Rise of the Rest

Liberal world orderIMF, World Bank, World Trade Organization

(started as GATT)1970’s: Problems 1971, Nixon Shock: end of the original

Bretton Woods with American refusal to sustain dollar’s direct convertability to gold

1973, the Oil CrisisBorrowing was encouraged1980’s: debt crisis and conditionality

Expansion of the world orderChina initiated economic reforms1980’s: the roles of IMF and the WB changedNeo-liberalism gained popularityEconomies of the Third World countries were

restructured 1990’s: liberalization of the post-socialist

countries India initiated economic reforms The Washington Consensus as the only truth

IMFOriginally, the main aim was to maintain stable

exchange ratesIn order to do it, IMF’s purpose was to lend

money to countries to meet short-term fluctuations in currency exchange rates

In August 1982, Mexico announced that it could pay neither the interest nor the principle due of its foreign debt

G-7 decided to ensure debt paymentsIMF became an intermediary in negotiations

between creditors and debtor countries

In return for financial assistance economic reforms were suggested (or, alternatively ,enforced)

IMF conducts annual meatings to evaluate macroeconomic situation

IMF became an authority that decides whether aid and credits from itself, the World Bank and private financial firms should be allocated or not

IMF proposed uniform recipe everywhere: “one size fits all”: liberalization, privatization, fiscal discipline

Fiscal discipline (the US and some other Weestern countries did not follow this one)

Criticisms about IMF-WBDecisionmaking in IMF and the WB is under the

influence of the US and other Western statesThe IMF managing director is always a

European and the WB president is always and American

A limited-member executive boards decide everyday policies

In the executive boards members have voting power in accordance with quotas

However, quotas is a matter of negotiationMajor donors are decision-makers

VotingG-7 : 44.3%The US: 16.7% 2010 reform: 41.2% and 16.5%Even this change still has not been

implemented

Joseph Stiglitz and his criticism about decision-making in IMF-WB: Bureaucracy of IMF and the WB and ideological power of the WestWestern dominance is reinforced by bureaucracyPredominantly economists trained in Western

countries in the same liberal economic tradition as US decisionmakers

The bureaucrats also have strong organizational cultures

They do not just support neo-liberalism they believe in neo-liberalism

Close cooperation between Western decisionmakers, IMF, the WB and multinational corporations(MNC)

“Structural power of the US” (Robert Cox)Dollar as the world currencyThe global predominance of American

financial marketsUS control of the IMFThe US is predominant in the other

international economic institutions, the World Bank and the World Trade Organization

GATTPrinciple of non-discrimination and reciprocityBy granting “most favoured nation” status to all

trading partnersGATT’s focus: the reduction of tariff barriers

against imported manifactured goodsAgriculture and services were off the agendaNon-tariff barriers were off the agendaRounds of negotiationsDuring the Kennedy Round, the Tokyo Round and

the Uruguay Round tariffs on manifactured goods were brought down substantially

Average tariffs in 1947 had stood at 40 %, this had been reduced to about 3 % by 2000.

The Uruguay Round, started in 1986 and concluded in December 1993, covered new items such as services (insurance), intellectual property rights (patents, copy rights, trade markets)

For the first time agriculture and textiles were negotiated

Nevertheless, agriculture remained protected and subsidized (the US and the EU)

Textiles remained subject to quotas on country-by-country, product-by-product basis

WTOWTO became the primary instrument of international

law in the area of tradeDispute settlement mechanism was establishedSettlement judgements can only be rejected if they

are opposed by all members of the Dispute Settlement Body

Decision-making mechanism seems more democraticCriticism: it is not democratic since developed

countries and MNC’s have influenceSuspension of the Doha Round over protectionism in

agriculture

Robert CoxHegemony is crucial for maintaining stability and

continuity in world order.Dominant powers in the international system have

shaped a world order that suits their interests, by coercion and by generation of consent.

