Page 1 of 8
Advances in Social Sciences Research Journal – Vol. 9, No. 11
Publication Date: November 25, 2022
DOI:10.14738/assrj.911.13234. Ashik, S. A. I., Afroje, S., & Hossain, N. (2022). Economic War and Multipolar Economic World. Advances in Social Sciences Research
Journal, 9(11). 23-30.
Services for Science and Education – United Kingdom
Economic War and Multipolar Economic World
Syod Ahsanul Islam Ashik
Dept. of International Relation
Peoples’ Friendship University of Russia
Sahariya Afroje
Dept. of International Relation
Peoples’ Friendship University of Russia
Nazmul Hossain
Dept. of International Business, RUDN University, Moscow, Russia
ABSTRACT
This is an everchanging and ever-competitive global arena. It’s called globalization
of economic affairs. After the WWII a significant number of international financial
institutes and economic mechanisms including World Bank, IMF, SWIFT System,
WTO (GATT), International Stock Exchanges as well as global Reserve currency
have been developed to create a borderless economic world, called American World
Order. Due to global market economy and borderless economic world whole world
has become a global village and the movement of goods, capital and people has been
eased and widened. Economic activities have been faster, diversified, and
widespread in one hand and on the other hand the outer influence on an economy
has become very significant. Inter-exchange of products and services and inter- dependability among the nations are the global scenarios in the modern world. On
the contrary, these financial institutions and economic mechanisms are being used
as western leverage and being politicized and weaponized to counter the rival
states, causing economic volatility in national and global levels during last several
decades. The main purpose of the study is to analyze the impacts of outer influence
and politicization & weaponization of economic mechanism and international
financial institutions on a particular economy and on global economy in large and
potential ways to overcome the challenges. The study is mainly based on secondary
sources of data including scholarly journal, articles, books, research materials,
news of media outlets and other relevant sources pertaining to the subject. The
finding of the study will contribute to counter the unusual economic situation, deter
the counterproductive economic measures of hostile outsiders and suggest a
mechanism and framework for an Alternative Economic System to form a
multipolar economic world to neutralize the western domination.
Key words: Economic globalization; Economic Turmoil; Politicization & Weaponization
of Economic Institutions; Economic War; Multipolar Economic world.
INTRODUCTION
The world is under new global challenges. In this era of global market economic the outer
influence of an economy is so crucial as the internal influence. Moreover, economic
Page 2 of 8
24
Advances in Social Sciences Research Journal (ASSRJ) Vol. 9, Issue 11, November-2022
Services for Science and Education – United Kingdom
politicization is very common fashion in the ever-competitive global arena. Together with
politicization of diplomatic and military spheres, economic spheres are also being politicized
and economic mechanism and economic institutions are being used as weapons to ravage the
rival states for last several decades. The most common tactic of attacking on rival economies
are economic sanctions, financial embargo, asset freezing, unusual tariffs imposing, market
dumping, deterring financial institutions from SWIFT System, from International Stock
Exchanges, and from financial institutions, deterring ports and vessels to transport of goods etc.
Due to the hostile economic approaches and economic politicization not only the targeted
nations rather whole world is being affected. The adverse impacts of economic warfare are slow
growth of economy, global economic crisis, unusual inflation rate, acceleration of
unemployment and poverty rate etc. The potential ways to deter the challenges are to apply
convenience monitory policy and multipolar economic world.
In the study a convenience monetary policy has been recommended and a mechanism and
framework has been developed to form an Alternative Economic System and multipolar
economic world to neutralize the western domination.
GLOBAL ECONOMIC CHALLENGES
The world is currently confronted with numerous economic challenges arisen from political
dispute and hegemonial intention of imperial powers. After the WW II US lead international
institutions including IMF, World Bank and WATT were established with a view to create a
borderless economic world dominated by western countries known as American world Order.
These institutions are now being used as western leverage and world economics are under
numerous challenges. The most remarkable challenges are massive economic downturn,
unusual inflation, high unemployment rate, permanent economic crisis, crisis of goods &
services, depreciation of national currency, defaulting of state debt etc. The challenges are
becoming more deadly, and the impacts are being more severe and wider due to rapid
politicization and weaponization of economic spheres, and international financial mechanisms
and institutions to crackdown the rivals’ economies. Adverse impacts of hostile measure of an
economy rapidly spreader throughout the world from the affected country due to the
globalization of economic affairs and global market economy.
