World in flux as US veers towards isolation

We are witnessing the biggest change in the world order since 1945.

Post 1945, the world relied on the United States (US) for its stability and more particularly, the US ensuring the following:

Security in Europe, Asia, and the Middle East

The US has kept the peace in Europe. There were no major wars in Europe prior to the Russian invasion of Ukraine in 2022. The one war that broke out in the old Yugoslavia in the 1990s was more a civil war than a state war, and even that was eventually brought to an end through North Atlantic Treaty Organization’s (NATO’s) intervention, of course backed by the US.

The US also ensured that Southeast Asia stayed quiet for the past 50 years by having treaties with Japan, South Korea, and the Philippines. While the US did fail spectacularly in intervening in the Vietnam War in the 1960s and 1970s, it has since kept things relatively quiet in that region.

In the Middle East, though not being able to prevent numerous wars, the US is still the only power in town able to bring any peace deals to the warring sides. For example, all the peace treaties Israel has signed with Its Arab neighbours have come to fruition only through US mediation, guarantees, and involvement.

Dollar as the world’s reserve currency

Everything including oil, gold, diamonds, and smaller-value items such as coffee and sugar is priced in dollars. This has brought stability and predictability to world markets.

US pushed hard for – and guaranteed – free trade

It ensured that trade routes and sea lanes remained open, and actively pushed for globalisation, which ensured that the world prospered. Countries like China and India have experienced the biggest reduction in poverty in world history.

With Trump being elected on a US-first policy and not wanting to be the world’s sheriff anymore, the world order that has prevailed since 1945 is changing. To an extent, Trump has a point, as many Americans feel that Europe has been freeloading off the US. Members of NATO pledged to spend at least 2% of their gross domestic product on defence per year by 2024. Twenty-three of the 32 members are expected to have achieved that, but big economies like Italy, Spain, Belgium, and Canada are spending 1.5% or less. Americans are unhappy that they have to cover the costs for Europe’s defence, while Europeans spend their money on healthcare and pensions and don’t do enough to secure themselves.

However, Europe cannot survive militarily at the moment without the US, and Trump’s actions with Ukraine have caused alarm in Europe as no-one is sure what his attitude is towards NATO. If he is posturing to get Europe to spend more on its own defence, then it’s understandable. However, it’s feared that he isn’t prepared to defend Europe at all, or even to stay in NATO. Trump’s refusal to provide a backstop for United Kingdom and French troops if they ultimately act as peacekeepers in Ukraine is a case in point. No-one is sure how far he will push this disengagement from Europe, and recent press reports state that at least a few members of his Cabinet – although it seems a minority at this stage – don’t want to stay in NATO at all.

Southeast Asia, Japan, South Korea, and the Philippines are also worried. If the US isn’t prepared to defend them any longer or stay involved in the region, there’s a good chance that Japan and South Korea will go nuclear. It’s already being discussed openly in think tanks in the two countries. Also in Asia, things are hotting up between India and Pakistan. The question being asked is where is the US leadership to bring quiet and prevent these two nuclear powers from escalating things? On previous occasions, like the 2019 flare-up, the US actively intervened to prevent any major escalation.

The problem is that no-one is sure if Trump is just posturing or really aiming for a full US-first policy. Historians are all starting to quote the 1930s, when the US withdrew from any involvement in Europe, which gave the Nazis free rein to conquer almost the entire continent. That was clearly an error, and the US was then forced to intervene at great cost from 1941 onwards to defeat the aggressors. Europeans are openly asking if they are going back to the 1930s, and for the first time since World War II, European governments are calling for massive rearmament, even in pacifist countries like Germany.

Free trade

Just like the 1930s, the US has started bringing in tariffs to protect its industry. Economists are talking about the Smoot-Hawley Tariff Act of 1930, which started a tariff war and had several detrimental effects including deepening the Great Depression domestically and internationally, and harming international trade relations. Again, no-one is sure if Trump is serious about his tariffs or just posturing. If he is serious, then the danger is that the errors of the 1930s are potentially being repeated. He has also made it clear that he wants to weaken the dollar, which has now started taking place, with the dollar weakening against the other major currencies like the euro and pound.

The result has been a massive increase in the gold price, which is a clear indication of the fear factor in world markets and international finance. As a quote from a well-known billionaire investor put it: “Bitcoin and gold are report cards on financial stewardship … and what they’re telling you is something that’s not great.”

The world is resetting as it seems to do every 80 years or so. For example, the 1940s and World War II brought great change to the world, as did the American Civil War 80 years before in the 1860s – with major changes in Europe like German and Italian unification in 1871 and the French Revolution of 1789 before that.

What’s happening now is probably not a case of small systemic changes, but something much larger. The positive news is that by 2030, things should start improving. New technology like self-driving cars, artificial intelligence, and healthcare advances will be much more widely used and will have progressed, and in general, long-term change has always been positive for the world. However, the 2020s are going to be bumpy!

• Baruch The Balanced is an attorney who can’t be named for professional reasons, but who studied both politics and international relations at university.