Who Should Run the Global Economy?

April 23, 2012

Deborah James
Al Jazeera English, April 20, 2012

See article on original website

You wouldn’t know it from the mainstream press, but there is a huge fight brewing over the future of global economic governance that will come to a head at a conference in Doha, Qatar this weekend. There, governments from around the world will join the 13thmeeting of the United Nations Conference on Trade and Development (UNCTAD XIII), where they will finalize a document that will set the mandate of the organization for the next four years.

UNCTAD, as the only multilateral economic agency focused on development, has emerged as one of the leading critics of “finance-led globalization,” positing “development-led globalization” as the needed alternative policy focus of global economic governance.

Therein lies the fight.

Not surprisingly, those institutions currently in charge of these matters, such as the International Monetary Fund (IMF), the World Bank, the World Trade Organization (WTO) and the Organization for Economic Cooperation and Development (OECD), are reluctant to share the governance space with UNCTAD.

While all of these institutions are dominated by the same rich country governments whose failed policies and unrestrained private sectors led the world into the biggest economic crisis since the Great Depression, UNCTAD is an institution known for not only having predicted the crisis, but also for not being afraid of suggesting alternative-to-the-Washington-Consensus solutions.

Just to be clear: the only reason that there is a fight, is because UNCTAD’s excellent, prescient, and influential work is seriously threatening – but only to those individuals and institutions that caused the crisis, and are still benefitting from it.  

Within the negotiations, rumor has it that the Germans are the worst offenders in the EU, and the Swiss and the U.S. are the worst culprits in the so-called “JUSSCKANNZ.” This is a non-EU developed-country catch-all which includes Japan, the US, Switzerland, Canada, Australia, Norway, New Zealand, Lichtenstein, and the unfortunate recent addition of South Korea. (Really, South Korea? Couldn’t have detoured to strengthen a new “BRICKS” for a bit?)

Keep in mind that the European authorities – meaning the European Central Bank (ECB) and the European Commission – along with the IMF, are imposing the anti-growth, inequality-exacerbating policies which have been long suffered by developing countries on the receiving end of the IMF’s structural adjustment mandates – on their own people, in the current failed policy crisis in the eurozone. As my colleagues at the Center for Economic and Policy Research and others have pointed out, the European authorities could end the self-imposed crisis tomorrow if they engaged in the same kind of monetary and fiscal expansionary (counter-cyclical) policies that the BRICS undertook. (But alas, this would rob the elites of the opportunity to impose structural reforms – meaning the evisceration of the traditional European social safety net – which is the underlying goal of their austerity-focused policies.)

Thus the biggest site of contention, unsurprisingly, is UNCTAD’s role in global macroeconomic governance and finance policy. But as prominent professor and journalist Vijay Prashad put it, how “finance can be seen as ‘far’ from issues of trade and development boggles the mind.”

Fortunately, developing countries are fighting back. First to appear was a statement by (now) over 60 former high-level staff of UNCTAD, “Silencing the message…or the Messenger..or Both?” It explained, as one illuminating analysis put it, “How UNCTAD was Ahead of the Curve.” “As otherwise unfavourable commentators have occasionally admitted, UNCTAD was ahead of the curve in its warnings of how global finance was trumping the real economy, both nationally and internationally. It forecast the Mexican tequila crisis of 1994/5. It warned of the East Asian crisis of 1997 and the Argentinian crisis of 2001. It has consistently sounded the alarm of the dangers of excessive deregulation of financial markets.”

Former chief economist of UNCTAD, Yilmaz Akyuz, further noted that UNCTAD was the first to argue for debt relief, as well as orderly workout mechanisms for sovereign debt – issues that have now come to the fore in the IMF only ten years later. “Again UNCTAD has been well ahead of the curve in predicting and analysing financial crises in emerging economies and recognising the need for reform of the international financial architecture and to manage international capital flows,” said Akyuz, according to the South Centre.

Then G77 and China themselves fought back with a declaration on 13 April. This was not a normal statement of diplomatic niceties; instead it pulled no punches in assigning blame and calling individuals and countries to account for an unseemly return to semi-colonial behavior of the past. It critiqued both the process and the substance of the negotiations, in no uncertain terms.

In support of UNCTAD and reflective of the position of G77 and China, a grassroots solidarity statement reinforcing the importance of UNCTAD’s mandate on global governance and finance garnered support from 15 international and 76 national organizations and 128 further individuals.

