(based on B.Gokay’s presentation at the Pipedream: geopolitics of pipelines and new regional energy frontiers conference organised by Middlesex University, 3 May 2013)
Mapping the Faultlines: Global Shift, Crisis, Energy and Geopolitics of Pipelines
Keywords: Global Faultlines, Global Shift, Hegemony, Geopolitics of oil
Just after the crisis started to affect the UK economy, Queen Elizabeth asked a group of academics, during her visit at the London School of Economics in November 2008, how none of the ‘financial wizards’ has not predicted the global financial and economic crisis coming. In the summer of 2009, after labouring mightily over the question, the leading academics from various universities delivered a reply to the Palace. The three-page letter, signed by London School of Economics professor Tim Besley, an external member of the Bank of England’s monetary policy committee, and political historian Peter Hennessy, explains that “risk management was considered an important part of financial markets… But the difficulty was seeing the risk to the system as a whole rather than to any specific financial instrument or loan… .Risk calculations were most often confined to slices of financial activity, using some of the best mathematical minds in our country and abroad. But they frequently lost sight of the bigger picture.” The letter ends as: “In summary, Your Majesty, the failure to foresee the timing, extent and severity of the crisis and to head it off, while it had many causes, was principally a failure of the collective imagination of many bright people, both in this country and internationally, to understand the risks to the system as a whole.”
There were, of course, some experts and academics warning about the systemic risks and possible burst of the housing bubble at least since 2006, but the admission about the majority of the mainstream academic profession, expressed in the letter to the Queen by a group of prominent British academics, is true and quite telling about the state of the mainstream profession. No account was taken of systemic risk because the fundamental assumption of all mainstream views is that there are no systemic contradictions or processes with the current economic system that could threaten the system itself. Until summer 2010, majority within the mainstream economics profession did not believe in the systemic nature of the current crisis, or they did not understand what was causing the problems. But mainstream views are mainstream precisely because they underwrite uncritical and introvert view that reinforces existing structures and denies any structural contradictions within the system.
The recent financial crisis and economic downturn has not come out of the blue. They are the outcome of deep-seated contradictions within the structure of the global economic system. A financial (and economic) crisis is not necessarily a ‘failure’ of the system, is not an aberration. It is not the result of some ‘mistakes’ or ‘deviations’, but rather inherent to the logic of the system. The crisis needs to be understood structurally, as the result of a system prone to crisis, rather than as an aberration. We, therefore, need to look beyond greedy bankers and spineless regulators, even though there were plenty of both, for the root causes of this crisis. When I speak of crisis I am not pointing to a single event, but rather to a historical process.
Financial crises (and economic downturns) have been a regular feature of the global economic landscape since the late 1970s: we’ve had in the recent past a stock market crash in 1987; the Savings and Loan crisis and bailout in 1989-90; the ’emerging markets’ crisis of 1997-98; and the bursting of the dot-com stock market bubble in 2001. The underlying long-term cause of all these crises has been the fundamental shift of economic power from the West to the East, caused mainly by the shift of manufacturing capacity from developed countries to the emerging economies, mainly China, India, and Brazil. This was the fundamental structural adjustment of the world economy shaping the 21st century.
At the conclusion of his widely popular 1987 study of the global system, titled The Rise and Fall of the Great Powers, English born and Oxford trained Yale historian Paul Kennedy observed, ‘The task facing American statesmen over the next decades . . . is to recognize that broad trends are under way, and that there is a need to ‘manage’ affairs so that the relative erosion of the United States’ position takes place slowly and smoothly’ (Kennedy, 1989: 534). In chronicling the decline of the US as a global power, Kennedy compared measures of US economic health, such as its levels of industrialization and growth of real gross domestic product (GDP), against those of Europe, Russia, and Japan. What he found was a power shift in the global system over the last fifty years generated by underlying structural changes in the organization of its financial and trading systems.
Kennedy’s argument about a structural decline in US power is shared by other critical thinkers who similarly see global politics through a historical lens. Andre Gunder Frank (ReOrient, 1998), Emmanuel Todd (The Breakdown of the American Order, 2002), Giovanni Arrighi (Adam Smith in Beijing: Lineages of the Twenty-First Century, 2007), Niall Ferguson (The Ascent of Money, 2008), Peter Gowan (Crisis in the Heartland, 2009), and Fareed Zakaria (The Post-American World, 2008) all use history to argue that US-centered power system is declining in parallel to a rise of regional powers/ or group of powers, and in particular China. This decline reflects structural changes that have occurred as the global system attempts to adapt to new historical circumstances for the last three decades.
