Page last updated at 22:09 GMT, Thursday, 24 September 2009 23:09 UK

The end of the Western economic era?

Preparations in China for the 60th anniversary of Communist rule
China is preparing for the celebrations of 60 years of communist rule in October

By Helena Merriman
BBC News

This time a year ago, the world was reeling from the collapse of Lehman Brothers and the multi-billion dollar rescue of Merrill Lynch and insurance firm AIG.

But for Joern Schuetumpf, a German publisher, life was looking up.

Mr Schuetumpf, director of Karl-Dietz, was revelling in the increase in sales of one of his books which was now selling at seven times the usual rate.

That book was Marx's Das Kapital, the founding text of communism.

On television and radio outlets across the world, Marxists, socialists and anti-capitalist groups seized the moment in the post-Lehmans-world, to declare that the Western economic era was over.

Even before the crisis there were warnings. In March 2007, American writer and journalist Tom Wolfe said "we may be witnessing the end of capitalism as we know it".

Then in September last year, the British political philosopher John Gray said that "the era of American global leadership is over... in a change as far-reaching in its implications as the fall of the Soviet Union, an entire model of government and the economy has collapsed".

'The great story of our time'

But now, a year after, as the polemical dust settles, do leading commentators believe that we are at the brink of a new financial world order?

According to Fareed Zakaria, editor of Newsweek International and author of The Post American World, we are.

"This is the major power shift of the last few centuries," he says, speaking to the BBC World Service.

"For the first time in at least 300 years, you have non Western actors of a size and scale that will really be dominating the world."

Yet Mr Zakaria does not think the West will be obliterated by the new scenario.

"America will be the most powerful economy in the world for the foreseeable future and the West will still be important... but it will have to share that power with countries, cultures and civilisations it has traditionally dominated, colonised and looked down on, and that re-balancing of the world will be the great story of our time," he says.

Wall Street
Questions have been raised about the viability of the Wall Street model

For Walter Russell Mead, of the liberal-minded Council on Foreign Relations, the financial crisis is merely the latest in a stream of continual crises.

"I look at the history of the last 350 years, and it's been 350 years of constant financial crisis, and all of these other crises haven't derailed the continued construction of this... global liberal system," he says.

In fact, he sees these crises as important instigators of the kind of innovation that makes the Western liberal economic model so successful.

"The social capacity to innovate and respond well to change is probably going to be the most significant factor in power in the 21st century," he says.

But historian Niall Ferguson is more doubtful.

"The financial crisis... has to raise a profound question about the viability of that Washington model, or perhaps more accurately that Wall Street model," he says.

"The question really is whether an alternative model will take the place of the Western financial model. And of course the prime contender is the model of the People's Republic of China."

'From East to West'

China's position as major world power was predicted long before the global financial crisis in the famous 2005 Bric Report from Goldman Sachs.

It argued that with high investment rates, a large labour force and steady convergence, China would become the world's largest economy by 2041.

More recently, in February 2009, the International Monetary Fund predicted that China's economy will grow by six per cent this year.

But does this signal the dawn of a new era economic era, based on China's so-called communist model of government?

Not according to Mr Ferguson.

While the four biggest banks in the world are now Chinese, he argues that they are not symbols of a communist power in the ascendant, since they are run on an increasingly Western model.

"China's economy is growing rapidly not because it is still a communist planned economy, but because since 1979 China has moved in the direction of market institutions," he says.

"So global power is shifting from West to East, but the reason it is doing that is that the East has become rather better at managing western financial institutions than the West itself."

Fareed Zakaria concurs, arguing that while the new order will be Western in construction, it will be fuelled by non Western powers.

"China, India and Brazil and all those other countries are getting rather good at capitalism. That's the real story here," he says.

Walter Russell Mead agrees, saying that for a number of decades to come the US is likely to be "one of the world's leading actors and will have a unique international role as the one global power in a world of regional powers… the US will be like a global broker".

So just as American neo-conservative thinker Francis Fukuyama argued that Western liberal democracy was the final form of government, for many, Western economic liberalism appears to be the final financial order.

The big difference is that its power base will come from the East, not the West.

Back at the Karl-Dietz publishers in Germany, Mr Schuetrumpf is doubtful about whether the resurgence of Marx will have much effect:

"I doubt they will read it all the way to the end, because it's really arduous."

Print Sponsor

Has China's housing bubble burst?
How the world's oldest clove tree defied an empire
Why Royal Ballet principal Sergei Polunin quit


Sign in

BBC navigation

Copyright © 2020 BBC. The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.

Americas Africa Europe Middle East South Asia Asia Pacific