G20: Moving Up BRIC by BRIC

September 8, 2009

Analysis by Sanjay Suri, Inter Press Service, 4 September 2009

LONDON, Sep 4 (IPS) – Every one of these ‘G’ meetings becomes now an occasion for the developing countries – say the emerging economies – to turn that extra energy into a louder voice in the business of global decision-taking.

A day before the leaders of the wealthiest developed nations met at the last G8 summit in L’Aquila, Italy in July, the G5 met with announcements of consolidated positions. They held together jointly, and therefore that much more firmly, against a particularly European push for some binding commitments on actions towards curbing climate change.

And now on the eve of the substantive part of the G20 finance ministers meeting in London Saturday, the BRIC nations came together to make a collective announcement that would both inform the formal meeting in advance of common positions, and pre-empt increased pressure from the developed – the G8 part of the G20.

For the record, the G8 are the U.S., Canada, Britain, France, Germany, Italy, Japan and Russia; the G5 are Brazil, India, China, South Africa and Mexico; and BRIC are Brazil, Russia, India and China. The remaining members of the G20 are Argentina, Australia, Indonesia, Saudi Arabia, South Korea, Turkey and the EU represented by its rotating presidency (currently Sweden).

Russia belongs to both the G8 and outside, China some say should really belong to a G2 alongside the U.S., to sit above the G8. These numbers are not that serious; certainly they are not formal. That one or two may move this side or that is just a fallout of what everyone calls these days ‘the changing world order.’

Change has come outside of the U.S. too, and U.S. President Barack Obama is not the only one looking for change, even if that sort of push coming from others makes for smaller headlines. But the push is unmistakable – and change inevitable.

So the BRIC finance ministers did not just call for reform of the international financial institutions when they met in London Friday ahead of the finance ministers meeting proper. “The main governance problem, which severely undermines their legitimacy, is the unfair distribution of quotas, shares and voting power,” the BRIC ministers said in a statement following their meeting. That they have said before, but on Friday they went further.

“We propose the setting of a target for that shift of the order of seven percent in the IMF and six percent in the World Bank Group so as to reach an equitable distribution of voting power between advanced and developing countries. This would lead the overall share of emerging market and developing countries in the IMF and World Bank to correspond roughly to their share in world GDP.”

Six or seven percent may not sound like a lot. But the last time, three percent of votes shifted from rich to developing countries. Now they want the next shift to be twice as big. Push has not yet come to shove – the emerging economies are looking for change, not upheaval, for steps that will in time add up to a change that is certain to be revolutionary, but not looking for a dramatic revolution in the old ways.

The G8 governments have been dragging their feet since agreeing to reform of these institutions. At this G20 gathering, the pressure will be on for reform. U.S. Treasury Secretary Tim Geithner dropped in at the end of the BRIC ministers meeting to hear what the ministers had to say, and to reassure them the U.S. will back change. Brazilian Finance Minister Guido Mantega reported at the end of the meeting that Geithner agreed action to reform the international financial institutions, and to do so quickly.

And he agreed too, as the BRIC ministers demanded, that the next managing director of the IMF and the next president of the World Bank should be elected “irrespective of nationality or any geographical preference.” And that the executive boards of these institutions give more representation to developing countries.

This was always a good argument, but now strength speaks. As Indian Finance Minister Pranab Mukherji said after the meeting, BRIC nations between them have a higher gross national income (GNI) now than does the U.S. Sure, that is still four big countries that just about surpass the U.S. standing alone – but the U.S. giant stands less tall above others now than it did before, and looks more fragile than the smaller economies.

“Emerging market economies have shown resilience and helped the world economy absorb the impact of the deterioration of trade, credit flows and demand,” the BRIC ministers pointed out in their statement. “In many of them, growth is already back on track after a few quarters of recession or slowdown.”

And with 80 billion dollars of their money now going into the international financial institutions, it does not seem likely they will be able to resist change for long along the lines that the emerging economies are pushing insistently for.

The BRIC ministers held on to earlier positions on the principle of common but differentiated responsibilities in taking action on climate change. But they acknowledged too that there is much that needs to be reformed beyond voting rights and the lot within financial institutions.

