The world order is changing, is Canada prepared? | Commentary

By Dave Wilkin

The headlines are filled with seemingly endless tough news of late: the Ukraine war, COVID fallout, an energy crisis, growing economic worries, etc.  Now look below the surface and see a fundamental change underway — a shift in the world order.

Decades of offshoring manufacturing and resource development to lower costs, boost profits, and reduce domestic pollution led to high dependency on both Chinese and Russian exports. Combined with its decade of Belt and Road investments, China has risen to become the world’s top exporting country, putting its economy on track to surpass the US economy by 2030. Russia is the world’s largest exporter of energy (supplying almost a fifth of global energy imports), fertilizer & wheat, giving them oversized influence on global energy and food markets.  

In energy, as the West shuns fossil fuels, China and Russia systematically expand their global reach, filling US voids, including significant investments in the Middle East,  Africa, and Latin America. In agriculture, Western countries are shifting away from natural gas-based fertilizers to costly organic alternatives. The timing couldn’t be worse, with skyrocketing food costs & increasing food security concerns. Just ask Sri Lanka how that worked out.

Botched EU energy policies opened the door to Putin’s invasion, but it was his fear over Ukraine’s potential NATO membership, placing a US-backed country on its 2300 km border, that ultimately triggered the invasion. Beijing no doubt understands this and fully backs Russia, knowing they stand to benefit most as Russia moves further into their orbit, strengthening their long-term energy & commodities security. 

It’s not just China that continues buying Russian exports, so do many other developing countries, including India, Brazil, Mexico, & Indonesia, many upping them at big discounts to high world prices. Under 15% of the world’s population are in countries that have levied sanctions on Russia and none are developing countries. They watch as Ukraine receives seemingly unwavering support while many other conflicts and tragedies are discounted or ignored. The UN recently reported more than 100 million people are displaced globally and 193 million people are facing a food crisis or worse.  It’s a similar story for energy too, where half the world remains energy poor.  Yet developing countries are pressed to slash emissions, despite Western financial support falling short on their relatively minor commitments to help them.

Then at the last G7 meeting we saw the US-led $600 billion “Partnership for Global Infrastructure and Investment” announcement, pitched as a counter to China’s Belt & Road initiative. Its focus on ‘climate/green energy, gender equity, global health and digital infrastructure’ reads like President Biden’s (failed) multi-trillion dollar Build Back Better plan. It sure doesn’t appear to fit developing countries’ top priorities today.

Now we see EU countries introducing emergency actions, including upping coal-powered generation, to ease their growing energy crisis and extreme plans if Russian gas is entirely cut off. From the US, a push for a cap on Russian energy prices and pleas to OPEC for production increases signals increasing desperation as sanctions fail to deter Russia, just like past failed sanctions. Such tactics won’t alter OPEC decisions either, and a price cap would likely backfire, triggering further Russian retaliation, and driving energy & food prices even higher.

NATO’s escalating heavy weaponry for Ukraine has also failed to stop Russian military advances. So why does it continue? Obviously Western leaders see Putin’s Russia as a growing threat to the Liberal World Order, thus making it a Western proxy war with Russia. So on it goes, with a mounting loss of life, escalation risks, growing energy & food crises, and economic damages reaching trillions of dollars.

Now governments face slowing economies, record debt, and rising interest rates, as decades of loose monetary policy, money printing, and high deficits come back to bite. The Bank for International Settlements (pdf.) puts it this way: “The most pressing monetary policy task is to restore low and stable inflation while limiting as far as possible the cost to economic activity and preserving financial stability … there is a need to sustainably rebuild monetary and fiscal buffers”. The war makes this impossible to achieve.

Developing countries aren’t blind, they see the failures, disparities, and hypocrisy and suffer the brunt of the war’s economic fallout, so their distrust of the West grows, colonial history notwithstanding. Little surprise then when they place their own interest first, as was again on display at a recent G20 diplomats’ meeting.

The war must end, and a compromise settlement is the only way to do it. Western leaders, our PM included, along with western media don’t seem to see this, but public support may be waning.

For decades the West brushed off Chinese and Russian moves while failing to see how the world order was changing. Now that China has risen to challenge US global leadership, with much of the developing world in tow, a course change is long past due.  It will require thoughtful, rational long-range planning, not knee-jerk reactions. It should include mending divisions, serious fiscal & monetary policy discipline, and smarter trade, energy, military, and foreign policies, including achieving a sustainable climate/energy security balance. It must also smartly deliver more support to developing countries, but not by tying it to our priorities, values, or governance.

Is Canada prepared for this new reality? Considering our lagging economic outlook, muddled policies, and weak leadership, the simple answer is no. Canada is blessed with bountiful natural resources, bordering the US, coasts on three oceans, and a highly educated, peaceful population. Unleashing our full potential to meet the new challenges in this changing and more dangerous world, demands a new Canadian vision and new energized national leadership.

Muskoka has a voice in this, so let’s make sure it is heard.

Dave Wilkin is a Professional Engineer, with a master’s degree in Electrical Engineering from the University of Toronto. His career spans over 40 years in Information Technology, banking, and energy. He is currently a co-owner in a small energy consulting company and lives in Huntsville, Ontario.

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