From Mighty Dollar to Multipolar, Part 2

A changing global landscape, and how might the land lie in the future

In the first blog we summarised the disruption to geopolitics caused by the end of the “New World Order”, the rise of China and the BRICS countries, events such as Covid-19 and Russia’s invasion of Ukraine, and the impact of the second Trump Presidency on the United States and its relations with other powers and regions.  The blog identified growing pressures on the global systems of international trade, and the reduction of the centrality and power of the dollar. The blog found that while there was undoubtedly a trend towards ”de-dollarisation”, and some powerful countries and blocs explicitly supported it, there was no obvious and immediate replacement in prospect.

However, given the unstable geopolitical and economic situation, and the explicit calls by some world leaders for change, it seems sensible to think about how systems may change and evolve in the next 10-15 years – far enough into the future not to focus solely on the events dominating today’s news, not so far into the future as to lose the thread in a forest of wider strategic change.

The Scenario Set

The scenario set uses two axes, drawn from the key issues in Part 1 of this Blog.  The horizontal axis runs from geopolitical order – i.e., a geopolitical environment similar to the current one – to geopolitical conflict, in which there is heightened tension between individual states and blocs. The vertical axis runs from economic stability, in which the world achieves continuity and stability through what we know will be very difficult times in the future, as the impact of the closure of the Straits of Hormuz takes full effect.

Scenario A – Survival

Geopolitical Order/ Economic Instability

This is a scenario of disillusionment. In the west, opportunities and living standards are declining: there are fewer career opportunities for younger people, and state support, such as pensions and health care for older people, is also declining in scope and quality. Elections and engagement in current affairs and politics show increasing cynicism about governments and disengagement from party politics.  Similar challenges apply elsewhere in the world, where there is a hollowing out of the middle classes in developing economies, and few signs of consistent and rapid development in the poorest regions.

Technologies such as AI and quantum computing mainly enrich big corporations and their stockholders.  While these sectors grow, there is a sense of “managed decline” across other sectors and in what used to be manufacturing hubs: even China is experiencing stalling growth, as global demand falls, international trade and supply lines are disrupted, and costs of materials rise.

Serious climate events are becoming too big, and too frequent to ignore, but the emphasis tends to be on “firefighting” rather than radical action to transform the Earth’s use of resources, which is deemed ‘too difficult and too expensive at the present time’.

Global trade is punctuated by tariffs, embargoes, different trade standards and rules, which inhibit the flow of trade in goods, although services and intellectual property fare slightly better, being free of most of the physical barriers to trade in goods.

Scenario B – Uprising

Geopolitical Order/Economic Stability

Younger generations find their voice.  As they become fewer in number, their value becomes greater. They are critical of the regimes and the ageing leaders who have brought the world to its present state. Their views are often challenging and unsettling for the older generations, and are expressed vividly and colourfully.

The applications of technology include the rise of free speech and disclosure and development of socially beneficial alternative uses – ‘tech to challenge tech’. Innovation is led by young people.

With the rise of the Millennial Generation, there is growing political pressure for a renewal of the concept of the social contract – not a return to the post-WW2 settlement, which is seen as having failed, but one based on greater equality and fairness.

This social contract also has at its core a focus on sustainability and cleaning up the planet: there is a rapid shift to renewables in Europe, Asia and Africa, despite the objections of the USA and other fossil fuel producers and exporters.

There is impetus to create a new architecture of international bodies; following the rift between the USA and its former allies, the “Middle Powers” are instrumental in encouraging a wider global perspective.  This is welcomed by ASEAN and the African Union, as well as by most of the BRICS countries – China is cautious at first, and Russia has its own internal conflicts to deal with. But others, especially India with its rising population, are strong advocates for change. This marks a shift in global influence away from the USA and other would-be superpowers.

Scenario C – Burnin’

Geopolitical Conflict/Economic Instability

This is a world of “winners and losers”.  The “winners” see wealth and power as the due reward for their energy and enterprise. Poverty and failure to thrive are seen to be markers of dysfunctional societies.

This ethos reinforces the oligarchic flavour of the tech world in the west and the Party hierarchy in China. Governments and corporations encourage and reward loyalty and conformity, and those who step out of line can expect to be sanctioned.

The “winners” gain control over access to and trade in essential raw materials, and seek to maintain and extend their areas of control.  States without direct access to such essentials are expected to show due subservience to the more powerful ones. They are sanctioned by the powerful, and often become politically unstable as a result.

The winners believe that the environment is there to serve the needs of its masters.  Some parts of the planet are carefully nurtured and protected, because that is where the rich and powerful choose to spend their leisure.  Other parts are seen mainly as a source of resources.  The winners do not pay anything more than token heed to environmental movements.

The role of international forums is limited. The big economic hegemons make the most important strategic decisions themselves.  The lesser powers are expected to fall in with what the hegemons have decided. Non-compliance leads to local hybrid conflicts.  The big powers seek to use their economic size and strength, and mastery of technology to bring resisters back into line.  Diplomacy is a power game, rather than a dialogue.