“Permanent, stable reforms must still be implemented on multiple fronts,” they acknowledged. The need, they said, is to “change international practices, rules and governance structures to make the global economy more resilient to future crises.” They have an interest in this, suffering as they did from a crisis not of their making.

Few expect the developing nations to secure all the reforms they want in a hurry. But few doubt, either, that the developing world has taken at least some steps towards that end as never before. (END/2009)


The Virtues of Deglobalization

September 5, 2009

By Walden BelloForeign Policy in Focus, 3 September 2009

The current global downturn, the worst since the Great Depression 70 years ago, pounded the last nail into the coffin of globalization. Already beleaguered by evidence that showed global poverty and inequality increasing, even as most poor countries experienced little or no economic growth, globalization has been terminally discredited in the last two years. As the much-heralded process of financial and trade interdependence went into reverse, it became the transmission belt not of prosperity but of economic crisis and collapse.

End of an Era

In their responses to the current economic crisis, governments paid lip service to global coordination but propelled separate stimulus programs meant to rev up national markets. In so doing, governments quietly shelved export-oriented growth, long the driver of many economies, though paid the usual nostrums to advancing trade liberalization as a means of countering the global downturn by completing the Doha Round of trade negotiations under the World Trade Organization. There is increasing acknowledgment that there will be no returning to a world centrally dependent on free-spending American consumers, since many are bankrupt and nobody has taken their place.

Moreover, whether agreed on internationally or unilaterally set up by national governments, a whole raft of restrictions will almost certainly be imposed on finance capital, the untrammeled mobility of which has been the cutting edge of the current crisis.

Intellectual discourse, however, hasn’t yet shown many signs of this break with orthodoxy. Neoliberalism, with its emphasis on free trade, the primacy of private enterprise, and a minimalist role for the state, continues to be the default language among policymakers. Establishment critics of market fundamentalism, including Joseph Stiglitz and Paul Krugman, have become entangled in endless debates over how large stimulus programs should be, and whether or not the state should retain an interventionist presence or, once stabilized, return the companies and banks to the private sector. Moreover some, such as Stiglitz, continue to believe in what they perceive to be the economic benefits of globalization while bemoaning its social costs.

But trends are fast outpacing both ideologues and critics of neoliberal globalization, and developments thought impossible a few years ago are gaining steam. “The integration of the world economy is in retreat on almost every front,” writes the Economist. While the magazine says that corporations continue to believe in the efficiency of global supply chains, “like any chain, these are only as strong as their weakest link. A danger point will come if firms decide that this way of organizing production has had its day.”

“Deglobalization,” a term that the Economist attributes to me, is a development that the magazine, the world’s prime avatar of free market ideology, views as negative. I believe, however, that deglobalization is an opportunity. Indeed, my colleagues and I at Focus on the Global South first forwarded deglobalization as a comprehensive paradigm to replace neoliberal globalization almost a decade ago, when the stresses, strains, and contradictions brought about by the latter had become painfully evident. Elaborated as an alternative mainly for developing countries, the deglobalization paradigm is not without relevance to the central capitalist economies.

11 Pillars of the Alternative

There are 11 key prongs of the deglobalization paradigm:

  1. Production for the domestic market must again become the center of gravity of the economy rather than production for export markets.
  2. The principle of subsidiarity should be enshrined in economic life by encouraging production of goods at the level of the community and at the national level if this can be done at reasonable cost in order to preserve community.
  3. Trade policy — that is, quotas and tariffs — should be used to protect the local economy from destruction by corporate-subsidized commodities with artificially low prices.
  4. Industrial policy — including subsidies, tariffs, and trade — should be used to revitalize and strengthen the manufacturing sector.
  5. Long-postponed measures of equitable income redistribution and land redistribution (including urban land reform) can create a vibrant internal market that would serve as the anchor of the economy and produce local financial resources for investment.
  6. Deemphasizing growth, emphasizing upgrading the quality of life, and maximizing equity will reduce environmental disequilibrium.
  7. The development and diffusion of environmentally congenial technology in both agriculture and industry should be encouraged.
  8. Strategic economic decisions cannot be left to the market or to technocrats. Instead, the scope of democratic decision-making in the economy should be expanded so that all vital questions — such as which industries to develop or phase out, what proportion of the government budget to devote to agriculture, etc. — become subject to democratic discussion and choice.
  9. Civil society must constantly monitor and supervise the private sector and the state, a process that should be institutionalized.
  10. The property complex should be transformed into a “mixed economy” that includes community cooperatives, private enterprises, and state enterprises, and excludes transnational corporations.
  11. Centralized global institutions like the IMF and the World Bank should be replaced with regional institutions built not on free trade and capital mobility but on principles of cooperation that, to use the words of Hugo Chavez in describing the Bolivarian Alternative for the Americas (ALBA), “transcend the logic of capitalism.”

