LIKE our national ‘establishment’ which constitutes a selected group of politicians, military-civil bureaucrats, judges of superior courts, business magnates, and media persons; an international development policy establishment also exists. The latter predominantly comprises international financial and trade institutions, the UN and a few of the wealthiest countries.
Presently, the global institutions with teeth are the IMF, the World Bank (WB) and the World Trade Organisation (WTO). Their secretariats maintain a close liaison with handpicked developed countries that house the world’s largest MNCs. Under the patronage of international investors (usually large multinationals) based in developed countries, the global establishment pressurises the developing countries to adopt recommended policies and institutions in return for aid or loans, hence, controlling their policies. If a domestic policy of a developing country is against their interests, they jointly lobby and exert pressure to change it. If it is not possible, they change the elected official who is backing that policy.
Since their establishment, there has been rampant dissatisfaction among developing nations about decision-making processes and their implementation by these organisations. There are even instances where governments in developing countries have colluded with international corporations against their domestic ethnic groups. Shell Oil Company was reported to have forged a secret alliance with the Nigerian government to suppress the indigenous Ogoni people for their oil-rich lands. Fortunately, these people drew the attention of international civil society, forcing the Nigerian government to cease its human rights violations.
Some economists believe that, before the start of the ruthlessness of the WTO in 1995, the IMF-WB-GATT regime (1948-1990) was moderate, and it provided enough freedom to poor nations to respond to their socioeconomic needs at the local level. That is why the period between 1948 and 1990 is referred to as a golden period in terms of the increase in the volume of international trade.
Wise countries design growth strategies as per their socioeconomic needs.
However, the creation of WTO in 1995 has shifted the ambit of governance beyond the control of national citizenship. It has impacted the daily life of people in its 165 member states. Agriculture was not included in the negotiation’s agenda under GATT, but WTO forcefully brought it under the umbrella of liberalisation. Evading international trade agreements under GATT was not a big issue for the member states, but now international arbitration is binding upon them. Investment treaties are designed to protect the interests of foreign investors legitimately. In case of disputes, member states are bound to follow the rulings of international tribunals and dispute resolution centres.
In his book Kicking Away the Ladder, the South Korean development economist Ha-Joon Chang validly argues that what developed countries have achieved through interventionist policies during the past two centuries they are now proscribing for developing nations. It is like kicking away the ladder for others once you have climbed up yourself. History shows that the US government from 1816 to 1945 was highly protective about its industries. Similarly, during the colonial days, the British Empire banned exports from colonies that competed with its local products.
In this scenario, what are the options available to developing countries? Wise countries design growth strategies according to their historical context and socioeconomic requirements. They make the best use of available resources without wishing for the things they lack. If there is a capital shortfall and your markets cannot accommodate huge labour then the best strategy, for a while, could be to curtail imports to encourage local industries and employment.
Research shows that reliance on external capital markets impacts the economic growth of any country negatively. Japan, Brazil, South Korea, China and many other countries prospered by pursuing their own agenda of economic development. They violated basic concepts of economics (free market and laissez-faire) and underwent a successful structural transformation from an agricultural economy to industrialisation with government intervention. South Korea developed not merely due to US support but also by restraining tax evasion, fixing exports targets, eliminating capital flight and promoting strong financial markets and a culture of savings. Korea’s controlled banking system provided financial support to the local industries. Its bureaucracy was strong but less corrupt.
Our national establishment needs to focus on reforms ranging from anti-corruption to labour to financial markets. While signing, executing and reviewing foreign investment treaties, specifically CPEC’s loan agreements, they must have an insight into the long-term impacts of such deals. Capitalism has no perpetual friends.
The writer is a governance and development analyst.
Published in Dawn, October 27th, 2021