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Ralf Peters
on Fri, January 25, 2013 at 01.31 pm

Now closed: e-discussion on Development-led Globalization

Details:

Welcome to the e-discussion on development-led globalization. This is the third in a series of four e-discussions organized on growth and employment in the post-2015 development agenda. The discussion will take place from 25 January to 8 March 2013.

Efforts now underway to renew the global partnership for development are taking place in a very different world from the one that gave rise to the Millennium Declaration. The global financial crisis served as a reminder not only that markets can fail, and with devastating consequences for economic and social welfare. It has also exposed the questionable assumptions and flawed values behind the idea of a self-regulating market economy.  This is increasingly challenging the underlying trust, cohesion and sense of justice that are essential to a balanced economic and social system, at the international as much as the national level.
 
Regaining economic and social balance calls for new policies and new instruments to adapt and control the working of economic forces, in an equitable and sustainable manner. So far, the international policy community has failed to produce a “new global consensus on the key values and principles that will promote sustainable economic activity”, in particular with regard to patterns of international trade and investment. The challenge at the international level is to ensure that the gains from greater interdependence are widely shared, that adequate and timely resources are available to help countries adjust to the pressure of a more interdependent world economy and to mitigate potential threats and crises that could upset the prospects of more inclusive growth.

The financial system is the obvious place to break with "business as usual". Stable and inclusive development is incompatible with speculative market behaviour, boom-and-bust cycles and the austerity programmes to which they invariably lead. Finance needs to get back to the business of providing security for people’s savings and mobilizing resources for productive investment. Reforms are also needed to replace unruly and procyclical capital flows with predictable and long-term development finance, to regain stability in currency markets and to support expansionary macroeconomic adjustments. Surveillance and regulation will need to be strengthened at all levels, and new institutional arrangements may need to be considered, including regional financial cooperation.
 
Global trade rules must also be designed and administered in a fair and open manner and provide the policy space to adopt measures appropriate for a countries level of development.  Industrial development remains a priority for many developing countries because of the opportunities it provides to raise productivity and incomes, and to get the most from international trade. But a wider sectoral approach, including a focus on the primary sector in many Least Developed Countries, is needed in order to ensure that measures to diversify economic activity are consistent with job creation, the security of food and energy supplies, and effective responses to the climate challenge.

We look forward to your participation and your insights. To guide the discussion, we propose the following questions:

1) What are the employment implications of current trade patterns?  Which groups and sectors are the most affected in different countries, and how is this affecting political and social responses?

2) Given the current state of the Doha Round, is there an alternative trade agenda that can be pursued at the regional and international levels in support of inclusive and sustainable development?

3) What reforms to the international financial system are needed in support of an inclusive and sustainable development agenda? Are such reforms possible given the power and influence of financial markets?

4) Is there really a crisis in economic multilateralism?  If so, where does responsibility lie? Can the UN play a more positive and dynamic role in revitalizing the multilateral economic architecture?

 
Jayati Ghosh (Jawaharlal Nehru University, New Delhi)

Richard Kozul-Wright, Ralf Peters, Amelia U. Santos-Paulino (UNCTAD)

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Jayati Ghosh from
Tue, March 19, 2013 at 05.07 pm

Summary Comments on this e-discussion

Jayati Ghosh

The development agenda

Manuel Montes notes that “The MDG discourse – in international agencies and in national settings – appears to have crowded out the basic idea that development is about economic transformation.” He pinpoints the critical question of access to technology. Also, “diversity creates enormous space for regional cooperation in pursuit of overcoming dependence on commodity exports - whose earnings are highly unstable - and establish domestic industries to provide productive jobs.”

Deepak Nayyar specifically takes on the implicit assumptions behind MDG 8 on international co-operation for development, to argue that "foreign aid is not all there is to external finance, and that external finance is not all there is to development". Indeed aid is a mixed blessing that can even be similar in effects to a natural resource curse. Rather, access to markets in trade and access to technology for development are what is really important. That is why the future agenda must recognise the need to change the currently unfair rules of the game in the international economy. But even making the existing rules less unfair may not be enough, since uniform rules for unequal partners are likely to produce unequal outcomes. As long as there are countries at vastly different levels of development, there should be flexibility rather than rigidity in the application of rules, some sort of "affirmative action" for less developed countries.

Pedro Martins argues that macroeconomic policy co-ordination, especially among the major country blocs, is vital to rebalance the world economy and address systemic crises – of finance, food and fuel. He believes that this could include the adoption of synchronised countercyclical fiscal and monetary policies, a new global reserve system, exchange rate coordination, and therefore improved institutional arrangements for coordinating global economic policy. To achieve this, Martins supports the creation of a Global Economic Coordination Council, with the mandate to coordinate economic policy as well as identify and tackle imminent problems and institutional gaps – such as setting out global economic and financial reforms. The idea that such a body could achieve "global consensus" that is also favourable to the weaker countries may appear idealistic, however, especially given the distribution of global power and the experience of the functioning of other multilateral institutions that apparently provide equal power to all countries but have actually reflected unequal power of various kinds.

A di Caprio raises the issue of the potential for mega RTAs to “to repair the disconnect between liberalization and development outcomes and to move towards the alternative trade agenda”. This is partly because many RTAs today include references to core labour standards.

            The criticality of employment generation, and specifically the move to more productive work through diversification of employment into better remunerated activities, is a continuing thread in the discussion. One (anonymous) participant stresses the promotion of quality, non-volatile growth that supports employment, with attention to distributive aspects, which in turn requires macroeconomic, sector and labour policies. These include monetary and fiscal policies that boost aggregate demand (also supported by exchange rate policies ), financial services for real economy growth, investments in physical and social infrastructure, policies for technology and industrial development.  In addition labour market policies have to be implemented, just as they were in the "New Deal" social compact that brought developed countries out of chaos and instability after the second World War. These include ensuring labour standards and fair income to all, and increasing the importance of social dialogue. And there also need to be equitable sector policies that provide opportunities, assets and incomes to the poor, through policies in any sector -from agriculture to education to energy-  that benefit all but are fundamentally progressive in nature.

 

External debt management

Fran Luke raises the issue of “odious” and illegitimate” debt, which should be writen off through systematic international arrangements. In a broader context, Matias Vernengo draws lessons from the Argentine experience to show that "foreign debt should be maintained to a minimum, and that negotiations with creditors have to be on the basis of ability to pay, putting the well being of the population ahead of interest payments." He reiterates a point that is all too often ignored in the international discussion: restructuring of debt obligations is not a major aberration but rather a normal procedure in capitalist economies.

Finance and international money

Luc Guillory notes the implications of money creation (quantitative easing) being directed only to banks and to private hands rather than also to the public sector, especially in countries where governments are forced into deeply counterproductive fiscal austerity. “We have created a surplus of public debt to bail out private debts and still we keep abiding to the diktat of the financial markets.  The Euro is a typical example : the European Central Bank controls its emission, but is not entitled to lend money directly to member states who have to resort to the financial markets, i.e. private banks and financial institutions.” The continued relevance of the famous statement of FDR “being governed by organized money is as dangerous as being governed by organized crime” points to the need to much more comprehensive and systematic re-regulation of finance. These could include regulations for the financial sector such as separation of deposit banks from investment banks; outright bans on certain kinds of financial activity that are seen as excessively dangerous, on creation of new financial instruments with adverse implications, on financial speculation in commodity markets and on machine-enabled high-speed transactions that add to volatility. He also mentions measures to extract fiscal resources from such activities, such as the transactions tax and requiring institutions like hedge funds to meet their tax obligations by locating their activities in non tax haven locations.  In a similar vein, Pedro Martins also argues for an international system that allows and encourages finance-related policy measures to promote greater financial stability, increase the availability of development finance, and strengthen the impact of foreign investment on host countries. These include an international liquidity buffer, measures to tackle illicit capital flows, exploring alternative sources of development finance (e.g., global taxes and SDRs), and strengthening investment standards.

Guillory’s proposals to reform the international monetary system may appear Utopian – or at least excessively optimistic, such as his view that serious reform can deliver stability, predictability, harmony… putting an end to competition between nations”. A critical issue is whether the creation of a new global currency can actually resolve many (or any) of the concerns with the current international financial architecture. The dominance of the US dollar obviously generates an uneven playing field prone to imbalance and instability, but it is a moot point whether this dominance is cause or effect. And while an alternative world money that is a composite index of many currencies may appear attractive, it is not evident that this can be easily achieved with the current distributions of global power. This reflects the essential nature of money as something that operates as a medium of exchange and store of value essentially because of the trust that it commands. As Charles Kindleberger noted many decades ago, money is about power and international money is about international power. Just as national currencies are accepted because they are backed by a nation state, so too the globally accepted currency must have the backing of a powerful state or the community of nations together (in the way that Keynes had envisaged for his proposed “bancor”). But current international relations hardly seem conducive to such as harmonious arrangement. In the absence of a world government, it is hard to vouch for the viability of such a world currency. Indeed, the ongoing travails of the euro point to the inherent difficulties of monetary union without the backing of a single state that could simultaneously ensure fiscal federalism. 

Guillory’s proposals with respect to tax havens, by contrast, are not just desirable but eminently practicable and “doable”, even within the current international order, and there are indeed already some positive signs that countries may be moving in this direction.

The significance of capital controls

Kang-kook Lee makes the important point, while it is good news that the IMF and other institutions are now recognising the usefulness of capital controls that moderate short-term and unstable international capital movements, these are not enough for developing countries. Rather, incorporation of active and more extensive capital controls with industrial policy by competent developmental states is essential, s as to include these as part of a broader framework to promote their manufacturing industries in conjunction with capital controls, which is essential to job creation, sustainable development and inclusive growth. "For example, they need to introduce more regulation measures in foreign direct investment so as to maximize their domestic industries as East Asian countries historically did. Moreover, the developmental governments may well think of utilizing foreign financial capital and supporting domestic priority companies, of course, together with some discipline. Establishing development banks and effective intervention of the government in the financial sector are necessary for this purpose."

Global value chains and changing production structures

A fascinating thread of the discussion centres on global value chains. Will Milberg and Gary Gereffi sparked this off by suggesting that the emergence and growing dominance of global value chains create the need for new forms of industrial policy in the developing world, as older policies based on national development strategies are no longer relevant. "In promoting the capacity and activity of domestic firms, government strategy must take into account the interests and power of lead firms in GVCs, international (and increasingly regional) networks of competing and cooperating supplier firms, and foreign non-governmental organizations. Reliance on export growth alone will be inadequate when value added in exports can vary considerably, depending on the country’s position in the value chain and shifting demand in export markets." According to them, industrial policy should now be oriented to promoting the ability of domestic suppliers to link to global value chains directly, and to build skills and capacity in response to private sector needs. 

In response, Richard Kozul Wright poins to the conceptual and practical problems of overgeneralisation. He notes that "the drawing of the global value chains landscape still remains rather impressionistic, with a tendency to throw together everything, from cut flowers to automobiles to transport logistics, in to the same analytical pot as if they are organized and governed in much the same fashion or contain the same growth and employment linkages, and to lump together countries and regions which share vary different histories with respect to hosting FDI and value chains." He points to three critical issues that are underemphasised in Milberg and Gereffi's approach: demand matters, size matters - and therefore policy matters crucially, and cannot be delinked from a broader plan for national development.

 

 

 

Faizel Ismail traces the relationship the "downsize and distribute" model that is driving more of the global production chain investment by multinational corporations to the focus on shareholder value, as elaborated by Lazonick and Sullivan (2002). He notes that new research points to "increasing corporate oligopsony power of the largest firms from the US, EU and Japan, governance and control of these global value chains through systems integrator lead firms, and the shift of the incentive structure towards the financial sector and away from manufacturing making the challenges of development and industrial policy even more difficult."

As Ravi Kant notes in his response, the discussion on value chains has been caught up with the ongoing (but currently stalled) Doha negotiations, and in particular with discussions to reach an agreement on trade facilitation. This is being presented, particularly by richer countries, as a win-win agenda even though many developing countries have serious reservations.

This brings into focus another important point: the need to focus not just on large private corporate behaviour but on the wider and more preponderant range of small producers who still proliferate in most economies. Christina Chang emphasises the need to put poor and  small scale producers at the centre of trade and finance policies. This is not only because they account for up to 90 per cent of jobs and 50 per cent of GDP in a majority of developing countries, but because supporting and investing in them can pay the greatest dividends in terms of reducing inequality and tackling poverty (and indeed, it could be added, ensuring the diversification that is at the heart of economic development).

References

Lazonick, W. and O’Sullivan, M., “Maximizing shareholder value: a new ideology for corporate governance”, Economy and Society, Volume 29 Number 1 February 2000:13-35

 

Charles Gore from
Fri, March 1, 2013 at 09.04 am

I think it is important to connect this very rich discussion more closely to the design of a set of post-2015 global development goals.

Here is a link to a blog which I wrote in January which I believe is relevant in this respect.

http://www.thebrokeronline.eu/layout/set/print/Blogs/Inequality-debate/R...

Best regards

Charles

Shanthi Sivakumaran from
Thu, February 28, 2013 at 11.10 pm

IBON International is happy to submit the following response to the consultation on development led globalization

1)       What are the employment implications of current trade patterns?  Which groups and sectors are the most affected in different countries, and how is this affecting political and social responses?

Current trade patterns emanate from neoliberal principles of free trade and economic liberalization imposed on developing countries by developed countries and the Bretton Woods and multilateral institutions. Developed countries have used the reforms to protect their markets and facilitate their entry into developing countries markets.

Clearly, while developing countries are coopted into liberalizing markets under a neoliberal ideology promoted as in their best interest, in the key developing country sector of agriculture protectionism reaps massive benefits for developed countries, at the expense of developing countries, pushing inequality between countries and risking immense political, economic and social fall-out. As the World Bank research group’s chief economist has outlined: "Global inequality reflects two types of increasing inequalities: rising gaps between nations (which cause migration) and rising inequalities within nations (which cause protests, disenchantment and revolts). So, in that double sense, what happens to global inequality is very important."[1]

Unable to protect nascent industries and sectors, developing countries have had to compete with each other for foreign direct investment and have thus competed to lower minimum wages, labour standards and regulations and reduce tax rates. This has resulted in a “race to the bottom”. Most countries also crack down on trade unions to maintain conditions favorable for foreign investors.[2] Such policies operate to the benefit of incoming, largely northern-domiciled countries, and to the detriment of local staff. Often, due to a lack of capacity, it is also difficult for developing countries to reap the benefit of the theoretical “spillover” effect touted as a benefit of FDI, especially through export-processing zones. Export-oriented production has led to workers who produce basic commodities becoming poorer since the price of low-cost imports has crashed since the WTO launch and countries are actively encouraged to prevent them from demanding better labour standards. It can also be indirectly be associated with a raft of human rights abuses committed by corporations in developing countries where domestic governments lack either the will – due to dependence on FDI streams or a two-way corruption - capacity, or both, to hold corporations to account.

A consistent trend across the Global South is that since the neoliberal economic model began to be introduced in the 1980s, wage and income inequalities have increased.[3]  There has been increasing unemployment, and precarious employment and lower working conditions of the poorest workers. This has led to greater social tensions and in some cases has erupted to full-scale protests as seen in North Africa during the Arab Spring.

Over the last twenty years, world exports have multiplied almost five times but progress to improving health and education and nutrition has become slower over the same period.[4] The benefits from trade and investment has accrued to elites and extracted out of the countries by foreign corporations. Little investment or wealth remains with the people.

 

2)       Given the current state of the Doha Round, is there an alternative trade agenda that can be pursued at the regional and international levels in support of inclusive and sustainable development?

The neoliberal model for trade is not working. It has generated instability and inequality and is not an effective framework to generate inclusive and sustainable development or equitable and mutually beneficial trade. The financial crisis of 2008 illustrated how unstable and unfit for purpose the current trade regime is. Furthermore, consistent evidence over the last twenty years has shown that there has been a decline in the living standards in Africa following widespread reforms prescribed by the IMF and World Bank.

Trade liberalization has hurt developing countries as they have lost more than they gained. From the 1980s to 1990s, it is estimated that low-income countries lost approximately US$896 billion due to trade liberalization policies.[5] This is mainly due to the impact on agricultural production and industrial production which have been unable to compete due to trade liberalization policies.