In particular, Frank’s 1998 thesis in Re-ORIENT: Global Political Economy in the Asian Age offers broad analytical tools that have proven their value in anticipating what is now increasingly acknowledged as a primary shift in the global system toward China and India as emerging powers in the world. My central purpose here is to borrow the tools of Frank’s thesis and extrapolate their application to the current situation in an effort to determine its continued relevance. This discussion attempts to identify both the visible shifts and less visible fault lines that underlie the global political economy in crisis. This broader focus argues against a Eurocentric view of global political economy, as does Frank, which distinguishes my work from texts that follow modern liberal, realist, Marxist, and constructivist theory.
What exactly happened?
There seems to be a consensus that the immediate cause of the crisis lay in the US sub-prime mortgage lending. During the last decade, a large number of people, previously considered as bad credit risks, were offered mortgages. Because house prices were rising and it seemed like they would continually increase. It was anticipated that if people could not keep up with their mortgage payments their houses could be repossessed and sold at a generous profit. Indeed, it was such lending which pushed the very rises in the house prices it relied upon. The greater and easier availability of mortgage funding predictably led to greater demand for housing. Sharp and consistent rise in house prices served to reinforce speculation, and the rise in house prices made the owners feel rich. The result was a consumption boom that has sustained the economy in recent years.
Those banks, mortgage lenders who lent the money did not usually do so out of their own pockets. They went to others to borrow, and those others in turn would borrow from somewhere else. All major banks in the US and in Europe were doing this, setting up special entities to borrow in order to lend. In this way, all kinds of different loans were packaged together into what came to be called ‘financial instruments’. There emerged, as a result, a range of complex and complicated ones during the last decade, such as financial instruments involving derivatives, forward contracts and hedging activities. Finance market is composed of endless strings of bilateral transactions involving an incredibly diverse array of high-risk financial instruments. And for a time all seemed to go well and provided enormous, almost effortless profits. There are limits, however, to how far economies can be sustained by debt that is not based on any real economic value created.
The eventual bursting of the housing bubble was inevitable once housing prices peaked in early 2006. Economic growth slowed that ignited a sharp increase in the number of mortgage holders who could not afford the interest rates, and in the end there was a growing number of repossessions. Meanwhile, investors who bought these mortgages through a range of schemes, known as mortgage-backed securities, found out that the value of what they own is sharply dropping. As a result, house prices fell sharply, and mortgage lenders discovered that they could not make enough from selling off roughly one million repossessed homes to pay back what they themselves had borrowed. For some, the losses represented by various toxic securities simply diminished their reserves and brought them down.
Many commentators in the media saw the story as ending there, and the only lesson they drew was the urgent need for more financial regulations. Most of the debate was centred on how much and what kind of regulation. Even more critical and nuanced commentators, such as British anti-debt campaigner Ann Pettifor, was explaining the crisis by ‘the stupidity, poor economic analysis and sheer ignorance of those central bankers, politicians, auditors …’ in openDemocracy. Such an explanation, focusing on the blatant deceit and corruption of financial players, runs the risk of downplaying the structural features of global system in the 21st century, which indeed breeds such financial meltdowns.
The real roots of the crisis
There are lots of proximate causes – the US housing bubble and the huge size of the American economy, persistent unresolved global imbalances, a lack of government regulation of the financial sector,lax regulation and insufficient regulation that lead to widespread underestimation of risk. But all these are still symptoms. In order to make clear sense of this crisis, I would like to develop a broad picture here regarding the configuration of the world economy.
I interpret the present crisis as an early stage in what will be a major restructuring of the world economy around new political and ecological realities. While in its earliest stages this restructuring may appear as a series of reforms/ adaptations, these reforms will not be able to contain the inherent contradictions in the system, and will themselves be eclipsed by continuing changes in the global system that will undermine the assumptions of its managers.
