the 2008 crisis and its drive in creating a Chinese Bretton Woods system.
Rapoza points out that in most emerging economies the private sector has grown rapidly with the public sector lagging behind to provide the necessary infrastructure projects, emphasizing that regulatory measures by Western governments have made it very difficult for institutional investors to provide enough funding. Furthermore he stresses the fact that it will be in Chinas interest to provide for infrastructure developments since it needs the infrastructure to place its goods in the market and expand its export base (Rapoza, 2015).
Moreover Totten points out to the fact that with the so needed IMF reforms desired by most of the nations, especially the BRICS, it is no surprise that after the devastating global financial crisis of 2008, the BRICS patience would come to an end especially when the US Congress vetoed any new reforms to the IMF. Thus like Keynesianism was the outcome of the Great Depression, so could the global financial crisis lead to the establishment of a “paralleling international financial system” as pursued as a long term goal by Beijing. A very important aspect one shall emphasize is that the paid in capital and reserves are planned to be denominated in the national currencies of the member states of the Bank (Totten, 2014). This is a very important fact one cannot neglect, this means a shift away from the traditional dollar and the US dominated global economic order.
Thus so far the emerging economies of the BRICS nations followed the line and pursued undisrupted economic growth under the current traditional global financial system with future prospects of playing a larger role in those institutions when time is due, and they played along. However, the 2008 global financial crisis led to unforeseen events that upset the whole current system of global financial governance and a major cleavage emerged over the say in the future decision making structure of the global financial system and the respective institutions, in which the current power holders were not ready to share their power in those institutions. Add to that the IMF reform bill was rejected by the US, it practically disillusioned the BRICS among other countries, which saw that it is very hard and difficult to put though their concerns and active participation in those institutions controlling the major global economic order.
It should come to no surprise to anyone that there would be a challenger seeking better terms to the current global financial system.
Just like the US challenged the British gold standard system earlier this century even leading to war among them. So it is the course of history that a country acquiring a major power status in the international system, which China did by becoming the number two of the world economy,will instigate new policies and initiatives different from the current global financial system that led to the illusion of not only the emerging countries but also many other states. This is not the only example, there are many states eager to see a change to the current hegemonic structure established and dominated by the USA over many decades. One has to acknowledge that change does not come overnight, these new initiatives established by China are laying down the ground framework and paving down the way for structures that have the potential to the create a new ‘Chinese Bretton Woods’ system or a ‘parallel global financial/economic order’. The key concept one has to understand is that this shift will come gradually over time, and will be perhaps less painful than the one we have seen during the events that led to the two World Wars.
One has also to see the development in light of the South-South economic cooperation, thus instead of competing with each other the BRICS realized a coordinated effort in place is much more valuable to them, and the New Development Bank just serves well this purpose. Comparatively speaking the value of South to South trade exceeds North to South trade by approximately $2.2 trillion, which is over 1/4 of global trade. There is also the surge in South to South foreign aid, with countries like China, Brazil and India increasing their share in foreign aid. Another important fact to notice is that China became Africa’s most important trading partner and Brazil for example has more embassies there than the former colonial giant Great Britain (Desai and Vreeland, 2014). All this necessitates a coordinated approach within the BRICS, since each country on their own competing against the former colonial powers and another BRICS member would definitely be to the disadvantage of the latter. With a structure such as the New Development Bank in place, this coordination and cooperation among the BRICS will ease the entry to new markets.
This new initiative will enable the BRICS to play a greater role in the world economy than is the case under the current system. The group of the BRICS comprises one fifth of the global economy, but have only 11 percent of votes in the IMF. With all reform attempts to increase the share of the BRICS in the IMF stalling, mainly due to US but also to some smaller European states concerned not to lose voting shares to others, the establishment of the NDB was almost inescapable. We have seen a forerunner to the NDB in Latin America for example, with frustrations from the World Bank and the IMF a regional ‘Development Bank of Latin America’ the CorporacionAndina de Fomento (CAF) was developed to bypass the strict infrastructure rules of the World Bank. The CAF funds more infrastructure projects in Latin America than the Inter-American Development Bank and the World Bank combined. According to Desai and Veerland the NDB has the same potential and its loans could surpass that of the World Bank (Desai and Veerland, 2014).
