Geopolitical economy of a Trumped-up world

The return of the Trump administration has only accelerated the decline of the global neoliberal order, yet this disruption merely continues patterns visible throughout monetary and fiscal policy history. History doesn’t repeat itself, but it rhymes. Understanding contemporary geopolitical shifts and the implication for Nigeria requires examining the economic architecture built since the Great Depression. […]

The return of the Trump administration has only accelerated the decline of the global neoliberal order, yet this disruption merely continues patterns visible throughout monetary and fiscal policy history. History doesn’t repeat itself, but it rhymes. Understanding contemporary geopolitical shifts and the implication for Nigeria requires examining the economic architecture built since the Great Depression.

 

From Gold Standard to Dollar Hegemony

The Great Depression forced classical liberalism’s retreat, giving way to social liberalism and government intervention in economic affairs. This shift produced the New Deal programs, but more critically, it produced the Gold Reserve Act, which ended private gold ownership in the USA, transferred all gold to the Treasury, and revalued it from roughly $21 to $35 per ounce. This created massive windfall profits that funded both domestic programs and, crucially, the Exchange Stabilisation Fund (ESF).

The ESF’s architect proposed a simple philosophy: “the bigger the fund, the better”. Post-war negotiations at Bretton Woods transformed this domestic stabilization mechanism into a global one. Fearing post-war economic contraction after industrial demand dried up, American negotiators pushed for an international stabilization fund, the International Monetary Fund (IMF). The architect himself later warned that if the Fund became a tool for influencing member governments, it would “play a minor, and probably an unfortunate role in future economic development”. His warning went unheeded, and the IMF emerged not as a global institution but as an instrument of dollar dominance, ensuring American economic interests shaped developing world policies.

The War Economy Myth and the Golden Era

Yes, war spending created employment and spurred technological development, but government-directed investment in planned economies have achieved similar results at lower human and financial costs. Yet such discussions are forestalled by reflexive accusations of communism or socialism. What war did achieve, particularly the Second World War, was establishing conditions for accelerated decline in income inequality that persisted through the Cold War. This created the consumer-based economy of the “Golden Era”.

The Exorbitant Privilege and the Great Default

By the 1960s, French authorities recognized the dollar’s status as global reserve currency gave America “exorbitant privilege”, which is the ability to create money from nothing. They demanded gold conversion, suspecting America lacked the reserves it claimed after financing wars in Korea and Vietnam. These fears proved prescient. Following the London Gold Pool’s collapse and multiple countries demanding gold redemption, the administration admitted in 1971 that gold reserves had fallen to less than half their post-Bretton Woods levels, even as global trade requiring gold-backed dollars had expanded significantly.

The “suspension” of dollar-gold convertibility announced that year remains in place five decades later. Gold’s price has risen from $35 to over $4,000 per ounce, which isn’t necessarily gold appreciation, but dollar depreciation. This was nothing less than a massive financial default, enabling Western economies to print money indefinitely while exporting inflation and economic instability to the developing world through fiat currency.

The Triffin Paradox and Structural Adjustment

A fundamental contradiction emerged: supplying sufficient dollars to support global trade required running persistent balance-of-payment deficits, which inevitably undermined confidence as unpayable debt accumulated. With federal debt now exceeding $37 trillion and annual interest payments surpassing $1 trillion, America confronts the consequences of financial capitalism. They birthed an economic system built on speculation and capital expansion rather than productive growth. This system drove deindustrialization by shifting production to Asia in exchange for stock market valuations, enriching elites while hollowing out Western industry and destabilizing neoliberal democracies.

Following the 1971 default, America faced mounting interest payments on global reserves held in American banks. The IMF’s Structural Adjustment Programs reversed this burden, forcing developing countries into loans that shifted interest payments from American banks to the Global South. Unlike European powers with direct colonial holdings to absorb surplus production, America needed mechanisms for surplus absorption. The solution: forcing countries to accept foreign direct investment by privatizing public assets crucial for collective development, then devaluing currencies to discount these assets through exchange rate manipulation. This created generational dynasties for elites and their Western backers while bankrupting low-income populations and halting industrialization. Countries became trapped in debt cycles managed through interest rate balancing rather than productive growth, transforming central banks into “theatres for balancing acts”.

The New Mercantilism

Current expansionist rhetoric represents standard Western approaches: colonialism, imperialism, zero-sum dominance through force. Yet the chickens have come home to roost for as we can see today European vassal states are expendable, northern neighbors negotiable, and Arctic territories consumable. America desperately needs Arctic access through strategic straits, driven by the region’s approximately 90 billion barrels of oil, 1.6 trillion cubic feet of natural gas, and abundant rare earth deposits.

The renaming of a major mountain after former US president William Mckinley, a president who championed expansionist policies between 1897-1901 reveals the ideological template of the current Trump administration. That administration shifted America from continental expansion to overseas imperialism through “benevolent expansion”, which involved civilizing, Christianizing, and democratizing while securing strategic and economic interests. Policies included territorial annexations, the Open Door Policy proposing equal commercial access to Asian markets while opposing European spheres of influence, and naval expansion to protect trade and territories.

The contemporary version sees the world similarly available through coercion and force. As this approach fails against peer adversaries, weaker resource-rich nations such as Nigeria face intensified pressure. No appeasement from such governments will prevent attempts to colonize their resources to preserve American hegemonic position and prevent economic upheaval following the emergence of a polycentric world order.

Mujahid Shamwil Mukhtar is member, Daily Trust Board of Economists