The recent crisis is an expression of the structural changes and deep-rooted contradictions which have occurred within the global system in the last 30 years. As a result, today’s global economic system is marked by three profound vulnerabilities, which I call “globalfaultlines”, as a metaphor for the historical processes that have acted over time like tectonic plates, which move not always smoothly but from time to time suddenly as crises that cause shifts within the structure of the global economy: 1) the explosive growth of the financial system relative to manufacturing and the economy as a whole– financialisation; 2) the loss of relative power by the US, and the rise of other centres of accumulation; 3) Resource Depletion and environmental risks.
Examining these areas for their historical contradictions and vulnerabilities suggests how they have become embedded in the very logic of the global economic system and the process of capital accumulation, as well as offer a more complete understanding of the deeper roots of the current crisis.
1) The explosive growth of the financial system during the last three decades
The current global economy rests upon the search for profit and accumulation of capital. What stimulates investment is not just the absolute level of profits, but the ‘rate of profit’, which is the ratio of profits to investment. Most observers consider the rate of profit as one of the most important indicators of the health of the economic system. The rate of profit is an essential indicator that determines as well as exposes conditions of accumulation, in other words, the health of a particular economic body. In the world economy, the rate of profit stayed more or less steady all through the late 1940s, the 1950s and the 1960s. As a result, these years witnessed a steadily rising levels of investment, and a continual boom. This era, from the end of the Second World War to the late 1960s, is generally referred as ‘the golden age of capitalism’. But from the late 1960s until 1982, profit rates fell continuously, and global economy witnessed real decline in the rate of global GDP increase. As a result, the mid-1970s and the early 1980s witnessed a number of deep economic recessions. Growth slowed, profits dropped, and serious levels of unemployment became a central feature of the system.
The response of governments to the economic recessions was to introduce a series of measures which later came to be known as neoliberalism. Under the pressure of the leading states (primarily the United States) and international monetary institutions (IMF and the World Bank), the developed and developing economies all adopted structural adjustment programmes along the same lines.
Such measures were able to encourage spending to some extent and thus to extend the booms, but in retrospect one can now conclude that they simply delayed the recessions for a few years.
The ‘demand’ was largely fabricated by speculative mania on the part of developers and financiers that wanted to make quick and great profits. In other words, many people were provided mortgages (by relaxing income documentation requirements) to buy overpriced properties that they could not, in reality, afford. ‘The housing bubble, associated with rising house prices and the attendant increases in home refinancing and spending, which has been developing for decades, was a major factor in this.
It seemed, for the time, the economy was dragged out of recession, yet one can claim in retrospect that the same measures laid the ground for much more serious problems the system faces right now. Greater levels of risky borrowing lead to speculative bubbles that lead to the temporary prosperity but which ultimately ended up in corporate collapse and in recession in the real economy.
As a result, the value and the reach of financial wealth has grown considerably, and the relations between productive capital and financial capital were profoundly modified subordinating all other economic activities. The road to wealth accumulation has no longer been manufacturing industry or the provision of financial services associated with manufacturing, but the buying and selling of assets using borrowed funds for profit. All this vast financial sector expansion, overaccumulated financial capital, in other words «the new centrality of the financial sector » greatly advanced speculation. This process, widely referred to as financialization, is defined as «the increasing role of financial motives, financial markets, financial actors and financial institutions in the operations of the domestic and international economies».
2) The rise of new centres and the loss of relative weight of the US as a global hegemonic power
The central place that the U.S. occupies until recently in the global system rests on a particular convergence of structure and history. The crucial phase in this process occurred during and after World War Two. Only after the twin disasters of the Great Depression and the Second World War did the global economy obtain a new life under the hegemonic control of the U.S. power. This reorganization could not have been accomplished without the uneven development of certain structural characteristics that also shaped the post-war leadership of the U.S. hegemonic state. The post war state of physical and economic ruin in much of Europe, Asia and parts of Africa challenged the remaining industrial states to reestablish order in the world system. The economic and financial system in France was shattered, the whole of the German state was collapsed, Britain was on the brink of bankruptcy, and Japan was prostrate and disorganized after the collapse of its imperial state. With the unraveling of international competitive capital, only the U.S. remained as a stable industrialised state capable of determining the terms of a new world economic and political order.