Moreover, as mentioned throughout the research, the 2008 Global Financial Crisis has upset all the current balances of the global financial order and led to major cleavages especially between China and the US, the number two and number one economies of the world, respectively. Before the crisis China was financing the US debt by buying US Treasury Bills, which the US used to import goods from China. As a result China was accumulating huge US Dollar reserves, earning interest on them as well, but with the global crisis, this option became no more in the economic interests of China, since it incurred big losses due to the dollar loosing value. Sitting on $4 trillion in foreign currency reserves and the rate of return of US Treasuries not anymore promising, something needed to be done with the vast reserves (Bloomberg, 2015). Thus with considering the Obama administrations ‘pivot to Asia’ making China uneasy it has no options but to look to alternatives. Bearing in mind also that we are still in the aftermath of the crisis which disillusioned and affected many states negatively, including major US allies, the time seemed to be ripe for the fomenting of a parallel international economic order, or simply balancing US domination of the world economy by establishing alternative economic policies that might look uncorrelated at the first glance, but are all inter-related in creating a Chinese Bretton Woods system; the AIIB, NDB, One Road One Belt, and the Currency swap Agreements and China International Payment System. Connected together under one roof they constitute the main pillars of the Chinese Bretton Woods.
The AIIB initiative just serves well in demonstrating the new role played by China and its capacity for providing for an alternative gravitational point in the world economy that has the potential ultimately to lead to a Bretton Woods made in China. Seeing this as an opportunity the powerful economies of Europe joined the Chinese led initiative of an Asian Infrastructure Investment Bank, despite heavy opposition from the US.
After having discussed the two key pillars of the new initiative that paves the way down for a new global economic order, now let’s focus perhaps on the most important pillar that complements all these combined efforts in the making of the ‘Made in China” Bretton Woods system, the ‘One Belt One Road’ initiative. Not only a grand economic policy but also a geopolitical maneuver that will have a huge impact once completed not only to all the states involved but also to the different geographical regions of Europe and Asia as a whole, changing the economic and political landscape by bridging continents together.
One Belt One Road
The ‘one belt one road’ program initiated by President Xi Jingpin is perhaps an unprecedented bold move in Chinese foreign and economic policy since the days of Deng Xiaoping. It covers and combines so many inter-related issues such as economic development, export promotion, FDI, and new investment opportunities for Chinese companies when looking solely from the economic perspective but it is for sure not only limited of being a tool to fomenting a new economic order which has huge potential to bring development to the states in question as well, that is not dictated by World Bank and IMF adjustment or structural programs.
The ‘one belt one road’ initiative was first announced by Xi Jingping in October 2013, it’s a policy that constitutes two complimentary projects connected together to one another, on the one hand to review the historical Silk Road between Europe and Asia, there is the ‘New Silk Road’ initiative and on the other hand to connect China to the markets of Southeast Asian countries, Europe and Africa throughout the sea, or the so called ‘21st Century Maritime Silk Road’. So on the one hand a Maritime network and on the other hand a land based road-train network that will serve China to further assert itself into the world economy and increase its economic and political influence further in the global arena eventually perpetuating a Chinese Bretton Woods system. President Xi is attaching a great importance to the project, since he allocated a budget of $40 billion to a newly created Silk Road Fund, intended to improve trade and transport routes in Asia. He stressed that the purpose of the Fund is to support the ‘one belt one road’ project’, i.e. the New Silk Road Economic Belt and the 21st Century Maritime Silk road (Caixin, 2014).
On November 2014 giving a speech to the APEC Central Leading Group on Financial and Economic Affairs, President Xi stressed on the urgency of the construction of the ‘one road one belt’ initiative. Thus the timing of the announcement of the Silk Fund Road was interesting, at the signing of the memorandum of understanding establishing the AIIB, he announced the creation also of the Silk Road Fund, stating that the former and latter are complementary in nature rather than being a substitute to other institutional development banks (Chen, 2014). As mentioned earlier the AIIB, the NDB, and the Silk Road Fund are all a well calculated and executed policy strategies in the road towards fomenting the Chinese Bretton Woods system and serve for that purpose. Under the new leadership of President Xi, China has found a creative way to use its huge currency reserves for lessening its dependency on the US led global financial system that is prone to incur China big losses and at the same time to use these reserves for a grand policy strategy that will lead to the creation of its own economic gravity area, or sphere of influence that will help maintain the much needed economic growth figures in the future years ahead.
The ‘one belt one road’ initiative is also called China’s Marshall Plan, referring to the US development and reconstruction plan of post-World War II Europe, and integrating its markets thereby establishing a grip over the postwar European economic order. Now if we compare the ‘one belt one road’ initiative to that of the Marshall plan one can indeed see some similarities, since the ‘belt and road’ projects were envisioned to serve China’s increasing needs, be it economic expansion or creating alternative secure routes to its markets beyond its borders.
