01
Oct
The Bretton Woods Conference established the post-World War II economic order 70 years ago. The global south is just reaching its half-century mark. The reason for the rise of the latter is the failure of the former.
The global economic system was designed by the big powers at a conference held at the New Hampshire resort of Bretton Woods in 1944. The gathering sought to establish post-war economic rules that would govern international economic, financial and trade relations. The result was the creation of the International Monetary Fund (IMF), World Bank and International Trade Organisation (ITO). One year later, the UN was established at the 1945 San Francisco conference.
The economic system was designed by the victors of World War II, who were also the dominant colonial powers. It served their interests and was governed by them. The Soviet Union, opting for the confrontational posture of the Cold War, refused to join the system, until the union’s collapse in 1991.
The ITO was not approved by the US Senate and so, as a compromise, its functions were covered by a provisional treaty called the General Agreement on Tariffs and Trade (GATT). This was renamed the World Trade Organisation (WTO) in January 1995, still with much the same function as globalisation dominated the economic agenda at the close of the 20th century.
Although most people in the world, and specifically the people of the global south, recognise that the UN, with its slanted membership powers in the UN Security Council, needs to be reformed, it was primarily under the Bretton Woods system that non-Western powers felt most acutely marginalised.
The global south, a term that emerged in the 1960s, is the successor of the term “Third World”, and was manifested politically in two groupings, both of which were formed some 50 years ago: the Group of 77 and the Non-Aligned Movement.
In 1974, the countries of the global south tried to push through the UN General Assembly a New International Economic Order (NIEO). This included a set of proposals to promote their interests by improving terms of trade, increasing development assistance, reducing developed-country tariffs, and other means. It was meant to revise the international economic system in support of poor countries.
The Declaration for the Establishment of a New International Economic Order was adopted by the UN General Assembly in 1974, and referred to a wide range of trade, financial, commodity, and debt-related issues (1 May 1974, A/RES/S-6/3201). Along with the declaration, a Programme of Action and a Charter of Economic Rights and Duties of States were also adopted (12 December 1974, A/RES/29/3281). This was the most complete effort of the countries of the global south to overhaul the Bretton Woods system.
It failed to have any impact. Beyond the flaws in the document (such as advocacy of central planning, then much in vogue), Western opposition completely killed it. The US and its allies were too powerful.
On the whole then, while decolonisation was successfully completed in the post-war period and through the 1960s, and despite the many demands of developing countries, the post-war world economic order remained largely unchanged.
Looking at the second half of the 20th century, one sees that the political momentum of the victorious allies, as the founding democracies in the world, fighting authoritarianism, plus their enormous wealth and the success of the welfare state in raising the standard of living of their citizens, all made the post-war order seem acceptable to many — if not most — of the world.
The G-7 group of Western powers, victorious in the Cold War with the collapse of the Soviet Union in 1991, and then the expansion of democracy and the entry of the former socialist states of Eastern Europe into the European Union and NATO, seemed to seal the success of the West and ensure that the 21st century would see more of the same. But things have not worked out that way.
BREAKING THE CHAINS: FROM NICS TO BRICS: The global south, representing almost 80 per cent of humanity, would rise again in the beginning of the 21st century. First we witnessed the emergence of the newly industrialised countries (the NICs) in the 1980s, as South Korea, Taiwan, Hong Kong and Singapore were recognised as the Asian Tigers. South Korea, one of the poorest countries in the 1950s, was now exporting automobiles and electronics to the United States.
Soon Samsung would overtake Sony of Japan and South Korea would rank third after the US and Japan in the number of patents filed, ahead of the UK, France, and even Germany. Mexico, South Korea and Chile, as well as the Eastern Europeans, joined the Organisation for Economic Cooperation and Development (OECD) — the club of rich countries established in 1960.
By the beginning of the 21st century, these success stories were overtaken by the biggest success story of all: China’s unstoppable rise to dominate much of manufacturing and to become the second largest economy in the world.
China became the holder of the world’s largest reserves, and Asia generally withstood the debt and credit crisis of 2007-2008, which struck Western banks. The enormous meltdown resulted in a major burden on Western powers. Their economies reeling, their citizens rebellious and dissatisfied, Western powers seemed off-balance and unable to cope, much less to lead.
Politically and militarily, the US seemed to have alienated everybody with its wars in Iraq and Afghanistan. Against that background, the surging China seemed to offer another model that suddenly appeared to many to be a possible alternative to the liberal economics and democratic politics of the West.
At the beginning of the century, the G-7 enlarged its consultations, creating the G-20. To counter the G-7, a new economic grouping emerged —BRICS: Brazil, Russia, India, China and South Africa. All were distinguished by their large, fast-growing economies and significant influence on regional and global affairs, and they are all G-20 members. These countries have started to build their own institutions in parallel to the Bretton Woods institutions.
Noting that existing international institutions (the World Bank and the IMF) did not provide enough voting power to developing countries and over-represented the West, the leaders of the five BRICS countries met in Brazil in July 2014 and created a new $100 billion development bank and emergency reserve fund.
