From Poverty to Power, 2Nd Edition
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PART FIVE THE inTERnaTIOnal SYSTEM WHO RULES THE WORLD? 241 THE INTERNATIONAL FINANCIAL SYSTEm 244 THE INTERNATIONAL TRADING SYSTEm 260 THE INTERNATIONAL AID SYSTEm 289 HOW CHANGE HAppENS: THE 2005 GLENEAGLES AGREEMENTS 311 INTERNATIONAL RULES AND NORMS 313 THE INTERNATIONAL SYSTEM FOR HUMANITARIAN RELIEF AND PEACE 317 HOW CHANGE HAppENS: LANDMINES, AN ARMS CONTROL SUCCESS STORY 333 CLIMATE CHANGE 335 GLOBAL GOVERNANCE IN THE TWENTY-FIRST CENTURY 351 WHO RULES THE WORLD? Global institutions such as the World Bank, the IMF, and the United Nations, transnational corporations, rich country governments, (and even interna- tional non-government organisations such as Oxfam) are sometimes viewed as the most powerful and dynamic forces in the fight against poverty and inequality. This book has argued, on the contrary, that the main actors are poor men and women and their national governments – a combination we have called active citizens and effective states. This is not to deny the power of global institutions. In tackling global poverty and inequality they can, by both action and omission, be either part of the solution or part of the problem. They can foster efforts to build an effective, accountable state and an active citizenry, or they can under- mine or even crush them. This part of the book examines those aspects of the international system most relevant to the fight against poverty and inequality, and explores how global institutions can be placed at the service of development. The web of international institutions, laws, regulations, and agreements collectively known as ‘global governance’ is constantly growing in range and density. Global governance can help the fight against poverty and inequality in eight main ways: • Managing the global economy through, for example, rules on trade and investment; • Co-ordinating the systemically important countries, for example through the Group of Twenty (G20), to manage the functioning of international financial markets; • Redistributing wealth, technology, and knowledge through aid or other mechanisms, such as international taxation; • Averting environmental or health threats, through agreements such as the Montreal Protocol (on ozone depletion) and the Kyoto Protocol on climate change, or through institutions such as the World Health Organization or UNAIDS; • Avoiding war and limiting abuses during war by providing a forum for negotiation of differences, and upholding the body of international humanitarian law, such as the Geneva Conventions; 241 FROM POVERTY TO POWER • Preventing powerful countries or corporations from harming weaker and poorer ones. This ‘stop doing harm’ agenda includes regulating the arms trade, carbon emissions, corruption, and destructive trade policies; • Providing a safety net for the most vulnerable people when disaster strikes and states are unable or unwilling to cope, as through the relief work of UN agencies or the international community’s embrace of the ‘responsibility to protect’; • Changing attitudes and beliefs, for example through the Convention on the Elimination of Discrimination Against Women (CEDAW) or the Convention on the Rights of the Child. Unfortunately, global governance often fails to live up to these high ideals. Whether by using aid for short-term political purposes, waging war rather than averting it, using regional trade agreements to impose economic strait- jackets rather than the freedom to pursue wise development policies, or simply failing to rise to the historical challenges facing us all, the misguided actions of global institutions and the short-sighted policies of wealthy coun- tries often pose threats to development. The whole project of multilateralism – the nations of the world working in concert to address its many challenges and problems – has been questioned in the aftermath of the US invasion of Iraq and the apparent failures of numerous UN summits to achieve more than a watered-down consensus. Powerful states are inevitably tempted to bend or bypass institutions of global governance, but they do not always succeed. Public pressure can persuade the more enlightened leaders to put building a stable and fair global system ahead of their own short-term self-interest. Moreover, the rule of law through international institutions can become capable of influencing even the most powerful of nations as, for example, when the World Trade Organisation ruled against US cotton subsidies in 2005 because of the damage they do to producers in other countries. (The US, sadly, failed to comply with the ruling.) The global balance of power is shifting rapidly, as the world enters what looks increasingly like the ‘Asian Century’. In 2009 the tectonic plates of world power shifted with startling speed, as the G8 handed the baton of world leadership to the G20, and European diplomacy was humiliated at the Copenhagen climate summit by a combination of old and new power (prin- cipally, the US, China and India). A new ‘global middle class’ of increasingly assertive developing countries, led by China and India, is challenging the dominance of Europe and North America in global institutions, while a range of regional organisations and initiatives such as the African Union or the Shanghai Cooperation Organisation is creating a more varied political geog- raphy than the traditional global–national divide. 