ECONOMIC WAR
Economic war is literally an economic strategy set by combatant nations in order to weakening
the economic power of rival states. The method is classic and achieved by the use of hostile
economic measures including economic sanction, financial embargo, deterring financial
institutions from SWIFT System, from International Stock Exchanges, and from financial
institutions, deterring ports and vessels to transport of goods etc. Economic war has become
very common tactic to ravage the rival states during last several decade and western countries
are the dominant forces of it. Any nation which doesn’t comply with western nation’s ideology,
political philosophy, economic, social or geo-political interests are given financial and
diplomatic sanctions.
Not only the targeted nations rather whole world suffers from counterproductive economic
war due to globalization of economic affairs and global market economy. The aftermaths of
economic war are unusual economic downturn, global economic crisis, mass inflation, high rate
of unemployment and poverty, shortage of supply etc.
Page 3 of 8
25
Ashik, S. A. I., Afroje, S., & Hossain, N. (2022). Economic War and Multipolar Economic World. Advances in Social Sciences Research Journal, 9(11).
23-30.
URL: http://dx.doi.org/10.14738/assrj.911.13234
Weapons of Economic war
The concept of economic warfare is most applicable to total war, in which together with the
armed forces of enemy countries, economic power is applied and weaponized. The
ammunitions of economic warfare are economic mechanisms and international economic
institutions including SWIFT System (International transaction system); International Stock
Exchanges; Financial Institutions (Banks & financial entities); Transaction & Reserve
Currencies ($, €, £), ports and transport ships etc.
Western dictatorship in Economic world
Economic world is predominantly controlled by the western countries, their allies and partners.
Almost all the international economic mechanism and international financial institutions are
owned and controlled by the western countries and their partners.
SWIFT System, the western leverage
SWIFT, the Society for Worldwide Interbank Financial Telecommunication, legally S.W.I.F.T. SC,
is a cooperative society is to provide services related to the execution of financial
transactions and payments between banks worldwide. SWIFT acts as a carrier of the "messages
containing the payment instructions between financial institutions involved in a transaction.
As of Feb. 2022, 11,000 member banks of 200 countries are with SWIFT system with 4 billion
accounts. SWIFT system’s gradual acceleration of global transaction is in table1.
Table 1: Global transaction through SWIFT System
Year/segment Total massages for global transaction/day
2018 37 million
2019 44.58 million
2020 50.2 million
2021 82 million
Source: Statista 2022
So, it is clear that SWIFT has an influential and incremental domination in global financial
transaction. If SWIFT is blocked for a nation its international financial activities totally deterred
as secondary sanction is imposed on any financial institute if it conducts any financial activities
with the western sanction-imposed nation.
SWIFT is controlled by the central banks of US leads G10 countries, the European Central Bank,
and the National Bank of Belgium.
INTERNATIONAL STOCK EXCHANGE AND WESTERN DOMINATION
A stock exchange is an exchange where stockbrokers and traders can buy and sell securities,
e.g., shares of stock, bonds, and other financial instruments. There are 16 stock exchanges in
the world which have a market capitalization of over $1 trillion each and account for 87% of
global market capitalization.
The major 16 stocks exchanges are –New York Stock Exchange; Nasdaq; Euronext; Shanghai
Stock Exchange; Japan Exchange Group; London stock Exchange; Deutsche Borse AG
(Germany); Toronto Stock Exchange; National Stock Exchange; Hong Kong Stock Exchange;
Page 4 of 8
26
Advances in Social Sciences Research Journal (ASSRJ) Vol. 9, Issue 11, November-2022
Services for Science and Education – United Kingdom
Korean Stock Exchange; Six Swiss Stock Exchange; Taiwan Stock Exchange; Australian Security
Exchange; Shenzhen Stock Exchange; Nasdaq, Nordic and Baltic Exchanges; Chicago Mercantile
Exchange
It is a matter of fact that 13 out of 16 stock exchanges are western countries and their allies
controlled and if trade activities are conducted by any stock exchange with the western
sanction-imposed nation, secondary sanction is given on it. So, the western stock exchanges are
huge blows for the western rival countries.
IMF
By the leadership of the USA IMF was established in 1944 with 44 states to surveillance the
global monetary system and to assist the member states to confront and overcome the
monitory challenges in crisis situation. The total member states of IMF are 190 as of today. The
principal functions of IMF are- 1. Surveillance
2. Lending
3. Technical assistance
The financial sources of IMF are –
1. Financial contribution of member states
2. Multilateral Borrowing
3. Bilateral loan agreement
Quata of the member states is the largest financial sources of IMF where USA is the biggest
contributor and single biggest voting owner of IMF decision making body (16.5%) and veto
power. So, IMF is predominantly dominated by USA and its allies.