All of today’s developed countries developed through policies which contradict neoliberalism. This includes protectionism and subsidies to develop local markets. Many developed countries continue to implement protectionist policies while advocating for developing countries to open their doors. For example, the US is a strong backer of trade liberalization in agriculture in developing countries and push and yet it is estimated that the total value of direct and indirect US federal agricultural subsidies amounted to $180 billion in 2009.[6] The US law also stipulates that 75%% of food aid should be bought and distributed from US sources (while prices remain 11% above the market average) 

Another well-known example of developing country protectionism is the European Union’s (EU) Common Agricultural Policy (CAP). The CAP budget for 2010 was €43.8bn, which equates to 31% of the EU budget and 6.4% more than in 2009.[7] The CAP is a distinct form of protectionism that is explicitly designed to protect the European agriculture sector from cheaper, non-EU products. Its combination of subsidies – estimated at €22 billion in 2011, more than 40 percent of the CAP budget[8] – and setting import tariffs is combined with surplus production being exporting at below cost price, being stored, destroyed or dumped on poor countries.

At the same time that the US and EU implement protectionism and subsidizes its local producers, they are pushing for developing countries to open their markets. Developing countries need a trade regime which allows them to benefit from similar policies which allowed the countries that are now-rich to industrialize.

There needs to be reform of the trade agenda which would shift the perspective from trade and investment as an end goal in itself but rather as instruments to reach a just and sustainable development. This means conceiving of a trade regime which allows countries to pursue mutually beneficial trade that are not necessarily on market terms.  

A new trade agenda must be built on key principles of justice, equality and solidarity and aim to improve the well-being of marginalized and poor. It must recognize the role of the state as a regulator and coordinator of economic activity (and not merely the facilitator). Multilateral trade rules and disciplines should be applied flexibly to developing countries – WTO rules are equally binding on all participants but in economic terms are biased to the requirements of richer countries. And it should recognize the need for special and differential treatment (SDT) for developing countries as a means to redress structural imbalances rather than giving concessions.

Trade regimes should be based on building coordination and support within regions to pull up regions of developing countries. Regional and bilateral trade agreements between developed and developing countries can lead to significant trade losses for non-members; can weaken efforts to improve the multilateral trading system; and can in many cases lead to a much broader and deeper liberalization of trade than under the WTO. Thus any regional and bilateral trade agreements must prioritise building mutually reinforcing relationships between countries within regions and must prioritise collaborative development.

An alternative trade system is realistic and realizable. The Bolivian Alliance for the Peoples of America (ALBA) has demonstrated that it is possible to develop a new trade system which is based on mutual respect and support and which is built on the principles outlined above.

 

3)       What reforms to the international financial system are needed in support of an inclusive and sustainable development agenda? Are such reforms possible given the power and influence of financial markets?

Neoliberal policies which have emphasized deregulation and faith in open markets have opened the international monetary system to instability and high risks. The financial crisis in 2008 has been linked to growing inequality and lack of regulation and control of the international financial system.[9]

Financial speculation wherein commodities are treated as an asset class has increased volatility, disconnected prices from fundamentals, created problems for those with a real economic interest in commodity futures markets, and has made signals from commodity exchanges less reliable as a basis for investment decisions and for supply and demand management by producers and consumers.

Despite widespread recognition of the structural flaws of the prevailing international financial system, there has yet to be any strong reforms to address the causes which led to the 2008 crises.

Critically, there needs to be deep reforms of the governance structures in international financial institutions (IFIs). At the moment, voting powers and control is weighted in favor of the wealthy developed countries. However, the IFIs exert disproportionate influence over developing countries who are pressed to accept conditionalities with any loans or financial assistance. to the greatest investors. This has led to developing countries accepting deep structural reforms which have set back development at the behest of the IFIs. For developing countries interests to be protected and respected there needs to be reform of the governance structures to ensure that there is equal control and guidance of the international financial architecture. Governance of the IFIs must be based on equal participation, transparency and accountability.

Unregulated, unsustainable and excessive financial speculation can only be controlled through greater and improved regulation of banks and international financial activities. This would include greater regulation and supervision of finance and international capital flows and the creation of international mechanisms to prevent and manage financial crises, including debt reduction.

A viable international monetary and financial system needs to reaffirm the emphasis on employment and growth and also establish mechanisms that ensure adequate growth opportunities for all members of the system – the establishment of “a development consensus”

Crucially there is a need to create an international financial system which is not be based on a global reserve and payments system in one country’s currency. The global reserve and payments system must adopt a neutral financial standard.

 

4.)   Is there really a crisis in economic multilateralism?  If so, where does responsibility lie? Can the UN play a more positive and dynamic role in revitalizing the multilateral economic architecture?

There is a crisis in economic multilateralism. The current multilateral regime favors certain powerful states to the detriment of the rest and it is losing legitimacy as it fails to keep up with the changing global sphere. The current multilateral order has been co-opted by the wealthiest and most developed countries to advance their economic and political interests. Thus developing countries interests have been pushed aside in the current economic multilateral order. Northern wealthy states remain responsible for the imbalance of power and for failing to act in solidarity with developing countries to build a new economic order which benefits all equitably.

Economic multilateralism must be re-oriented towards a sustainable development led agenda. This means that the three pillars of sustainable development – economic, social and environmental – must be given equal priority in the multilateral system. This can only be achieved through cooperation and collaboration between all states The most inclusive international decision making body remains the United Nations, which has greater legitimacy in the eyes of most because of its universal membership. The United Nations and human rights bodies are central to developing an inclusive and participatory multilateral order which will achieve sustainable development.

However, most significant economic agreements are made outside the UN in non-participatory and opaque forums such as the G-7 and the G-20. Decisions which have global repercussions on the economic order must be made in a transparent and participatory process in which all affected stakeholders can have a say. The UN can play a key role in re-orientating the current informal and formal processes. But this requires decisive and coordinated action. Developing countries must have greater collective influence over multilateral practices.

Multilateral systems must also acknowledge that there are more actors in the global development debate who have influence and insight into the development process and are essential in the aims to achieve development agenda. Multilateral organizations must open themselves to civil society participation to ensure that under-represented voices are included in development processes. Thus civil society must be given full and effective participation in the UN and HR bodies relevant to sustainable development.

Luciana MERMET from
Thu, February 28, 2013 at 07.15 pm

We thank you for organizing this timely e-discussion which has fostered interesting postings and research/policy questions. We would like to address question #2. Our main message is that given the prevailing global imbalances, which continue to tilt the balance against developing countries on many counts, including on their ability to build up their productive capacities and to benefit from trade, a multilateral option remains preferable to the bilateral avenue, coupled with flanking policies to support effective integration.


The WTO Doha Round is the latest, and most prolonged, of several rounds of multilateral trade liberalization since an international trade regime took shape in the 1940s. In its current form, the multilateral trade regime functions on the basis of two main pillars, one including the principles of “non-discrimination” (based in turn on Most-Favored Nation (MFN)) and “national treatment” (i.e. imported goods must not be accorded treatment less favorable than that accorded to like domestic products), together with the principle of Special and Differential Treatment for developing countries (SDT).


Indeed, the preamble of the Marrakesh Agreement by which the WTO was established states that  “trade and economic endeavor should be conducted with a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand (…) in accordance with the objective of sustainable development”. The preamble also recognizes that efforts should be made to “ensure that developing countries, and especially the least developed among them, secure a share in the growth of international trade commensurate with the needs of their economic development”. The main instrument recognized to achieve this is through “entering into reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade and to the eliminations of discriminatory treatment in international trade relations”.


While the stated objective of the current multilateral trade regime is raising living standards, full employment and growth of real income, as well as ensuring that developing countries secure a fair share in global trade growth, the focus of the trade rounds have been mostly focused on the elimination of tariffs and non-tariff barriers. In turn, insufficient attention has been paid to the development aspects of the global trading system, mainly what trading rules and complementary policies are necessary to maximize the trade-development link.


On the other hand, the current phase of economic globalization has favored the proliferation of free trade agreements, which challenge the foundations of the multilateral trading system. The main challenge lies on the fact that such agreements have ended up eroding the two principles of WTO: the general principle of non-discrimination and SDT (exceptions to MFN are allowed either through Article XXIV of the General Agreement on Trade and Tariffs (GATT) and Article V of the General Agreement on Trade in Services (GATS –which require ‘substantially all trade’ and ‘substantial sectoral coverage’ is achieved, respectively, or ‘Enabling Clause’ for non-reciprocity among developing countries).


It has been often noted that these exceptions made sense early on when they involved ‘deep integration’ regional processes (for instance, the case of the EU where a region became the unit of trade that negotiated with the rest of the world, or a continental regional integration framework for Africa which has been deemed the best integration option in terms of economic and human development outcomes, for details see a recent UNDP report) and when there was promotion of South-South trade through the Enabling Clause’. But the agreements that came later, particularly the series of FTAs initiated in the mid-1980s by the US, has serious impacts on the two pillars of the regime.


We have seen numerous waves of these agreements, and their nature has increasingly gone beyond their regional character to cover interregional agreements. This proliferation of agreements beyond regions and beyond the preferences associated with the ‘Enabling Clause’ or Article XXIV of GATT and Article V in GATS has led many experts to indicate that MFN is no longer the rule but rather the exception. More research is needed to assess if trade creation is more important than trade diversion.  In this context, and despite decades of effort to build a multilateral regime, we are back to a system of bilateral trade rules governed by bilateral agreements in a process often referred to as ‘competitive liberalization’ (a process that has been quite difficult to contain at the WTO).


One of the main implications of this proliferation of preferential agreements outside of the WTO is that the uneven negotiating power between developed and developing countries in these deals has brought into the agreements the non-trade issues that developing countries have refused to negotiate in the WTO, being therefore less desirable trade options for the poor/smaller countries relative to multilateralism.


Another important implication is that, even if some of these agreements include more gradual liberalization of trade or broader exceptions for rules for developing countries, they tend to erode the SDT because the double condition of liberalization of ‘substantially all trade’ and reciprocity mean that only very weak forms of SDT can be incorporated into the agreements. Experts have argued that given the existing fiscal capacity to subsidize agricultural or industrial sectors in developed countries, these agreements can actually turn SDT upside down, where the developing partner has to compete with cheap subsidized agricultural products or cannot afford to protect technology infant industries and must compete with science and technology subsidies of industrial countries.


On the South-South trade front, these rules also present challenges because while the ‘Enabling Clause’ allows for developing countries to promote such trade by giving each other preferences that are not extended to industrial countries, to the extent that FTAs include a MFN clause among contracting parties, South-South agreements signed by any of its developing country parties of the FTA would have to be extended to the industrial country partners of the FTA.


The issue of negotiating capacity remains crucial. While developing countries are better organized and have actively used their collective strength in the WTO, this is much more difficult to achieve in the context of FTAs. Often developed countries have forced into these agreements issues and provisions that developing countries have refused to negotiate in the multilateral level.


The Doha round standstill is telling of a crisis in the multilateral trading system which has shied away from the basic principles that were framed in post war period, non-discrimination (including MFN) and SDT (the latter, in particular, based on the recognition that the world economy is still a highly unleveled playing field, and that equal rules for unequal circumstances may worsen inequalities). This may require, importantly, a more coherent approach to SDT and the sustained building of productive capacity, especially for LDCs as recently stressed by the Istanbul Programme of Action, which goes well beyond the Doha propos.


Indeed, market access provisions for LDCs have been insufficient to take fair advantage of global and regional value chains that today, more than ever, determine the direction and content of international trade flows. In a context of declining ODA and volatile capital, retaining policy space in agriculture and industrial policy domains as well as ensuring investment flows to productive sectors without undermining the external front must be part of the development package for vulnerable countries.  The Aid for Trade agenda launched in 2005 has partially addressed these issues recognizing that there must be policies in place to support the development of productive capacities “to trade” more and better.


Furthermore, recurrent multiple financial and economic crises underline the vulnerability of economies to external shocks, including through sudden variations in the prices of tradable strategic goods, such as oil and food.  A truly inclusive and sustainable development agenda that looks to trade as an engine for generating inclusive growth and poverty reduction should go beyond the traditional discussion over the benefits of trade liberalization and market access to identify policy solutions for generating quality jobs and economic resilience.  Popular discontent in the Arab world is recognized as a development failure which was reinforced by a political economy of exclusion. A pro-poor economic agenda building on fair trade relations and greater integration should factor in these risks and concerns.


Luisa Bernal, Massimiliano Riva and Luciana Mermet

Luciana MERMET from
Thu, February 28, 2013 at 07.15 pm

We thank you for organizing this timely e-discussion which has fostered interesting postings and research/policy questions. We would like to address question #2. Our main message is that given the prevailing global imbalances, which continue to tilt the balance against developing countries on many counts, including on their ability to build up their productive capacities and to benefit from trade, a multilateral option remains preferable to the bilateral avenue, coupled with flanking policies to support effective integration.


The WTO Doha Round is the latest, and most prolonged, of several rounds of multilateral trade liberalization since an international trade regime took shape in the 1940s. In its current form, the multilateral trade regime functions on the basis of two main pillars, one including the principles of “non-discrimination” (based in turn on Most-Favored Nation (MFN)) and “national treatment” (i.e. imported goods must not be accorded treatment less favorable than that accorded to like domestic products), together with the principle of Special and Differential Treatment for developing countries (SDT).


Indeed, the preamble of the Marrakesh Agreement by which the WTO was established states that  “trade and economic endeavor should be conducted with a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand (…) in accordance with the objective of sustainable development”. The preamble also recognizes that efforts should be made to “ensure that developing countries, and especially the least developed among them, secure a share in the growth of international trade commensurate with the needs of their economic development”. The main instrument recognized to achieve this is through “entering into reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade and to the eliminations of discriminatory treatment in international trade relations”.


While the stated objective of the current multilateral trade regime is raising living standards, full employment and growth of real income, as well as ensuring that developing countries secure a fair share in global trade growth, the focus of the trade rounds have been mostly focused on the elimination of tariffs and non-tariff barriers. In turn, insufficient attention has been paid to the development aspects of the global trading system, mainly what trading rules and complementary policies are necessary to maximize the trade-development link.


On the other hand, the current phase of economic globalization has favored the proliferation of free trade agreements, which challenge the foundations of the multilateral trading system. The main challenge lies on the fact that such agreements have ended up eroding the two principles of WTO: the general principle of non-discrimination and SDT (exceptions to MFN are allowed either through Article XXIV of the General Agreement on Trade and Tariffs (GATT) and Article V of the General Agreement on Trade in Services (GATS –which require ‘substantially all trade’ and ‘substantial sectoral coverage’ is achieved, respectively, or ‘Enabling Clause’ for non-reciprocity among developing countries).


It has been often noted that these exceptions made sense early on when they involved ‘deep integration’ regional processes (for instance, the case of the EU where a region became the unit of trade that negotiated with the rest of the world, or a continental regional integration framework for Africa which has been deemed the best integration option in terms of economic and human development outcomes, for details see a recent UNDP report) and when there was promotion of South-South trade through the Enabling Clause’. But the agreements that came later, particularly the series of FTAs initiated in the mid-1980s by the US, has serious impacts on the two pillars of the regime.


We have seen numerous waves of these agreements, and their nature has increasingly gone beyond their regional character to cover interregional agreements. This proliferation of agreements beyond regions and beyond the preferences associated with the ‘Enabling Clause’ or Article XXIV of GATT and Article V in GATS has led many experts to indicate that MFN is no longer the rule but rather the exception. More research is needed to assess if trade creation is more important than trade diversion.  In this context, and despite decades of effort to build a multilateral regime, we are back to a system of bilateral trade rules governed by bilateral agreements in a process often referred to as ‘competitive liberalization’ (a process that has been quite difficult to contain at the WTO).


One of the main implications of this proliferation of preferential agreements outside of the WTO is that the uneven negotiating power between developed and developing countries in these deals has brought into the agreements the non-trade issues that developing countries have refused to negotiate in the WTO, being therefore less desirable trade options for the poor/smaller countries relative to multilateralism.


Another important implication is that, even if some of these agreements include more gradual liberalization of trade or broader exceptions for rules for developing countries, they tend to erode the SDT because the double condition of liberalization of ‘substantially all trade’ and reciprocity mean that only very weak forms of SDT can be incorporated into the agreements. Experts have argued that given the existing fiscal capacity to subsidize agricultural or industrial sectors in developed countries, these agreements can actually turn SDT upside down, where the developing partner has to compete with cheap subsidized agricultural products or cannot afford to protect technology infant industries and must compete with science and technology subsidies of industrial countries.