242 5 THE INTERNATIONAL SYSTEM Global governance systems must adjust, and rapidly, to this new geometry of power, and yet the multilateral system often verges on paralysis, failing to take the action necessary to correct deep flaws in the financial system, or sleepwalking towards irreversible climate change. At the time of writing, a looming financial crisis once again hangs over Europe, and probably the global economy, threatening an even greater test of the ability of global insti- tutions to cope with change and instability. This century, humanity will either sink or learn to swim together. 243 THE INTERNATIONAL FINANCIAL SYSTEM THE WORLD BANK AND THE INTERNATIONAL MONETARY FUND In 2005, the World Bank and the International Monetary Fund (IMF) told the government of the impoverished West African nation of Mali that it would have to privatise its energy companies and its major export sector, cotton, if it expected to see any loans or credits. Mali’s President Amadou Toumani Touré went to Washington to plead his country’s case, but later could only lament: ‘People who have never seen cotton come to give us lessons on cotton … No one can respect the conditionalities of certain donors. They are so compli- cated that they themselves have difficulty getting us to understand them. This is not a partnership. This is a master relating to his student.’1 The ensuing liberalisation of the cotton sector left Malian farmers exposed to world markets, where cotton prices are artificially suppressed by massive US and EU subsidies, and they received 20 per cent less for their cotton in 2005 than in the previous year. Combined with unfavourable exchange rates, rising input prices, and late rains in 2007, the result was devastating, with thousands of farmers running up unpayable debts and some leaving cotton farming alto- gether. Production in 2007–8 collapsed to half its previous level.2 The acronyms of faceless international organisations do not usually start riots, but the three letters IMF provoke explosive reactions. Throughout the 1980s and 1990s, ‘IMF riots’ periodically ravaged cities throughout the devel- oping world, leaving hundreds of people dead and wounded and losses of millions of dollars in damaged and looted property. In the South Korean financial crisis of 1998, restaurants offered cut-price ‘IMF menus’ to the newly unemployed, who protested with placards carrying the eye-catching slogan ‘IMF = I’m Fired’. For much of the past 30 years the IMF and the World Bank have been pursuing nothing less than a radical overhaul of the way that developing countries run their economies. That role has been hugely controversial and, in many eyes, profoundly destructive, and both institutions have been obliged to rethink their approach. The IFIs’ level of influence has ebbed and flowed in inverse proportion to the state of different countries’ economies. When countries are in crisis, they become hugely dependent on the Bank and Fund as gatekeepers of other donor lending as well as private capital; when times are good, their leverage shrinks, to almost nothing as in the case of the emerging economies in recent years. They are also powerful sources of 244 5 THE INTERNATIONAL SYSTEM research and technical assistance, which helps them shape what policies aid donors and many developing country governments consider to be ‘sound’. The IMF and the World Bank were born in July 1944 in Bretton Woods, New Hampshire, when the outcome of World War II was already evident. The new institutions formed part of an attempt by the victorious powers to prevent a repeat of the global economic collapse of the 1930s, which had sown the seeds of war. While constitutionally part of the UN system, the giant multilateral financial organisations were set up in a radically different manner. While the UN system works largely on a ‘one country, one vote’ prin- ciple (with the notable exception of the Security Council), decisions at the IMF and World Bank in general are taken on the basis of ‘one dollar, one vote’, guaranteeing the dominance of the United States and other major donors.3 At US insistence, the organisations were located in Washington, within walking distance of the White House, rather than with the UN in New York. The Fund and Bank were arguably given the wrong names at birth. The IMF is supposed to lend money like a bank when financial crises threaten, while the World Bank funds projects and government reform programmes to address longer-term development issues. The two institutions were created not to feed global markets but to step in where markets failed, in order to mitigate the harsh effects of global capitalism.4 At first, they confined their attentions to rebuilding Europe with loans to Denmark, France, and the Netherlands.