World Bank (WB)
By the name of International Bank of Development and Reconstruction World Bank was
established in 1944 by the leadership of the USA. The main objectives of WB are financial and
infrastructural development, improvement of poverty condition and reduction of illiteracy rate
mainly in developing and list developed countries through financial assistance. Moreover,
World Bank provides loan to the NGOs for financial growth and employment creation. It
provides financial, commercial, technical and ethical assistance and consultancy to the
government of member states. It also works to strengthen the NGOs of member state. Like IMF
World Bank is also dominated by the USA.
WTO
The word trade organization is the only international global organization dealing with the rules
of trade and commerce to smooth and accelerate trade among the member states. It is the world
largest economic organization with 164 member states and representing over 98% global trade
and global GDP. It officially commenced operations on 1 January 1995, following to the 1994
Marrakesh Agreement, thus replacing the 1948’s General Agreement on Tariffs and Trade
(GATT) which was established by a multilateral treaty of 23 countries led by the USA in 1947
in the wake of other international organizations including World Bank in 1944, IMF in 1955 etc.
Page 5 of 8
27
Ashik, S. A. I., Afroje, S., & Hossain, N. (2022). Economic War and Multipolar Economic World. Advances in Social Sciences Research Journal, 9(11).
23-30.
URL: http://dx.doi.org/10.14738/assrj.911.13234
Prime Banks, the springboard for the West
Bank is very significant financial institution in the modern global arena. It operates transaction
for internal and external trade, commerce and all other issues, lends for infrastructure
development, investment, education and other development purposes. According to S&P 2000,
the biggest banks in the world are Industrial and Commercial Bank of China, China Construction
Bank, Bank of China, JPMorgan Chase, HSBC, Bank of America, BNP Paribas, Credit Agricole,
Mitsubishi UFJ Financial Group, Citigroup Inc. Wells Fargo etc.
These banks play a leading role for global lending and borrowing which account for 53% of
global lending.
It’s a matter of fact that they are the SWIFT members and if any financial institutes maintain
commercial activities with western sanction-imposed nation and/or their financial institutions
either through transaction, lending or depositing activities, secondary sanction is given to it.
Transaction and reserve currency, the western powerhouse
A reserve currency is a strong currency which is widely used in international trade, is held in
significant quantities by central banks or other monetary authorities as part of their foreign
exchange reserves. The strongest reserve currencies in world are- US dollar, Euro, Pound
Sterline, Japanese yen, Swiss franc etc. The western domination on global transaction and
reserve currencies are the following:
Table 2: Global transaction by currency
Year/segments USD Euro Pound
2018 40% 34% 5.1%
2019 43% 33% 5.3%
2020 39% 38% 5.5%
2021 40% 36.65% 5.89%
Source: Statista 2022
Table 3: Foreign Exchange Global Reserve
Year/segments USD Euro Pound
2018 61% 20% 5%
2019 62% 20% 5%
2020 63% 20% 5%
2021 60% 20% 5%
Source: Statista 2022
The tables (2 and 3) shows that the western countries and their allies own all the major
reserved currencies by which almost all global transaction is conducted.
REASONS FOR FINANCIAL WAR
Economic war is mainly a political agenda to accelerate the bargaining power and a way to
punish the rival state economically. If any country doesn’t comply with western nation’s
ideology, political philosophy, economic, social, or geo-political interests are given financial and
diplomatic sanctions. The list of countries under the western sanction are-
• Cuba (Since 1962)
• North Korea (Since 1950)
Page 6 of 8
28
Advances in Social Sciences Research Journal (ASSRJ) Vol. 9, Issue 11, November-2022
Services for Science and Education – United Kingdom
• Iran (Since 1979)
• Venezuela (Since 2014)
• Afghanistan (since (1999)
• Nicaragua (since 1985)
• Russia (2014)
• Zimbabwe (since 2002)
These nations are under west imposed economic sanctions due to their own political ideologies,
political philosophies, and own way to rule the nations.
Preventive Measures (temporary solution)
The most conventional way to confront the challenges is to apply an effective monitory policy
to ensure stability, continue investments, and usual economic growth. Monetary policy is the
policy adopted by national monetary authority to control the interest rate for short-term loan
and/or control the money supply to ensure price stability and general trust of the value and
stability of the nation's currency. There are 2 types of monetary policies commonly applied are- A. Expansionary policy: Expansionary policy primarily is a stimulation of economic growth.
In the expansionary form of monetary policy, the monitory authority reduces the interest
rate, cut taxes, accelerates the government spending and government transfer to enhance
the investment and money liquidity. It accelerates the economic growth and reduce the
unemployment rate but accelerate inflation rate and depreciate national currency.
