High expectations
As I tried to make clear in last week’s column, the global economic crisis-induced shift in international economic governance and authority away from the G7 club of rich countries, to the G20, which includes the emerging economies of China, India, Brazil and Russia, was met with extremely high expectations in the developing world. These were founded on the leading role the emerging economies had been playing in those global economic struggles, which still remain crucial to the interests of poor developing countries. One of these is the struggle for greater developing countries’ influence over the operations of key inter-governmental economic institutions: the World Trade Organisation (WTO), IMF, and World Bank.
In practice poor countries have had little influence on the operations of the IMF and the World Bank, even though these institutions have been able to exercise disproportionately enormous influence on the economic affairs of poor countries. Similarly, the WTO, which is the duly constituted framework for global trade negotiations under the Doha development round puts developmental considerations on the back seat to focus on trade liberalization for all economies, irrespective of their development levels and prospects. As I pointed out in last week’s column also, the recent reform of voting rights in the IMF leaves a lot to be desired from the perspective of poor countries.
Another effort which the emerging economies had championed in the past is the call for rich countries to meet their commitments to raise resources for the global fight against poverty and the attainment of the Millennium Development Goals (MDGs). Instead, the historic pattern has been for the G7 countries to pledge resources for highly desired global objectives, but in practice they have reneged on these pledges. The most notorious case is the decades-old pledge to transfer one (1) per cent of rich countries GDP to aid the development of poor countries.
A third struggle in which the emerging economies had been strongly engaged was to defeat those processes promoting the inequalisation of global income, wealth, and levels of well-being, as well as the unjust distribution of political and social power worldwide. It was expected that this struggle would have sharpened, as economic crisis usually intensifies the processes of inequalisation worldwide.
Inequality in America
We can take the example of the USA, the richest nation, and at the same time the hardest hit by the global economic crisis to see how inequalisation has proceeded. Recent data show that the richest one per cent of US households collectively possesses a higher net worth than the bottom ninety per cent of US households. Alternatively, the value of annual consumption of the richest 12,000 households in the United States is greater than the value of the annual consumption of the poorest 24 million households in that country!
This inequalisation process is also seen in the political sphere. Politics and money have become much more closely intertwined. Thus, it has been estimated that the cost of mobilisation by both Democrats and Republicans for the recent (2010) mid-tem elections in the USA was about US$4.5 billion. Of note also, it is estimated that President Obama, who has promised so much to reform US politics, is expected to raise as much as US$1 billion for his re-election campaign in 2012.
The China critiques
The strong criticisms which I have made of the role of China and the other emerging economies within the G20, principally reflect the high expectations that I, along with many others have had that, as the weight and influence of these nations grew in the global economy; so would their attention and concern for the plight of the poor and powerless everywhere.
It is therefore with some shame and disgust that I am forced to acknowledge that the emerging economies have been a big let-down in the G20. China has emerged as a dominant player in those global markets engaged in the illicit and illegal trading of the natural resources of poor countries. This trade ranges from rare earth elements and precious metals to protected animals and plants. Further, Chinese-connected enterprises are engaged in resource extraction in several poor countries in open violation of human and environmental rights, acceptable labour and social standards, and other government regulations. China continues to do business in war and conflict zones in poor countries. NGOs and international observers link Chinese firms to the most corrupt regimes, while China pleads in response that it does not “interfere” in the domestic affairs of the countries with which it does business!
Here in Guyana, for example, observers tie Chinese operators, working out of neighbouring countries, as major players in the gold and diamond smuggling trade, as well as “trafficking in-persons.”
Conclusion
It would be a grave mistake for readers to infer from this discussion that China’s turncoat has been so complete that there are no conflicts within the G20, between the G7 club of rich countries led by the United States and the emerging economies, led by China.
There are several areas of conflict, disagreement, and tension. I shall highlight a few of these in future columns, namely 1) China’s role in the global illicit/illegal trade; 2) accusations by both parties of deliberate currency manipulation by the other in order to gain a global competitive advantage for their export of goods and services; 3) disagreement over the approach, at this juncture, to dealing with the global economic crisis; and 4) the role of institutional reform of the regulatory and oversight mechanisms of the global economy in preventing future crises.