From the Cult of Efficiency to Effective Economics

The aim of the deglobalization paradigm is to move beyond the economics of narrow efficiency, in which the key criterion is the reduction of unit cost, never mind the social and ecological destabilization this process brings about. It is to move beyond a system of economic calculation that, in the words of John Maynard Keynes, made “the whole conduct of life…into a paradox of an accountant’s nightmare.” An effective economics, rather, strengthens social solidarity by subordinating the operations of the market to the values of equity, justice, and community by enlarging the sphere of democratic decision making. To use the language of the great Hungarian thinker Karl Polanyi in his book The Great Transformation, deglobalization is about “re-embedding” the economy in society, instead of having society driven by the economy.

The deglobalization paradigm also asserts that a “one size fits all” model like neoliberalism or centralized bureaucratic socialism is dysfunctional and destabilizing. Instead, diversity should be expected and encouraged, as it is in nature. Shared principles of alternative economics do exist, and they have already substantially emerged in the struggle against and critical reflection over the failure of centralized socialism and capitalism. However, how these principles — the most important of which have been sketched out above — are concretely articulated will depend on the values, rhythms, and strategic choices of each society.

Deglobalization’s Pedigree

Though it may sound radical, deglobalization isn’t really new. Its pedigree includes the writings of the towering British economist Keynes who, at the height of the Depression, bluntly stated: “We do not wish…to be at the mercy of world forces working out, or trying to work out, some uniform equilibrium, according to the principles of laissez faire capitalism.”

Indeed, he continued, over “an increasingly wide range of industrial products, and perhaps agricultural products also, I become doubtful whether the economic cost of self-sufficiency is great enough to outweigh the other advantages of gradually bringing the producer and the consumer within the ambit of the same national, economic and financial organization. Experience accumulates to prove that most modern mass-production processes can be performed in most countries and climates with almost equal efficiency.”

And with words that have a very contemporary ring, Keynes concluded, “I sympathize…with those who would minimize rather than with those who would maximize economic entanglement between nations. Ideas, knowledge, art, hospitality, travel — these are the things which should of their nature be international. But let goods be homespun whenever it is reasonably and conveniently possible; and, above all, let finance be primarily national.”

Foreign Policy in Focus columnist Walden Bello is a member of the House of Representatives of the Philippines and senior analyst at the Bangkok-based research and advocacy institute Focus on the Global South.

G-20 or G-192: Fear of the South

July 20, 2009

The Real News, July 13, 2009

Western governments shutting UN out of global crisis response, as Southern governments question pillars of the world economy.

Developing nations’ appeals unheard at UN Summit on Global Economic Crisis

June 27, 2009

AlJazeera, June 26, 2009

More than 140 countries have agreed on a blueprint to respond to the global economic crisis.

The paper calls for the inclusion of developing countries in finding solutions to the financial meltdown.

But some say the 15-page document is short on specifics, and has been undercut by indifference from the world’s largest economies.

Al Jazeera’s Cath Turner reports from the United Nations.

Peoples Voices: UN Conference on the World Financial and Economic Crisis and its Impact on Development

June 21, 2009



People Impacted by the Economic Crisis from Around the World Gather to Give Voice to the Forgotten, Marginalized

20 June 2009 – Responses to the current economic crisis have been inadequate and fail to fully address the myriad of related global crises, such as food security and climate change. An international coalition of ‘working’ people directly impacted by these crises, and civil society organizations, will meet in a public forum to deliver this message to world leaders in advance of a UN Conference on the economic crisis on 20 June from 1pm to 6pm at the historic Church of the Holy Trinity in New York.  Miguel D’Escoto Brockmann, the current President of the UN General Assembly and the convener of the Conference, will deliver a keynote address.

