The Chinese in recent years have been proceeding with the development of the “Belt and Road Initiative” (BRI). The BRI is intended to solidify Chinese economic trade with the rest of Eurasia, the great landmass that comprises Europe and Asia. It stretches across the Eurasian landmass along both land and maritime routes. As the following photo demonstrates:
Its trade routes begin at a number of strategically important Chinese cities. Land routes are connected to Iran, Russia, Turkey and Germany, while the sea routes pivot toward Malaysia, Indonesia, Bangladesh, Sri Lanka, Kenya, Greece, and Italy. The sea routes in particular cross the Indian Ocean to reach the Mediterranean Sea through the Suez Canal from the adjacent Red Sea. Note that the BRI lacks any trade routes to India, Africa, Vietnam, Korea, and Japan.
The significance of the BRI’s distinct trade routes warrants a different perspective. From a contemporary context, it can be argued that the intended purpose of BRI is to secure China’s economic power within Eurasia. But this very same argument can even be extended to include similar historical cases where the Chinese sought to dominate Eurasian trade.
Below is a map of the older “Silk Road” which the BRI is based on.
Intercontinental trade between Europe and Asia dates back to the reign of the Roman Empire. The Silk Road served as an important route in the transportation of silk from Ancient China to Ancient Rome, hence its name. Its role as a strategically important trade route continued long after the end of the Roman Empire, contributing to the historical developments in the Middle East, Europe, and Africa. The Silk Road has allowed for the exchange of ideas, philosophies, religions, technologies such as gunpowder, and even the spread of diseases like the Black Death which ravaged Europe prior to the Renaissance.
All of these considerations were what compelled the Western world to find an alternate route to Asia. The well-known Spanish and Portuguese explorations have yielded in the discoveries of the Americas and Atlantic seafaring routes around Africa to the Indian Ocean. And as is well known, the discovery of the Americas resulted in the Spanish and Portuguese to stake territorial claims, conversion of natives to Roman Catholicism, and the destruction of Mesoamerican Civilization. The Americas on their own were also abundant in natural resources, contributing to the rise of the trade in African slaves.
But often unconsidered within today’s political climate is the historical significance of the Americas upsetting the economic balance of power away from China in the centuries that followed the Americas’ discoveries. For in the millennia prior, China was previously the economic power that most powers in Eurasia sought to acquire resources from. The Americas altered this dynamic, allowing for international trade to shift away from Eurasia and toward the Atlantic. The subsequent British and French colonization of North America accelerated the change between the 17th and 18th centuries. The 19th and 20th centuries saw the completion of this geopolitical shift due to the economic and financial rise of the United States, its rise coinciding with expansion beyond the Mississippi River and the imposition of the Monroe Doctrine.
The US since the late 19th century had a vested interest in trying to control the economic trade across the Pacific, culminating in a war with the Spanish. By the beginning of the 20th century, Hawaii, Alaska, the Philippines and various other islands scattered across the region were under American control. The Philippines in particular provided American business interests the necessary entry point into the Chinese Mainland, its people and natural resources already being exploited by the colonial empires of the period. It was around that point in time that an economically powerful China waned until the resurgence of the PRC following the economic reforms of the late 1970s.
Today, as a result of the economic difficulties from the Coronavirus Pandemic, the economic balance of power is finally shifting away from the US. As power returns to Eurasia and spearheaded by its recent economic resurgence, the PRC has emerged from the Pandemic in a much stronger position when compared to the Americans. Financial power in the world still remains firmly within the grasp of the US, as evidenced by the US Dollar continuing to be the World Reserve Currency. The Chinese, much like the Japanese, have nothing to gain from allowing the US Dollar to lose its status as the World Reserve Currency. Neither China nor Japan is willing to provide a reliable alternative to the US Dollar, an alternative that will not be realized so long as both countries remain dependent on American Kapital. The world is still too dependent on the US Dollar.
To understand why the US Dollar continues to be the World Reserve Currency is to understand the international system of finance that was set up towards the official end of the Second World War. The upcoming Blog Post will delve into the topic of Bretton Woods, including its rise and fall, the spiraling Schuld (Debt/Guilt) which plagues the world, and why Petroleum is not the only commodity relying on the US Dollar.
Categories: Economic History