Like the Marshall Plan, the ‘one belt one road’ policy is aiming to cement the framework for the export sector of China in those states. However, here one has to look to the role China has played so far in the region and in the regional institutions such as the ASEAN. China promises a win-win cooperation system where both the investor as well as the host country will gain; this is visible in the stance it takes in those institutions, by setting up a relatively fairer operating system and giving space to its partners, like forgoing of the veto power in the NDB although it’s the biggest contributor by far. Moreover as opposed to the Marshall Plan it’s all encompassing by welcoming new members, the Marshall Plan was limited only to Western Europe. Furthermore due to its vast scope it faces bigger challenges by competitors, such as roadblocks by US like the TPP initiative etc. However, its impact will be huge to the region and the global economic system, and since all the countries involved have a high stake in this project as well, it has a promising outlook (Dingding, 2014).
Thus the aim of the ‘one belt and one road’ projects incorporates the development strategies of participating states into regional cooperation thereby linking those states’ economies with the Asia-Pacific, European and African area. Thus China is well suited to lead this initiative, with being the largest trading partner of more than 120 states, engaging in different types of partnerships with 67 countries and five regional organizations. More importantly the developing world as well as economic powers and staunch allies of the USA don’t shy away anymore entering into initiatives led by China; more than 60 states have expressed willingness and interest in the ‘one belt one road’ initiative (Zhang, 2015).With the implementation of the ‘one belt one road’ policy Xi aims to double the 2010 GDP per capita and build a prosperous China by 2021, thus connecting China and Europe by both land and sea. These new initiatives are by no means to be compared with traditional foreign policy or economic development policies adopted by states’.
Just to highlight and understand the scope and pace of the ‘one belt one road’ initiative one simply needs to look at its routes; the sea route or Maritime Silk Road (MSR) is set to start from Fuzhou in Southeast China and glide south through the ASEAN states, crossing the Strait of Malacca turning west to countries along the Indian Ocean till reaching the land based Silk Road in Venice via the Red Sea and the Mediterranean. Moreover under the structure of the MSR China has plans to broaden this initiative and build hard and soft infrastructure projects form the Indo-Pacific area to Africa (Deepak, 2014).
The mentioned design of a ‘one belt one road’ policy looks promising; however one cannot also deny the geopolitical competition that has roots in the formation of such a policy. China is highly energy dependent and imports most of its energy from abroad. To keep a balance in its energy supply new projects such as the Central Asia Gas Pipeline (CAGP) were established, including the Central Asian nations of Turkmenistan, Kyrgyzstan, Tajikistan, and the Turkmenistan, Uzbekistan and Kazakhstan line that roughly supply half of Chinas gas imports. However gas has only a 4 % share in Chinas total energy consumption, oil accounting to 20 % that is mainly coming from the Middle East (Qureshi, 2015).
For about 40 % of its oil supply China relies on the Straits of Malacca also in the Maritime Silk Road, the Malacca Strait is the key gate to the West. However the strong presence of the US Navy in the Strait of Malacca and the threat of piracy stipulate for the search of alternative routes as well, this is where the New Silk Road comes in as a complementary measure. China has no option but to diversify its supply routes, the Trans-Myanmar oil and gas pipelines just come as another lucrative option for securing oil and gas resources (Qureshi, 2015).
Source: Qureshi; 2015
As one can see the ‘one belt one road’ option not only provides China with an increased role in the global economy, but at the same time it serves its economic interests in diversifying the supply routes for its energy needs. In the North-West it has set up land based pipelines with the Central Asian Nations, in the South-West it has set up pipelines reaching Kunming that provides for an energy corridor giving it direct access to the Bay of Bengal. These initiatives are still regional in nature. However the pearl of the ‘one belt one road’ project connecting China to the far West by land is indisputably the New Silk Road railway project starting from Yiwu crossing the heartlands of Asia and Europe finally reaching Madrid. This railway network connecting dozens of states and creating a direct line from the East Coast of China to the far West up to Madrid not only serves the purpose of fomenting China further into the global market, increasing its role, and providing a cornerstone for the ultimate goal of a Chinese Bretton Woods system. This project is of major strategic value to China since it helps circumvent US naval superiority and strives for greater business efficiency between Europe and Asia, thus bridging the continents. It’s a win-win scenario since the countries along the belt would get the necessary infrastructure investment and benefit from this route (Qureshi, 2015).