On the South-South trade front, these rules also present challenges because while the ‘Enabling Clause’ allows for developing countries to promote such trade by giving each other preferences that are not extended to industrial countries, to the extent that FTAs include a MFN clause among contracting parties, South-South agreements signed by any of its developing country parties of the FTA would have to be extended to the industrial country partners of the FTA.


The issue of negotiating capacity remains crucial. While developing countries are better organized and have actively used their collective strength in the WTO, this is much more difficult to achieve in the context of FTAs. Often developed countries have forced into these agreements issues and provisions that developing countries have refused to negotiate in the multilateral level.


The Doha round standstill is telling of a crisis in the multilateral trading system which has shied away from the basic principles that were framed in post war period, non-discrimination (including MFN) and SDT (the latter, in particular, based on the recognition that the world economy is still a highly unleveled playing field, and that equal rules for unequal circumstances may worsen inequalities). This may require, importantly, a more coherent approach to SDT and the sustained building of productive capacity, especially for LDCs as recently stressed by the Istanbul Programme of Action, which goes well beyond the Doha propos.


Indeed, market access provisions for LDCs have been insufficient to take fair advantage of global and regional value chains that today, more than ever, determine the direction and content of international trade flows. In a context of declining ODA and volatile capital, retaining policy space in agriculture and industrial policy domains as well as ensuring investment flows to productive sectors without undermining the external front must be part of the development package for vulnerable countries.  The Aid for Trade agenda launched in 2005 has partially addressed these issues recognizing that there must be policies in place to support the development of productive capacities “to trade” more and better.


Furthermore, recurrent multiple financial and economic crises underline the vulnerability of economies to external shocks, including through sudden variations in the prices of tradable strategic goods, such as oil and food.  A truly inclusive and sustainable development agenda that looks to trade as an engine for generating inclusive growth and poverty reduction should go beyond the traditional discussion over the benefits of trade liberalization and market access to identify policy solutions for generating quality jobs and economic resilience.  Popular discontent in the Arab world is recognized as a development failure which was reinforced by a political economy of exclusion. A pro-poor economic agenda building on fair trade relations and greater integration should factor in these risks and concerns.


Luisa Bernal, Massimiliano Riva and Luciana Mermet

Alisa DiCaprio from
Mon, February 25, 2013 at 04.46 am

Several posts have mentioned the growing role of regional development as opposed to targeting individual poor countries. There are three points in particular I’d like to revisit, each of which brings up a different angle of how to tackle development in poor countries, and each also highlights the yawning divide between development practice and development research, particularly as it pertains to regional integration.

First, Jayati Ghosh mentions the need to tackle inequality directly as a feature of development policy. This has become an important issue for the Asian Development Bank this year as it has become clear that inequality has risen even as growth has stabilized. In the case of Asia, the fear was that lending has not been targeted properly. But in a Dec 2012 article in the JEL, Esther Duflo points out that for the case of female empowerment, neither growth alone nor directly targeted policies alone will “solve” gender inequality.  She points out that the best action is to implement policies that favor women over men.  But is this really a position that MDBs can take? And at least for the case of Asia, this issue is rarely mentioned in regional discussion forums, so regional bodies are unlikely to provide the necessary support.

Second, Richard Kozul-Wright’s discusses a recent blog where the authors suggest countries need to plug into global value chains.  This is also a hot issue in Asia where regional value chains have become a key feature of growth. But while these value chains are extremely important for middle-technology middle-income countries like Thailand and Malaysia, they are not at all important for Asia’s LDCs.  In Africa, the AGOA program tried to create regional supply chains through its textile rules, which completely failed for a number of reasons. We need to be more realistic about what features of the global trading system are truly developmental.  Being a part of a supply chain for an LDC is likely to increase specialization which increases volatility rather than promoting development.

Finally, on Deepak Nayyar’s point about the need for a true global partnership for development. The benefits of developing countries working together to reach common policy positions makes eminent sense. However, one such example - the LDC group at the WTO - has rarely articulated demands beyond requesting exceptions to trade rules. For such a partnership to function to its potential, there needs to be a change in the mindset from one where existing rules should not apply, to one where members submit policies that would be a developmental alternative. Similarly, the MDBs have much to learn from each other. These are big lenders with many decades of experience. And yet cross-regional learning is only in its very early stages. How can we support creative thinking and cross-regional learning where individualism and exceptionalism is deeply institutionally ingrained?

Regional ties have certainly been underexploited by the development community. But these three topics highlight some of the difficulties (and benefits) of doing so. 

Jayati Ghosh from
Fri, February 22, 2013 at 02.49 pm

Inequality is the biggest threat to the world and needs to be tackled now


The post-2015 agenda must ensure universal access to quality basic goods and services, and tackle earlier policy failures


Nowadays almost everyone will probably acknowledge that growing inequality has become a pressing issue – even business leaders in Davos recently identified it as one of the biggest threats to the world economy. Now, discussions around the post-2015 global agenda include a specific focus on reducing inequalities.


Over two days this week, a meeting in Copenhagen brought together the advisory group for these discussions with leaders from across the world – including finance ministers and those concerned with social policy, development co-operation, planning and trade – to talk about the various forms of inequality and what can be done about it. The official outcome is meant to feed into the post-2015 process, and indeed there was a recommendation to include a stand-alone goal on inequality reduction as well as to mainstream reducing inequality into all other goals and targets.


But the discussion was important because it went beyond the ideas of "goals" to talk about policies and processes that affect inequalities within countries and globally. It was recognised that inequalities are determined by structural factors as well as policies, and typically intersect across economic, social and political features, which become mutually reinforcing. It was also pointed out that things have reached such a pass that incremental measures are not likely to be enough: "transformative changes" are required, with the ultimate aim of zero discrimination. So measures to reduce inequality have to be part of a wider economic and social policy framework.


At the national level, one critical strategy for reducing inequalities is to ensure universal access to good quality basic goods and services: food, housing, basic amenities like water and energy, health services, education and social protection. The Copenhagen chairperson's summary statement suggested targets directed at universal access to basic services and resources. Because of the existing structures of discrimination and exclusion, indicators need to track progress among the most impoverished, marginalised and excluded groups.


So, in addition to a policy of universalism, specific interventions may be required, and some of these were discussed at the meeting: affirmative action; targeted public investments in underserved areas and sectors; access to resources that are not conditional; and conscious understanding of how policies are implemented on the ground with reference to the economic, social, legal, administrative and cultural realities.


This leads to the question: where are the resources for such desirable policies to come from? Fiscal policies were explicitly under consideration, particularly tax policies that seek to improve collection from sectors and agents that have benefited disproportionately from aggregate income growth. Many leaders talked about tax strategies – not just higher tax rates, but better and more effective implementation of existing tax laws and closing tax loopholes. This clearly requires international co-ordination.


In addition, monetary and financial policies need to be reoriented, to encourage greater inclusion of those excluded and to make the financial system one that provides financial security and possibilities for stable intermediation between savings and investment, rather than lead to vulnerability and enhanced possibilities of economic disruption. So measures are required to control financial activity and direct it towards socially desired goals.


Since levels and patterns of employment and wages are significant in determining degrees of inequality, macroeconomic policy needs to emphasise policies for increasing regular good quality work that is covered by basic labour protection.


A large part of existing inequalities within countries results from unequal control over assets. These include natural resources such as land, water, minerals and other fruits of nature, as well as produced productive and financial assets. It was pointed out that the increasing concentration of all such assets needs to be countered by explicit policies to reduce it and spread the access to resources and assets more equally.


Addressing inequalities between countries, which accounts for the dominant part of global economic inequality, requires economic diversification, improving aggregate productivity, and enabling the shift of workers to less fragile and better remunerated activities with safe and healthy working conditions.


However, these national strategies require an international context that supports such measures and is conducive to progressive strategies implemented by governments. Many speakers noted the need for international acceptance and promotion of efforts made by poor and developing countries to address these concerns.


This means international treaties and agreements must be framed or reworked to be sensitive to these requirements, including those relating to trading rules, investment agreements, intellectual property regimes, and financial flows. The monitoring and control of the activities of large corporations that now have a global reach is important, especially when these impinge on human rights and help perpetuate or aggravate inequalities. These arguments were at least partially reflected in the final statement.


Much water is going to flow under many bridges before any of these ideas become more forcefully stated in the global discussion on inequality and development. And they may not get picked up so enthusiastically by the powers that be.


But at least these issues are being raised and discussed. And more public pressure could lead to some positive changes, not just within national economies but in a global dialogue that has resisted the difficult questions because it has been trapped in a failed economic policy paradigm.

Jayati Ghosh from
Sun, March 3, 2013 at 05.46 pm

From : Luc Guillory, Partage international – Share France. Luc.guillory@wanadoo.fr

It is really great news if political leaders are beginning to seriously consider  these issues.  The present model of economic competition and « free »  market has failed to meet the basic needs of the world population and provide a stable, predictable, sustainable and harmonious economic system. We can clearly see that only a global vision together with an interrelated plan of various negotiated policies and programs (fiscal, economic, financial, monetary…) will bring forward a sustainable solution for the future.

Fiscal policies can only be efficient if tax havens are banned at the same time and if a strong regulation of the financial industry is being implemented. Reorienting financial policies involves the possibility to actually control and supervise the financial sector, fight tax evasion, create a set of incentives to redirect financial flows towards productive (social, economic, health, education…) projects and reverse the present 90-95% flow of purely speculative exchanges on the financial markets.

It  also requires coordinated monetary policies to put an end to the devastating war on currencies. This only has any chance to succeed if nations are sovereign in the creation and control of their currency ( ex : today most of monetary aggregate M1 in the Euro zone is elec tronic money and accounts created by commercial banks, therefore by expansion of credits) and if the international community designs a new global trade and reserve currency, in order to replace any dominating single of group of existing currencies. It also means the possibility for developing nations and LDCs in particular to have access to credits at low interest rates and not to depend entirely upon neither private financial markets and capitals nor ‘conditionalized’ loans.

Coordinated macroeconomic policies should indeed aim to increase « regular good quality work » with high social content and decent wages, and also generate an increase in national assets as well as the equitable access to those assets for local populations. That means a new frame of global economic and financial cooperation designed to promote national vivid economies and markets should supersede the present international competition led by multinational corporations seeking to optimize cross border Global Value Chains, and, of course, notwithstanding the necessity to remove the  trap of the race-to-the-bottom between low income nations in order to attract the so much needed but missing FDIs.

In other words, we must put an end to competition between nations . As rightly put forward by Jayati Gosh, this requires « an international context that supports such measures and is conducive to progressive strategies implemented by governments ».  I call it a Green and Global Marshall Plan.

I am optimistic, I don’t think that « much water is going to flow under many bridges before any of these ideas become more forcefully stated in the global discussion on inequality and development », because time for change is ripe and the ‘civil society’ in general will force the powers-that-be and the political leaders of the world to negotiate this new ‘paradigm’. Justice will be at the core of this new pagadigm.

Thanks so much for your immensely valuable input.

You can post a reply on Teamworks by replying directly to this email. Text above this line will be included in the post.

World We Want 2015
Growth and Employment: New comment on Discussion Development-led globalization by jayatighosh13@live.com : Inequality is the biggestInequality is the biggest threat to the world and needs to be tackled now The post-2015 agenda must ensure universal access to quality basic goods and services, and tackle earlier policy failures Nowadays almost everyone will probably acknowledge that growing inequality has become a pressing issue – even business leaders in Davos recently identified it as one of the biggest threats to the world economy. Now, discussions around the post-2015 global agenda include a specific focus on reducing inequalities. Over two days this week, a meeting in Copenhagen brought together the advisory group for these discussions with leaders from across the world – including finance ministers and those concerned with social policy, development co-operation, planning and trade – to talk about the various forms of inequality and what can be done about it. The official outcome is meant to feed into the post-2015 process, and indeed there was a recommendation to include a stand-alone goal on inequality reduction as well as to mainstream reducing inequality into all other goals and targets. But the discussion was important because it went beyond the ideas of "goals" to talk about policies and processes that affect inequalities within countries and globally. It was recognised that inequalities are determined by structural factors as well as policies, and typically intersect across economic, social and political features, which become mutually reinforcing. It was also pointed out that things have reached such a pass that incremental measures are not likely to be enough: "transformative changes" are required, with the ultimate aim of zero discrimination. So measures to reduce inequality have to be part of a wider economic and social policy framework. At the national level, one critical strategy for reducing inequalities is to ensure universal access to good quality basic goods and services: food, housing, basic amenities like water and energy, health services, education and social protection. The Copenhagen chairperson's summary statement suggested targets directed at universal access to basic services and resources. Because of the existing structures of discrimination and exclusion, indicators need to track progress among the most impoverished, marginalised and excluded groups. So, in addition to a policy of universalism, specific interventions may be required, and some of these were discussed at the meeting: affirmative action; targeted public investments in underserved areas and sectors; access to resources that are not conditional; and conscious understanding of how policies are implemented on the ground with reference to the economic, social, legal, administrative and cultural realities. This leads to the question: where are the resources for such desirable policies to come from? Fiscal policies were explicitly under consideration, particularly tax policies that seek to improve collection from sectors and agents that have benefited disproportionately from aggregate income growth. Many leaders talked about tax strategies – not just higher tax rates, but better and more effective implementation of existing tax laws and closing tax loopholes. This clearly requires international co-ordination. In addition, monetary and financial policies need to be reoriented, to encourage greater inclusion of those excluded and to make the financial system one that provides financial security and possibilities for stable intermediation between savings and investment, rather than lead to vulnerability and enhanced possibilities of economic disruption. So measures are required to control financial activity and direct it towards socially desired goals. Since levels and patterns of employment and wages are significant in determining degrees of inequality, macroeconomic policy needs to emphasise policies for increasing regular good quality work that is covered by basic labour protection. A large part of existing inequalities within countries results from unequal control over assets. These include natural resources such as land, water, minerals and other fruits of nature, as well as produced productive and financial assets. It was pointed out that the increasing concentration of all such assets needs to be countered by explicit policies to reduce it and spread the access to resources and assets more equally. Addressing inequalities between countries, which accounts for the dominant part of global economic inequality, requires economic diversification, improving aggregate productivity, and enabling the shift of workers to less fragile and better remunerated activities with safe and healthy working conditions. However, these national strategies require an international context that supports such measures and is conducive to progressive strategies implemented by governments. Many speakers noted the need for international acceptance and promotion of efforts made by poor and developing countries to address these concerns. This means international treaties and agreements must be framed or reworked to be sensitive to these requirements, including those relating to trading rules, investment agreements, intellectual property regimes, and financial flows. The monitoring and control of the activities of large corporations that now have a global reach is important, especially when these impinge on human rights and help perpetuate or aggravate inequalities. These arguments were at least partially reflected in the final statement. Much water is going to flow under many bridges before any of these ideas become more forcefully stated in the global discussion on inequality and development. And they may not get picked up so enthusiastically by the powers that be. But at least these issues are being raised and discussed. And more public pressure could lead to some positive changes, not just within national economies but in a global dialogue that has resisted the difficult questions because it has been trapped in a failed economic policy paradigm. 22 Feb 2013 [ read more ] [ reply ]

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Luc Guillory from
Thu, February 21, 2013 at 12.45 pm

 

From : Luc Guillory, President of Share France – Partage international. France.

Luc.guillory@wanadoo.fr

 

 

 

On financial and monetary issues :

 

We have to take into consideration the reality of both the international monetary system and the international financial system, because it is illusory to expect solve the problems of the international financial system without tackling the key issue of creation and control of ‘Money’.

I would like to point out 4 key facts in this respect :

 

1 -)  According to former French Prime Minister Michel Rocard, some USD 800 trillions (800.000 billions) in liquidity are roaming around the world for « investment » outlets. Three decades ago 85 % of the world capital invested in the stock exchanges were dedicated to the real economy, therefore pure speculation was only 15%. Now this ratio is reversed. Some authors even say that 98% of the capital available is poured into devastating speculation, including that on currencies, highly harmful derivatives, CDS, CDOs…. Money for real production purposes has become rare.