“In the midst of the most serious economic downturn since the Great Depression, we now have the opportunity and the responsibility to search for solutions that take into account the interests of all nations, the rich and the poor, the large and the small,” Mr. Brockmann has said.

The immediate impacts of the economic crisis on stock prices, private pension funds and access to lines of credit have been apparent and well-reported.  But the precise consequences of the financial meltdown for working men and women – across the globe – have been less obvious and have received far less attention.  Indeed, only recently has data been reported that describes the deep impact of the economic crisis on developing countries, who moreover played little role in the creation of the crisis, organizers say.

People’s Voices on the Crisis will give voice to those that have felt the impact of the crisis and whose stories have thus far received little attention.  The event will showcase the testimonies of grassroots activists from diverse regions of the world working with many of the world’s forgotten victims, who will give evidence on how the financial, as well as food, energy and climate change crises, are affecting their lives and their work.

“We believe that the current economic crisis is the result not merely of misinformation, lax regulation or simple hubris. Rather, it is the result of a deeply flawed system that perpetuates crises in food security, in the environment as well as in finance and economics,” says Roberto Bissio, Coordinator of Social Watch and one of the organizers.

The forum will also address a more hopeful future, as advocates will offer their proposals on overcoming the current crisis and in the process develop a new economic system that is built on the rights – and in the service – of all people.  The outcome of the Hearing will be a set of recommendations to be delivered to world leaders gathered at the UN Conference on the Economic Crisis that will begin the following Monday.

People’s Voices on the Crisis

Saturday, 20 June

Church of the Holy Trinity

316 E. 88th Street, New York, NY

For more information contact:

Jana Silverman∙Social Watch∙jsilverman@item.org.uy

Nicolas Luisani∙International Network for Economic, Social and Cultural Rights (ESCR-Net)∙nlusiani@escr-net.org

Zak Bleicher∙UN-NGLS∙212.963.3117∙bleicher@un.org

Is West Undermining Summit on Financial Crisis?

June 19, 2009

By Thalif Deen, Inter Press Service, June 17, 2009

UNITED NATIONS, Jun 17 (IPS) – When a Western diplomat was asked whether his country would be represented by a head of state at next week’s U.N. summit meeting on the global financial crisis, his response was tinged with sarcasm and contempt.

We will send only our note takers,” he was quoted as saying.

In diplomatic jargon, “note takers” are equivalent to glorified stenographers who religiously take down everything said at a meeting but have no authority to intervene or take decisions.

The decision to hold a U.N. summit on the global economic crisis was taken by all 192 member states – by consensus – at an international conference on financing for development held in the Qatari capital of Doha last November.

The participants at next week’s summit were expected to be “at the highest political levels”, meaning heads of state and government.

But Western nations have apparently backed out of the decision which they themselves took in Doha.

Speaking on condition of anonymity, an Asian diplomat told IPS: “The Western states are trying to undermine the meeting by sending low-level representatives.”

“The reason is obvious,” he explained. “The West feels the General Assembly is not the appropriate forum to discuss the global financial crisis.”

“They think the crisis belongs to the World Bank, and more importantly, the International Monetary Fund (IMF),” he added.

Asked if there were any Western heads of state or heads of government scheduled to participate in the summit, Enrique Yeves, spokesman for the president of the General Assembly, told IPS: “None from the West.”

But there are around 30 heads of state and government (out of 192), mostly from developing nations, who have confirmed attendance, he added.

“We (will) have a strong presence of Latin America and the Caribbean – especially from the Caribbean, we have several heads of state and government coming,” Yeves said. “We’ll (also) have a good attendance, I’ve been told, from Africa and Asia.”

“And then, as they have already been said in public, the developed countries, especially the Europeans and the United States and some others, have indicated they might not be represented at the level of heads of state, but certainly at the level of ministers or whoever is the chief of delegation,” Yeves added.

The summit meeting of the General Assembly, due to take place Jun. 24-26, was originally scheduled for Jun. 1-3.

But delegates wanted more time to negotiate the draft outcome document that will be adopted at the meeting.

The negotiating process on the document has been painfully slow and is expected to continue till the eve of the summit next week.