Source: Qureshi; 2015.
Perhaps the ‘one belt one road’ initiative is one of the biggest economic and political endeavors of the 21st Century, thus its success along with the other Chinese initiatives resembling the Bretton Woods would change the outlook of the global economic order and create a different ‘parallel economic and political order’ that can pose as a major challenge to the US led system.
One has to understand that in this one China does not go it alone, it would be too costly, open to sabotage of the project by competitors and other difficulties such as coordination issues since it is encompassing such a diverse region and different countries with different backgrounds, add to that the financial burden solely placed on China, opening the success of the project to more vulnerabilities. But it’s not only the Chinese policy makers who grasp the importance of this unique project and the incorporated win-win option for all participating states makes it lucrative to join; it will benefit them in multiple ways, not to mention better infrastructure, easier and broader access to markets due to deepening integration etc.
It should be for that reason that the Shanghai Cooperation Organization (SCO) declared it will combine its development plans with the ‘one belt one road’ policy initiation, thus giving it more cloud and international leeway in its course of actions. The Secretary General of the SCO, Dimitry Mezentsev gave in an interview on CCTV more insights and details on the shape of such cooperation between the SCO and the ‘Silk Road’ project. The SCO prepares a draft of cooperation plan between itself and the ‘one belt one road’ initiative to be handed over to member states for review and ratification. The focus is on mutual benefits on the area of politics, economy and culture; in addition all observer states as well will be invited to join the Silk Road Economic Belt initiative (Mezentsev, 2015).
Not only brings the Silk Road Economic Belt initiative states closer to each other by means of providing them with a common economic interest where all sides win, but also fosters stability and decreases the chances for conflict in the region, since with the deepening integration the costs of conflict becomes much higher than cooperation. So states are much more likely inclined to cooperate out of sheer self-economic and political interest rather than choose the path of conflict. Add to that the increasing role of the Shanghai Cooperation Organization, which has a huge potential not only as mentioned above in fostering and developing ‘political, economic, and cultural’ traits but also providing states with a forum to litigate their differences and promote harmonious relations among them by taking a leading role in this new initiative, and the fact that the SCO has by now longstanding professional operational structure where states are already engaging each other for quite some time now. Hence it has a good reputation among the member states, thus making it a viable organizational tool for the smooth functioning of the New Silk Road Economic Belt.
The importance of this initiative lies not only in providing for infrastructure investments, such as ports, railways, and power facilities and a network of connecting geographical regions, but also the additional benefit of generating economic growth.
According to a study conducted by Minsheng Securities the ‘one belt one road’ initiative will have an impact on 4.4 billion people in 26 countries and regions whereby the economic effect is estimated at about $21 trillion. Furthermore, on the one hand the investments are expected to include domestic provincial infrastructure investments in China, in areas like railway, highway and airport construction totaling $ 1.04 trillion. On the other hand, international projects are expected to be $ 52.47 billion in areas of Central and South Asia, with highway, railway, and of course energy projects. The funding for these projects comes from the ‘custom made’ Silk Road Fund consisting of $ 40 billion. Thus China started already in funding some projects that are in line with the Silk Road Economic Belts philosophy (Wang, 2015).
In light of these developments one can see, how important the ‘one belt one road’ policy is to China, since it is not only a vital pillar of an economic strategy to gradually foster the Chinese Bretton Woods system, but also an economic policy tool to stimulate economic growth at home at times of downward economic pressures. Thus summing up the ‘one belt one road’ initiative by China, it is an ambitious project that has the potential to change the outlook of the current global economic order. As discussed in the section above, it has many sides; economic, political, geo-politics, as well as cultural aspects that provides for the further integration of the region of Asia that will according to analysts foster regional peace. Moreover it’s not only bound to bridge the continents of Asia and Europe, but reach out to the entire world. The reason why so many countries embrace the ‘belt and road’ project cannot only be explained by economic motives and gains of the countries encompassing it, another reason includes the fact that it is built on a win-win concept as opposed to the Bretton Woods system that is criticized of being mainly Western dominated.
In order to accomplish this goal, many Chinese Scholars for example refer to the “three no” notion, i.e.: non-interference into domestic affairs of other states, not to create a sphere of influence, and lastly not to seek for hegemony (Deepak, 2014). Thus one thing is for sure, there is a big need in the development of the infrastructure of Asia, which the AIIB has the potential to fill in the gaps, and other initiatives such as the ‘one belt one road’ provide even a bigger potential in integrating continents. However all these pillars of the Chinese Bretton Woods system mentioned so far are not complete without the internationalization of the RMB.