For the USA and the UK the ruling, hegemonic idea has been “free trade”.

“Free trade” is in the interests of hegemon.Hegemon is the most efficient producer in the global

economy, can produce goods which are competative in all markets, so long as they have access to them.

Liberal ideas and liberal IO’s: the generation of consent

Robert Cox“Civil society, in Gramsci’s thinking, is the

realm in which the existing social order is grounded; and it can also be the realm in which a new social order can be founded.

His concern with civil society was, first, to understand the strength of the status quo, and then to devise a strategy for its transformation.”

“Gramsci insisted that the revolution must occur (in civil society) prior to the revolution (in the form of the state).”

Organized criticisms to the liberal world order and American hegemony1960’s: UNCTAD and G-77 1974: The New International Economic

OrderAnti-globalization movement, NGO’sBRICG-20 instead of G-7Shanghai Cooperation OrganizationThe Bolivarian Alliance for the Peoples of Our

America-Peoples’ Trade Treaty (ALBA-TCP)

Errosion of IMF power1997 Asian Crisis and IMF’s loss of credibilityJoseph Stiglitz exposes the truth Rise of ChinaUnconditional (?) credits and aid provided by

such countries as China and RussiaAs became clear during the Crimea crises

this aid is not unconditional, great power simply pursue their national interests

Initiative of BRICS(just an attempt)

In 2001, China spent roughly $1.7 billion on foreign aid.By 2011, the annual foreign-aid figure had risen to $189.3

billionBetween 2001 and 2011, China's pledged foreign aid was

$671 billion, divided among 93 emerging-market countries.

 In 2010, annual aid pledged by China was $169 billion and in 2011, $189 billion—

equivalent to about 3% of its reported GDP and more than twice the size of the officially reported budget of the ministry of defense.

Those receiving the largest amounts are Latin America and Africa.

BRIC, BRICSThe BRICS alliance has existed as a concept since

2001, when a Goldman Sachs economist, identified Brazil, Russia, India and China as rising economic powers and argued that they should play larger roles in global economic policymaking, perhaps by joining the established Group of 7.

Russia-China summitsApril, 1997: Russian-Chinese Joint Declaration on a

Multipolar World and the establishment of the New International Order

Russia organized a triangular group with India and China

“A growing number of countries are beginning to recognize the need for mutual respect, equality and mutual advantage - but not for hegemony and power politics - and for dialogue and cooperation - but not for confrontation and conflict. The establishment of a peaceful, stable, just and rational new international political and economic order is becoming a pressing need of the times and an imperative of historical development.”

“Every country has the right independently to choose its path of development in the light of its own specific conditions and without interference from other States. Differences in their social systems, ideologies and value systems must not become an obstacle to the development of normal relations between States. All countries, large or small, strong or weak, rich or poor, are equal members of the international community. No country should seek hegemony, engage in power politics or monopolize international affairs. The Parties believe that the renunciation of discriminatory policies and practices in economic relations, and the strengthening and expansion of trade, economic, scientific, technical and humanitarian exchanges and cooperation on the basis of equality and mutual advantage will promote their common development and prosperity.”

Defenders of developing states “The Parties stress that numerous developing countries

and the Movement of Non-Aligned Countries are an important force that promotes multipolarization and the establishment of a new international order. Interaction among developing countries is gaining momentum. Their role in international politics is growing, and their share in the world economy is increasing. The rise of the developing countries will provide a powerful impetus for the historical process of establishing a new international order. These countries should take their rightful place in the future new international order and participate in international affairs on an equal and non-discriminatory basis.”

BRICSRussia, China, India, Brasil: united by

opposition to the Western control of global financial institutions

Calls for reform in these institutions and the UN

Implementation of the 2010 reform of IMFSupport of developing states’ rightsMore representative financial architecture of

the worldThe revival of Doha Round talksThe group has discussed creating a

development bank to rival the World Bank