The leaders announced that the bank would start with $50 billion in capitalisation and be headquartered in Shanghai. The first president of the bank will come from India.
The emergency reserve fund — which was referred to as a “contingency reserve arrangement” — will have $100 billion, and will help developing nations avoid “short-term liquidity pressures.” This is a clear indication of BRICS’ parallel role to the IMF. However, it was also announced that it would “complement” existing international arrangements, not replace them.
As the global south reaches the half-century mark, we can see that some of the people living in the world’s historically poor countries have clearly pulled ahead, defining themselves on the global stage and challenging the Western powers’ long-standing hegemony.
So what is left of the original solidarity that pulled together 80 per cent of the world’s population in a group that aimed to challenge the economic world order and the institutions that perpetuated the special status of Western countries?
THE CHALLENGES OF THE NEW CENTURY: The configuration of success stories and emerging muscle shows that there shall be no repeat of the G-7 defeat of the “New International Economic Order” proposal in the 1970s. It also shows that business as usual for Western powers is over. The palliative of the G-20, while definitely a step in the right direction, is going to be insufficient to respond to the rising aspirations of poor and developing countries.
Twenty-five years ago, the South Commission, headed by Julius Nyerere, submitted its report. In that report, the commission wrote that the fundamental international cleavage was primarily between the rich and the poor, and defined the basis for grouping the countries of the global south together as the result of their resolve to pursue united action in the struggle for a fairer international economic system.
Today, the economic system is changing. The BRICS can see value in special partnerships with the poorer developing countries of the world, especially in closer ties with sub-Saharan Africa, where enormous potential remains unexploited.
But does that lay the foundation for a further half-century of solidarity? I think not. It is enough for formulating a series of trade deals and possibly for a number of joint ventures, but unless there is a conscious policy that regroups the global south around a system where the poorest and least-developed countries will be assisted by the more advanced countries of the global south to attain a sustainable development path, that solidarity will remain mostly confined to political rhetoric.
In other words, the solidarity that characterised the countries of the global south in the last half-century was based on being against the post-war order crafted by Western powers. In the next half-century, it will have to be based on being for something more than what has been achieved. It is infinitely harder to forge a coalition around a positive goal than around a negative goal.
Thus, in many colonies, a national consensus could be easily forged against the coloniser for the limited goal of independence. The colonised — from extreme leftists to right-wing nationalists, despite the various ethnic and religious identities of the nationals — could all agree on the goal of independence. However, when the independent state had to face the choice of what sort of an independent country they wanted to build, differences emerged.
So the global south countries have to forge alliances based on their remaining commonalities of interests and new avenues for cooperation. In the task of nation building, South-South collaboration will now loom large. This will be essential if we are to transcend the narrow confines of individual nations and pursue a purpose that will seem worthwhile to many.
Europe showed the way when visionary Europeans such as Jean Monnet and Robert Schuman crafted the European Union, a community of nations among erstwhile foes and long-time adversaries. The global south must have such a supra-national perspective, a new raison d’être for the countries concerned.
More than an echo of the G-20
The global south must address more than purely economic issues. The G-20, where the leaders of the global south already sit, is the pre-eminent economic forum of the planet. The leaders of these countries have been meeting regularly since 2008. The G-20 economies represent around 85 per cent of gross world product (GWP), and 80 per cent of world trade.
In terms of population, because of the membership of the global south countries, the G-20 accounts for about two-thirds of the world population. So what is the need for an organisation of the global south unless it offers something more than the same G-20 menu?
The countries of the global south must be willing to become champions of a profound revision of the legacy of the 20th-century economic paradigm, not just the institutions that governed it on the global scale. They must actively promote the development and adoption of an alternative economic paradigm.
The capitalist system, the most creative and productive system devised by humanity, is still in need of a profound humanist critique. There are many people, this author included, who believe that the presence of hunger amidst plenty, and other social problems, are not a necessary price to pay for the robustness of the economy. Many of us believe that the ruthless allocation efficiency of the market must be tempered by a caring and nurturing society.
Today, many distinguished economists have argued against the current paradigm that deifies GDP growth and pays only lip service to everything else, from equity to welfare, from quality of life to environment. Many are still repeating the mantras of the extremists of Reaganite and Thatcherite ideology that argued that the private sector would do everything, and that what governs best is that which governs least.
We must recognise that the private sector will not take care of public goods, and that the public must remain engaged to deal with market failures and public goods.
We must change the calculus of our economics and finance to internalise the full social and environmental cost of our decisions. Some headway is being made on this at the local level, but we have certainly not even begun to introduce the global costs of local actions at the level of national policy.
Carbon emissions continue unabated and are factored as zero costs in investment decisions. We must rectify our national accounts that count a forest standing as zero and give it a positive value only if it is chopped down.
We should measure the growth in our capital stock, not just the growth in the volume of our activities. We should be concerned with nurturing natural capital and building human and social capital as much as we are about economic growth.
All of that is possible. It will not diminish the vibrancy of the entrepreneurial spirit, but it will help make new investments environmentally friendly and socially responsible.
