Understanding the Geopolitical Implications of the Global Financial Crisis

Although the global financial crisis breaking out in the fall of 2008 seems to be drawing to an end, it is still too early to tell exactly how big a loss it has caused to the world economy. Viewed through a macro politico -economic lens, the global financial turmoil formally put an end to the unipolar post—Cold War era, in which the U.S. power preponderance, its alleged universal politico- economic model of development (often referred to as the Washington Consensus), and its overwhelming international influence had been a defining feature. The looming new era is characterized by the emergence of a multipolar power structure, plural politico -economic models, and multiple players on the international stage.

What the United States Suffered

The preeminent U.S. position in the world has been mainly supported by two pillars: its overwhelming military and economic might. These two pillars, however, have been shattered in the past decade. The Iraq and Afghanistan wars testified to the limit of U.S. military power, while the financial crisis revealed the fragility of the U.S. economy. In the 1970sand 1980s, Japan and West Germany, respectively, once posed ever-rising economic challenges to the United States and undermined its economic superiority. But in the 1990s, the United States reaped the longest cycle of an economic boom, leaving Japan and unified Germany further behind.From 1999to2001, U.S. annual gross domestic product (GDP) accounted for over 28percentofworldGDP, the highest in decades. Since 2002, however, the U.S. share of world GDP has been in relative decline due to the slowdown of its economic growth and the rise of the developing economies, with China and India at the forefront.1 The crisis merely highlighted the weakness of the U.S. economy and a major change in the international economic landscape because: 1) Washington heavily relied on the financial support of China and other countries to withstand it, 2) China and other developing economies had abetter performance during the crisis in 2008—2009 than the United States, and 3) China and other developing economies, not the United States, took the lead in the recovery of world economy. Broadly speaking, however, the financial crisis maybe only an episode in the long-term change of the world economy. It can be argued that the crisis did not start anew trend, but rather expediteda preceding one, exposing the depth and breadth of the changes that have been brought about.download