The Internationalization of the RMB
Already being traded in currency markets in London, Singapore and elsewhere the RMB is on its way to full internationalization. Many Asian central banks and some non-Asian states have also RMB reserves. Furthermore China has currency swap agreements with almost all states in the Pacific region, many in Europe, and beyond to enable for direct trade in the Chinese Yuan, circumventing the long established passage through US dollars (Smith, 2015). Though one has to note the internationalization of the RMB does not mean that it will at the outset replace the dollar; it means that like the Euro it will become another powerful reserve currency and be dealt in with international transactions.
Barry Eichengreen (2011) for example elaborates on how long it will take for the Chinese renminbi to attain international currency status. By referring to the historical analogy of the US dollar that managed to gain international currency status from 1914 to 1924; only in a decade did the US Dollar surpass the British Sterling and became by 1924 the leading international and reserve currency (Eichengreen, 2011). Moreover he points out to the fact that the internationalization of the RMB does not need to come at the demise of the US Dollar or the Euro for that matter, according to Eichengreen: “it is possible to complete the internationalization process quickly if the authorities set their minds to it.”
For sure it seems that China set its mind to make the RMB an international currency when one looks at the policies adopted, like the currency swap agreements between major trading partners and also other states and moves such as the China International Payment System (CIPS) and applying to the IMF for the placing of its currency in the Special Drawing Rights (SDR) basket of currencies in the IMF. Since the monetary pillar of the Chinese Bretton Woods system requires the internationalization of the RMB, these policy moves show a willing Chinese government to enter the international stage and play a bigger role.
Coming back to Eichengreen’s historical analogy of the British Sterling and the US Dollar, there are challenges to the internationalization of the RMB but also advantages in going ahead with the policy. Just like the USA today with the Bretton Woods institutions and its major global financial status, so was London an established center for global trade and the international financial market. It had the entire infrastructure needed with sets ranging from specialized investment banks to foreign branches and institutional and individual investors. Like the US Treasury market nowadays, London was the single most liquid market in the world (Eichengreen, 2011). Just like New York had to face this situation a century ago and compete for its position, so does China face similar challenges that New York faced when jockeying for the number one position in global finance.
Eichengreen (2011) argues that there are sequencing stages in order to internationalize a currency: first the use of the RMB in invoicing and settling trade; second promoting its use in private financial transactions; third encouraging the RMB to be held as foreign reserves by central banks and governments. Thus China has to provide for greater exchange rate flexibility to accompany the transition to capital account convertibility and allow a higher amount of capital flows. The Chinese policy authorities seem to follow the lines as argued; they have begun promoting the use of RMB for trade transactions, initially at the infant stage the authorities permitted the RMB to be used by special eligible companies in cross border trade with neighboring states such as Cambodia, Vietnam, Mongolia, Nepal and North Korea and the special administrative zones of Hong Kong and Macao. In addition to this it set currency swap agreements in 2010, starting with Brazil to allow the two countries’ currencies to be used in bilateral trade settlements (Eichengreen, 2011).
Moreover in the same year of 2010 the Monetary Authority of Hong Kong got the approval from Beijing to liberalize supervisory regulations about the RMB denominated business in the region, granting the right to any company in the world to open a RMB denominated account. This basically unleashed the way of open trade in RMB denominated transactions in Hong Kong. The conventional finance packages started to be provided in RMB’s. A year later in January 2011 the Bank of China was authorized by the government to provide for RMB based deposit accounts in New York. Thus as opposed to critics, the internationalization of the RMB will be a positive development for the global financial system as Eichengreen (2010) puts it; the existence of alternative international reserve currencies to the US dollar such as the Euro and the RMB will be an improvement for the smooth functioning of the international monetary system, since countries will not be forced to accumulate hoards of dollars. Thus: “No one reserve-currency country will be able to finance its current account deficit as freely as did the United States in the years leading up to the recent financial crisis” (Eichengreen, 2010). The competitive nature of the international monetary system will provide for an auto balance system that prevents irresponsible financial behavior as showcased by the United States during the 2008 crisis.