 

2 -) Within the Euro Zone, in 2009, the total monetary aggregate M1 equalled  € 4.483  billions, out of which € 746 billions were real cash and 3.737 billions (83%) were very short term deposits (at sight), according to the European Central Bank. This is the result of bank credits expansion. The commercial banks have become the first creators of money. Essentially, money has become a system of electronic scriptures in the debit and credit accounts of banks, from the most liquid « money » (M1) to the largest definition of M3 aggregate including titles and securities which may or may not be liquid (and sometimes do not even appear in the accounts !). Said differently, credit creates monetary expansion, not the way around. In some economies 97%  is debt created by commercial banks. This statistic comes from  « Where Does Money Come From? » (NEF, 2011). http://neweconomics.org/publications/where-does-money-come-from. Money creation has been transferred to private shareholders whose motives are driven by profits and optimized ROI first and foremost.

 

 

 

 

3 -) Simultaneously, war on currencies is raging, threatening to outbalance the precarious state of the international monetary system. Focus is at present on Japan’s intention to ‘weaken the Yen’.  The US Dollar is in turmoil and the British Pound is no better off. And it could worsen as Brazilian Finance Minister Guido Mantega recently told Reuters in an interview where he declared that "We will continue to have this currency problem unless the global economy takes off ». The reality is that every nation is engaged in a very dangerous temptation to self preservation. But there will not be any recovery of the ‘economy of the past’ with one or more « growing » leading economy. A disruption in the international monetary system is in the making. We need to build up a stable, predictable and harmonious international monetary system. This cannot come to birth in a competitive context, because trust cannot result from competition. « Fair » competition does not exist ! Competition means ‘winners’ and ‘losers’ and contains no seeds of trust.

 

 

4-) Nations are bound to high levels of national debts as a result of a deliberate strategy by the international financial world. Just one example, that of France :

Until 1973, the French State government could finance its action through the French Central Bank and without the payment of any interests. But a banking law passed under Finance Minister Giscard d’Estaing changed the deal in such a way that the national Central Bank was deprived of any right to provide funds to the governement, and France had to resort to the financial markets and borrow money at 4-5% in average. The result of that is that the French national public debt is now around 90% of the GDP.  The system of private loans with interests has created that situation. This, is almost universal, most of the nations are bound to borrow private money from private financial institutions. In the aftermath of the 2008 financial crash, and though thousands of billions of public money had been poured into private financial institutions to save them « too big to fail » from their own folly, Bloomberg discovered that the US Fed has lent some USD 1.200 billions at 0,01% interest rates to private banks, the same banks that begrudge to lend at 5-6-8% to Italy, Greece….We have created a surplus of public debt to bail out private debts and still we keep abiding to the diktat of the financial markets.  The Euro is a typical example : the European Central Bank controls its emission, but is not entitled to lend money directly to member states who have to resort to the financial markets, i.e. private banks and financial institutions.

 

Former US President Roosevelt used to say that « being governed by organised money is as dangerous as being governed by organised crime ».

 

 

 

 

 

REFORMING BOTH THE INTERNATIONAL FINANCIAL AND MONETARY SYSTEM

 

The problem, therefore, is twofold  :

-          reform, deeply, the international financial system

-          reform the international monetary system.

These endeavours should be undertaken simultaneously.

 

 

REFORMING THE FINANCIAL SYSTEM

-          the value of money is not based on ‘hard’ assets, national or otherwise, but on ‘trust’ and a few bank ratios (those of Basel II agreement for example)

-          We have thus opened the door to unlimited expansion of ‘money’ without consideration of real economy, needs, social benefits…

-          Deregulation of financial markets, technology (electronic transaction, robots tactic buy and sell actions …), together with unrestricted creativity of greedy financial institutions have opened the door to extreme volatility of capital flows, unrefrained speculation, deprivation of citizens rights in front of the desiderata of the financial world, reduction of democracy, outbalanced power in favor of private financial institutions.

-          With the faculty of unregulated instruments (hedge funds and their favorite tools such as CDOs, CDS..) to get located in tax havens, many nations become powerless.

-          The 2008 crisis has dramatically increased the national debts of many developed nations, now implementing austerity measures to satisfy the requests of lenders they previously had to rescue 

 

Unctad and the UN institutions should aim to promote an initial set of measures intended to discourage financial speculation and gear investment towards more productive purposes. Some of these primary measures could be :

 

-          implement laws to separate deposit banks from invesment banks ( a ‘Glass Steagul Act’ like endeavour). This has to be handled with great care as even some of the ‘big players ‘ in the bank world seem to agree with that. This should encompass the obligation to prevent the reappance of disguised bank trusts.

-          11 European countries have just decided to levy a tax on some of the financial transactions ( 0,1% on securities and obligations ; 0,01% on derivatives). That is a good basis and it proves that it is feasible provided the political will is there. Such measures should be extended to as many financial transactions as possible. A group of international figures could work to design, under the UN auspices, a comprehensive program of progressive taxes on financial transactions and regulations to be negotiated by sovereign nations. This would necessarily include :

-          a progressive taxation according the « harmfulness » of financial products (with maximum tax rates on fast electronic transactions, CDS, derivatives….)

-          a ban on dangerous practices

-          a ban on financial institutions to participate in the commodity markets

-          a ban on the creation of new speculative instruments

-          the obligation for hedge funds to locate their activity in non-tax havens countries

-          a ban on fast speed transactions through machines on the stock exchanges

-          ban bank trusts

-          create serious criteria of bank reserves and capital (a ‘super Basel’ agreement. Why not have an obligation of 30-40 % capital instead of the ridiculously low 8%

-          a set of negotiated bank practices with increased control by nation states

-          the creation of a public international notation agency

-          generally speaking : re-regulate the financial sector globally, completely

 

We know it is essential to redirect and gear capital flows towards the creation of  valuable and high social content economic and industrial activities consistent with jobs creation, especially in low income and developing nations in order to develop strong and vivid national markets. Today FDI play a significant role in providing capital and resources in developing activities but it is too often for the exploitation of raw materials and other primary activities which generate less added values to the country (often imbedded in non refundable national debt, thus exporting raw materials to get the necessary foreign currencies to repay creditors, and left without major value for the country, and still importing a large deal of their industrial products and manufactured products and, in the end, not substantially improving the level of employment, wages, welfare and social services for nationals. Therefore, in spite of deregulation, low tariff barriers, sales of national strategic assets, FDI do not bring the expected harmonious development. It is therefore key to promote higher added value industries, to increase valuable jobs, and create and sustain national markets. It can hardly be anticipated that financial markets, as they exist today, will find any interest in such long term projects oriented with high social input and value. An international tax system levied on financial transactions will undoubtedly help to redirect money for this purpos, to some extent.

( nota : It also behoves the international community to design a Global Marshall Plan to enable this plan to be born and succeed. A global currency, in this scheme, will play a central role,  Furthermore, nations may benefit from low interest rates of such currency to fund their own programs).

 

 

 

 

 

REFORM THE INTERNATIONAL MONETARY SYSTEM

 

But it is hopeless to think that such program has any chance to succeed if, simultaneously, the international monetary system is not deeply reformed. Unless the nations regain their independence from the financial markets, they are powerless to make any significant changes.

It is crucial to implement a serious reform to get stability, predictability, harmony… In the last analysis, it has to do with putting an end to competition between nations.

 

 

The G20 will meet next September in St Petersburg, Russia. Some nations, particularly some of the BRICS nations, wish to initiate talks on a new global reserve and trade currency. But their vision is more likely to be oriented on a basket of a few of the leading world currencies. Authors suggest elsewhere that the G20 should issue this new global currency, a sort of G20 currency. But the legitimity is a G192 ( +1) nations, and currency. Therefore a new global currency shall become the pivoting element for the conversion of all the currencies

 

If the international community misses to set up a global currency the result will be the increase of a constellation of regional currencies competing with strong national currencies and stability will not be reached.

 

Money has so far been considered as the mean to represent the economic power of a nation in comparison to others (wrong in the case of the Euro zone where all nations were forced into the unique currency despite glaring differences in the level of their economy and GDP).

The time has come to consider an international currency which, per se, will serve the transition to a green global economy and will act as a tool towards an economy of cooperation, particularly dedicated to cooperative projects for the next program after MDG, alleviation of poverty, transfer of resources, ending of hunger, eradication of extreme poverty, building the infrastructures of developing nations….

 

On the paper, that seems a far reaching projet but Unctad could create a group of high level experts who would advocate and lobby for the short or medium term implementation of an internationally negotiated strategy towards that goal.

 

The new reserve currency must include from its inception the basis of international justice and  become the pivoting element of convertibility for all currencies, with a limited spectrum of variations. All currencies should take part to it. Nations as a whole must become the stakeholders of a new and more inclusive international monetary system.

 

We live in a limited world, with limited resources. Therefore, with regards to the goal of sustainable development, it is of utmost importance that the new currency takes into consideration the limited resources in commodities of the planet. The world stands on the verge of major natural disruptions and disasters. It is time to link sustainable economy to planet resources and the capability of monetary expansion should therefore be monitored, controlled and limited, versus the erratic expansion of liquidities which has characterized the last thirty years.

A supranational world currency to serve as a reserve account unit and trade currency should replace the present system, fuelled with speculation, of floating currencies, and dominated in effect by very few ‘strong’ currencies (strong at first glance at least, but can the US Dollar still be called a ‘strong’ currency with the never ending deepening of the US national debt ?). It is crucial to establish a stable and harmonious international monetary system, free from the grip of the market forces. In particular, that new currency will include, or be :

  • The inclusive integration of all currencies. As a starting point it could be necessary to weigh each currency with respect to the GDP of each nation, to weigh every currency in comparison to the total fiat money.
  • The pivoting currency for the convertibility all world currencies with a limited spectrum of variation allowed for each of them.
  • A mechanism that would enable the periodical adjustment of the value of this world currency based on some kind of weighted indexing value : a basket of other non monetary commodities such as gold, basic raw materials, chosen among the Global commons as defined above. This would be instrumental in preventing erosion of this world currency, would any particular national currency be subject to devaluation.
  • An instrument that helps to control monetary expansion and to prevent bubbles, boosts and bursts cycles which are so disruptive to the world economy.
  • An extension to the SDRs facility to enable developing countries to have access to low interest rates loans for their investment programs in agriculture, industry, education and health, without 'conditionalities' as they exist today.
  • A Global Central Bank, acting under the mandate and supervision of the UN General Assembly could be created in order to issue this global world currency.

 

 

 

A new monitoring authority

The present rule of G7/G8/G20, IMF and WTO totally reflects an ideology which has promoted fierce competition between social systems, freedom for capitals but not well being for populations, and which tends to protect the vested interests of powerful nations who dominate the policy making institutions.

It is time to shift from that unbalanced system to another rule where one nation equals one voice, without any discriminating right of ‘veto’,  in which synthesis and global equilibrium are the guidelines of institutional action. This is why the United Nations system offers the best and most legitimate platform to monitor the international monetary system.

 

The new monetary order should reflect a radically different principle (and of course not allow any other single nation or group of nations to step in and simply take over), with welfare of all nations at the center of its considerations.

 

 

 

 

Another point is : chasing the « tax havens » is necessary to create a fair and balanced global economy.

Hundreds of billions of Dollars or Euros are being diverted each year, that could otherwise be helpful to meet the basic needs of hundreds of millions of people. A black list was established by the Financial Action Task Force (FATF) with classification of Non Cooperative Countries or Territories (NCCT) with lists in year 2000, review in 2009 and 2012.  In the 2012 February report, 17 countries are ranked (with potential counter measures to be applied). Strangely, in the first rank only Iran and North Korea appear... There are not many hedge funds in these countries...Where are the British Islands, the Delaware state of USA, Macau...? The list has been established according to political considerations, but not so much because of economic damages. It is necessary to extend that work and actually work to eradicate tax havens.

 

 

 

 

CONCLUSION :  JOINT CAMPAIGN BETWEEN UNCTAD AND THE CIVIL SOCIETY

 

Recent events in North Africa and elsewhere show that changes happen only when Civil Society as a whole becomes aware of its power to act and has the will to act accordingly to make things move.

 

Unctad and Civil Society should unite their efforts to campaign in favor of a strong regulation of the international financial system and a deep reform of the international monetary system.

 

Opportunities like the upcoming G20 meeting in Russia in September 2013 can be seized to promote a petition of simple but strong ideas , 10 points, around which all the civil society groups could gather and act in common as a support to Unctad’s work.

 

A campaign with 8-10 major ideas could be adopted as a common joint work by all civil society groups cooperating with Unctad, in order to disseminate information about the changes required, promote those changes and act under a common banner.

 

Elena Zhiryaeva from
Wed, February 20, 2013 at 06.56 pm
Faizel Ismail from
Wed, February 20, 2013 at 08.46 am


Global Value Chains, Globalization, and the New Trade Policy Narrative


 


Faizel Ismail


 


 


 


Angel Gurria, the OECD Secretary-General argued at the first Trade Ministers meeting held under the auspices of the G20, in Puerto Vallarta Mexico that “we need to make a better and more compelling case for open markets. The emergence of Global Value Chains as a new reality of international trade where goods are no more manufactured in one country but are made in the world and the large share of intermediate goods exports provide a compelling reason for countries to have more open trade policies” (OECD, 19th April, 2012). He argued that given this new reality "there is increasing evidence that comprehensive market opening benefits all of us, wherever we are".



 



Recent research on Trade in Value Added and Global Value Chains (GVCs) undertaken by the OECD and the WTO reveal that "imbalances like the US trade deficit with respect to China are reduced by more than 30 percent when trade is measured, as it should be, in value-added and not in gross commercial value" (Pascal Lamy, Roundtable Discussion at OECD Paris 16th January, 2013). This new evidence does put into perspective the growing concern with the US-China trade deficit and could contribute to stemming the current tide of protectionism in the US and other countries.



 



However, the main purpose of this research agenda as Gurria clearly explains above is to make the case for trade liberalization. We recognize that some of this research provides compelling evidence for a revision of the methodology for compiling trade data and will reduce the trade tensions between the US and China on trade imbalances. However, the OECD research does not point to the more perverse social impact of this form of globalization nor does it raise the increasing challenges this poses to developing countries that seek to break out of the trap of low value production and advance their economic development strategies of diversification and industrial development.



 



UNCTAD had already identified this growing trend towards global value chains in the global economy in its 2002 report (TDR, 2002). The study found that the increased mobility of capital together with continued restrictions on labour mobility had "extended the reach of international production networks in a number of products in which the production process can be partitioned into different segments that can be located in different countries according to their factor endowments and costs". UNCTAD argued that developing countries will need to rapidly upgrade production to more market and supply dynamic products, instead of extending the existing patterns of production and trade.



 



However new research on GVCs and globalization discussed below raise a number of critical questions for policy makers on trade and industrial policy in the era of GVCs. Recent studies on GVCs and globalization undertaken by Nolan et al (2002), Lazonick and Sullivan (2002), and Millberg (2007-9) and Nolan and Zhang (2010), trace this new phenomenon of GVCs to three major trends in US and EU business organization emerged in the 1990s: a) a change in the norms and values of corporate governance; b) the increasing concentration of capital and, c) the increasing financialization of global markets.



 



a) From "retain and reinvest" to "downsize and distribute". Lazonick and Sullivan (2002) argue that the increased competition by Japanese firms, deregulation of the financial sector in the US, and the move towards shareholder value forced corporations to cut their labour force and to increase the returns on equity - thus the shift to the principle of "downsize and distribute". This concept of shareholder value rose to prominence in the Reagan - Thatcher decade of the 1980s. Until then the major US corporations were governed by the corporate governance principle of "retain and reinvest". This had a significant impact on job security leading to flexible labour markets, low wages and incomes for most of the working population, and increased inequality. The OECD “Principles of Corporate Governance” (1999) followed this trend in the corporate sector and emphasized that corporations should be run, first and foremost, in the interest of shareholders.


 


b) Disintegration of MNCs to System Integrators. (Nolan et al, (2002) argue that the new profit imperative (discussed above) also forced businesses to shift their focus from non-core to core business competences. This process led to a process of disintegration of the traditional large MNCs as firms moved to focus on their core competences. Nolan et al (2002) point to the high levels of concentration that has occurred in a range of industries including, commercial aircraft, automobiles, micro-processors, computer software, insurance etc. They characterize this phenomenon as a "big business revolution". This revolution, they argue "produced an unprecedented concentration of business power in large corporations headquartered in the high-income countries. The lead firms thus became core systems integrators developing a network of outsourced businesses. At the heart of the global business revolution is a new form of "separation of ownership and control". Core firms within the value chain exercise tight control over firms across the whole value chain, both upstream and downstream. Firms that wish to be selected as 'aligned' or 'partner' suppliers to the leading systems integrators, must agree to cooperate with the core firms within the sector in opening their books, planning their new plants, organizing their R&D, planning their production schedules and delivering their products to the core firms.