However, this situation did not last long. By the 1970s, West European and Japanese capital had already recovered from the devastation of the Second World War and begun out competing US corporations, and US hegemony, both in America and abroad. By the 1980s, this time it was the turn of southeast Asian capital to out-compete both the US and West European capital through the formation of a new kind of transnational business structure – a structure that was deeply rooted in the region’s history and geography, and that combined the advantages of massive, young, dynamic population with the flexible business networks. This is a very significant development in the context that all major indications point out that the economic power of the United States was in stagnation since the 1970s and is in decline since the end of the Cold War. Particularly its share of world trade and manufacturing is substantially less than it was just prior to the end of the Cold War, and its relative economic strength measured against the EU and the East Asian economic group of Japan, China and other Southeast Asian countries is similarly in retreat.
So, the real roots of the current crisis lie in downward pressure on profitability under the conditions of sharply increased competition stemmed from West European capital in the 1970s and Southeast Asian economies since the end of the Cold War.
The post-Second World War era witnessed economic miracles in Japan and South Korea. But neither was big enough to power worldwide growth, or change the direction of global economy in a complete spectrum of industries. China and India, by contrast, possess the weight and dynamism to transform the 21st century global economy. The closest parallel to their emergence is the saga of the 19th century America: a huge continental economy with a young driven force that grabbed the lead in agriculture, apparel, and the high technologies of the era, such as steam engines, the telegraph, and electric lights. But in a way, even America’s rise falls short in comparison to what has been happening in China and India for the last two decades. Never has the world seen the simultaneous and sustained takeoffs of two countries that together account for one-third of the world’s population.
This is what we call the Global Shift: a shift in the hegemonic structures of the world economy, a shift away from North America and Western Europe to the Emerging economies of Asia and South America.
3) Resource depletion and ecological crisis
The very logic of accumulation under the current economic system necessitates that the material elements (resources) of nature are transformed into commodities in an ever-expanding rate. In this long history of human excessiveness in production and consumption, the stability of the economic order, as an unrestrained structure, is dependent, more than ever, on the continued accumulation in a cycle of never-ending expansion. This means that more and more materials from the nature must be consumed in the process of production. So far, the world’s most valuable energy supplies and minerals are being extracted and consumed at a bread neck pace.
Perhaps the most intractable challenge faced by a global economic system is its need for ever-growing profits. The central point in environmental sustainability is preserving a balance between human wants and nature’s needs. As Karl Marx pointed out long ago in fashioning the term “reification”, the natural tendency of the system is to reduce all human relationships to objectified and quantified values for the marketplace. This universal quality of the current economic system similarly attempts to reduce nature to a set of economic values that can be bartered in markets. Thus, it is no accident that the present drive to craft an international agreement concerning climate change, which has occurred at the height of neoliberalism and within a global economy, has focused on market mechanisms such as emissions trading. As informed critics have pointed out, none of these proposals hold any real promise of slowing, let alone stopping, global warming. In reality, since the leading governments depend on economic growth for their political legitimacy, they also depend on ready access to and the use of natural resources, which clashes with any effort to rein in resource consumption for the sake of ecological sustainability.
So, this is the final and perhaps greatest vulnerability of the world system: that of availability and distribution of critical resources as oil, food, and water.
In the contemporary world, hardly any issue causes more stress, either directly or indirectly, than the exploration, production and consumption of the world’s energy resources, in particular oil. From the war in Iraq to rising food and fuel prices, energy consumption has been a crucial topic. A direct consequence of the consumption of oil is air-pollution, which is a burden on society due both to current health issues, and future costs related to global warming.
Oil is the most strategic raw material. It can hardly be overstated how crucial petroleum is to our modern industrial society. Virtually every aspect of modern industrial life requires oil, gas and electricity (largely created from these fossil fuels). The modern life depends on petroleum as the main energy source for its very existence. Every day we rely on fossil fuels in one way or another – to transport us to work, to cook our food, to light, heat, and cool our homes, and even to grow our food. Our lives are so dependent on petroleum that it is impossible to imagine of a world without it. There is very little we consume or use in our lives that does not use petroleum in its manufacture. Oil fuels the economy. It is the largest single traded product in the world. Oil is also determinant of national security. Today’s modern armies are entirely dependent on oil-powered ships, planes, helicopters and armoured vehicles.
