On the 10^th anniversary of 9/11, it is sobering to reflect on  how the world has changed almost beyond recognition in many ways beyond terrorism.

First, the unipolar world is fast fading if not completely gone. American is still in a position to lead but her capacity to do so is much constrained as diminished financial resources, military overreach, divisions amongst Western allies, the rise of the Emerging Markets, the emergence of non-state actors including terrorists, and global issues like climate change, epidemics, and nuclear proliferation, all underline the realities of an inter-connected, inter-dependent, and multi-polar world (1).

Second, global economic gravitas is clearly shifting from the West to the East. What used to be peripheral countries in the late 18^th century have become today’s “emerging economies”. They now collectively contribute almost three-quarters of global growth, while their share of economic output is projected to account for almost 60% of total world output by 2030 (2).

Third, as a developing country, China has become the world’s second largest economy and is rising as a superpower. Nevertheless, China’s per capita income in purchasing power parity terms will still be trailing behind the United States at least by mid-century if not beyond (3). What is more, during this trajectory, though China has become increasingly convergent with the global norm economically, she remains largely divergent politically. There is a growing, classic security dilemma between the United States as the extant sole superpower and China as a rising challenger.

Additionally, while China has become the largest trading partner with many Asian countries including Japan, there is increasing anxiety amongst China’s Asian neighbours about a perceived “China threat”, which extends beyond intractable territorial disputes with China in the South China Sea.

As the US is re-asserting her traditional interests in the Asia Pacific while China is fast modernising her navy, there is growing tension in regional security covering strategic choke points along sea lanes in the South China Sea and the Indian Ocean (4).

The bilateral relations between the United States and China are thus set to test the skill and imagination of the two countries if world peace and stability are to be maintained in the coming decades.

Fourth, along with China and India, Islam is on the ascendant, not because of but in spite of extremism in some quarters. Emerging strong, secular Islamic countries like Turkey, Indonesia, and perhaps more importantly Egypt, underline the need for a change in world order and power politics to accommodate growing Islamic voices.

Fifth, the financial crisis has exposed the global contagion of debt, excessive leverage, high-frequency trading, and the divide between liquidity and debt-and-consumption driven growth. The can being kicked down the road is how the West would be able to maintain adequate long-term job growth to preserve the social contract with the Main Street without compromising the vitality of financial flows and globalized value and production chains.

Sixth, the middle class is rising rapidly in the developing world. The emerging economies are adding 125m people into the middle class each year, doubling  the global middle class population to 3.2bn by the end of this decade.  By 2020, Asia is set to comprise more than 50% of the global middle class population, or more than 40% of global consumption (5). This would change the shape of global consumer markets and have long-term implications for world resources.

Seventh, for the first time since its inception, major cracks are appearing in the Eurozone. The hour of reckoning seems to be arriving. A decisive choice has to be made between a more politically-unified or a two-track Europe. Either course would  have earth-shattering global consequences in currency, finance, economics and geopolitics.

Eighth, as the long-term value of the greenback is increasingly being called into question, the so-called Triffin Dilemma (6) and the need for a more sustainable global reserve currency system are gaining worldwide attention. This comes at a time of increasing global currency volatility, the growing uncertainty of the Euro’s future, rising Petrodollar wealth, and rapid internationalization of the Chinese yuan. How the world currency system would involve over time may have a seismic impact on the world’s economic and geopolitical landscape.

Ninth, unlike previous industrial revolutions, several countries with very large populations are all industrializing and urbanizing at the same time. This has ushered in an Age of Scarcity. Concerns about the environment as well as energy and resource security, including food and water, are on the top of national agendas. Coupled with increasing anxieties about Climate Change, it would clearly be ecologically unsustainable if the developing world were to replicate the energy and resource-intensive model of the so-called “American Dream”.  How to attain a “Low Carbon Future” for all would demand much closer cooperation between the developed and the developing countries in a common “One-World” mindset.

Tenth, throughout the past few centuries, Adam Smith’s Invincible Hand has worked wonders not only in the West but has been embraced by virtually all socialist and communist countries. However, the “fundamentalist capitalism” defining the financial crisis has begged the question (as was asked ironically by China’s Premier Wen Jiabao) whether the moderating hand of the state has been at least sidelined if not forgotten, along with Adam’s Smith’s earlier “The Theory of Moral Sentiments”. On the other hand, income inequalities in both the United States and China have been rising to alarming levels. A sense of social injustice is coming to the fore in both countries. Moreover, a rising, more vocal and now internet-empowered middle-class is beginning to assert its aspirations and opinions, not only in the Arab street but in the cyberspace of China and the streets in the Western world. Regardless of political ideologies, how to respond to this rising divide between the government and the governed would remain a hotly debated issue across the globe in the coming decades.

It goes without saying that the crumbling edifice of the Twin Towers on September 11, 2001 changed America and the world. While the images are still fresh in our mind, it is timely to commemorate this historical human tragedy and to reflect upon the continuing fight against global terrorism. However on this anniversary, it is at least equally, if not even more instructive, to ponder how countries should best respond to the challenges and opportunities of a dramatically transformed world in the wake of this epoch-defining catastrophe.

 *********************************************************************************************************************************

(1)  National Intelligence Council Report – Global Trends 2025: A Transformed World, Washington DC, 21 November 2008

 (2)  Aziz, Zeti Akhtar, Governor, Bank Negara Malaysia,  An end to western dominance: How change will ripple out across the world, Official Monetary and Financial Institutions Forum, September 2011

 (3)  Tatom, John, When Will China's Prosperity Catch up with the US?, Networks Financial institute at Indiana State University, 31 January 2007 (http://mpra.ub.uni-muenchen.de/17779/1/MPRA_paper_17779.pdf accessed on 11 September, 2011)

 (4)  Kaplan, Robert, Monsoon, The Indian Ocean and the Future of American Power, Random House, New York, 2010

 (5)  Aziz, ibid.

 (6)  The dilemma was first identified by a Belgian-American economist in the 1960s, Robert Triffin, who opined that global reserve currency-issuing countries have to suffer large trade deficits in order to supply the world with enough of its currency to fulfill the world demand for foreign exchange reserves. This leads to a conflict of interests as well as tension between what are national monetary policy imperatives of the reserve currency issuing country and what is best for global currency stability.