 


c) Financialization of global markets. Milberg (2007-9) discusses the third trend that was to emerge from this increasing competition in the 1980s - the shift from manufacturing to finance. As manufacturing became less competitive these firms shifted their investments to finance creating increasing liquidity and pressures to de-regulate financial markets. This process that has accompanied the rise of financial capital in the major economies has been called financialization. This high profit share has resulted in US MNCs being "awash in cash" and an increase in their investments in financial assets in search of higher profitability rather than productive assets. This concern with the pursuit of shareholder value in corporate strategy has resulted in reduced investments in manufacturing and slower growth. In developing countries this trend towards financialization has increased the occurrence of financial crisis in developing countries.



Research and Policy Questions



 



The UNCTAD study of trends in developing countries in the 1980s and 1990s (TDR, 2002) will need to be updated in the light of this new research discussed. The new research (Nolan et al, 2002; Lazonick and Sullivan, 2002; and Millberg 2007-9, and; Nolan and Zhang, 2010), discussed above, suggests that the new era of globalization, reflected in Global Value Chains, is characterized by increasing corporate oligopsony power of the largest firms from the US, EU and Japan, governance and control of these global value chains through systems integrator lead firms, and the shift of the incentive structure towards the financial sector and away from manufacturing making the challenges of development and industrial policy even more difficult.



 



The narrative of the OECD/WTO proponents of the GVCs approach to international trade focuses on the efficiency of the GVCs and the need to liberalize markets. By ignoring or discouraging the need for active policy measures to address the asymmetries and oligopsonic power of GVCs, the risks of the fallacy of composition and the tendency for the declining terms of trade of low value manufactures, it privileges the role of lead firms and their drive to increase their shareholder value.



 



The new trends identified by the research above suggests that the driving force of lead firms in these global value chains has shifted from that of productive investment towards the search for greater and greater profits in line with the new corporate philosophy of “downsize and distribute” rather than “retain and re-invest”. Lazonick and Sullivan (2000) argue that "the experience of the US suggests that the pursuit of shareholder value may be an appropriate strategy for running down a company - and an economy. The pursuit of some other kind of value is needed to build up a company and an economy".



 



The social and development impact of international trade cannot be ignored or glossed over. Researchers and policy makers have a responsibility to interrogate the social and development context in which the economy is embedded. A number of research questions thus arise for socially responsible researchers:



 



How can we rebuild a new corporate accountability that privileges productive investment, job creation and social equity?



 



How can the high social costs associated with rapid liberalization and hyper-globalization that the WB/IMF structural adjustment programmes of the 1980s were associated with be reduced and avoided in this new era of globalization associated with GVCs?



 



How can we address the growing concentration and oligopsony power of lead firms? How can this growing asymmetry of lead firms, that continues to squeeze the margins of local producers and increases the “commodification” of low value manufacturing in developing countries, be addressed?



 



How can developing countries not simply need to latch onto these global value chains in a dependent relationship but also engage them with a view to negotiating a better balance between the social and development needs of the society and the imperatives of lead firms in the new global value chains?



 



What implications does the new challenges posed by the new era of globalization reflected in these GVCs have for industrial policy and strategy in developing countries?



 



 



 



References



Laonick, W. and O’Sullivan, M., “Maximizing shareholder value: a new ideology for corporate governance”, Economy and Society, Volume 29 Number 1 February 2000:13-35



Nolan, P., Sutherland, D., and Zhang, J., Contributions to Political Economy (2002) 21, 91-110 Cambridge Political Economy Society 2002



Milberg, W. “Shifting Sources and Uses of Profits: Sustaining US Financialization with Global Value Chains”, Schwartz Center for Economic Policy Analysis. The New School. SCEP Working Paper 2007-9



Nolan, P., and Zhang, J., “Global Competition After the Financial Crisis”, New Left Review 64, July Aug 2010



UNCTAD, Trade and Development Report, 2002

Kang-Kook Lee from
Tue, February 19, 2013 at 01.32 pm

Dear friends, I agree that it is crucial to think of efforts to reform the current globalization process for inclusive and sustainable growth as other comments indicate.

I just like to add a brief discussion on the implication of financial globalization, related to question 3). It is about time for developing countries to push for strategic globalization in the area of finance by introducing active capital controls. The failure of the Washington Consensus is so clear in the disappointing experiences of financial opening and globalization in developing countries since the 1980s. Opposite to the mainstream argument, financial globalization did not encourage economic growth in developing countries, while it led to more instability and inequality in many cases. Moreover, the recent global financial crisis finally shattered the neoliberal belief in financial opening and liberalization.

Thus, it comes as no surprise to see a serious change in thinking of capital controls. Now, even the IMF endorses the need of capital controls in developing countries as measures to protect them from shocks from volatile international capital movements. Several emerging market countries such as Brazil have already adopted capital controls in response to the pressure of currency appreciation due to incoming foreign capital inflows. Given the serious problems of international capital market, I believe that this change is indeed very important and meaningful for developing countries to promote economic stability.

However, I think that current capital controls to focus on short-term and unstable international capital movements are not enough to developing countries. They should establish a broader growth strategy to promote their manufacturing industries in conjunction with capital controls, which is essential to job creation, sustainable development and inclusive growth. For example, they need to introduce more regulation measures in foreign direct investment so as to maximize their domestic industries as East Asian countries historically did. Moreover, the developmental governments may well think of utilizing foreign financial capital and supporting domestic priority companies, of course, together with some discipline. Establishing development banks and effective intervention of the government in the financial sector are necessary for this purpose.

Incorporation of active and more extensive capital controls with industrial policy by competent developmental states is an essential strategy to developing countries when they pursue development-oriented globalization. Developing countries should cooperate so that they can achieve this policy space for strategic globalization in the process of the future reform of the international financial system.

 

 

Zoya Sokolova from
Tue, February 19, 2013 at 12.58 pm
Pedro Guzman from
Sat, February 16, 2013 at 02.10 pm

Institue measures for accountability and transparency in governance. 

Ensure people's participation in decision-making, access to information, and access to justice - three pillars of the Aarhus convention.

Ensure compliance of bussines and industry with international human rights norms and enviromental standards, including mandatory reporting requirements

Ensure access to remedies for victims of human rights violations

Christina Chang from
Fri, February 15, 2013 at 03.53 pm

Despite making up to 90% of jobs and 50% of GDP in a majority of developing countries, poor small-scale entrepreneurs are still written off as basket-cases in most economic policy and development strategies. This is a major oversight, they suffer most when trade rules are unfair, when gaps in global governance (such as IMS) mean instability or unfair terms, but supporting and investing in them can pay the greatest dividends in terms of reducing inequality and tackling poverty. This blindspot needs addressing, putting their needs at the centre of trade and finance systems: http://www.cafod.org.uk/content/download/563/5610/file/Policy_Economic-justice_Think-small.pdf

Uyanga Gankhuyag from
Fri, February 15, 2013 at 04.35 am

Matias Vernengo wrote an interesting blog about three lessons from Argentina in his blog in response to the article by Richard Kozul-Wright and Jayati Ghosh on the Global New Deal:

  • Maintaining foreign debt to a minimum
  • Ensure better income distribution
  • Have a strong state
Anonymous from
Wed, February 13, 2013 at 09.50 am

Enterprises of the (third) world unite you have nothing to lose but your (global value) chains!!!!


 


In their blog Milberg and Gereffi (MG) make a pitch for revisiting the debate on industrial policy in light of the spread of global value chains. This they argue is the new normal which policy makers in developing countries must adapt to if they are to industrialize successfully.  They contend that the "old" policies tied to national development strategies have lost much of their traction, and may even be damaging. Geography may still count in defining the industrial policy challenge but the focus has shifted to the regional level.


 


This is an important discussion, and (albeit sotto voce) their recognition that the "developmental state" remains a critical player, particularly when faced with what the call the "upgrading" challenge, offers an appropriate corrective to the efforts of the WTO, OECD, World Bank and others who seem bent on hijacking the GVC framework to kick start the Washington Consensus.


 


There are several issues raised by MG which deserve closer attention. But let`s start with a point of agreement.  Industry still matters to the development prospects of most developing countries and, though MG don't specify, for a whole host of familiar reasons which have to do with the way industrial development can combine and augment dynamic advantages (scale economies, learning, technological progress etc), self-sustaining demand (a virtuous circle between rising productivity and incomes and between profit and investment) and diversification in to more productive lines of activity.  Together these are the basis of a pattern of fast growth that is consistent with both rising productivity (and therefore a strong competitive position) and job creation.


 


A debate continues to rumble about the role of the service sector in the development process and its neglect as a result of what some see as a manufacturing fundamentalism (this debate was recently revived in an Economist e-discussion involving Ha Joon Chang and Jagdish Bagwati). There is some truth to this, but it can be exaggerated.  Service provision was always important in early development thinking albeit linked to an expanding public sector, this approach went in to decline in the late 1970s with the rise of the Washington Consensus and the related privatization agenda. There is a debate to be had on whether or not public provision was done well, whether privatization has improved things and if not what are the possible alternatives, but that is a different matter from the charge of neglect.


 


It is also true that much of what used to be included under manufacturing was in reality service activity -- people working in accounts or human resources departments or product design of big (and not so big) manufacturing firms -- and its decoupling (or subcontracting) in advanced countries, as researchers such as Bob Rowthorn have documented, has certainly been a feature of their "positive deindustrialization" process; but how this figures in the developing country context where industrial capacity is still at a much lower level of sophistication (and many countries have in recent years experienced "premature deindustrialization") is still in need of careful research.  Striking the right balance on policy should not be difficult, however, .Jose Antonio Ocampo, for example, in his 2011 ECLAC Prebisch lecture has talked about "proactive production sector development policies" to make sure that the focus is not just on manufacturing but other productive sectors and their interaction.


 


Across these discussions on shifting development patterns it seems to me that the drawing of the global value chains landscape still remains rather impressionistic, with a tendency to throw together everything, from cut flowers to automobiles to transport logistics, in to the same analytical pot as if they are organized and governed in much the same fashion or contain the same growth and employment linkages, and to lump together countries and regions which share vary different histories with respect to hosting FDI and value chains. Certainly talk of things now being "made in the world" clearly has little connection to how most value chains are actually organized and managed.  I think MG are aware of these problems.  But there are some issues they raise which merit further discussion and that that matter, in particular, for thinking about development strategy associated with GVCs.  Three in particular stand out:


 


1. Policy matters; at one point MG argue that "Trade policy is no longer enough to guarantee growth and development" The obvious response is was it ever? In fact  their classification of trade policy is a little too simplistic;  success cases, including in East Asia where value chains have been part of the development reality for decades, have always used trade policy strategically combining tariff protection and liberalization measures depending on the nature and development of the sector involved.  Moreover industrial policy was integrated with other policies, including macroeconomic and technological policies, to force through a rapid pace of capital formation and upgrading both of which remain key to long-term industrial success, including in the context of GVCs. China`s central role in the recent growth of GVCs raises the question of whether it followed old or new approaches to industrial policy?  But instead of asking what has worked in the past and why, MG argue that "a new set of development policies are taking hold" but give few indications of what these are or indeed how "developmental states" should go about "regulating links to the global economy". These are areas in need of further clarification.


 


2. Demand matters; MG makes much of the rise of new markets in the South as a substitute for post-crisis stagnant markets in the North; but there is little sense of proportions so it is not easy to address the arguments presented.  What we do know is that most chains are organised by firms from advanced economies and sell the final product in these markets so if these markets remain sluggish over the coming years then "the fallacy of composition problem" identified by UNCTAD with GVCs over a decade is potentially more of a problem today. The suggestion of MG is that the BRICS will fill the demand gap.  They may be right and there is a burgeoning literature (much of it emanating from the research desks of large international banks) on convergence and decoupling that suggests this is the case. However, a more careful examination is merited. Take outChinaand the share of these countries in world income is actually lower today than it was in 1980.  Obviously changes such as the collapse of the Soviet Union account for some of that, but it seems that MG are repeating the "emerging market" story without carefully looking at demand (including external demand) patterns linked to these experiences.  In fact, all these countries face massive internal development challenges not least around their own weak industrial performances; it is doubtful that simply hooking up to value chains will provide the solution these countries are looking for. On a related matter should countries participating in value chains worry more or less about balance of payments issues than in the past; MG hint at being less worried but there is no discussion of the pressures involved along this front.


 


3. Size matters; we know that it is still predominantly big firms who trade and invest abroad and that scale gives them huge opportunities to create and protect rents. But there is absolutely no discussion by MG of the asymmetric economic power relations along the chain and the problems this can pose to "upgrading" and diversification.  At some point it is probably worth revisiting Steve Marglin`s (unduly neglected) work on international production but the China scholar Peter Nolan has provided some useful insights on the difference between firms from advanced and emerging economies in a recent article in New Left Review on "global competition after the financial crisis".  The dominance of large corporations, the financialization of their strategies, their use of transfer pricing (and tax evasion), the abject failure of self-regulation, the exit threat used to undermine wage growth in line with productivity growth, etc are all missing from the MG discussion which makes this a very lop-sided account of how large international firms actually operate in todays world. Interestingly an "old "feature making a comeback to the GVC scene is state owned enterprises which have in a number of emerging countries become prominent foreign investors in some sectors: there is the potential here for developing countries to begin to define their own VYc but it is not clear how MG approach these decidedly antiquated -- but apparently highly effective -- entities but hopefully their research will take a further look in this direction.

Anonymous from
Tue, February 12, 2013 at 12.43 pm

DEVELOPMENT AGENDA BEYOND 2015: THE INTERNATIONAL CONTEXT 


The international aspects of the MDGs are set out in Goal 8 which seeks to develop a global partnership for development.  The objectives enunciated in the MDGs are long on words.  But it would seem that outcomes have been short on substance.  Indeed, Goal 8 has turned out to be simply inadequate. In the international context, the focus of MDGs is much too narrow. The misplaced emphasis on concessional development assistance, attributable to a donor-centric world view, dominates the discourse. Clearly, the international community needs to do better at this unfinished business but far more needs to be done. It must also be recognized that foreign aid is not all there is to external finance, and that external finance is not all there is to development. Moreover, aid is a mixed blessing and often turns out to be the equivalent of a natural resource curse. There are other sources of external financing such as remittances from migrants that need to be explored. In any case, for developing countries, access to markets in trade and access to technology for development are far more important than foreign aid could ever be.


 


Thinking ahead, it is clear that, during the first quarter of the twenty-first century, development outcomes would be shaped, at least in part, by the international context.  It is also clear that unfair rules of the game in the contemporary world economy would encroach upon policy space so essential for development.  Many of these rules are a part of the WTO regime while several are implicit in IMF-World Bank conditionalities. Similar conditions are increasingly imposed, particularly on LDCs, by donor countries that provide foreign aid.  This situation needs to be corrected.  The correctives should endeavour to make existing rules less unfair and recognise that even fair rules may not suffice.  In reshaping unfair rules, the nature of the solution depends upon the nature of the problem.  Where there are different rules in different spheres, it is necessary to make the rules symmetrical across spheres.  Where there are rules for some but not for others, it is necessary to ensure that rules are uniformly applicable to all.  Where the agenda for new rules is partisan, it is imperative to redress the balance in the agenda.  But that is not all.  Rules that are fair are necessary but not sufficient.  For a game is not simply about rules, it is also about players.  If one of the teams or one of the players does not have adequate training or preparation, it will simply be crushed by the other.  For countries at vastly different levels of development, there should be more flexibility, instead of complete rigidity in the application of uniform rules.  Indeed, uniform rules for unequal partners can only produce unequal outcomes.  And there is a need for positive discrimination if not affirmative action in favour of poor countries, particularly but not only for the LDCs that are latecomers to development.


 


In sum, the object of change, whether reshaping unfair rules or allowing exceptions to existing rules in the world economy, should be to address the problems associated with the constraints on poor countries implicit in the presence or absence of rules, so as to enlarge the policy space available for the pursuit of national development objectives. This alone can provide the foundations for what is described as a global partnership in development. Of course, such a global partnership will also require a change in the asymmetrical relationship between rich and poor countries that has unfolded as the reality in the present agenda for global development cooperation, read by some as no more than performance criteria for developing countries, even if the intentions underlying the MDGs were noble. In this quest, there is need for a more equal partnership between industrialized countries and developing countries.