Regarding the internationalization of the Chinese renminbi, it will come sooner than expected by many; the China International Payment System is a vital move in that direction. It will not elevate the RMB to the level and status the US Dollar shares on the international arena, but will pave the way for future developments. Obviously it’s questionable whether the Chinese renminbi will manage to surpass the US dollar within a decade as the US currency did a century ago vis-à-vis the Sterling. However Eichengreen (2011) points out to the possibility of this, by outlining the major sequences that need to be done if Shanghai wants to surpass New York as the international center of finance.
When one looks to the different policy initiatives of China such as the establishment of the AIIB or the New Development Bank, one belt one road policy or financial instruments such as the CIPS and currency swap agreements on their own then these developments might not show us the grand strategy that lies behind these initiatives. However, analyzing those major moves in combination as part of a bigger strategy one can indeed see a move towards the establishment of a Chinese Bretton Woods system, a mechanism ultimately leading to the challenge of the status quo that is dominated mainly by the US. Thus this analysis has tried to shed light on the Chinese policy drives that have the potential to challenge the current world economic order in the future by the emergence of a new economic as well as political gravitational point that will be possible with the creation of a Bretton Woods system made in China.
The Blazing Revival of Bitcoin: BITO ETF Debuts as the Second-Highest Traded Fund
It seems like bitcoin is as resilient as a relentless pandemic: persistent and refusing to stay down. Not long ago, the crypto-giant lost more than half of its valuation in the aftermath of a brutal crackdown by China. Coupled with pessimism reflected by influencers like Elon Musk, the bitcoin plummeted from the all-time high valuation of $64,888.99 to flirt around the $30,000 mark in mere weeks. However, over the course of the last four months, the behemoth of the crypto-market gradually climbed to reclaim its supremacy. Today, weaving through national acceptance to market recognition, bitcoin could be the gateway to normalizing the elusive crypto-world in the traditional global markets: particularly the United States.
The recent bullish development is the launch of the ProShares Bitcoin Strategy ETF – the first Bitcoin-linked exchange-traded fund – on the New York Stock Exchange. Trading under the ticker BITO, the Bitcoin ETF welcomed a robust trading day: rising 4.9% to $41.94. According to the data compiled by Bloomberg, BITO’s debut marked it as the second-highest traded fund, behind BlackRock’s Carbon fund, for the first day of trading. With a turnover of almost $1 billion, the listing of BITO highlighted the demand for reliable investment in bitcoin in the US market. According to estimates on Tuesday, More than 24 million shares changed hands while BITO was one of the most-bought assets on Fidelity’s platform with more than 8,800 buy orders.
The bitcoin continued to rally, cruising over the lucrative launch of BITO. The digital currency rose to $64,309.33 on Tuesday: less than 1% below the all-time high valuation. In hindsight, the recovery seems commendable. The growing acceptance, albeit, has far more consequential attributes. The cardinal benefit is apparent: evidence of gradual acceptance by regulators. “The launch of ProShares’ bitcoin ETF on the NYSE provides the validation that some investors need to consider adding BTC to their portfolio,” stated Hong Fang, CEO of Okcoin. In simpler terms, not only would the listing allow relief to the crypto loyalists (solidifying their belief in the currency), but it would also embolden investors on the sidelines who have long been deterred by regulatory uncertainty. Thus, bringing larger, more rooted institutional investors into the crypto market: along with a surge of capital.
However, the surging acceptance may be diluting the rudimentary phenomenon of bitcoin. While retail investors would continue to participate in the notorious game of speculation via trading bitcoin, the opportunity to gain indirect exposure to bitcoin could divert the risk-averse investors. It means many loyalists could retract and direct towards BITO and other imminent bitcoin-linked ETFs instead of setting up a digital custodianship. Ultimately, it boils down to Bitcoin ETFs being managed by third parties instead of the investor: relenting control to a centralized figure. Moreover, with growing scrutiny under the eye of SECP, the steps vaguely intimate a transition to harness the market instead of liberalizing it: quiet oxymoronic to the entire decentralized model of cryptocurrencies.
Nonetheless, the listing of BITO is an optimistic development that would draw skeptics to at least observe the rampant popularity of the asset class. While the options on BITO are expected to begin trading on the NYSE Arca Options and NYSE American Options exchanges on Wednesday, other futures-based Bitcoin ETFs are on the cards. The surging popularity (and reluctant acceptance) amid tightening regulation could prove a turn of an era for the US capital markets. However, as some critics have cited, BITO is not a spot-based ETF and is instead linked to futures contracts. Thus, the restrain is still present as the regulators do not want a repeat of the financial crisis. Nevertheless, bitcoin has proved its deterrence in the face of skepticism. And if the BITO launch is to be marveled at, then the regulations are bound to adapt to the revolution that is unraveling in the modern financial reality.