After consultations with the various regional groups, the president of the General Assembly, Father Miguel d’Escoto Brockmann, the organiser of the three-day summit, decided to postpone the meeting from the original date to next week.

Meanwhile, there have been several stories in the mainstream media, quoting Western diplomats as saying they are very unhappy with the left-wing agenda of D’Escoto, a former foreign minister in the Sandinista government in Nicaragua.

Asked about this, Yeves told reporters Monday: “But let me – because I have been quoted in some of these articles, as well – tell you what I find strange in the last two or three articles that we have seen, is that we keep hearing these anonymous sources quoting diplomats of the developed countries basically saying that the meeting is not a good idea.”

“It’s going to be a failure or that they don’t think it is going to accomplish anything or whatever,” Yeves said. “I would like to make two comments on this particular issue. The first one, it is very difficult to discuss anonymous sources because, you know, we don’t know who said what, and in what context.”

“However, the president (of the General Assembly) speaks for himself – or I speak for myself – on the record all the time, and our record is very clear.”

“And the second part that I wanted to say is on substance,” because the criticisms are strange, because the summit, and the entire process leading to the summit, have been approved by consensus by all 192 member states,” he said.

Overhauling Global Finance

June 3, 2009

Alex Wilks | May 28, 2009 Foreign Policy in Focus

The global financial crisis has discredited the financial institutions that played a part in causing it. Discussions of radical alternatives are beginning to flourish, with the world’s governments rushing to consult experts who previously found themselves out in the cold.

If only. In fact many of the same financial experts as a decade ago populate finance ministries, review panels, and talk shows. The commission of experts convened by the president of the United Nations General Assembly represents one rare exception.

This commission includes 18 researchers, politicians, former officials, and activists from all the world’s regions. Their mandate is to recommend “needed institutional reforms required to ensure sustained global economic progress and stability which will be of benefit to all countries, developed and less developed.” The body is popularly known as the “Stiglitz Commission” because it’s led by Nobel laureate and former World Bank chief economist Joseph Stiglitz. But it’s most notable for the participation of high-level experts from developing countries.

The commission is slated to release its 110-page report within days to foster public debate and to improve the outcome of the forthcoming United Nations conference on the world financial and economic crisis and its impact on development.

Clean Break

In much tougher language than we’ve seen from other official bodies this year, the commission wholeheartedly condemns the fundamentals of the mainstream thinking over the last 30 years. The commission’s draft report, released May 21, seeks to bury “previously fashionable economic doctrines, which held that unfettered markets are, on their own, quickly self-correcting and efficient.” It finds that the globalization constructed on these flawed hypotheses enabled defects in one economic system to spread quickly around the world, bringing recessions and impoverishment to developing countries.

The commission points out that inequality has left many people unable to buy what they need, even in richer countries. Working-class people in wealthy nations have gone deeper and deeper into debt, contributing to the severe financial imbalances between nations which were a major cause of the crisis.

Yaga Reddy, former governor of the Reserve Bank of India and Yu Yongding, director of the Institute of World Economics and Politics at Chinese Academy of Social Sciences, two of the commission’s members gave a preview of its findings at a meeting my network organised in Brussels. Reddy and his fellow speaker repeatedly stressed that politicians are currently too focused on fiscal stimulus measures, rather than plugging the gaping holes in policies and institutions. Without structural reforms, they warned, the world economy will continue to suffer repeated crises. The Stiglitz Commission appeals, sensibly, for short-term economic stimulus measures to help introduce, and above all not obstruct, required long-term changes.

The commission also points out that at present poorer countries are effectively lending to the richer countries at low interest rates because of the way the global monetary system works.Global financial redistribution is going the wrong way.Now, following a period where private funding was readily available, many developing countries are seeing massive outflows as rich country banks and investors repatriate funds. They can be expected to do little else, having been bailed out by politicians who want to ensure they make money available in their home economies.

Practical and Visionary Proposals

The commission will make a very comprehensive series of proposals — covering reforms to development funding, tax policies, regulation, and environmental investment. Most innovatively, the commission suggests some new structures that are required to make the world economy more stable and equitable.