 


The possibilities of cooperation among developing countries provide a new window of opportunity at this juncture in time.  So far, this has been in the world of rhetoric rather than reality, words rather than substance.  But this subset is an integral part of the logic of international collective action.  What is more, the world has changed In the international context where the distribution of economic and political power is so unequal, the increased economic significance and political influence of developing countries provides an opportunity to reshape rules and institutions even in the world of unequal partners.  The United Nations, the World Bank, the International Monetary Fund and the World Trade Organization are among the most important multilateral institutions in which countries such as Brazil, China, India and South Africa, could exercise influence on behalf of the developing world.          


Even if developing countries cannot change the world by articulating their voice or by using their bargaining power as a group, or subset of a group, there are possibilities of cooperation among developing countries for themselves in many spheres.  The institutional mechanisms might be inter-regional or intra-regional arrangements that pool markets and resources for development.  The institutional mechanisms could also be bilateral or plurilateral forms of assistance where some developing countries, learning from their experience, can help other countries that have to traverse a similar path. In fact, cooperation among developing countries may be particularly important in the pursuit of the MDGs, because it is about learning from each other in spheres where countries in the industrialized world simply do not have the experience.


 


In reflecting on the MDGs after 2015, there an almost obvious need to think again and start afresh on the international aspects of MDGs. In doing so, it is imperative not simply to adapt, modify or transform the existing Goal 8 but also to reformulate, indeed redefine, the global agenda for development cooperation beyond the confines of Goal 8. This reflection should be concerned with three dimensions of the international context. First, it is necessary to remove the asymmetries implicit in the relative importance of different issues and in the relationship between rich and poor countries. Second, it is essential to enlarge the policy space available to countries that are latecomers to development, which has been encroached upon and significantly diminished by unfair rules for unequal partners in the contemporary world economy. Third, it is time to move away from unidirectional or asymmetrical relationships to  evolve partnerships in development between industrialized countries and developing countries, as also among developing countries, in keeping with the logic and the spirit of international collective action.

Anonymous from
Sun, February 10, 2013 at 11.40 pm

I believe that the success of any post-2015 development framework will hinge on its ability to promote global collective action around key policy areas. Specific proposals for new (outcome) goals, targets and indicators have already emerged – including on income poverty, employment, education, health, environment and governance – but there has been far less attention on the key policy reforms that would be needed to fulfil those ambitions. In a recent paper, I try to contribute to the post-2015 debate by presenting some arguments and proposals that could motivate the construction of an effective and progressive ‘global partnership for development’. Below, I highlight some of the key recommendations.

www.odi.org.uk/publications/6443-recasting-mdg-8-global-policies-inclusive-growth

Macroeconomic policy coordination, especially among large country-blocs, is vital to rebalance the world economy and address systemic crises – of finance, food and fuel. This is also crucial for poor developing countries, since they are particularly vulnerable to changes in the global economic context. A stable and vigorous world economy will greatly support national development efforts to create productive employment, promote structural transformation and sustainably increase living standards. This is likely to require the adoption of synchronised countercyclical fiscal and monetary policies, a new global reserve system, exchange rate coordination, and therefore improved institutional arrangements for coordinating global economic policy. [In this regard, the UN (2009) proposes the creation of a Global Economic Coordination Council, which would have the mandate to coordinate economic policy as well as identify and tackle imminent problems and institutional gaps – such as setting out global economic and financial reforms. The Council would be a globally representative forum, at the level of the UN General Assembly and the Security Council, providing leadership in social and economic affairs. Tasked with building consensus among countries and ensuring policy consistency and coherence of major international organisations, it would strive to provide efficient and effective solutions for the global economic challenges lying ahead. This would be a legitimate, representative and accountable body that could contribute to a more efficient global economic and financial system. Moreover, strengthening existing (or creating new) regional governing bodies would also be desirable, especially in order to promote greater and deeper regional integration.]

Moreover, a stronger focus should be placed on removing barriers to inclusive growth and structural transformation in developing countries. This could be achieved through development-minded reforms of the global trading and financial systems. In this regard, policy reforms should recognise the central role that productive employment plays in sustainably lifting people out of poverty and tackling deep-rooted inequities. We draw attention to finance-related policy measures to promote greater financial stability, increase the availability of development finance, and strengthen the impact of foreign investment on host countries. These include an international liquidity buffer, measures to tackle illicit capital flows, exploring alternative sources of development finance (e.g., global taxes and SDRs), and strengthening investment standards. In terms of international trade, we argue that tariff and non-tariff barriers may constrain the ability of poor developing countries to build productive capacities and further integrate in the world trading system. We then call for measures to simplify rules of origin and technical standards, mitigate the impact of commodity shocks and enhance food security, reform intellectual property rights, and scale up aid-for-trade.  

Anonymous from
Sat, February 9, 2013 at 10.47 pm

Dear friends,


 


Thanks for hosting this interesting discussion on a development-led globalization. It comes at the right time - crises oblige policymakers to rethink development models.  The 1929 financial crash led to a New Deal that radically altered the development model of the day. At the end of World War II, politicians from advanced economies were determined that unemployment and economic crisis, which had provoked political crisis and fueled the rise of fascism, should never be repeated. They accepted that full employment and social cohesion should be primary national policy objectives, and, as a result, governments supported employment-generating macroeconomic policies, public investment in the economic sector as well as in education, health care, and social security, and enforced different labour laws and regulations. Such programs were not new; they were an essential part of modernization programs in these societies during the early stages of their development. These governments progressively formalized their labour forces as a way to expand the tax base, build social protection systems, raise social standards and develop domestic markets. This approach was highly successful: postwar policies achieved high productivity gains in the workforce, expanded internal markets and increased economic growth, with the populations of Europe, North America, Japan, Australia and New Zealand experiencing unprecedented prosperity.



A comparable policy push is needed today. The current global economic crisis presents an opportunity to rethink socio-economic policies. Yes, a global new deal.  This requires shedding the myopic scope of macroeconomic, trade and sector policy decisions of recent decades and, instead, basing them on their potential to achieve employment, social development, and sustainable growth for all.  


In the 1980s and 1990s, there was the idea that growth should be a priority through deregulation, free markets, minimal governments, privatization, export-led growth and residual social policies (safety nets).  These ideas are old, but somehow remain alive. During the last decades, economic policy choices at both international and national levels have often been taken without adequate consideration of their distributional impacts. Economic policies are detached from social objectives such as generating employment and protecting people’s incomes – often have a narrow focus on containing inflation, budget deficits, service debt, liberalizing product/factor markets and trade, a major reason why inequality increased worldwide.


As an alternative, the United Nations development agenda has been proposing the combination of social and economic policies in a complementary and mutually reinforcing manner. The UN agenda focuses on country ownership of national development strategies, as well as addresses systemic issues. There are multiple documents, many produced by UNCTAD which our colleagues should add, let me just quote here for reference the UN Policy Notes for National Development Strategies: http://esa.un.org/techcoop/policynotes.asp


(a) Promoting employment-generating growth: That means promoting quality, non-volatile growth that supports employment, with attention to distributive aspects. Policy-makers always talk about employment but few have managed to create it; it was jobless growth prior to the crisis, and now, a jobless recession. Decent jobs will require adequate macroeconomic, sector and labour policies:


1. Employment-sensitive macroeconomic and sector policies:


- Monetary and fiscal policies that boost aggregate demand; eg. a tight monetary policy focused on containing inflation do not generate jobs.


- Financial services for real economy growth


- Investments in physical and social infrastructure, human capital


- Technology/industrial policy


- Adequate exchange rates; gradual and sequential trade opening to support it. 


 


2. Labour policies: Decent employment is not only about generating jobs, most poor people work long hours but they cannot bring their families out of poverty; it is also about adequate salary and working conditions.


- Labour market policies, including labour standards and fair income


- Social dialogue to reach optimal solutions in macroeconomic policy, public and private investment, the need for productivity, job and income security.


 


(b) Equitable sector policies that provide opportunities, assets and incomes to the poor: This is, public


policies in any sector -from agriculture to energy-  that are progressive and benefit all. Analysis from different development agencies evidence that, generally, the following public investments are equitable:


• Education and health: Expanding coverage of free primary and secondary services, leaning towards universal services


• Social Protection: social protection floors


• Finance: development banks, rural banks, branching out to local areas; regulating the financial sector, fighting illicit financial flows


• Rural development programs ensuring food security, access to land, water, markets, livestock, credit for smallholders


• Infrastructure: rural electrification, affordable water and sanitation, rural roads, affordable public


transport systems


 


When thinking of this equitable economic and social agenda, the question - invariably arises: where is the fiscal space? There is a national capacity to fund economic and social development even in the poorest countries. Main options include: (i) improved taxation, (ii) reprioritization of expenditures, (iii) debt, including debt financing for those who can, as well as debt restructuring, (iv) domestic borrowing, (v) more accommodating macroeconomic frameworks (eg tolerance to of some inflation, fiscal deficit), (vi) fighting illicit financial flows and (vi) use of reserves for national development. All countries are different, and they will have different options, but in any case fiscal space exists. More on this can be found in “A Recovery for All” http://arecoveryforall.blogspot.com/


This agenda focuses on national domestic topics. At the international level, it will be necessary a new system of global governance to ensure that national and international public policy-making is coherent and benefits all. There have been many proposals, including the creation of an Economic Council at the UN. As necessary reference is the Report of the Commission of Experts of the President of the United Nations General Assembly on Reforms of the International Monetary and Financial System, led by Nobel Laureate Joseph Stiglitz: http://www.un.org/ga/president/63/commission/financial_commission.shtml


 


It will be necessary to manage international finance and corporations through a new financial architecture that supports development, fights short-term speculative capital flows, tax evasion and money laundering. A new international debt-work out mechanism must be put in place. And it will be necessary to reform international trade, current trade arrangements are not free and non discriminatory as is claimed -the EU, US and Japanese subsidize their own producers, including the agricultural sector -agriculture is one of the few economic activities that poor countries can develop to reduce poverty. Instead, in the name of "efficiency" and "free markets", developing countries are told to open-up and liberalize their economies - as a result, domestic producers cannot compete with the subsidized, higher quality products from developed countries and close down, generating further unemployment and poverty. Abandoning this double moral ("Do as I tell you, not as I do") and uncritical implementation of market-fundamentalist policies is essential to a global new deal.


 


To end, I would like to bring the issue of global inequality. At the beginning of the 21st century, inequalities are staggering. We live in a world in which by the most conservative calculations, the richest 20 percent of the population enjoys more than 70 percent of global income, while the poorest 20 percent of people at the bottom only has two paltry percentage points. Further, the richest 1 percent (61 million individuals) had the same amount of income as the poorest 3.5 billion (or 56 percent of the whole world population) as of 2007. More on this can be found in “Global Inequality: Beyond the Bottom Billion – A review of income distribution in 141 countries”, published by UNICEF: http://www.unicef.org/socialpolicy/index_58230.html


In historical perspective, if we look at the evolution of Gini indices measuring inequality, using World Bank data from 1820s onwards to 2002, what we find is a steep increase in income inequality in the 19th century, some stabilization after the 1930s crisis up to the ‘70s and another steep increase of income inequality from the 1980s onwards. While there is evidence of some progress in recent years, it is too slow - it would take more than 800 years for the bottom billion to achieve ten percent of global income under the current rate of change.


Business as usual is not an option.  We need to change the development model. Some have denominated this current situation as a kind of global apartheid, and if we were to think in these terms, clearly, apartheid will not change by small, remedial policies.  We need to seriously rethink policies and consider a development-led globalization.


Isabel Ortiz


 

Anonymous from
Fri, February 8, 2013 at 03.41 pm

Industrial Policy When Global Value Chains Matter

William Milberg and Gary Gereffi,

New School for Social Research and Duke University, respectively

 

Global value chains (GVCs) are the sequence of productive and distribution activities that result in final consumption.  The expansion of GVCs since the early 1990s has played an important role in shifting the pattern of international trade and restructuring the industrialization process, particularly in developing countries.  As a result of these shifts, economic development now often occurs through “industrial upgrading” within GVCs. 

 

Twentieth-century debates over the merits of industrial policy as a strategy for economic development occurred prior to the spread of these complex international production networks.  As support for the Washington Consensus fades in the wake of the financial crisis of 2008, a new set of development policies are taking hold, and the GVC is figuring prominently in the formation of these policies.

 

Industrial policy viewed through the lens of GVCs will differ from traditional arguments for industrial policy, such as import substitution or export orientation.  In promoting the capacity and activity of domestic firms, government strategy must take into account the interests and power of lead firms in GVCs, international (and increasingly regional) networks of competing and cooperating supplier firms, and foreign non-governmental organizations. Reliance on export growth alone will be inadequate when value added in exports can vary considerably, depending on the country’s position in the value chain and shifting demand in export markets.   The broad spread of GVCs implies an industrial policy focus on regulating links to the global economy -- especially trade, foreign direct investment, and exchange rates – more than was the case under import-substitution industrialization (ISI) policies, which focused on building national capabilities, but also in a different way than had been the case in the era of export-oriented industrialization (EOI), where the focus was typically on final goods exports. Export competitiveness remains a crucial feature of this phase, but exports are now the result of participation in global production networks and thus often depend on imports from the network.

 

China’s manufacturing export boom was driven by varied ties with foreign multinational corporations, and especially production for western branded goods, such as apparel, footwear and toys.  These were often buyer-led GVCs, in which the lead firm was a large foreign retail firm with brand identity and significant market power over competing suppliers globally.  India’s IT services expansion, less the result of government policy than was China’s success in manufacturing, was nonetheless geared to the provision of business services “tasks” as part of GVCs in business and finance.

 

With the post-recession stagnation in the US and EU and the emergence of the BRICs, there has been a shift in the composition of global final demand, with buyer-driven GVCs led by firms in industrialized countries shrinking in importance, and with developing countries playing a larger role as buyers, middle men and full-package producers, in particular the large emerging markets of China, India, Brazil, Russia, and South Africa.  With this shift in the composition of final demand is also a recognition of the relative efficiency of regional supply networks, in part the result of decades of transnational corporation (TNC)-led production networks at the regional level, for example in East Asia, North America, Western and Eastern Europe.  Changes in these conditions of global demand and supply are likely to frame the industrial policy choices in the future.

 

The current South African development policy emphasizes regional integration as the basis for industrial upgrading, focused on mining, agriculture and pharmaceuticals.  South Africa has announced a strategy of processing minerals shipped to China.  The latter would prefer to do the processing itself.  But for South Africa, the goal of upgrading will involve skills development and higher wages along with higher profits.  Industrial policy, in this case, is aimed at shifting production from China to Africa.  The regional dimension of South Africa’s industrial policy is based on the view that a larger regional entity will have access to more minerals and raw materials, more productive and processing capacity, and larger markets, all aimed at promoting upgrading. 

 

Brazil’s development strategy has both similarities and distinctive elements compared to South Africa and China.  Although Brazil belongs to Mercosur, this does not reflect a pan-Latin America vision analogous to that of South Africa. Like South Africa, however, Brazil is very concerned about the so-called “primarization of its exports,” whereby Brazil’s export basket contains a high proportion of primary products with relatively low levels of processing.  A major challenge for Brazil is how to increase the technological content of its exports in order to upgrade into higher value activities in both the primary product and manufacturing sectors. 

 

The appeal of a regional-based development strategy is not about building a demand base and not just about reducing transportation costs, although both of these do figure in.  The logic of regional industrial policy comes also from the legacy of regional trade agreements and existing TNC production networks.  Thus we are still in a world organized by international supply chains, but where those production networks face a different set of constraints that brings the logic of regionalism to the forefront of development policy.  GVCs are often governed by large, lead TNCs, but they need not just serve the interests of those firms. The domestic private sector thus has a more important role than in previous regionalization efforts and with a broader set of industries involved, ranging from minerals to agriculture to apparel to mobile phones.

 

In sum, the regional industrial policies of the post-Washington consensus era will be driven by the recognition that regional supply chains are anchored in a new set of realities.  Trade policy is no longer enough to guarantee growth and development.  Industrial policy will need to promote the ability of domestic suppliers to link to global value chains directly, and to build skills and capacity in response to private sector needs.  Today’s developmental states increasingly acknowledge the legacy of GVC development over the past twenty or more years, but also are responsive to the recent indications of shifting end markets and changing institutions of global governance.  This combination of factors means that industrial policy in the current era of GVCs will have some new features -- such as the need to capture more value from imported intermediates by building the capabilities of local firms --  and will need to respond to new challenges,  such as the new conditions for upgrading that come with new end markets.  Efforts at regional integration with the BRICs as the regional hubs are already well under way.