Since the beginning of the 20th century, global trade and a global economy have developed, and our population has grown in size from 1,000m to 7,000 m by drawing down a massive natural gift of energy in the form of cheap crude oil. Up until early modern times, miners, scientists, natural philosophers, and other ‘experts’ believed that gold, silver and other minerals were vegetable-like in that, when mined, they would literally grow back like mown grass. This belief was not wrong in principle in the case of coal and its hydrocarbon cousins in gaseous and liquid form, because they are the remains of ancient organisms. As a practical maxim, however, it was completely mistaken, because the time it would take normal geological processes to transform organic matter into coal, natural gas and petroleum is of the order of millions of years. Therefore, for all practical purposes, these fuels are finite, non-renewable energy sources, i.e. in any given region there is a fixed amount of oil at the beginning of the exploration, and after every drop of oil taken out there will be that amount of less oil left under the ground.
Like any fixed non-renewable resource, oil is limited, and its consumption will rise, peak and decline. Oil production follows a bell curve, and after the production reaches its peak (meaning when half the oil is taken out), oil production will inevitably fall. On the upslope of the curve, there is the first oil, the oil closer to the surface, which is also called ‘cheap oil’ or ‘easy oil’, because it is easier and cheaper to take that oil out and also it is better quality (‘light’, low-sulphur oil, therefore cheaper to refine). On the upslope of the curve, oil production costs are lower than on the down slope, when extra effort (and cost) is needed to extract the remaining poorer quality oil from deeper in the reservoirs, and extra cost needed to refine this ‘heavy oil’ (which is high-sulphur, very viscous and does not flow easily). Thus, once oil production reaches its peak, global demand for oil is most likely to exceed the capacity to produce it, prices will rise, oil-dependent economies will face serious problems. There is now an overwhelming body of evidence that the era of “easy oil” is over and that we have entered a new period of “tough oil”’.
Today, as demand for energy explodes worldwide, there is less of it available and, it seems, less exploration for it. Crude oil prices have doubled since 2001. There may still be times when oil prices temporarily fall due to sharp decline in demand, mainly during the times of serious economic crisis like the current financial crisis in the Western economies, but the general long term trend is unquestionably upward in the price of crude oil.
Some observers have drawn attention to the extraordinary technological accomplishments of the industry over the past few decades. Of course, advanced technologies will buy a bit more time before production commences to fall, but it is also important to appreciate that spending more money on oil exploration will not really change this situation. There is only so much crude oil in the world, and the industry has found about 90 % of it.
There are some indications that, in the years to come, the search for new sources of oil maybe transformed into a quest for entirely new sources of energy. But the replacement of fossil fuels by alternatives such as solar, wind, geothermal, biomass, hydrogen and nuclear fission does not yet seem to be a viable alternative. So far, the available energy alternatives, mostly solar and wind power, offer only diluted energy substitutes, i.e. not as powerful a fuel source as oil.
Many leading economists and oil experts claim that the price of oil generally reflects the fast rising demand from China and India, and stagnant production as reserves of accessible oil become less plentiful. According to some experts, even a shortfall between demand and supply as little as 10 or 15 percent is enough to wholly shatter an oil-dependent economy. It is becoming clear that cheap fuel is no longer something that we can take for granted.
Without volume energy we have no sustainable water, we have no sustainable food, we now have no sustainable healthcare. And since five-sixths of the world still barely uses any energy it really is an important issue. And since five-sixths of the world is still growing fast or too fast it’s even a more important issue.
Maybe you’ve heard that North America is producing a bit more oil these days, courtesy of fracking, tar sands and other new sources. However, despite this recent increase, the latest report by the International Energy Agency (IEA), World Energy Outlook (WEO), paints a depressing picture of an oil industry having to run faster and faster, like a hamster trapped on a wheel, just to keep pace with burgeoning oil demand over the next 20 years.The first paragraph of the IEA report reads as ‘the world’s energy system is at a crossroads. Current global trends in energy supply and consumption are patently unsustainable – environmentally, economically, socially’.
One of the major flash points is China’s fast growing demand for oil. China became the world’s second largest consumer of petroleum products in 2004, having already surpassed Japan for the first time in 2003. According to all estimates China’s oil demand will keep growing 7 percent annually for another decade. By 2015, China would be consuming 15 m barrels per day more than it does today. This is more than double than even the most optimistic increase in exploration expected globally.
The Caspian Sea basin has received considerable attention over the past ten years, both because of its potential as a significant source of oil and natural gas for world markets, and because of the international competition that has emerged over the control of its resources. Two basic questions loom over the future of this important resource: who owns the rich oil and natural gas resources? And who will have the control over the transportation of the Caspian oil and gas to world markets? The answers will greatly contribute to shape the re-configuration of the world economy in this century and the international order that governs it.
