We must adopt a class-based analysis of globalization in order to attack the multilateral system that is producing inequality, advises South Centre Chief Economist Yilmaz Akyuz
March 15, 2017 Produced by Lynn Fries
LYNN FRIES: Welcome to The Real News Network. I’m Lynn Fries in Geneva.
The question is often posed whether trade and investment is a zero sum game among nations – between Mexico, for example, and the US. South Centre Chief Economist Yilmaz Akyuz says he does not think nations are the correct focus here. He said this at a South Centre briefing for developing countries at the United Nations Geneva.
In this report, we feature clips of that briefing by Yilmaz Akyuz talking on the global economy at an event convened by India’s Permanent Representative to the UN Geneva, Ambassador Ajit Kumar, as high level Representative of the South Center Council. Dr Akyuz was given the floor in a panel chaired by Geneva’s Vice Chair of the G77 + China, Pakistan’s Ambassador Tehmina Janjua. We go now to our featured clips of Dr Akyuz.
DR. YILMAZ AKYUZ: Many developing countries have become so enthusiastic about globalization. At UNCTAD, we wrote our first report on globalization in 1997. And we came to two conclusions – and it’s on record. We said it would create two things – greater inequality and instability. In fact, it’s happened. And we also said that it is as likely that the North may walk out of it as the South.
Now we left our development too much to global market forces, transnational corporations, international financial firms, banks. We rely excessively on foreign capital, foreign markets, transnational corporations. We have one of the worst income distributions. Income is heavily concentrated in the rich classes. But we have the lowest savings and investment rates in the world. And we expect foreign direct investment to come and give us a boost.
I think we need rebalancing. We need rebalancing. I am not suggesting autarky. I am suggesting a strategic integration, integration that will support your development. Since Mr Trump won the elections, there is a concern among developing countries about the retreat from globalization. DIsmantling FTAs
[free trade agreements]
like TPP or NAFTA.
Now first of all TPP was not about trade. It was more about transnational corporations finding a free space to enter without any interference from national or international bodies in their operations. NAFTA – I circulated a short executive summary of a paper on NAFTA. Under NAFTA, 20 years, Mexico grew 19%. And in terms of growth performance Mexico was 18 out of 20 countries. Before NAFTA, 20 years, Mexico grew 97%. Mexico is exporting manufactures without producing them, without creating value added. It’s got a trade deficit not only in the overall but also in manufactures. Its poverty, technology, productivity performance is not very encouraging. So, I would have expected Mexico to have a second thought on NAFTA rather than the United States.
But that brings me to a bigger problem. Everybody seems to be unhappy. The US is unhappy and Mexico should be unhappy about this. I think the question is often posed whether trade/investment is a zero sum game among nations. But I don’t think nations are the correct focus here. I think it’s not nations that lose or gain – its people, corporations, workers, banks. So perhaps we should focus more on these than on the implication of trade or FDI for nations as a whole. So in other words, we should move from a nation based analysis of globalization to a class based analysis of globalization.
FRIES: That clip was from Dr Akyuz’ formal statement. Our next clip features related comments with Dr. Akyuz speaking in open forum.
AKYUZ: Countries are jealous of their sovereignty but they want the others to take obligations. And other cannot take obligations unless you take some obligations. The point is that obligations may be equal on paper but in reality they mean totally different things because of power relationships. Secondly, obligations they can be taking should vary according to their capability, capacity. And this was recognized after the Second War. In the GATT System (General Agreement on Tariffs and Trade) developing countries were given special privileges, certain facilities. In the Bretton Woods system aid mechanisms were created – multilateral. But there was this erosion of this and you know it much better than I do. And now we come to a situation where countries pursue their own interests without any international objective being agreed collectively. There’s a lot of rhetoric about development agenda. I worked in the UN long enough to know about that. But it’s quite empty.
How do you discipline big powers multilaterally? It’s very difficult to do it. You cannot create alternative institutions to the IMF or WTO. They weren’t even second best. We had the Chiang Mai initiative. No one used it. We had the G20, BRICS initiative on the contingency reserve facility. It was very small. So we cannot really create Southern alternatives to multilateral institutions that have mechanisms already. So we have to really attack the multilateral system. Now, I think our best friends in this respect are ordinary people. I think the inequality, injustices, that the global system is producing will take a lot of people on our side. And I think, it is on that ground that Trump won the election. I think the main point about the US/American election is that why he won the election, is the culprit is not on this side, it’s on the other side, the people in Davos. These are the culprits. And you don’t have to choose between the two. So it’s very difficult for developing countries to impose multilateral discipline. Actually, the IMF has never imposed multilateral discipline on anyone except those who borrow from it. Before the ink dried, the BRITs [the British] devalued the currency without asking the IMF even though that was needed.
For, there’s a major big political question. And that is, in fact, as I said at the beginning, it should be dealt with not on the basis of nations but society at large and the corporations and others who really drive this process. Globalization is a process driven by corporate interests. In the trade negotiations, you know it quite well. Why TRIPS came into existence. So we need some mechanism to reduce the power of finance, the power of corporations. And that power of finance could be in India, in China as well as in the United States. The power of corporations could be everywhere.
FRIES: We have to leave it there. Special thanks to the South Centre and to South Centre Chief Economist, Yilmaz Akyuz. And thank you for joining us on the Real News Network.
APPENDIX: (For interested viewers more details of this South Centre event follows.)
Details of the full event are posted on the South Centre website (www.southcentre.int) This briefing by senior experts from the South Centre was intended to give ambassadors and delegates of developing countries’ missions in Geneva a good overview of global economic conditions and prospects & linkages to major multilateral policy negotiation processes. Negotiations that developing countries will be actively engaged in at the World Trade Organization and the World Health Organization, for example, with significant implications for developing country broader development goals and objectives.
Dr. Yılmaz Akyuz, Chief Economist of the South Center, was formerly the Director of the Division on Globalization and Development Strategies at the United Nations Conference on Trade and Development (UNCTAD) when he retired in August 2003. He was the principal author and head of the team preparing the Trade and Development Report, and UNCTAD coordinator of research and support to developing countries (the Group-of-24) in the IMF and World Bank on International Monetary and Financial Issues. He taught at various universities in Turkey and Europe before joining UNCTAD in 1984 and after his retirement, and published extensively in macroeconomics, finance, growth and development. He is the second holder of the Tun Ismail Ali International Chair in Monetary and Financial Economics at the University of Malaysia, established by Bank Negara.
Originally published at TRNN