But still the raison d’être of the global south in the next half-century must be founded on broader values and be woven in a larger vision than reforming the economic paradigm.
A VISION FOR THE GLOBAL SOUTH: The global south must harness the emerging universal values of our common humanity and create a coalition of the caring. It must mean something to be a member of the global south, something more than that you are poor and are against an international economic order that serves the interests of the rich. I believe that the global south must stand for certain values that should be central to all its members of which the basic tenets, described below, appear paramount.
First: Ensure real participation in global decision-making. Problems today confront governments beyond their borders. All governments need to collaborate in an effective international machinery of decision-making to take action against environmental problems, the chaotic structure of our markets and the multiple levels and overlapping jurisdictions that govern human actions in the world of the 21st century.
The leaders of the global south should help set that agenda inclusively, to avoid others suffering the same marginalisation that they suffered in the last century. They should provide a forum that brings in rich and poor countries, large and small economies, to fight poverty and promote sustainable development. Those with dual membership in the global south and the G-20 can be the voice of those who are absent at the G-20, which still seems wedded to the economic orthodoxy of the past.
Second: Credible macro-management of the economy. The preeminent role of government in setting and maintaining the proper macro-economic fundamentals is essential for any effective growth, as well for a well-functioning competitive economy. The costs of severe austerity measures in a period of limited or zero growth are felt primarily by the poor and destitute. Sound government policies are essential to ensure social equity and welfare, limit market distortions and prevent monopolies. This broad view of the role of government in society encompasses economics but also transcends it.
Third: Advancement of sustainable development. The environment is not just an issue for the rich. It is about every child in every country having the right to clean air, clean water and fertile soils. It is about ensuring that all children are secure from natural calamities and have food security throughout their lives. It is about educating girls and empowering women, and ensuring equity in the treatment of all citizens. It is about being conscious of our responsibility to our children and grandchildren.
The global south, having the vast majority of the population of the planet, has a direct interest in promoting mitigation and adaptive measures that ensure sustainable development and a secure future for their citizens. The global south should take the lead in ensuring that such measures are not flouted by the Western powers that have been the prime sources of environmental degradation in the past.
Fourth: Advancement of good governance. The global south needs to endorse systematic approaches to promote good governance, under its own guidance, not under Western tutelage. Here we are not talking of parliamentary or presidential systems, or whether parliament should be bicameral or a single chamber: we are addressing the promotion of principles like transparency, accountability, free expression, free flow of information, participation and the rule of law.
In fact, I would argue that Western-style electoral politics would not be the best answer for many countries where ethnic identities are strong and religious tensions are rife. Possibilities of experimenting with hybrid systems that involve forms of selection other than conventional elections, such as sortition and representative sampling, should be tried.
Fifth: Facilitate the flow of knowledge and information. The future will require more access to open communications and information at a speed that will defy our current thinking and that will exceed most of what we can imagine today. It is not just about availability of information: it is also about access to that information. It is also about new forms of free speech and intellectual property rights (IPR) in the emerging digital age.
Sixth: The promotion of science and the values of science. The systematic collaboration of the countries of the global south for the promotion of capacity building for science, technology and innovation (STI) would be mutually reinforcing to the free flow of information. Science for society is not just to produce consumable technology: it is also about commitment to evidentiary-based regulation, and arbitration of disputes by scientific methods whenever possible.
Seventh: Promoting investment in human and social capital. The education, health and nourishment of persons are a primary competitive asset as well as being the best investment that societies can make. They are essential for both equity and economy. But equally important is to strive to build up shared values and the legitimacy of institutions of mediation in society, for these are the essential glue that holds societies together and allows them to function. This is social capital.
Eighth: Nurture flexible institutions. The one common denominator of the global knowledge-driven economy of the new millennium is the pace of change itself. The successful, competitive economies of the future, those that will be creating jobs and prosperity for their people, will be those that ensure the flexibility of their institutions.
ENVOI: TOWARDS A NEW GLOBAL PARADIGM: We need a new global paradigm, and the leaders of the global south should make it their goal to construct it. They should not look only to their current national economic interests, but also to the interests of all humanity. That is how they will really construct a system that is fundamentally different from the one that prevailed in the last century.
The eight points described in the preceding section can and should be reformulated as a set of principles for the global south in its next half-century. I think that such a declaration of principles and objectives has the capacity to harness the potential of rapidly evolving and diversifying South-South cooperation.
It has the capacity to inspire national and international visions and give meaning to actions by the countries of the global south, from the largest to the smallest. It has the ability to forge effective bonds between these disparate countries that are different from what has prevailed in traditional North-South economic dealings.
I believe that these are some of the elements that can rally the developing countries that belong to the global south, despite their great diversity, into a meaningful unity of action. That action needs a platform of basic principles and objectives, which perhaps could even be formulated as a “Charter of the Global South” that can have a lasting value and contribute to the struggle to build a better world for the entire human family, as we promote a culture of peace, justice and sustainable development for all.
Source: http://weekly.ahram.org.eg/News/7312/21/The-global-south—-The-next-half-century.aspx