Driven by a burgeoning demand for energy, the Chinese government has made securing access to the largely untapped reserves of oil and natural gas in the Caspian region a cornerstone of its economic policy. China’s focus is the construction of a 4200 km network of gas and oil pipelines running from China’s western province of Xinjiang to the major east coast metropolis of Shanghai. In 1997, the China National Petroleum Corporation (CNPC) acquired the right to develop two potentially lucrative oilfields in Kazakhstan, outbidding US and European oil companies. The work is are also underway for the construction of over 3000 kilometres of gas pipeline from Turkmenistan to Xinjiang by the state oil holding company, PetroChina Co. This east-west pipeline is China’s biggest infrastructure project after the Three Gorges Dam.China’s influence in the Caspian oil politics has increased as a result of a recent business deal in Azerbaijan: two subsidiaries of China National Petroleum Corporation bought the 30 percent stake owned by the European Bank for Reconstruction and Development in two oil fields, the Kursangi and Karabagli fields, in Azerbaijan for 52 million US dollars as part of China’s move to diversify its resource base.
The worl is underway, to extent oil and gas pipelines to China from Turkmenistan and Kazakhstan to link into the pipeline networks of both Russia and Iran. This model has been dubbed the “Pan Asian Global Energy Bridge”, a Eurasian network of pipelines linking energy resources in the Middle East, Central Asia and Russia to Chinese Pacific coast. China’s pipeline network has a strong potential to bring about a significant strategic realignment in the region. Central Asia with its huge reserves of oil, and natural gas, and strategic position is already a key arena of sharp rivalry between the US, major European powers, Russia, Japan and China. All of the major powers, along with transnational corporations, have been seeking alliances, concessions and possible pipeline routes in the region. In the midst of this increasing competition, open conflict between the declining superpower US and the emerging superpower China seems highly likely.
If one believes in the economists’ theory of “convergence” – that is, the coming closer together of the product and income of companies, regions and countries – then the conclusion is clear: As China, India, South Korea, Brazil, Mexico and Indonesia all “catch up,” the American share of things will relatively shrink. Sooner or later – and this debate really is about “sooner” or “later,” not about “if” – we are going to witness a major shift in the global balances of power.
China, India, Russia, Brazil, Turkey and other Emerging Powers are certainly on the move, and power is undeniably flowing away from the West. In 2010, four of the top five economies in the world were still from the West (the US, Japan, Germany, and France); from the Emerging World only China made the grade, coming in at no.2. By 2050, four of the top five economies will come from the Emerging World (China, India, Brazil and Russia), only the US will make the cut ranking second, and its economy will be half the size of China’s. The 2008 financial crash has made the managers of the developed economies realise that the ‘China challenge’ is not something for the distant future, but it is happening here and it is happening now. China has the world’s largest currency reserves; it is the largest exporter of the world; it is the largest producer of steel, and the biggest market for motor vehicles; it has recently become the largest trading partner of other significant emerging economies, India and Brazil. Just as the 20th century was the American century, the 21st is becoming the Asian century. This historic transformation underpinning this shift in economic power was well under way even before the outbreak of 2008 crisis, but the crisis is likely to go down as the moment that both revealed and accelerated the erosion of US-centred developed economies. The root causes of the 2008 financial crash and still ongoing global economic downturn can, therefore, be properly understood within the context of this changing global landscape– a truly global shift. In 2008 the world observed, not only the bursting of the housing bubble, but quite clearly the terminal crisis of the US-centred regime of financial and economic management and global hegemony. No radical intervention, like aggressive wars, can stop this historical shift. But it is possible to adopt policies that this transition occurs peacefully and productively. The worst thing to do is to pretend it is not happening. It is time to adjust: to be more paring with military force, and rely on diplomacy and economic cooperation to tame the onset of a multipolar world.
