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Editorial: World needs peaceful end to divisions triggering global economic crisis

Russia's invasion of Ukraine has divided international society and greatly shaken the global economic environment that has sustained development in the post-Cold War period.

    The 1989 declaration of the end of the Cold War by the leaders of the United States and the then Soviet Union eased world tensions and produced what was termed the "dividends of peace" for many countries.

    First of all, there was a major decline in military expenditure. The U.S. halved its spending, which had risen to more than 6% of GDP. France, Germany, Italy and other countries, meanwhile, decreased their outlays to the 1% level.

    The funds freed up as a result were used to foster new industrial growth and support the lives of the public. The U.S. promoted the spread of the internet, which was then in its infancy. It cultivated the digital age and brought about an economic transformation and changes to people's lives.

    The barriers between East and West were broken down, and cross-border economic activity also grew.

    Japanese, U.S. and European companies expanded into China and Russia, and an international system of division of labor was established. Employment and income increased in emerging and developing countries, and consumers in each country became able to purchase cheap products.

    -- Dividends from the end of the Cold War exhausted

    Commenting on globalization over the past 30 years, International Monetary Fund (IMF) Managing Director Kristalina Georgieva stated that "forces of integration have boosted productivity and living standards, tripling the size of the global economy and lifting 1.3 billion people out of extreme poverty."

    The invasion of Ukraine, however, has changed the situation. Russia's confrontation with Japan, the United States and European countries has resulted in a succession of energy, food and other commodity export bans, and international supply networks have been disrupted. U.S. political scientist Ian Bremmer pointed out that the world had seen an end of the peace dividend, and that uncertainty over the future of the international order is increasing. It is feared that further division will be seen in the world economy and community, bringing about a state of affairs that may be irreversible.

    Countries across the world are increasing their military spending. The North Atlantic Treaty Organization (NATO), the military alliance of the U.S., Canada and much of Europe, is seeking military spending rises to at least 2% of member states' GDP. Japan is similarly planning a significant increase from its current level of around 1%. Economic measures taken in response to the coronavirus crisis have strained the finances of countries across the world. If they trim other budgets or increase taxes to secure funding for defense outlays, then it will only pile pressure onto normal people in society.

    Soaring energy and food prices have also directly impacted people's lives. The United States has descended into negative growth, and stagnation of the economies of Japan, European countries and China has also continued. This has led to "stagflation" -- a combination of inflation and economic stagnation -- and there are fears of a global recession.

    Higher prices weigh more heavily on low-income earners, widening disparity that has spread as a result of the coronavirus crisis. According to the United Nations, 1.6 billion people are threatened by hunger and poverty. There are also many developing countries suffering from huge debts, such as Sri Lanka, which has gone "bankrupt."

    Spreading social unrest leads to political instability. If a hard-line, outwardly confrontational stance takes hold as a means to fend off domestic discontent, it will result in a negative cause-and-effect loop, with tensions increasing.

    After the Cold War, cheap Chinese products sold well, which led to job losses in the U.S., sparking confrontation between Washington and Beijing. If division of the world into rival blocs advances without the negative aspects of globalization being resolved, then the situation will only worsen.

    Nobuaki Takahashi, a professor emeritus at Ritsumeikan University, commented, "The deeper the interdependence among countries, the easier it becomes for poor countries and low-income classes in developed countries to suffer from the world being divided into blocs. If international society is divided, then healthy development of the global economy will falter."

    -- International cooperation as a lesson learned from World War II

    To recover, multilateral collaboration is indispensable. However, the framework of the Group of 20, which represents industrial and emerging market nations and regions, remains dysfunctional. For two meetings in a row, finance ministers have failed to adopt a joint statement.

    The world needs to return to the soul-searching that followed World War II.

    In the Great Depression of the 1930s, countries resorted to protectionism, imposing high tariffs to protect their own industries. Antagonism between blocs deepened accordingly, which became a trigger for World War II.

    In 1944, before the end of the war, the representative of 44 Allied nations including the United States and Britain gathered in the U.S. and agreed to establish the Bretton Woods international system of monetary management. This aimed to advance free trade, which strengthened economic ties, and stabilize the currency exchange market supporting this trade. Then U.S. Treasury Secretary Henry Morgenthau Jr., who attended the gathering, stressed, "We have come to recognize that the wisest and most effective way to protect our national interests is through international cooperation -- that is to say, through united effort for the attainment of common goals. This has been the great lesson taught by the war."

    Cooperation was the starting point for the postwar order, and became the base for economic development.

    The economies of countries across the world are deeply interconnected. It is unrealistic to sever these ties as was done during the Cold War. While remaining attentive to the side effects of globalization, international society must curb the divisions that are aggravating the crisis.

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