A world in transition
Clifford A. Kiracofe
THE upcoming BRICS (Brazil, Russia, India, China and South Africa) Summit in Goa, India, this October must advance global governance at a time of rapid change in the international system. The global community can benefit substantially from bold initiatives and from well-organized cooperation.
The present international climate is fraught with financial, security and environmental challenges. The West has failed to provide effective leadership, while at the same time it has compounded global problems. U.S. foreign policy in the Middle East and North Africa under George W. Bush and Barack Obama produced chaos which will take some time to overcome. Washington’s Cold War mentality and confrontational approach to international relations impair global governance.
Developing countries, consisting of the world’s poorest nations, are hit hard by the global economic slowdown. Irresponsible Western policies, particularly in the banking sector, triggered the 2008 financial crisis from which the world has yet to recover. Although Asia, with strong support from China, was able to weather the crisis at the time, the present situation is considered dire by many experts. They assert that the financial situation is more tenuous today, given the condition of European and U.S. private and public finance. Asia may not be able to insulate itself so easily, should things take another major turn for the worse.
Yet, there is reason for optimism. China with its new Belt and Road Initiative and Russia with its new Eurasian projects are providing new leadership and inspiration for the international community. The focus is on sustainable development and a broad vision involving vast infrastructure creation.
A systematic, proactive development focus for the real economy can mitigate the consequences of Western casino capitalism. However, the international community must take decisive action.
New leadership: Working under the United Nations, the 2030 UN Sustainable Development Goals are something the international community can indeed rally behind. Global governance can be improved and strengthened through the leadership of such organizations as the BRICS and the G20.
All five BRICS countries are members of the G20. In turn, the G77, a large coalition of developing nations, is supportive of the BRICS and the G20, and this can generate broad global awareness, support and action. The BRICS account for some 40 percent of the world’s population, with over 3 billion people. They have a combined nominal GDP of $16.039 trillion, equivalent to about 20 percent of the global total. In addition, they account for about $4 trillion in combined foreign reserves.
The goals of the BRICS and the G20 overlap and are mutually reinforcing. Innovation and inclusiveness are common themes of both organizations this year. For the BRICS Goa Summit, there is a five-point approach: institution building, implementation, integration, innovation and continuity with consolidation. As for the just concluded G20 Summit in Hangzhou, there was a four-point approach: innovative, invigorated, interconnected and inclusive.
With a lame duck U.S. president who has just a few months to go in office and with the clearly deteriorating socio-economic situation in Europe, it is heartening to see a spirit of responsible, new leadership emerging within the international community.
The poorest countries and the developing world must have advocates. The elitist G7 is obsolete in the present day. The BRICS and the G20 together have a leading role to play in the emerging new international order. Financial stability: Implementing sustainable development on a global basis is not possible without international financial stability and updated financial architecture. The BRICS have been a staunch advocate for such reform. The International Monetary Fund, created in 1944, must be adjusted to reflect current international realities and sound practices. In its early years after World War II, it served a good purpose, particularly in the maintenance of stable exchange rates.
In recent years, however, its leadership and voting procedures have not been representative of the international community, with its so-called lending conditionality that promotes neoliberalism.
Responding to the present circumstances with a view toward the future, new financial mechanisms have come into being. The BRICS New Development Bank (NDB), the Eurasian Development Bank and the Asian Infrastructure Development Bank (AIIB) are significant new players on the international scene.
In the developing world, modernization must be based on sound sustainable practices. Such practices cannot be limited to environmental considerations alone, but also must take into account financial stability and the real economy. Financial stability includes not only a sound banking system, but also the creation of sound national capital markets. Responsible regulation in capital markets and the banking sector is required to prevent the speculative “financialization” of a national economy.
The separation of commercial banking from speculative investment banking is essential. Where predatory and speculative international financial operations are targeted against national economies, capital controls are an indispensable defense mechanism.
Future goals: In the Delhi Declaration following the 2012 BRICS Summit, it was made clear that deep concerns exist about the condition of international finance and institutions. In particular, large speculative and predatory cross-border capital flows cause dangerous risks and challenges to emerging economies. The declaration called for enhanced international financial regulatory oversight and reform, strengthened policy coordination and financial regulation, and the promotion of the sound development of global financial markets and banking systems. To this end, some progress was registered at the G20 Hangzhou Summit. The real economy of productive forces, most notably the industrial and agricultural sectors, must be the focus of effective international cooperation and policies. Finance should serve the productive forces rather than vice versa. Poverty must be reduced and eliminated for development to be truly sustainable. Labor must be treated with due regard in terms of working conditions, and salaries must reflect a living wage which can sustain a family in terms of lodging, food, basic necessities, health and educational opportunities.
The relative decline of the West and the rise of Asia mark a new historical juncture for mankind. To be sure, there must be a renewed effort for cooperation among the major powers, but inclusiveness with respect to the international community is essential to overcome challenges and solve problems.
The world needs new and invigorated leadership; whether or not the United States and Europe can recover in the short term from their present socio-economic crises remains to be seen. The upcoming BRICS Goa Summit can and no doubt will build on the G20 Hangzhou Summit. In turn, the following 2017 BRICS Summit, which will be hosted by China, can continue to advance the significant progress on global governance and sustainability.
—Courtesy: Beijing Review
[The author is an educator and former senior professional staff member of the U.S. Senate Foreign Relations Committee]