The normative economic consensus underpinning the world order is undergoing a seismic shift, with the United States and China locked into a great-power conflict, and carving out new geo-economic ecosystems that maximise their self-interest. This great global transformation is reshaping global trade flows, financial/currency markets and strategic calculations. It also opens a rare window to forge a more equitable world-order.

Analysing new economic paradigms

First, populist-autocrats are enabling an unprecedented state-capital Gordian knot, which has had major socio-political implications. Unlike laissez-faire capitalism (where the state minimally intervenes in markets, companies negotiate with governments, and respond to market-competitiveness incentives), governments led by populist-autocrats primarily service large oligopolies and crony-capitalists who offer support for political centralisation in lieu of various concessions/commissions. Circumscribing the national interest, these plutocracies prioritise the well-being of corporations over citizens, by mortgaging national public assets and contorting policies. This has profound consequences for the social contract underpinning nations.

Second, and partly because crony-capitalists disproportionately influence populist-autocrats, primordial rules of statecraft are resurgent. Consequently, America is recalibrating a century of historical, strategic and economic convergence -- to purportedly Make America Great Again. It is no coincidence that America is exerting pressure on Taiwan to shift chip manufacturing to the U.S., securing its trade routes (Panama), fortifying supply lines for rare earths as China weaponises them (Central Asia and Africa), fusing digital-currency ecosystems with foreign policy (Pakistan), and exerting pressure on Arctic-rim nations (Greenland and Canada), possibly anticipating an imminent bout of ecological imperialism. This limitedly explains why America is pushing Europe to 'manage' Russia and Israel to 'manage' West Asia. The myopic notion that nations can have spheres of control has ignited mushrooming conflicts and genocides.

Third, Big Tech and cloud capitalists have overwhelmingly altered the global economy by siphoning out rents from the value chain, reshaping mass consciousness and political outcomes (inevitably rewarding populist-autocrats undermining digital rights). This is being compounded by digital colonialism, exemplified by the AI Action Plan, the Cloud Act, the SWIFT payment system's weaponisation and the introduction of state-backed digital currencies and ecosystems (which 100 central banks are piloting). While such systems could streamline cross-border financial transactions (and might reportedly be used to restructure national debt), they will undermine economic sovereignties of nation-states and dilute the Financial Action Task Force framework and anti-money laundering norms. They will also create complexities in political funding, which populist-autocrats would be optimally positioned to exploit.

Fourth, by withdrawing developmental aid, populist-autocrats have abandoned vulnerable populations and created expansionist opportunities for undemocratic forces. For example, the $44 billion funding cuts by G-7 nations may push 5.7 million more Africans into poverty by 2026. Similarly, the decline in international grants for small enterprises in Nepal sparked an exodus of eight lakh immigrants, exacerbating dissatisfaction with the government. Likewise, funding cuts for the World Food Programme impacted 16.7 million people in 2023, leading to distress migration, an uptick in recruitment by armed militias (in Sahel region) and socio-political tensions.

Finally, it is widely recognised that America's tariffs (on 70-plus nations) and sanctions (on 30-plus nations) have impacted the free flow of trade, capital, people and ideas. Clearly, America is unwilling to absorb goods from surplus-producing economies such as Japan, Europe and China, and penalising their dependencies.

Faced with uncertainty, the Global South is rapidly seeking alternatives (by exploring bilateral treaties, localising production, securitising supply chains and strategic sectors, ramping up gold reserves, cautiously de-dollarising oil trades, and tentatively exploring currency alternatives). These experiments could kickstart a domino effect, compelling the West to also chart an independent economic path.

Opportunity in crisis

These economic disruptions concomitantly pose opportunities, especially for China and India (which collectively dominated the world economy for 1,800 of the last 2,000 years). It is a fact that neoliberal globalisation was premised on capital accumulation, cheap labour, environmental colonisation and trickle-down economics.

These led to untenable sovereign debt, reduced fiscal space for developmental and welfare goals, and the relinquishing of national resources and assets to crony-capitalists. These triggered extreme concentrations of power and wealth in the hands of a few in the Global North, and glaring socio-economic inequalities.

Consequently, the 2022 "Poverty and Shared Prosperity" report asserts that 47% of the world's population lives below the $6.85 poverty line, while 735 million face crippling hunger. This invariably creates toxic conditions that propel societies towards traditional social-cohesion norms, which populist-autocrats have cynically exploited to unleash undemocratic upsurges against democracies.

Given this, India and the Global South can either accede to an unjust global (dis)order, or collaboratively and creatively construct a New Economic Deal that works for all nations. For example, while pressing for an overhaul of international financial institutions to secure fairer representation to Global South economies, India must push for a new debt-relief framework to free nations from structural adjustments that inevitably spark democratic regressions.

Similarly, in the pursuit of a fair and stable rules-based global economic system, India should also fashion new economic alliances (either through BRICS or South-South partnerships) while championing fair trade policies that protect domestic industries and sectors. Most importantly, to fire-proof our relationships from changes-in-guard (something the incumbent government failed to do, causing strains with the U.S., Bangladesh and Nepal), we must build bipartisan relationships with key stakeholders in partner-nations.

Need for a recalibration

But realising our manifest destiny means effecting a domestic recalibration, necessitating a hard course correction from the Bharatiya Janata Party government. As a growth driver and potential investor in public infrastructure and services, the private sector is undoubtedly a partner in national development. But because companies cannot redress structural problems and are primarily profit-oriented, the state must adopt a commanding role (as in many East Asian economies) over critical sectors such as energy, infrastructure, data/digital finance, defence, space, water, education, health care and agriculture. These are essential for national security and to provision for all Indians.

Similarly, instituting strong anti-monopoly norms and sovereign wealth-funds (as in Norway) can prevent oligopolistic control, and channelise national resources for national goals. Likewise, heavy investments in scientific research, education and pedagogic autonomies will make India globally competitive. Furthermore, strategically redeploying India's public sector units like China's state-owned-enterprises (instead of privatising them) and like international-aid agencies would maximise revenues and geopolitical objectives.

Finally, the emerging digital-financial paradigm must be aligned to constitutional and national goals.

Actualising this means prioritising substantive (not performative) foreign policy. It means the "India way" must be non-alignment (notwithstanding its rechristening as multi-alignment for political expediency). It means shedding partisanship and forging consensus on where India should be heading as a nation, and how it gets there. India must harness this golden opportunity to realise its rightful place in the emerging world order.

Salman Khurshid is India's former External Affairs Minister. Pushparaj Deshpande is Samruddha Bharat Foundation's Director

Navigating the global economic transformation