Anonymous from
Wed, February 13, 2013 at 01.51 pm

Value Chains and Trade Facilitation


In their blog Milberg and Gereffi want to recast the debate on industrial policy in light of global value chains. But it is important that they understand this is already happening in ongoing discussions in the WTO and World Bank, particularly around the push to negotiate an agreement on trade facilitation. World Bank economists presented a paper on this last month at the World Economic Forum in Davos.  Now Pascal Lamy, the embattled director general of the World Trade Organization claims a multilateral Trade Facilitation Agreement “could stimulate the US 22 Trillion dollar world economy by more than US 1 trillion dollars!” Early this month, Lamy spoke to the Chittagong Chamber of Commerce in Bangladesh about the benefits that a TF agreement would generate at a time when the world economy is adrift. 


He offers an elaborate justification as to how the TF agreement would bring about a turnaround, something that missed the attention of the world leaders and trade pundits over the last five years of economic turmoil. Indeed, it sounds like an Archimedes’ Eureka moment.  The actual nature of barriers facing the costs of trading across borders is estimated at US $ 2 trillion dollar, says Lamy, without offering the basis for suggesting such an estimate.  Perhaps, it is based on an OECD report of 2011 (but developing countries are not members of the Paris-club) or on the World Bank paper presented to an even more select group in the rarefied atmosphere of the Swiss Alps.


The breakup of the costs, according to Lamy, include “ 15%, 5% [agriculture products and industrial goods] is as a result of tariffs and 10% is as a result of border and customs procedures.”  “Globally,” he exhorts, “removing these barriers to trade and cutting red tape in half, which is what a multilateral Trade Facilitation Agreement could deliver.” In fact, “simply reducing this red tape by half would have the economic effect of removing all tariffs,” he emphasizes.


To move the wheels of trade, Lamy tells the Chittagong traders,  “the payment of fees and charges; risk management; electronic payment; expedited shipments; authorised traders; single windows; advance rulings — these are the processes — the spokes” that need to be agreed as binding commitment in the new TF agreement.  It is a different matter that these “processes” or “the spokes” of the trade which, Lamy refers so eloquently, constitute the core agenda of the United States, the European Union, Japan, Canada, Australia, Hong Kong, Singapore, and Korea among others at this juncture. Sweeping assumptions are made that decrease in trade costs will boost international trade relative to domestic trade flows.


The moot issue is whether there is anything called the multilateral Trade Facilitation Agreement which is being negotiated as a standalone agreement at WTO? And how did he arrive at the US 1 trillion dollar figure? The ground beneath these two seismic claims of the director general is shaky. To start, the TF agreement that Lamy referred to is part of what is called the Doha Development Agenda (DDA) negotiations. Of course, Lamy, who is one of the chief architects of the Doha Round that was launched in 2001, chose to remain deafeningly silent in his address on Doha and what happens to it. He did not mention the word Doha at all while referring to the trade facilitation agreement in his Chittagong address.


The Doha negotiations are premised on what is called the Single Undertaking- nothing is agreed until everything is approved. It includes various diverse issues and areas such as agriculture, industrial goods, services, rules, environment goods, trade facilitation, and improving special and differential treatment flexibilities. Lamy, in his previous avatar as the European Union trade commissioner, played a central role in launching the comprehensive Doha Round along with the former United States trade representative Robert b Zoellick. And it is established beyond doubt that developing countries were dragged into the Round on the promise that their issues- implementation-related difficulties, agriculture market access and subsidy barriers, especially for cotton, duty-free and quota-free market access for industrial goods from the poorest countries- would be addressed expeditiously.


Subsequently, Messrs Lamy and Zoellick were instrumental in concluding the July 2004 framework agreement following the collapse of the Cancun ministerial meeting in 2003 because of disagreement on four Singapore issues that include trade and investment, government procurement, competition policy, and trade facilitation.


Though trade facilitation was salvaged and included in the July 2004 framework agreement, it was done on the ground that developing countries will be provided substantial flexibilities, including financial and technical assistance would be provided to developing countries for implementing the new TF commitments. The mandate was further strengthened in December 2005 at the Hong Kong Ministerial Meeting when Lamy started his new innings as the WTO director general.  


Since the Hong Kong ministerial meeting, the Doha negotiations suffered 1000 cuts because of one member and the domestic constituencies in that country are unwilling to accept any commitments in agriculture and other areas. To help that member, the director general changed the tune and played according to what that member sought. He must take cue from his joint collaborator Zoellick when he argued in The Wall Street Journal (6 February 2013) that “there are gains from the stymied Doha Round of trade negotiations that should be harvested now: ending agricultural export subsidies; limiting food export controls; eliminating tariffs and quotas for almost all exports of the poorest countries; facilitating customs and clearance procedures; and improving the transparency and speed of the system for settling disputes.”


 It is a small wonder that a TF agreement is all about import facilitation- which is what the industrialized countries and their allies from high income developing countries are demanding. Lamy doesn’t remotely mention or emphasize about developing the export infrastructure (ports, highways, railways etc) in the poor countries to lower trade costs. After all, creating export infrastructure is part of the TF mandate on which Lamy and the developed countries want to offer only “best endeavor” provisions.


In return, Lamy supports the industrialized countries for insisting on “binding” commitments on their issues such as “the payment of fees and charges; risk management; electronic payment; expedited shipments; authorised traders; single windows; advance rulings.” 


Clearly, there is asymmetry between the commitments in a new TF agreement. Besides, it is important to address the concerns raised by Barbados and other small and vulnerable economies about the dangers of being drowned in the balance of payment difficulties because of import facilitation that would become the order of day thanks to the Lamy’s Multilateral Trade Facilitation Agreement.


Moreover, it doesn’t augur well for the world trading system when its chief “guardian” adopts blatantly partisan positions. Therefore, the developing and least-developed countries must remain vigilant about securing “balanced” outcome at the World Trade Organization’s ninth ministerial meeting in Bali this year. As pointed in Economic and Political Weekly (14 January 2013), “the pursuit of an agreement on trade facilitation would be a travesty of the larger Doha Round negotiations.” Besides, it makes a mockery of the give-and-take principle of the WTO’s mercantilist trading framework. Everybody must have something to take back home from the Bali meeting. Otherwise, the historic inequities in the global trading system will continue uninterrupted.

Anonymous from
Wed, February 13, 2013 at 10.09 am

This is a useful contribution which highlights the growth in influence that TNC's have claimed in the global economy through their co-ordination of a significant and increasing proportion of global production and trade via GVCs. It is worth highlighting some associated considerations which can also contextualise how developing countries engage with TNC's and the GVCs the latter co-ordinate. Some are already raised or hinted at.

Integration into the global economy needs to be strategic and purposive rather than simply opening up to trade and capital flows as advocated by the Washington Consensus (WC) set of policies. Ironically some countries that have uncritically liberalised these flows have made themselves less rather than more attractive as a site of both domestic investment and to attract TNC investment through factors such as currency overvaluation and instability and undermining of domestic productive structures. 

Financial sector policies will be extremely important to focus mobilisation of financial resources on investment rather than unsustainable credit-fueled consumption. This requires regulation in relation to forms of credit expansion as well as financing institutions which can mobilise and disburse resources for the long term investment necessary for real economy investments. Following comparative experience, domestic and perhaps regional development banks will prove indispensable in this regard.

Countries, regions and groupings need to purposively identify the mechanisms that can be used to leverage productive investment and mutually beneficial trade. There is significant scope for South-South and intra-regional trade and investment co-ordination based on complementarities rather than head on and potentially destructive trade focusing on substitutes advanced by the WC. In the case of various African countries relevant instruments can include:

  • Greater leveraging of natural - mineral and agricultural - resources, for instance by negotiating more strongly for larger reciprocal investments in infrastructure and manufacturing from partner developing countries (such as China and India) in exchange for natural resources rather than simply shipping these resources unbeneficiated or unleveraged.
  • Large populous markets, such as Nigeria, can use market access strategically to leverage both domestic and foreign investment. Initiatives such as the planned Africa Grand Free Trade Area - covering much of the South and East Africa - can help unblock the impediment associated with small individual market size which is one of the legacies of colonial boundaries.
  • Creation and strengthening of 'South-South' technology and production networks such as the possibilities that exist e.g. for collaboration between Brazil and South Africa in areas of aerospace.
  • Fostering large and diversified developing country firms which themselves can become important players in regional and global value chains, including through acquisitions abroad. Recent examples of Chinese, Indian and Brazilian firms provide some examples.
  • Taking advantage of major developments in other developing countries such as China's more balanced mix of domestic and export market orientation which can unlock potential in some of the 'first rungs' of industrialisation for African countries such as in apparel and other light industries.
Fran Luke from
Thu, February 7, 2013 at 04.06 pm

To conclude my previous thread regarding sustainable development, human rights, employment  and the relation to debt, I’d like to include this Report of the Independent Expert on the effects of foreign debt and other related international financial obligations of States on the full enjoyment of all human rights, particularly economic, social and cultural rights, Cephas Lumina, to the twentieth session of the Human Rights Council, 10-April-2011.    http://daccess-dds-ny.un.org/doc/UNDOC/GEN/G12/128/80/PDF/G1212880.pdf?OpenElement

Fran Luke from
Mon, February 11, 2013 at 01.08 pm

It appears I’ve attached an unreliable link.  A better link, perhaps, to “Guiding principles on foreign debt and human rights”, from independent expert Cephas Lumina appears toward the of this article from the office of the High Commissioner for Human Rights.  http://www.ohchr.org/EN/Issues/Development/IEDebt/Pages/GuidingPrinciples.aspx  


There is also a link to the resolution of the Human Rights Council endorsing the Guiding principles on foreign debt and human rights.   In this resolution from 18-July-2012 the Human Rights Council acknowledges,  “…the increasing debt burden faced by the most indebted developing countries, in particular the least developed countries, is unsustainable and constitutes one of the principal obstacles to achieving progress in people-centred sustainable development and poverty eradication and that, for many developing countries and countries with economies in transition, excessive debt servicing has severely constrained their capacity to promote social development and to provide basic services to create the conditions for the realization of economic, social and cultural rights,”    http://daccess-dds-ny.un.org/doc/RESOLUTION/GEN/G12/162/01/PDF/G1216201.pdf?OpenElement


Forgive an observation from someone fairly new to these discussions and with no disrespect to the participants and moderators herein.  It seems as initiatives take place across different platforms, at times in a vacuum, the participants are often called upon to re-invent the wheel.  A more open opportunity to share information across platforms, I think would allow much better use of the time and energy put into these discussions to bring substantive change. 


Kind regards,

Anonymous from
Thu, February 7, 2013 at 01.51 pm

 


Importance of broad community-based work on vocational training and sustainability


I just returned from a wonderful sabbatical in Ethiopia where I was working with the venerable Sue Edwards, founder of the Ethiopian Institute for Sustainable Development, on organic agriculture. Part of my sabbatical project was to move my charitable work with 900 rural schoolchildren in Sodorre, Ethiopia, from one of delivering goods, school supplies and food, to one of helping these rural schools and communities to be more self sufficient.


 


Sue and her staff helped the students to plant their own vegetable garden at the school, growing organic produce. We trained the teachers and young students to look after the garden and after a difficult start wherein the crops were destroyed because of summer floods, the students had their first harvest in November. With the help of drip irrigation in a region which is incredibly arid and dry, they are now growing a great variety of vegetables. The Institute is now helping the community on issues of soil conservation and filling gullys and building check dams and drenches to discourage flooding and redirect run offs in the rainy season.


 


Sue and my charity, the Ethiopian Chidren's Appeal, are now collaborating on establishing a youth environmental club to involve and sensitize youth on the importance of reforestation, soil conservation and combatting climate change. We are also helping unemployed youth to set up communal farms growing organic produce and to manage and to market their produce locally and eventually abroad. We are also planning to help unemployed mothers by training them to make environmentally friendly cookstoves and to market them in the region and to help maintain them. Another project is to train unemployed youth to repair irrigation pumps.


 

Anonymous from
Thu, February 7, 2013 at 08.46 am

The big attraction of the eight Millennium Development Goals (MDGs), or at least the first seven of these, was their near universal acceptability. It mobilized both resources and politics, both nationally and internationally, in pursuit of reducing poverty, hunger, gender inequality, malnutrition and disease.
Since they were introduced, the excitement over the MDGs fully occupied the space for development thinking. The MDG discourse – in international agencies and in national settings – appears to have crowded out the basic idea that development is about economic transformation.
The MDG discourse forgot that, while development can provide the means to reduce poverty and deprivation, development policies directed at reducing poverty do not necessarily lead to moving people permanently from less productive to more productive jobs. Poverty reduction is not the same as economic transformation. Economic development requires a new global deal which requires that countries have the policy tools to transform their economies. This is what development-led globalization entails.
Take the question of setting health targets. A debate has broken out about whether universal health coverage should be a goal. First of all, some developed countries, such as the United States, do not themselves have universal coverage as a goal in the health sector. Like many other facets of the global economy, such a goal would apply to developing countries but could exempt rich countries from a similar obligation.
Secondly, setting a goal of universal health coverage, even if possibly a basic human right, does not address the actual determinants of health outcomes, which include the usual indicators of deprivation including household poverty, but must also affordable access to medicine and an effective domestic health care system.
The availability and cost of medicine, the overwhelming proportion of which is still sourced from developed countries, has been a sore point for developing countries for a long time. Moreover, too much (as compared to the afflicted population) research and medical production are oriented toward diseases and maladies in the developed countries. Should there be agreed global goals in terms for the “right” kinds of medicines and their affordability? Which parties should accept these goals as their obligation?
Building capabilities in producing medicines in developing countries could certainly be transformative - moving the labor from less productive to more productive jobs. But this will require developing countries to have affordable access to technology, which will require easing the monopoly rights over the use technology now being granted to those recognized as their inventors.
Building effective domestic health systems will require upgrading domestic human resources and government capacities in building, maintaining, regulating, and financing the health sector. Historically, these new capabiliites have involved many of the most important aspects economic transformation. Otherwise these health systems must forever rely on the goodwill of foreign donors and private foundations.
At this point, it is really important to restore a genuine development discourse and the global community must seize this opportunity.
In fact, the idea that developed countries need only worry about poverty and the well-being of the populations in other countries, and not their development, dates from colonial times.
In the 1930s, as the scramble for colonies from the late 19th century ended, colonial powers sought to justify external control by proposing a new note of responsibility for “native welfare” which economist Arndt in 1987 described as “as quite distinct from that of economic progress or development.” For example, the Colonial Development and Welfare Act adopted by the UK government in 1939 provided for minimum standards of nutrition, health, and education in territories and trusteeships. In the same analysis, Arndt refers to a W. Arthur Lewis critique of a World War II British economic plan for Jamaica, for a failure to distinguish between “social welfare” as the raising the standard of living in the colony and “economic development.”
De-Colonizing the MDGs is necessary if the agreed post-2015 global goals are to be truly developmental. In the framework of development-led globalization, Africa is not just a continent whose extreme poverty the international community must focus on but a diverse set of countries, each with their own human and natural resources, which can be deployed toward their own development. This diversity creates enormous space for regional cooperation in pursuit of overcoming dependence on commodity exports - whose earnings are highly unstable - and establish domestic industries to provide productive jobs.

  Butch Manuel MontesReferences
Arndt, H. W. (1987) Economic Development: History of an Idea. Chicago: University of Chicago Press.

Fran Luke from
Tue, February 5, 2013 at 05.09 pm

A discussion on sustainable development and decent employment should, in my opinion, include at some point the discussion of debt at all levels and the role of the World Bank and the IMF in the debt cycle.  Is it possible to sustain development, even by the World Bank definition ("a process of managing a portfolio of assets to preserve and enhance the opportunities people face.") when we exist in debt economies?  It seems neo-liberalism, so-called free trade, has managed to enrich the elite and had the opposite effect on the rest of us.  Even In the USA, majority vote holder in the IMF, austerity measures and the effects of trade agreements and unregulated supranational corporate capitalism have and continue to take their toll. 