 Eurocentric thinking attributes to the West an almost providential sense of historical destiny, manifested in its continuous advances in science, technology, industrialism, rationality and economic institutions from time immemorial. It takes European experience as universal and envisions the world from a single privileged point that is Europe. The world is thus bifurcated into “the West” and “the Rest,” and a system of knowledge is constructed around a series of binary hierarchies with Europe invariably occupying the higher position: Western nation, non-western tribe; western religion, non-western superstition; western capitalism, non-western petty commodity production; western technology, non-western craftsmanship; western progress, non-western stagnation, so on and so forth. (See Lei GUANG,‘Re-Orient: Andre Gunder Frank and a Globalist Perspective on the World Economy’, Perspectives, Volume 3, No. 4, Sunday, March 2002, http://www.oycf.org/oycfold/httpdocs/Perspectives2/16_033102/re_orient.htm, accessed in February 2010.) This view has been expressed by both Marxist and non-Marxist scholars (Robert Brenner, ‘The Origins of Capitalist Development: A Critique of Neo-Smithian Marxism, New Left Review I/104, July-August 1977, http://www.newleftreview.org/A185, accessed in February 2010; David S. Landes, The Wealth and Poverty of Nations: Why Are Some So Rich and Others So Poor?, New York: W.W. Norton, 1998). The larger global context is simply left undiscussed on the assumption that it was unimportant as compared to European developments. Andre Gunder Frank and other critical thinkers call this ‘tunnel history’ derived from a tunnel vision, which sees only ‘exceptional’ intra-European causes and consequences and is blind to all extra-European contributions to modern European and world history. (Andre Gunder Frank, ‘A Review of David Landes` THE WEALTH AND POVERTY OF NATIONS’, 28 November 1998, http://www.reorient.net/html/frank_on_landes.html, accessed in February 2010)
 Sub-prime mortgages carry a higher risk to the lender (and therefore tend to be at higher interest rates) because they are offered to people who have had financial problems or who have low or unpredictable incomes.
 GOWAN, Peter, « Crisis in the Heartland: Consequences of the New Wall Street System », New Left Review, January-February 2009, p. 25.
 COOKE, Ronald R., « BANKS: Bleeding Value And Hiding Desperation », Financial Sense, 24 March 2008, http://www.financialsense.com/editorials/cooke/2008/0324.html.
 « Homes in foreclosure top 1 million », CNNMoney.com, 5 June 2008, http://money.cnn.com/2008/06/05/news/economy/foreclosure/index.htm.
 ‘Toxic debts’ are the debts that are very unlikely to be recovered from borrowers. The estimated US 1,000-billion dollar-worth of assets lost in the current crisis seems largely underestimated. It is probably closer to 10,000-billion of USD that are about to be lost over the coming two years. « Global systemic crisis: four big trends over the 2008-2013 period » GEAB N°24, April 16, 2008, http://www.leap2020.eu/GEAB-N-24-is-available!-Global-systemic-crisis-Four-big-trends-over-the-2008-2013-period_a1561.html.
 PETTIFOR, Ann, « America’s financial meltdown: lessons and prospects », openDemocracy, 16 September 2008, http://www.opendemocracy.net/article/america-s-financial-meltdown-lessons-and-prospects.
 WOLF, Martin, « Choices made in 2009 will shape the globe’s destiny », Financial Times, 6 January 2009, http://www.ft.com/cms/s/0/4f5c5ba2-dc22-11dd-b07e-000077b07658.html.
 For both classical and neoclassical economics, higher rates of profit mean greater investment and higher growth rates are possible, both because they provided greater sources of funds for investment, and because they generated higher expectations of future profits and through that a greater desire to invest.
 BELLO, Walden, « Afterthoughts: The global collapse: a non-orthodox view », Phillippine Daily Inquirer, 11 February 2009.
 PRESSLEY, James, « Brace for $1 Trillion Writedown of `Yertle the Turtle’ Debt », Bloomberg Press, 31 March 2008, http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aHCnscodO1s0.
 GUTTMANN, Robert, « A Primer on Finance-Led Capitalism and Its Crisis », Revue de la régulation, n°3/4, 2e semestre 2008, Varia, [En ligne], mis en ligne le 15 novembre 2008, http://regulation.revues.org/document5843.html.
 The ideas contained in this section are drawn from GŐKAY, Bülent, « The Beginning of the End of the Petrodollar : What connects Iraq to Iran », Alternatives. Turkish Journal of International Relations, vol.4, No. 4, Winter 2005, pp. 40-56; and GŐKAY, Bülent, and WHITMAN, Darrell, « Ghost Dance: The U.S. and Illusions of Power in the 21st century », Alternatives. Turkish Journal of International Relations, Vol.3, No.4, Winter 2004, pp. 60-91.