However, it should be the responsibility of the “insiders” to show convincingly that they are not ignorant of the “outside.” This means that they should show that they are going to preserve the environment, the rights of future generations, to protect limited resources from overexploitation and create a freer, fair and open global system.
Robert Zoellick, the president of the World Bank Group, noted in one of his recent articles that after experiencing the Dark Ages, the Renaissance, the Reformation and the Age of Reason, “it is time to herald the age of responsibility” in order not to allow intolerance, the clash of civilizations and the waves of protectionism, and search for partial solutions amongst the nations.
Therefore, in the midst of such a big economic crisis the issues to be handled include stabilizing a fragile financial system, stimulating demand at a time when interest rates are at or near zero in many countries, taking the first steps towards redesigning the global governance structures that failed to prevent the crisis, and finally, combating a dangerous turn towards protectionism. At the moment, the major homework of the ministers at the Seventh Ministerial Conference is to establish the ground to finalize the Doha Development Agenda (DDA) and convince the real players to avoid protectionist tendencies.
In my view, there are two important occasions that will test how serious the major global players are in bringing about a new world based on real multilateralism, participation and equity other than just solving the current financial crisis and its side effects for the time being. They are: this WTO Seventh Ministerial Conference and the approaching United Nations Climate Change Conference in Copenhagen.
Now I have witnessed the first of these tests in Geneva, I am not so optimistic. It seems that the priorities of the US are quite different and, therefore, we will lose time. Let me give you a couple of real life examples and show how irresponsible the world is despite the last crisis.
1. Although leaders committed not to resort to protectionism, direct or indirect, and put in place a transparent monitoring mechanism and to take measures which promote trade, the signs of a return to protectionist instincts are worrisome. For instance, while several cases of open or hidden acts of protectionism were observed in the US and Germany, emerging market economies such as Korea and Turkey have been amongst the countries that did not deviate into any kind of protectionism.
2. Although the pledge in Pittsburg was to “avoid destabilizing booms and busts in asset and credit prices and adopt macroeconomic policies, consistent with price stability, that promote adequate and balanced global demand,” there have also been dangerous signs of a new bubble economy yet there are no reliable signs of a rebound in the global economy. There is fierce resistance to putting teeth into the oversight of the financial markets’ mechanisms. Banks are going back to the very practices that precipitated the recent chaos. Bankers continue to be overpaid, while millions of men and women lose their jobs. What is striking is that both of these actions are prompted again by the industrialized countries, not by the emerging economies.
3. Again, although major donor countries promised to help poor countries, this has also been left on the table and forgotten to the larger extent.
4. Finally, industrialized counties have given several references to the importance of green growth as a way of achieving sustainable growth. However, in practice they refuse to shoulder their share of the burden when it comes to fighting global warming. It is not surprising, therefore, that dissatisfaction can be seen almost everywhere. Just to give an example, as Brazil’s President Lula Da Silva argues:
“Developed countries are reluctant to embrace proposals for reform of the Bretton Woods institutions. … They cannot delegate to developing countries tasks that are theirs alone. Developing countries did not cause today’s major crises. They are, indeed, the main victims. Yet, more and more, they have also become part of the solution. … Decisions must be made in a more transparent and representative manner. The emerging world has gone beyond just denouncing speculative adventurers and the breakdown of obsolete dogmas. It is making an active contribution to finding solutions. We must bring the representation and the voting power of developing countries into line with their relative weight in the world economy.”
These observations constitute the early signs of difficulties not only in defining the mission of the G-20 but also difficulties in enforcing the implementation of the decisions that are taken. Therefore, the fatal issues of “capacity” and “legitimacy” pertaining to the G-20 must be resolved. The WTO is not free from these problems. However, the president of the WTO has already warned us not to hope too much.
Let us discuss the outcomes rather than the wishful thinking. For this, we must wait for the final declaration of ministers at the WTO and focus on the issue in my next column.
