Since the Second World War, the US had dominated much of the world on the strength of its military, the vast network of its intelligene apparatus, and the power of its dollar. The collapse in 1991 of the Soviet Union merely added to American hubris. Nearly 85% of the world’s central banks maintained their reserves in US dollars. Additionally, in 1973, the Americans forced the Saudis — the world’s largest oil producer at the time — to trade oil only in dollars; hence the term petrodollars.
At the beginning of this century, the euro emerged as a rival to the US greenback. The euro has captured 20% of the reserve currency market diminishing the dollar’s dominance. Now another currency — the Chinese yuan — is making itself felt on the global financial markets. The yuan is emerging on the strength of the Chinese economy that is already the second largest in the world. In a decade or so, it is expected to surpass the US Gross Domestic Product (GDP). The US also has a huge trade deficit with China, not because of unfair trade practices or lousy deals, as Donald Trump alleges, but because American corporations make lousy products. They have also outsourced most manufacturing jobs overseas to gut the wages of American workers.
The yuan’s rise is inevitable because of the strength of the Chinese economy and Beijing’s massive trade with other countries. China has also entered into bilateral agreements with a number of countries whereby they would trade in each other’s currency, bypassing the dollar. This has already happened with Russia and moves are afoot to make similar arrangements with Turkey, Pakistan, and countries in Southeast Asia. These are hopeful signs and would certainly further diminish the dollar’s influence.
China has more than $2 trillion in reserves. It is gradually divesting dollars and acquiring gold. In fact, both Russia and China have agreed to back other countries’ reserves with gold. This was the arrangement until 1971 when then US President Richard Nixon de-linked the dollar from gold. The yellow metal priced at $35/oz at the time is now trading at more than $1,200. This reflects the precipitous drop in the value of the dollar whose victims are other countries.
On the military front as well the US has suffered massive blows. Despite its huge stockpile of weapons and obscenely high military budget (officially at $650 billion per annum), the US military has not won a single war on its own. This may sound strange but it is true. Let us look at the record. The US has never fought a war on its own; it always gathers allies (it actually coerces them to join) to fight weaker opponents. Despite this, the US and its allies have not succeeded. Afghanistan, Iraq, and Syria offer recent examples. North Korea continues to defy US threats.
After its defeat in Afghanistan at the hands of ragtag bands of Taliban fighters, the US decided to use proxies. Al-Qaeda and ISIS emerged to cause havoc in Iraq and Syria. In both places, the takfiri terrorists have been defeated and their territorial possessions reduced to isolated pockets. This came about as a result of determined help from Hizbullah and Islamic Iran to their allies in Iraq and Syria. Western media outlets harp on Russia’s air force achieving victory in Syria but deliberately ignore the more important role played by Hizbullah and Iran. According to military experts, the air force contribution to any modern war effort is about 10%. It is troops on the ground that make the real difference. Russia does not have boots on the ground in Syria; the US does — about 2,000 of them — and it has established illegal bases in the country.
Washington alleges that it is fighting ISIS terrorists. This is a lie; ISIS is a creation of the US and its allies. Following their defeat in Syria, ISIS terrorists were transported by American helicopters to Afghanistan. Zamir Kabulov, Russia’s special envoy for Afghanistan, said last month that there are more than 10,000 ISIS terrorists now operating in Afghanistan, thanks to US support.
There is no reason for US Special Forces to be present in Syria anymore; there never was a genuine reason in the first place. Their presence in Syria is illegal. General Qassem Solaimani, Commander of Iran’s Quds Force, in a message to the US last month warned it to get its troops out of Syria or they will be driven out. Unlike the US, Iranian commanders do not make empty threats; they fulfill them.
Thus, the twin pillars of US hegemony — its dollar and military — are both in decline. America’s crumbling infrastructure, shuttered factories, and crumbling cities with collapsing bridges and rotting water pipes are proof positive that the US is in terminal decline. Even its European allies — Britain, France, and Germany — have had enough of American hubris. They are charting their own course in global affairs.
A new multipolar world is emerging, one that promises a better future for humanity than America’s exceptionalism.
Zafar Bangash is Director of the Institute of Contemporary Islamic Thought (ICIT).