The Russian invasion of Ukraine, following hard upon the footsteps of collapsing supply chains caused by COVID 19 lockdowns, appears to have ended the era of free trade and a single global market. We have returned rapidly to a bi-polar world with two key power blocs facing off both economically and militarily. The peace dividend of a single power bloc based solely around the U.S., lasted approximately thirty years. It is instructive to note the rise of new powers and changing alliances and, the effect these will have economically on the world.

The first half of the last century saw the rise of Germany, where it combines its surging power with that of the old-world Austro-Hungarian and Ottoman Empires. By 1914, Germany and its allies were well equipped to confront the aging powers of the British Empire, France, and Russia. Prior to the end of WWI Russia had effectively left the field and the new western power of the United States entered the fray.

After WWI, two major power blocs remained; one led by the USA and one by a resurgent Germany, with Japan on its side. The end of the Second World War saw a changing of alliances as Germany and Japan joined forces with the U.S. and Western Europe, including the United Kingdom against the Union of Soviet Socialist Republics (USSR) led by Russia. 

However, with the collapse of the USSR the NATO Alliance, combined with Pacific allies in Japan and Australia, was completely dominant as can be seen from the two balloons joined by a blue line.

In comparing the power wielded by any entity versus another, one measures the manpower (population) and the capacity of that manpower (GDP per Capita). The chart reflects the Population (X-Axis); GDP (Y-Axis) and the GDP/Capita represented by the size of the balloon. It is instructive to note the speed with which the Sino-Russia bloc has grown from 1980 to today.

However, it is seemingly impossible for any single country or group of countries to remain dominant for long; today we are confronted with two very powerful power blocs which are just beginning to compete for world domination in both economics and influence.

The USA is clearly the leader of the first bloc and is a member of both NATO and “The Quad.” NATO is the North American Treaty Organisation including most of Western Europe, The United Kingdom and Canada. The Quad is The Quadrilateral Security Dialogue, a new alliance formed by Australia, India, Japan, and the U.S. This bloc represents 30% of the global population and 60% of global GDP.

The second bloc is led by the rising power of China and includes most of the first blocs enemies, notably Russia and its allies, Iran and Pakistan, together with numerous countries under the control of China. At the very minimum, this bloc represents 25% of the world’s population and 20% of the world’s GDP.

The reason for examining this phenomenon is that we in Canada have benefitted from the “peace dividend” and global supply chains provided in the last thirty years. We now need to plan for more expensive supply chains either closer to home or involving allied countries like India and Western-Europe. Canada shall of course benefit from Western Europe shifting their reliance on energy from Russia to North America. In addition, Canada will rebuild some of their industrial might to facilitate more secure supply chains.

Globalization has risen and declined throughout history.  Although this shift may seem like a change to the global environment, it is more of a return to the norm as economic and military alliances have been the global standard over hundreds of years.  

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