Developing countries need access to extra sources of funding to plug the hole in their finances which may amount to $200 billion this year for the world’s 40 poorest countries. These countries are facing shocks from reduced investment, remittances and export earnings. The commission points out that countries such as China, which have money available, are reluctant to channel funding through existing multilateral organizations such as the World Bank because they don’t have enough say on the Bank’s board, the institution’s decision-making body that’s currently dominated by the United States, Europe, and Japan. This is the principle of “no taxation without representation,” well-established at the local and national level in most countries, but still lacking at the international level.

The commission concludes that the only way forward is to create a new “facility” to transfer money from richer to poorer countries. But it unfortunately recommends that this new facility might be housed in an existing institution, administered by the existing institution’s staff, albeit under a new kind of governance arrangement. It’s true that — in the unlikely event that significant sums of money are mobilized this year — the most pragmatic way to proceed is the channel them through the World Bank and the International Monetary Fund (IMF). However, there is a clear danger that giving them more money now will consolidate their power. This is worrying, unless accompanied by a transformation of the Bank and Fund’s governance and economic policy approach.   

The commission recommends building up regional financial cooperation and regional financial institutions at the same time global ones are transformed. This is positive, although the European Union — the most mature regional grouping at the present time — hasn’t excelled itself in dealing with the current crisis.

To address the imbalances and injustices caused by the dollar being the world’s reserve currency, Stiglitz’s group of experts suggests creating a new global reserve system. This is a worthwhile discussion to initiate, but the commission isn’t likely to be very specific about it.

The commission creatively borrows from other policy areas that its members think can teach a sound lesson to finance officials. The Stiglitz experts recommend setting up a “Financial Products Safety Commission” similar to the U.S. Food and Drug Administration. Rather than assess new medical or edible products, this new body would scrutinize new financial products to see if they are safe to sell to unsuspecting consumers. The approach until now has been different: allow any kind of financial innovation and hope that consumers would wise up or regulators keep up. Many homeowners, credit card holders, and others can see the disastrous consequences.

The commission borrows another idea from the UN’s Intergovernmental Panel on Climate Change. This body of scientists has sounded the alarm on the need to address human-caused changes to our atmosphere, getting ahead of and driving the political consensus. Such a body could now be created on financial and economic issues. The body would produce public reports pointing out issues which need to be dealt with, and give advice to the United Nations General Assembly and other international organizations. If it’s constituted many of us would be happy to propose some of the Stiglitz panel’s commissioners as candidates.

Fearing a new and dangerous phase of the ongoing debt crisis in the next couple of years, the Commission recommends a Foreign Debt Commission, an International Debt Restructuring Court, and a Global Economic Coordination Council, all under the aegis of the United Nations. The latter would review the activities of the World Bank, IMF, and United Nations, as well as regional and other financial institutions, ensuring that gaps are filled and problems identified early.

Implementation Prospects

The commission is slated to release its final report soon. One of the main strategies of General Assembly President Miguel d’Escoto Brockmann when he established the panel was to inform the inter-governmental negotiations for the UN conference on the world financial and economic crisis and its impact on development, scheduled previously for the first week of June now postponed until June 24-26. And one of the commission’s findings is that decisions concerning necessary reforms in global institutional arrangements must be made not by a self-selected group, such as the Group of the world’s eight richest countries (G-8), but by all the countries of the world working in concert.

The unfolding crisis should provide an opportunity to abolish the G-8, slim down the International Monetary Fund, and bring forward the United Nations as the more legitimate and therefore more effective forum to set global economic policies and priorities. Over the last six months this has looked unlikely, as the G-8 began to expand into the somewhat more inclusive G-20. This sounds more democratic, as it involves many countries with large populations including India, China, and Brazil. But most other countries are left out. The G-20’s view of what the United Nations should do at this time was merely “to monitor the impact of the crisis on the poorest and most vulnerable,” rather than actively do anything about it.

Diplomats in New York are still arguing fiercely over the text that will define the UN conference. Civil society groups organizing around the process have raised their concerns that the conference may prove a major missed opportunity, but are urging heads of state to attend to raise the chances of a success. Several of the Stiglitz Commission’s innovations are already present in the panel’s latest draftalthough there is still much negotiating to be done. A lively public launch of the commission’s findings should help energize public discussions about how to build political will to make a decisive break with the institutions, thinking, and policies that created this crisis.

 *Alex Wilks is the director of the European Network on Debt and Development in Brussels.