Is Myanmar an ethical minefield for multinational corporations?
Business at a crossroads
Political reforms in Myanmar started in November 2010 followed by the release of the opposition leader, Aung San Suu Kyi, and ended by the coup d’état in February 2021. Business empire run by the military generals thanks to the fruitful benefits of democratic transition during the last decade will come to an end with the return of trade and diplomatic sanctions from the western countries – United States (US) and members of European Union (EU). US and EU align with other major international partners quickly responded and imposed sanctions over the military’s takeover and subsequent repression in Myanmar. These measures targeted not only the conglomerates of the military generals but also the individuals who have been appointed in the authority positions and supporting the military regime.
However, the generals and their cronies own the majority of economic power both in strategic sectors ranging from telecommunication to oil & gas and in non-strategic commodity sectors such as food and beverages, construction materials, and the list goes on. It is a tall order for the investors to do business by avoiding this lucrative network of the military across the country. After the coup, it raises the most puzzling issue to investors and corporate giants in this natural resource-rich country, “Should I stay or Should I go?”
Crimes against humanity
For most of the people in the country, war crimes and atrocities committed by the military are nothing new. For instances, in 1988, student activists led a political movement and tried to bring an end to the military regime of the general Ne Win. This movement sparked a fire and grew into a nationwide uprising in a very short period but the military used lethal force and slaughtered thousands of civilian protestors including medical doctors, religious figures, student leaders, etc. A few months later, the public had no better options than being silenced under barbaric torture and lawless killings of the regime.
In 2007, there was another major protest called ‘Saffron Uprising’ against the military regime led by the Buddhist monks. It was actually the biggest pro-democracy movement since 1988 and the atmosphere of the demonstration was rather peaceful and non-violent before the military opened live ammunitions towards the crowd full of monks. Everything was in chaos for a couple of months but it ended as usual.
In 2017, the entire world witnessed one of the most tragic events in Myanmar – Again!. The reports published by the UN stated that hundreds of civilians were killed, dozens of villages were burnt down, and over 700,000 people including the majority of Rohingya were displaced to neighboring countries because of the atrocities committed by the military in the western border of the country. After four years passed, the repatriation process and the safety return of these refugees to their places of origin are yet unknown. Most importantly, there is no legal punishment for those who committed and there is no transitional justice for those who suffered in the aforementioned examples of brutalities.
The vicious circle repeated in 2021. With the economy in free fall and the deadliest virus at doorsteps, the people are still unbowed by the oppression of the junta and continue demanding the restoration of democracy and justice. To date, Assistant Association for Political Prisoner (AAPP) reported that due to practicing the rights to expression, 1178 civilians were killed and 7355 were arrested, charged or sentenced by the military junta. Unfortunately, the numbers are still increasing.
Call for economic disengagement
In 2019, the economic interests of the military were disclosed by the report of UN Fact-Finding Mission in which Myanmar Economic Corporation (MEC) and Myanmar Economic Holding Limited (MEHL) were described as the prominent entities controlled by the military profitable through the almost-monopoly market in real estate, insurance, health care, manufacturing, extractive industry and telecommunication. It also mentioned the list of foreign businesses in partnership with the military-linked activities which includes Adani (India), Kirin Holdings (Japan), Posco Steel (South Korea), Infosys (India) and Universal Apparel (Hong Kong).
Moreover, Justice for Myanmar, a non-profit watchdog organization, revealed the specific facts and figures on how the billions of revenues has been pouring into the pockets of the high-ranked officers in the military in 2021. Myanmar Oil & Gas Enterprise (MOGE), an another military-controlled authority body, is the key player handling the financial transactions, profit sharing, and contractual agreements with the international counterparts including Total (France), Chevron (US), PTTEP (Thailand), Petronas (Malaysia), and Posco (South Korea) in natural gas projects. It is also estimated that the military will enjoy 1.5 billion USD from these energy giants in 2022.
