City and Business: Into the New World without a map

It's been eight years since George Bush prematurely proclaimed its existence, but it's finally happened. The New World Order is here. We saw it on Wednesday night as General Sir Michael Jackson announced the agreement under which the Serbs pull out of Kosovo and Nato's forces move in.

We shall see the New World Order this weekend as Group of Seven finance ministers converge on Frankfurt. The G7 is expected to throw a few crumbs - or, as their communique will put it, extend a lifeline - to the 42 destitute economies identified in civil servant speak as "highly indebted poor countries".

We will see it next weekend as Tony Blair, Bill Clinton, other leaders, their sherpas, and some 4,000 reporters throng Cologne for the G7 economic summit during which the US will gravely warn that Asia and Europe are not doing enough to prime the world economy, while Asia and Europe warn that US consumers are spendthrifts.

So what is it, this New World Order? You get the drift by understanding that it's easier to say what it's not. It's not a grand alliance, or even anything as formulaic as the state of affairs that prevailed during the Cold War. It's a grim, fluctuating determination on the part of Washington to keep the world's crazies in their boxes - to get down in the mud with madmen, criminals, poseurs and opportunists and slug it out, if need be.

To execute this grubby chore Washington has built up the special relationship with Britain. It wraps itself in the Nato flag while Nato seeks cover from the UN - exposing Washington, in the going-nowhere circularity that is a deep part of the New World Order, to unstable relations with Russia and China.

ECONOMICALLY, the New World Order is not the set of institutions led by the International Monetary Fund and World Bank put in place by John Maynard Keynes and Harry Dexter White at Bretton Woods, New Hampshire, in 1944. But it's not the "new world architecture" meant to replace Bretton Woods, either. The new world architecture is rhetoric, turned up or down depending on the outlook for world economic growth.

So we have no system for managing exchange rates. Instead the market guarantees flexibility, while this flexibility guarantees the status of the dollar as sole reserve currency.

Nor do we have a lender of last resort. The IMF served in that capacity from August 1981 - when Jose Angel Gurria flew to Washington to tell Paul Volcker that Mexico had gone broke - until August 1998, when Russia went bust.

But last August, Russia app-roached the IMF and its masters at the US Treasury with its begging bowl, and the IMF said "pass". Rip! went the safety net underpinning international finance. Panic hit the markets.

Nor do we have a stable trade regime. The World Trade Organisation cannot agree upon who should run it. The G7 wants New Zealand's Mike Moore for director-general. Emerging market nations want Thailand's Supachai Panitchpakdi. Meanwhile, the US and Europe are at each other's throats over bananas and genetically modified food.

This is an argument between friends. But then there is China. The entry of China into the WTO will set the seal on perhaps the most significant economic trend in the world today: the evolution towards a single, global labour market. With the exception of a lucky elite well enough endowed to sniff at the labour market, we shall all be Chinese coolies soon.

Nor is there any economic blueprint pointing in the direction of sustained, long-term economic growth. Globalisation was supposed to be the blueprint. But globalisation rests on the notion that emerging market nations will "graduate" to OECD status. Since last autumn the headmaster reports on nations from Brazil to Indonesia have become more problematic.

BEYOND the headlines, meanwhile, Latin America's middle class is being wiped out. The nomenklatura of the communist world is transforming itself into a class of East Europeans with Swiss bank accounts. Asia's entrepreneurs persevere with Confucian stoicism. But they run to stand still. Koreans who used to vie for directorships at Daewoo now vie for kerbside spots to sell plastic toys.

Nor, most ominously, do we have a serious system of investment any longer. Investment is an act of faith. Faith is built on confidence which is built on law and a shared view of the future. All this is under attack. In the place of investing we have gambling - the search for the quick killing.

Hedge funds and the proprietary trading desks of the world's big banks scour the globe for profit opportunities. They know, however, that no bright idea, no computer model, can help them cope with their Catch 22. If the world's biggest investors share similar positions in the markets, and those positions are shown to be wrong as a result of some unexpected event, there will be an unholy rush for the door. The ever-present chance of a rush for the door throws all the sophisticated risk/reward calculations that can possibly be made by computer model into question.

Meanwhile, US day traders mimic their betters. One hundred million Americans own shares and almost five million of them buy and sell online. You cannot go anywhere in the US without someone giving you a stock tip. The pockets of Americans are stuffed with slips of paper with the names of companies on them whose businesses only a tiny fraction of investors understand.

All this is fodder for the gloom-and-doomers. Pick your scenario. Russia. Global warming. My current favourite is a take on Japan from Professor Rudiger Dornbusch at the Massachusetts Institute of Technology:

"The Japanese situation may result in a truly nightmarish scenario. Imagine that, faced with no easy way out [of mounting government debts] Japan responds to its troubles by reversing financial liberalisation. The high savings rate would be targeted at rolling back the debt; savers would be taken hostage to postpone the inevitable. Much of Asia would join in an Asian financial area with heavily regulated finances and controls on the export of capital. This would spell the end of the open world economy."

But the negation of the gloom-and-doomers is also part of the New World Order. They have cried wolf too long. If the New World Order is a flimsy contraption, it is not a doomsday machine, either.

The emergence of the New World Order brings us to ground zero. Are stock prices too high? Will London house prices collapse? Should businessmen build factories in Asia? Is the internet revolution real or hype? Who knows?

Individually, we know the score. We must strive incessantly or risk getting picked off - losing our jobs outright or becoming semi-employed "consultants".

As businessmen, investors and citizens interested in economic policy, however, all judgements must be suspect. Only the ingrained optimist can sleep securely. The bottom line is clear and dark: no one knows much about anything anymore.