Then, the Civil Society Organizations (CSOs) present at the UNCTAD Civil Society Forum noted that “CSOs in Doha demand that UNCTAD’s crucial research and analytical work especially on 1) the global financial crisis, and 2) other development challenges including those arising from globalisation be maintained.”

Thus, while the global governance and finance mandate are the key issues at stake, they are not the only areas of contention. Issues from trade and finance to investment and debt; from agricultural commodities and employment to financial regulation and climate change – all of which are completely relevant to economic development – are included in the draft declaration.

This may seem inexplicable to those with too much faith in the emerging G20 as the multilateral salvation on global economic governance (an idea which has itself been widely critiqued). But in reality western governments have mounted a determined attempt to exclude UNCTAD from nearly all areas from “destabilising capital flows, exchange rate misalignments, the volatility and financialisation of commodity markets, special and differential treatment for developing countries, regional financial and monetary co-operation, and the need for reform of the international financial and economic architecture.”

And in every instance possible in the negotiations, developed countries have sought to reduce the mandate and scope of UNCTAD. And they have also sought to impose a pro-“Washington Consensus” mandate – on the only multilateral economic institution that works from a development perspective.

In the draft declarations, it is easy to see how the developed country proposals focused on mandating UNCTAD to help countries sign more trade agreements, lauding the role of the private sector, and even pushing investor-protection provisions in trade and investment agreements. In contrast, the G77 and China argued for a more nuanced approach that focused on the strategic use of trade for development, highlighting the importance of the public sector, and cautioning against investment policies which privilege foreign corporations over domestic citizenry. 

After closely monitoring these developments on UNCTAD’s mandate on myriad issues, another strong civil society statement emerged which detailed the main areas of contention, and what the focus of the policy analysis and mandate for the role of UNCTAD should be.

According to the statement, endorsed by nearly 200 international and national development, worker, agricultural, consumer, and religious groups, the outcomes of the UNCTAD XIII should “[M]andate UNCTAD to determine the contours of a global trade framework that is truly development-oriented, and thus to identify the changes to the existing WTO and ongoing negotiations that are necessary to ensure that governments have the policy space to use trade for sustainable and inclusive development, and to regulate in the public interest.”

The statement also noted that “In light of the rhetoric surrounding the commitment to a more open, democratic, and participatory system of global governance that have become commonplace in recent years, we find the return to the semi-colonial approach of the developed countries in the UNCTAD negotiations outrageous.” This makes obvious reference to the recent debate about the continued U.S. dominance of the presidency of the World Bank. The heterodox policy orientation of the new president, Dr. Jim Yong Kim, has been welcomed. But the uninterrupted control of this key Bretton Woods Institution by the United States remains patently unacceptable.

It should be noted that Brazil, Russia, India, China and South Africa, in the BRICS Trade Ministers’ statement issued on 19 April, in advance of the first G20 Trade Ministers’ Meeting this weekend in Mexico, affirmed the role of UNCTAD, building on their earlier statements.

For example, in the issue of services liberalization – a growing sector after more than a half-decade of manufacturing dominance, the BRICS note, “The services sector plays an important role in economic growth and development. Nevertheless, experiences of many countries have shown that in order to benefit from liberalization of services and avoid unintended consequences of premature liberalization, opening services markets should be correctly sequenced, progressive and commensurate with a country’s level of development, strength in particular sectors and regulatory capacity.”

This is clearly reflective of many countries’ lived experience with the negative outcomes of IMF- and WTO-mandated services liberalization, and much more reflective of the kind of strategic-deployment-with-caution viewpoint of UNCTAD.

All those who think that the current guys (and gals) in charge of global economic governance are doing a stellar job, go ahead – raise your hand; try to defend them on the merits. Those who think alternative, development, employment- and equity-focused policies, (emphasizing financial and other public interest regulation, employment-led growth, and equity-led sustainable development) over the current austerity model, would be welcome by the vast majority of the world’s inhabitants – raise your hands in support of UNCTAD this week in Doha.

The role of UNCTAD as an alternative voice to the “Washington Consensus” paradigm – being the only multilateral economic institution focused on development – must be strengthened vis-à-vis the WTO, the IMF, the World Bank, the OECD, and the G20 in global economic governance decision-making. In the coming week, it will be important to choose sides in the “Battle of UNCTAD’s Future Mandate.” A lot depends on it.

Deborah James is the Director of International Programs at the Center for Economic and Policy Research, based in Washington, DC. She also coordinates the WTO campaign of the Our World Is Not For Sale (OWINFS) network, and is a board member of Global Exchange.

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