Scenario D – Exodus

Geopolitical Conflict/Economic Stability

The spread of wars and hybrid conflicts around the planet, and the economic damage caused by disruptions to trade routes and supply chains sees the growth of mass-migration, which is in turn resisted by reluctant hosts. This is seen not only in Africa, but in Europe, Asia and even in America, as water shortages lead to chaos.

Technology comes into its own as an instrument of advanced hybrid warfare, government surveillance and repression, as well as organised fraud, theft and other crime. It has its positive sides, such as improvements in health, but to many in their daily lives, technology is at least as much a measure of control and coercion as of empowerment.

Tactical economic decisions cause loss of opportunities, and indebtedness grows to crisis levels as countries spend money they either do not have, or cannot afford to spend in order compete with their rivals, at local and regional as well as global levels. Access to vital materials, as well as markets, is more than ever in the hands of the big powers.

Droughts, famines and climate catastrophes become routine, while individual states or blocs seek to exploit short-term advantages and opportunities, such as control of water flows in major rivers.

This is a world dominated by the projection of power, coercion and the threat of, or use of force.  The number of hybrid wars, already rising today, continues to grow.

Conclusion

The question of the future role of the dollar comes up at a time of geopolitical uncertainty.  But there are in particular, potential economic disruptions and fissures immediately before us.  All the major economies are dealing with rising levels of debt. The OECD’s 2026 Global Debt Report reports on this trend, and warns that, “pressure on debt markets is growing and it will continue to test their resilience”.  The report pre-dated the closure of the Strait of Hormuz.

The US National Debt has reached $39 trillion. The report from economicsinsider.com states that annual interest payments on this mounting debt are now exceeding $1 trillion per year, and according to the Congressional Budget Office (reported in Fortune in February) interest payments could rise to $2 trillion by 2036. The rising debt may confirm scepticism among other economies about the future stability and strength of the dollar, even if it remains far stronger than any single rival currency: this may add to the desire to find supplements and/or alternatives to dollar-based trade.

The conflict between the USA and Iran, and the closure of the Strait of Hormuz has amplified the uncertainty. UNCTAD’s briefing highlights the impact on trade, not only in oil and gas, but also including oil products and chemicals, including those used on the production of fertilizers as well as metals such as aluminium. This is causing supplies to run down and prices to rise: this affects all economies to some extent. If the closure continues – and there is no indication that reopening is imminent – then fuel prices will rise further, shortages will become palpable, and as the UNCTAD briefing shows, food-production and other trade areas will also be affected. This report from the IEA looks specifically at the global impact of disruption to oil and gas supplies.

As well as its economic effects, the geopolitical aspects of the Strait of Hormuz cannot be ignored.  The US attack on Iran in February was undertaken without prior consultation with other global and regional powers – other than Israel, which is a participant. Even the Gulf States seem to have been taken by surprise.  The initial “shock and awe” of the USA’s Operation Epic Fury turned into an attritional stalemate, with the Strait of Hormuz leaving the USA apparently at a loss to know how to reopen it.  In effect, the war with Iran not only seemed to show the US to be an unpredictable and capricious ally, but also a weaker power than had appeared: unable to vanquish a smaller, but well dug-in and well-prepared adversary. 

This will not have escaped the notice of strategists in all parts of the world.  Nor will the imperative to diversify sources of energy, so as to become less dependent on a bottleneck in a conflict zone.

In one sense, the USA, being a major producer of oil, gas and other petroleum derivatives, is perhaps in a better position to withstand the effects of the conflict and the likely disruption to international trade, as others more dependent on imports, suffer greater damage. But with the duration and the outcome of the war uncertain, as well as the geopolitical impact, it is sensible to look at scenarios of the future rather than seeking to forecast an outcome. America’s blockading the blockade in the Strait may lead Iran to accede to a compromise which allows the Strait to be open and America to declare victory. 

On the other hand, a continuing struggle may tip over into a full global economic crisis as supplies and reserves of vital fuels run out, we may see shortages of fertilizer for planting seasons around the world, and trade in other key goods disrupted.  For the wealthy that would mean higher prices, reduced returns on investments and disrupted travel plans; for middle-income states it would mean real hardship especially for the poorest and the middle classes.  Poor countries will find themselves at the back of the queue for the necessities of life: fuel, food, medicines.

This is not a comfortable scenario set.  But the starting point is a world facing geopolitical and economic upheaval, and increased conflict in most continents.  Uprising (Scenario B) offers the most immediately positive view of the next 10-15 years.  But even in the less optimistic scenarios there will be opportunities to influence the future, and use them as they unfold to look for better hope for the future.

Written by David Lye, SAMI Fellow

The views expressed are those of the author(s) and not necessarily of SAMI Consulting.

Achieve more by understanding what the future may bring. We bring skills developed over thirty years of international and national projects to create actionable, transformative strategy. Futures, foresight and scenario planning to make robust decisions in uncertain times. Find out more at www.samiconsulting.co.uk

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