Additionally, data shows that the corporate businesses currently operating in Myanmar has been enriching the conglomerates of the generals and their cronies as a proof to the ongoing debate among the public and scholars, “Do sanctions actually work?” Some critics stressed that sanctions alone might be difficult to pressure the junta without any collaborative actions from Moscow and Beijing, the longstanding allies of the military. Recent bilateral visits and arm deals between Nay Pyi Taw and Moscow dimmed the hope of the people in Myanmar. It is now crystal clear that the Burmese military never had an intention to use the money from multinational corporations for benefits of its citizens, but instead for buying weapons, building up military academies, and sending scholars to Russia to learn about military technology. In March 2021, the International Fact Finding Mission to Myanmar reiterated its recommendation for the complete economic disengagement as a response to the coup, “No business enterprise active in Myanmar or trading with or investing in businesses in Myanmar should enter into an economic or financial relationship with the security forces of Myanmar, in particular the Tatmadaw [the military], or any enterprise owned or controlled by them or their individual members…”
Blood money and ethical dilemma
In the previous military regime until 2009, the US, UK and other democratic champion countries imposed strict economic and diplomatic sanctions on Myanmar while maintaining ‘carrot and stick’ approach against the geopolitical dominance of China. Even so, energy giants such as Total (France) and Chevron (US), and other ‘low-profile’ companies from ASEAN succeeded in running their operations in Myanmar, let alone the nakedly abuses of its natural resources by China. Doing business in this country at the time of injustice is an ethical question to corporate businesses but most of them seems to prefer maximizing the wealth of their shareholders to the freedom of its bottom millions in poverty.
But there are also companies not hesitating to do something right by showing their willingness not to be a part of human right violations of the regime. For example, Australian mining company, Woodside, decided not to proceed further operations, and ‘get off the fence’ on Myanmar by mentioning that the possibility of complete economical disengagement has been under review. A breaking news in July, 2021 that surprised everyone was the exit of Telenor Myanmar – one of four current telecom operators in the country. The CEO of the Norwegian company announced that the business had been sold to M1 Group, a Lebanese investment firm, due to the declining sales and ongoing political situations compromising its basic principles of human rights and workplace safety.
In fact, cutting off the economic ties with the junta and introducing a unified, complete economic disengagement become a matter of necessity to end the consistent suffering of the people of Myanmar. Otherwise, no one can blame the people for presuming that international community is just taking a moral high ground without any genuine desire to support the fight for freedom and pro-democracy movement.
The Covid After-Effects and the Looming Skills Shortage
The shock of the pandemic is changing the ways in which we think about the world and in which we analyze the future trajectories of development. The persistence of the Covid pandemic will likely accentuate this transformation and the prominence of the “green agenda” this year is just one of the facets of these changes. Market research as well as the numerous think-tanks will be accordingly re-calibrating the time horizons and the main themes of analysis. Greater attention to longer risks and fragilities is likely to take on greater prominence, with particular scrutiny being accorded to high-impact risk factors that have a non-negligible probability of materializing in the medium- to long-term. Apart from the risks of global warming other key risk factors involve the rising labour shortages, most notably in areas pertaining to human capital development.
The impact of the Covid pandemic on the labour market will have long-term implications, with “hysteresis effects” observed in both highly skilled and low-income tiers of the labour market. One of the most significant factors affecting the global labour market was the reduction in migration flows, which resulted in the exacerbation of labour shortages across the major migrant recipient countries, such as Russia. There was also a notable blow delivered by the pandemic to the spheres of human capital development such as education and healthcare, which in turn exacerbated the imbalances and shortages in these areas. In particular, according to the estimates of the World Health Organization (WHO) shortages can mount up to 9.9 million physicians, nurses and midwives globally by 2030.
In Europe, although the number of physicians and nurses has increased in general in the region by approximately 10% over the past 10 years, this increase appears to be insufficient to cover the needs of ageing populations. At the same time the WHO points to sizeable inequalities in the availability of physicians and nurses between countries, whereby there are 5 times more doctors in some countries than in others. The situation with regard to nurses is even more acute, as data show that some countries have 9 times fewer nurses than others.
In the US substantial labour shortages in the healthcare sector are also expected, with anti-crisis measures falling short of substantially reversing the ailments in the national healthcare system. In particular, data published by the AAMC (Association of American Medical Colleges), suggests that the United States could see an estimated shortage of between 37,800 and 124,000 physicians by 2034, including shortfalls in both primary and specialty care.
The blows sustained by global education from the pandemic were no less formidable. These affected first and foremost the youngest generation of the globe – according to UNESCO, “more than 1.5 billion students and youth across the planet are or have been affected by school and university closures due to the COVID-19 pandemic”. On top of the adverse effects on the younger generation (see Box 1), there is also the widening “teachers gap”, namely a worldwide shortage of well-trained teachers. According to the UNESCO Institute for Statistics (UIS), “69 million teachers must be recruited to achieve universal primary and secondary education by 2030”.
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