B. Contractionary policy: Contractionary policy on the contrary is a dampen of economic
growth. In the contractionary form of monetary policy, the monitory authority enhances
unusual interest rate and taxes and reduces government spending and government transfer
significantly. It reduces the inflation rate and appreciate the national currency but slows the
economic growth and accelerate the unemployment rate
Moreover, to bring stability and financial sustainability in an economically turmoil country
following measures are very effective- Ø Reduction of import through enhancing domestic growth and domestic consumption
Ø Acceleration of export through domestic production growth
Ø Reduction of money supply by changing interest rate or removing excess reserves, E.G.,
selling foreign reserve and buying national currency from international stock exchanges.
Ø Austerity measure to minimize the budget deficit (tax increases, spending and
investment cuts)
Ø Enhancement of capital inflows through tax acceleration or government borrowing
Ø Fixing exchange rate and exchange rate controlling
Alternative World Economic System (long term and permanent solution)
Alternative World Economic System is the only way to confront the global challenges through
establishing multipolar economic world and neutralize the western domination. The following
initiatives could be a very potential breakthrough to confront the challenges- Ø Alternative Stock Exchanges with western sanctioned nations, their allies and the neural
states
Ø Alternative SWIFT system with the Banks of western sanctioned nations, their allies and
the neural states
Page 7 of 8
29
Ashik, S. A. I., Afroje, S., & Hossain, N. (2022). Economic War and Multipolar Economic World. Advances in Social Sciences Research Journal, 9(11).
23-30.
URL: http://dx.doi.org/10.14738/assrj.911.13234
Ø Alternative reserve and transaction currency
Ø Alternative development banks, monitoring and rating agencies
BRICS platform could be a springboard in this regard. Some of the initiatives have already been
taken to counter the challenges.
Working Procedure for Alternative Economic World
The BRICS which consists 40% of global population, 24% of global GDP and over 16% of the
share of the world trade could be a potential Platform for alternative economic world. It could
be composed with 3 blocks- 1. the country already under western sanctioned
2. the anti-western countries and
3. the neutral states.
The BRICS nations will create a common economic zone, BRICS stock exchanges, BRICS
development Bank, BRICS currency and BRICS university and other financial, commercial and
international institutions. The BRICS SWIFT system can work with the same mechanism of
western lead SWIFT system.
CONCLUSION
A multipolar economic world is the demand of time. The above initiatives will play a role to
keep the balance in economic world forming a multipolar economic world and neutralizing the
western domination and arbitrariness. It will bring a very potential breakthrough for
sustainable economic growth free from financial sanction, economic embargo, asset freezing
and any other punitive measures and we will get a peaceful prosper world free from economic
downturn, financial crisis, inflation, unemployment and poverty.
References
1. Jahan, Sarwat. "Inflation Targeting: Holding the Line". International Monetary Funds, Finance & Development.
Retrieved 28 December 2014.
2. "Monetary Policy". Federal Reserve Board. Frb 2022.
3. Levy Yeyati, Eduardo; Sturzenegger, Federico (2010). "Monetary and Exchange Rate Policies". Handbooks in
Economics. Handbook of Development Economics. Vol. 5. pp. 4215–4281. doi:10.1016/B978-0-444-52944-
2.00002-1. ISBN 9780444529442.
4. Friedman, B.M. (2001). "Monetary Policy". International Encyclopedia of the Social & Behavioral Sciences.
pp. 9976–9984. doi:10.1016/B0-08-043076-7/02257-9. ISBN 9780080430768.
5. David A. Baldwin, Economic Statecraft (Princeton UP, 1985).
6. Shambaugh, George. "Economic warfare". Encyclopædia Britannica. Some common means of economic
warfare are trade embargoes, boycotts, sanctions, tariff discrimination, the freezing of capital assets, the
suspension of aid, the prohibition of investment and other capital flows, and expropriation.
7. Cornel Bontea (2018), "The Theory of the Passagium Particulare: A Commercial Blockade of the
Mediterranean in the Early Fourteenth Century?", in Georgios Theotokis; Aysel Yıldız (eds.), A Military
History of the Mediterranean Sea: Aspects of War, Diplomacy, and Military Elites, Brill, pp. 203–
204, doi:10.1163/9789004362048_011.
8. CBE Public Search". kbopub.economie.fgov.be. FPS Economy, SMEs, Self-Employed and Energy. Retrieved 27
February 2022.
Page 8 of 8
30
Advances in Social Sciences Research Journal (ASSRJ) Vol. 9, Issue 11, November-2022
Services for Science and Education – United Kingdom
9. Scott, Susan V.; Zachariadis, Markos (2014). The Society for Worldwide Interbank Financial
Telecommunication (SWIFT) : cooperative governance for network innovation, standards, and community.
New York, NY: Routledge. pp. 1, 35.