|
Article see also
CPDS Comment |
Article
Australia and other wealthy Western nations have blocked a proposal for an
unprecedented international push for stronger capital flows to developing
countries. This relates to a first draft proposal for a UN summit on financing
development. The West is satisfied with market driven global distribution of
capital - from which it benefits. The developing world wants to strengthen UN
social and economic bodies like the IMF and World Bank, and double the amount of
development aid provided. Australia rejected the proposal and a UN Development
Aid official (and ex Labor MP) criticized this as rationalizing doing nothing.
The problem is that global interdependence and wealth are increasing - while 1/5 of
human population lives on < $2 per day, and 86% of global wealth is earned by
20% of the people. One measure of the problem is that the US receives 2/3 of
foreign net capital flows of $400bn pa. Developing countries get little. Their
agricultural and manufacturing exports are harmed by import barriers in
developed countries. The agenda for conference on financing development
involves: domestic financing, trade, international private finance, overseas
development aid, debt and governance issues. UN Millennium Declaration pledged
governments to work towards ending of extreme poverty. A detailed agenda, Towards
a fully inclusive and equitable globalisation, was developed by a panel chaired
by Zedillo of Mexico. Reaction to this from West and Japan opened a breach.
The proposal recognized the importance of good domestic governance and the rule
of law to combat corruption, but also called for greater help from rich
countries. A doubling of overseas aid was sought, carbon and currency
transaction (Tobin) taxes, reform of international financial architecture,
strengthening of UN social and economic roles, and an international tax organization.
West and Japan rejected this - being unwilling to negotiate change to
international system that serves too many countries well. Australian UN
representative said draft was unbalanced. It didn't recognize the respective
roles of the developing and developed countries, and was impractical. In trying
to place main responsibility on donor countries, it gives too little attention
to national policies. Developed countries suggest that main responsibility falls
on developing countries to attract market-led investment by eliminating
corruption and improving accountability and transparency. (Barker G. 'Money
talks', Financial Review, 4/12/01)
|
|
Comment |
CPDS Comments [VERY preliminary]
The proposal, Towards
a fully inclusive and equitable globalisation, was intended as a means to
promote greater international equity through the establishment of reformed
global institutions and increased flows of capital to developing
countries.
This goal is clearly important on the basis of (a) humanitarian concerns (b)
the contagious problems associated with states
that experience social, economic and political failures and (c) the
international conflicts (such as World War I) which arose because of fundamental
disagreements about the nature of the 19th century globalised economic
order..
However there is no easy answer. The following is an attempt to identify the
complexities of the problem. It is certainly not a solution.
- there is disputation about whether or not global equality is increasing or
decreasing (see Global equality).
There are also political agendas in the advocacy of each side of this debate
concerning the role of markets and of governments;
- the proposal, Towards
a fully inclusive and equitable globalisation, appears to conform to a social democratic scheme involving an
increased role for global governance machinery. However:
- there has been, and remains, controversy about the
effectiveness of 'social' action (ie government programs) as a means for
achieving economic and social goals. This controversy is even greater in
the international arena (eg concerning the effectiveness of the UN, and
the World Bank /IMF) - so the proposal would presumably require
substantial reform of of their governance and operational arrangements.
- this is made far more complex by the differences amongst the major
(and numerous other) cultural traditions which can place quite different
interpretations on institutions which have similar names.
- both the proposal, and the rebuttal, appear to be expressed in terms
of 'Western' ideologies. Moreover Western societies appear to be the
only ones who tend to generate significant new ideas (see Islam
and the West). This presumably is a result of the traditional
negative attitude to abstract ideas in East Asia and to modernity in
Islam - however the results may not suit all cultures;
- there is a strong cultural dimension in market economic success - with the
leading position having been taken for two centuries by Western societies
(see Competing Civilizations).
Only East Asian countries demonstrating the ability to catch up (using
quite different cultural techniques).
- Competing Civilizations also suggests
that a contest for control of the global financial system is underway
amongst the strongest economies. Japan (and China and other countries in
East Asia) are part way towards the creation of an Asian
Monetary Fund as an alternative to the US dominated IMF. Towards
a fully inclusive and equitable globalisation must be seen as a third
alternative way with significant implications, eg:
- slowing the flow of global capital (with transaction taxes) would
reduce
instabilities which appear to arise under current arrangements. However it
would also lead to cultural
winners and losers - because Western societies tend to
have advantages in dealing with abstracts such as money.
- increasing global 'social' action would be incompatible with Japan's
traditional corporate state arrangements;
- market allocated capital flows appear at present to be highly distorted at
present - with most net capital transfers to the USA reflecting (a) the
strength of investment opportunities in the US (b) the $US's status as the
world's reserve currency - which makes it easier for the US to borrow (c)
loose approach to money supplies in the US which has stimulated an asset
boom and consumption - but not resulted in inflation because of deflationary
pressures elsewhere (d) the resulting large US current account deficit which
has to be balanced by capital inflow (e) the strong savings tradition, and
weak consumption tradition, in much of East Asia.
- flows of capital to developing countries are not all that would be needed for their
advancement. Arguably information is a critical prior requirement -
embodied in educated people, in an effective system of governing, social and
economic institutions and in the market and technological knowledge of
enterprises. Without this, experience suggests that capital flows are likely to be wasted.
Certainly investment MIGHT stimulate access to required knowledge and
institutions (as advocates of new growth theory believe) - but in reality
this seems unlikely;
- the suggestion that it is mainly up to developing countries to attract
market-led investment (eg by eliminating corruption) can not be sufficient because:
- the reason that such countries are not developed is that they
haven't the knowledge or the institutions required - and without these (which can
NOT just be obtained with the stroke of a pen) then can not get far.
Outside help is essential
- local leaders can find it more profitable simply to play the games of
external investors - rather than providing leadership to their communities.
- Improved access to relevant information and institutions in developing countries
is most unlikely to flow through the national governments of developed
countries (because of the political (ie context for power) dimension which
this introduces). Thus other arrangements that might enable economic and governance development to accelerate
in developing countries is probably required. One way in which progress might be made is suggested
in Foreign and Regional Aid via the Internet
10-12-01
|