World Politics News   Articles for World Politics Course

The world has witnessed a steady retreat from the commitment to liberal values and institutions that formed the bedrock of the world order for the last five centuries (despite the challenges posed by fascism and communism in the 20th century).  But the early 21st century has seen growing dissatisfaction with those institutions (market capitalism, representative democracy, and human rights) and experimentation with alternatives such as state capitalism (China) and the union of church and state (Iran).  In Europe, Hungarian Prime Minister Viktor Orban has explicitly called for a movement toward an “illiberal” state, the definition of which remains unclear.  The move parallels the rise of right-wing movements throughout Europe.

Much has been made of the movement by the US to reduce its commitments abroad, raising the question of whether a functioning world order requires a hegemon to enforce the rules of interaction among states.  Some authors are asking the question of whether the world should be looking for a new hegemon, and the implicit assumption of that question is that the US cannot and will not continue in that role.  Given the disarray in the world order that we are currently witnessing, the question is taking on greater urgency.

Argentina went into a “technical” default today by missing key payments on its sovereign debt.   The country is about $200 billion in debt, and was supposed to make an interest payment of $13 billion today on the total debt.  However, Argentina has restructured some of its bonds with some holders willing to take 10 cents for every dollar of debt.  A small group of hedge funds (Argentina calls them “vulture” funds) bought some of those reduced-value bonds and is insisting on getting full value back, and a US judge ruled that if the hedge fund holders are not paid, then none of the bondholders can be paid.  The deadline for payment is midnight, 30 July, but an “official” default depends upon a ruling by a private agency known as The International Swaps and Derivatives Association (ISDA).  If a default is declared, then the losses should be limited simply to those holders of Argentinian bonds.  However, if bondholders of other sovereign debt become “spooked” by the default (fearing that other countries will default as well), then the crisis could be more widespread.