Across the globe governments implement austerity measures to pay this outstanding debt removing the social safety nets from their citizens.  In Greece, for instance, I’ve read a portion of the ‘bail-out’ for the Greek people must be used to purchase military equipment from Germany.  How much of the billions loaned to developing countries lined the pockets of those countries’ elites, never making to the people?  Perhaps it’s time to decide which debt is legitimate and discuss the implications of odious debt. 


As a musician, not an economist, I found this publication from the Committee for the Abolishment of Third World Debt (www.cadtm.org) quite useful.  “2012 World Debt Figures”  http://www.scribd.com/doc/116217446/2012-worlddebtfigures  In the words of Iric Toussaint, “It is immoral to pay an immoral debt.” 


Two other documents I thought worth reading:  The Trilateral Commission Report, “The Crisis of Democracy”, http://www.trilateral.org/download/doc/crisis_of_democracy.pdf  and the Lewis Powell memo, http://reclaimdemocracy.org/powell_memo_lewis/.


Regards

Amelia U. Santos-Paulino from
Tue, February 5, 2013 at 09.06 am

The post-2015 development agenda – a global new deal is what's needed

Finance-led globalisation has failed – which is our cue to forget about setting targets and adopt a development-led approach.

Anonymous from
Tue, February 5, 2013 at 08.45 am

Questions 2 & 4 raise an important observation - the primary source of regulation of the global trading environment is no longer multilateral. The frontier of new regulations and innovative trade policies is now being pushed by regional and bilateral free trade agreements (FTAs). This has two important implications for the options countries have to pursue inclusive and sustainable development. 

First, and related to Question1, trade liberalization via FTAs is a project that is accomplished at the inter-governmental level; however the task of cushioning those hurt by liberalization is left to national and local governments. This disconnect means that resource constrained governments must find their own way to create and fund social protection systems. 

For policy makers from poor countries, this disconnect might be addressed by making sure FTAs are embedded in national development strategies. This would make it easier to direct Aid for Trade resources into the projects and sectors that need it most. This would also enable negotiators go into discussions with a clear idea of what features of the FTA should be enhanced, such as technical assistance for example, or knowledge transfer. 

A second observation - related to Question 4 -  is that the regional trade architecture appears to be increasingly moving towards multilateralization. The "big bang" event for FTAs was in the 1990s. Since then, the number of FTAs has exploded, leading to characterizations of a "spaghetti bowl" where overlapping agreements are no longer efficient. But the last 10 years have seen increasing efforts towards mega-agreements that cover multiple regions and subregions. These include the FTAA in the Americas, the TPP, the EU-ACP EPAs and the recently annouced RCEP in Asia.

While none of these has yet been implemented, there is the possibility that they will supersede the existing FTAS that they encompass. If this is the case, then the international community has an unprecedented opportunity to repair the disconnect between liberalization and development outcomes and to move towards the alternative ttrade agenda referred to in Question 2. There is some precedent for a refocus of FTAs. In agreements signed in the 1990s, labor standards were rarely included. Today, most FTAs include some reference to core labor standards. 

The state of the Doha round has necessitated a review of the global trade agenda. By capturing the potential that FTAs have to push forward an inclusive trade agenda, countries can move the development agenda forward more efficiently and effectively. 

Anonymous from
Fri, February 1, 2013 at 04.28 pm

Harmonize the Anglo-sanxon and Francophone education systems would be necessary in the context of globalization.

Youth would appreciate to see their diplomas recognized all around the world.

Anonymous from
Fri, February 1, 2013 at 07.58 am

Let us first of all greetings from the highest authorities of our country, the remarkable effort that the International Labour Organisation (ILO) through its Sub-regional Office for the Sahel deploys to support our initiatives development especially in the field of employment promotion and the fight against poverty.
It is an honor and a pleasure for us to share with all the participants in this session, the Burkina Faso experience in dealing with employment issues and the fight against poverty.
Burkina Faso is a landlocked country, highly dependent on weather conditions. Its estimated population of 13 million is predominantly rural. Agriculture, the main source of activity and income is dominated by subsistence farming and traditional farming, despite the existence of cash crops such as cotton, whose income remains precarious in terms of international market conditions . Informal activities largely occupy the urban economy, while the modern type of structured activities are insufficient. In any event, incomes remain low and the country is a phenomenon of poverty he now focuses on reverse.
Since 2000, our country has made the fight against poverty the central axis of its social and economic concerns and development efforts to be undertaken. It is in this context that now are part of government thinking and action on employment.
Initiatives taken by our country to deal with challenges to employment and economic and social development concern various fields contained in the Global Agenda for Employment International Labour Office. This presentation does not purport to address all of these areas, but only a few specific aspects with regard to the agenda of the Session

Anonymous from
Fri, February 1, 2013 at 07.47 am

Hardly had the Second World War ended , through programs like the Marshall Plan Expansion started  the large corporations development  establish a new world economic order , mainly characterized by of them Globalisation markets, deregulation and the gradual delocalization financial and commercial .


 Whatever the case, the international economy is the engine of this  Humanity having as a result one significant sectoral restructuring of economic activity generally with a  increase the role of the private sector  and  redefinition of the functions of the state.  Currently, we can see  the problems before, was exclusivity of  developing countries (Unemployment, Poverty, inequality, exclusion ...)  today, lesser extent  also affect industrialised countries.


If we WANT reducing the problem under, my point of view,   we are forced to make a coordinated geopolitics action,  respecting the legality of the free market, for the purpose of creating employment to secure social cohesion through Reducing poverty and socio-economic inequalities between countries

Anonymous from
Fri, February 1, 2013 at 07.13 am

1)   What are the employment implications of current trade patterns? Which groups and sectors are the most affected in different countries, and how is this affecting political and social responses?


Current trade pattern has objective of trade liberalization to facilitate well-organized producers of goods and services to gain wider market access throughout the world supplemented by putting in place, a range of facilitating environment that include, (1) free movement of capital across countries; (2) competition and transparency in government procurement; (3) simplifying trade procedures, known as “trade facilitation”; and (4) recognition of intellectual property rights.


Current pattern of trade tend to:


(a)        Eliminate employment on large scale in high wage countries;


(b)        Lead to curtailment of social protection to workers in high wage countries;


(c)        Creation of sweat shops in manufacturing in low wage countries;


(d)        Trampling of workers’ rights in low wage countries;


(e)        Dismantling of decent work and living wage conditions throughout the world.


2)   Given the current state of the Doha Round, is there an alternative trade agenda that can be pursued at the regional and international levels in support of inclusive and sustainable development?


Alternative already exists at international level to address the problems and issues concerning workers.  The forum is International Labor Organization, which have codified norms for decent employment supplemented by economic and social policies to be pursued by national governments.   Unfortunately, some of the governments including large democracies such as the United States, China and India have not yet ratified ILO Convention that recognize the rights of workers to freedom of association and to collective bargaining.


 


Doha Round and objective of trade liberalization is not the appropriate forum that can support  inclusive and sustainable development. 


 


3)   What reforms to the international financial system are needed in support of an inclusive and sustainable development agenda? Are such reforms possible given the power and influence of financial markets?


 


Inclusive and sustainable development agenda is possible by strengthening national governments to become more democratic and inclusive.  United Nations can play active role in promoting truly democratic governments.  For this purpose, the UN itself must be reformed to become far more democratic.  The vestige of history that created the UN following World War II led to usurpation of superior rights by victorious countries.  This rationale is no longer relevant.


 


4)   Is there really a crisis in economic multilateralism? If so, where does responsibility lie? Can the UN play a more positive and dynamic role in revitalizing the multilateral economic architecture?


A reformed UN can play more positive and dynamic role in revitalizing the multilateral economic architecture.

Anonymous from
Fri, February 1, 2013 at 02.28 am

Thanks for raisng key issues concerning development.I wish to ask the follwoing questions to the readers of this forum..the present development models leading to globalization in the world has failed to be inclusive or leading to one world or globe(most desirable).I see the present consumer/market centered development models would lead severel worlds within this globe filled with disparity and discrimination.We need development models which results in a world which bound by human values rather  a market driven uniformity in where in everyone uses similar tooth paste and cold creams!I would like challenge the very intentions of market driven uniformity and leading to global village which can destry the stereghths ,local skills,diverse ways of leading life,quality of life which is unique to each community rather measuring with GDP or Purchase power of people.

Dr Indumathi Rao

Anonymous from
Sat, February 2, 2013 at 07.51 pm

I support your comments Dr Rao.  I agree GDP does not measure the broad range of the way human beings live and work. The ecosytem with mother nature's services such as water and clean air are not accounted for. Neither does it measure the reproductive work done by women in any real sense. Informal work, unpaid work, gift work is not measured in this construct. We have to find new ways of valueing and working with a set of principles. I am interest in the way Bhutan is working with Gross National Happiness GNH.It seems to include factors and values that encompass much more than the current idea of economic growth such as environmental. cultural and social measures.


Slowly the triple bottom line is coming to the fore in measuring systems. Growth that damages the environment and ecosytems has a down side when the industry fails and people are out of work, no pay, no support for their families, disruption of life to shift to where work is and so forth all costs to the private sphere. Eventually the cleanup funded maybe by governments from public money is again seen as good for GDP. It does not make sense. Sustainable development and management of that development as well as community particpation with process leads to some balance.


Louise

Anonymous from
Thu, January 31, 2013 at 04.27 pm

Is the laissez-faire priciple proposed by Smith, Ricardo, working?  

Trade for the betterment for all?  Is this an ideal that cannot be achieved?  

Although there was never a promise of equity in the global system, the balance or gains from trade 

are too extremely unequal, even though gains are made.  As in politics, is it not more secure to have 

a financial hegemon to lead the world with democratic institutions in place?

Anonymous from
Fri, February 1, 2013 at 06.58 am

The citizenship is one of the important factor humab social and economic develoment in any country, therefore there is a need of educating the people and to consider gender equality in easuaring that there is equal sharing of   national resources  within the nationa and human rights are respected.

Rafael Barrio from
Wed, January 30, 2013 at 05.04 pm

Globalization, Unemployment and Vocational Choice


I think that trade liberalization and globalization of the economy favoured by rapid technological developments produce economic development opportunities for countries but also cause instability and employability difficulties for a significant part of the population: generally young,  women’s, low-skilled workers, collective of people over 45 years ...


The current thinking on the future of work stating that the survival of businesses in a global environment require greater competitiveness and needs  most qualified staff that in local or regional markets seems not fully confirmed because there another reality that suggests the fact that in some countries the occupational structure remains largely an offer of low-skilled jobs, mainly in the field of agriculture and services, where give as paradoxes  "the youth more prepared in history country's recent and one of the highest unemployment rate of its history".


For now, we can conclude that neither the market has sufficient capacity to absorb the number of unemployed or the institutions able to ensure "the right and duty of all citizens to work."


Strategies of growth policies in the short term as more orthodox: a) reducing the welfare state and increased consumption, while measures are implemented for the integration of the unemployed into the labour market or b) the reducing workforce through extraction people of the labour market (e.g. over 55 years) may lead to a split in the labour market (necessary or surplus) if stretched too in time.


Perhaps we should evaluate third ways with other long-term strategies that seek to adjust existing resources to opportunities that are appearing through modifying the current concept of work and a new organization of the same: job sharing (community activity) and employment (gainful employment), disconnect between social income and labour income...


We can argue this statement through a brief tour of the concept work that society had along history


  •  Primitive societies: Neolithic to not start separation between work and live

  •  GreeceandRome: Opposition work (labor) pleasure (Otium). The task of ensuring the material needs should make slaves only institutionalization of slave labour allowed free citizens engage in intellectual work

  • From feudalism to medieval industry: it accentuates the division between mental and manual labour. Separation between field work and the city (artisans, scholars and traders)

  • The modern age: Two different religious concepts a) the work as cargo, annoyance, disappointment and suffering b). Work as industriousness and duty

  • Seventeenth and eighteenth centuries: the industrial revolution in the work happens to have an economic category. Is a delightful well those people who are equipped and can be bought and sold

  • Industrial society:S XIX: social categories based on the work. Considered the essence of man; industrial work vs. spiritual work (political, artistic, philosophical systems ...)

  • Employment and welfare state: consider work as a right and duty of all the citizens. The main indicator is the universal declaration of human rights (1984)

  • Postindustrial society: developin countries in terms of the amount of the active population is engaged in each sector

  • In conclusion I would say that today, specifically focusing on some countries the European level, we have a currency crisis and a supply market (where the production of goods and services exceeds consumer demand) that leads to alarming rates of unemployment, with corresponding negative social impacts, such as increased marginalization, mainly young people, to an increase in precarious employment and a greater demand for qualification to work, causing mainly based career guidance their efforts to develop strategies to facilitate the employment in highly competitive markets and often remote geographical origin of the applicants.

Based on the recent experience of the key features and providing occupational scenarios[1]. In a future career guidance may need to change the approach stable jobs, in terms of content and organization, along professional life and emphasize the development of skills and strategies to help manage the discontinuity of careers and possibility of self-employment.


 


 


 


Rafa 


Technical of public administration
Recognition of research proficiency
Post graduate Business Administration


Bachelor's degree in Philosophy and Education





[1] 1600 million jobs will be needed over a period of 15 years to maintain current employment rates - World Bank report on development prospects 2013 -


 

Anonymous from
Mon, January 28, 2013 at 04.04 pm

1. Most least developed countries and lower middle income countries have diguised unemployment of over 50 per cent, which is called underemployment and the ILO calls "vulnerable employment." If there is an unemployment crisis in developed countries today, there is great unemployment depression in developing countries; current trade patterns are only part of the problem. I see a stronger sensitivity when developed countries are in crisis than toward the long-term employment crisis in poor countries


2. To form a trade group with the voice and an agenda of developing countries' needs and demands, this is an alternative to improve effectiveness in the negotiations. Larger presence in decision making of productive organizations at local and national levels are also necessary.


3. Same; regional cooperation and strengthening of financial institutions from the South


4. Yes, there is a crisis on formal multilateralism; real multilateralism is in the making, which needs stronger presence of civil society organizations of all kinds in regional cooperation organizations from the South (which should  also strengthen their links).


4.

Anonymous from
Mon, January 28, 2013 at 03.16 pm

Pour "growth and employment in the post-2015 development agenda",concernant les couches sociales affectées notamment les populations autochtones (pygmées, Mbororo,...), les handicapées, les jeunes diplômés et non diplômés, les jeunes filles mères et les femmes, les personnes vivant avec le VIH/Sida, les producteurs agricoles, pastoraux et d'objets d'art, un ensemble de mesures susceptibles d'améliorer leur condition doit couvrir les aspects ci-après:

1. Renforcer la gouvernance et les institutions de production agricole et animale, de transformation économique, de commerce et d'emploi pour soutenir l'autonomisation et la professionalisation des couches sociales affectées;

2. Identifier les moteurs et les obstacles à la transformation économique, à la production agricole, à la transformation économique, au commerce et à l'emploi pour un développement durable;

3. Renforcer le rôle du secteur privé en ce qui concerne les enjeux identifiés sur les moteurs et obstacles;

4. Mettre un accent sur les perspectives et les positions africaines sur les moteurs et obstacles à la production économique, à la transformation économique, au commerce, à l'emploi et au développement durable pour soutenir l'autonomisation des couches sociales dans la croissance économique et l'emploi.

Anonymous from
Sat, January 26, 2013 at 08.21 pm

Dear members eforum, I think thatardly had the Second World War ended , through programs like the Marshall Plan Expansion started  the large corporations development  establish a new world economic order , mainly characterized by of them Globalisation markets, deregulation and the gradual delocalization financial and commercial .


Best Regards


Rafa


 


 


Whatever the case, the international economy is the engine of this  Humanity having as a result one significant sectoral restructuring of economic activity generally with a  increase the role of the private sector  and  redefinition of the functions of the state.  Currently, we can see  the problems before, was exclusivity of  developing countries (Unemployment, Poverty, inequality, exclusion ...)  today, lesser extent  also affect industrialised countries.


If we WANT reducing the problem under, my point of view,   we are forced to make a coordinated geopolitics action,  respecting the legality of the free market, for the purpose of creating employment to secure social cohesion through Reducing poverty and socio-economic inequalities between countries

Kerstin Danert from
Sat, January 26, 2013 at 05.26 pm

1) What are the employment implications of current trade patterns? Which groups and sectors are the most affected in different countries, and how is this affecting political and social responses?

Let me echo the comments placed by Curtis to question 1 - we have to fundamentally ask ourselves the question of what sort of a world we are looking for, and look at how this can be beter supported or inhibited by trade, and what sort of regulations and other mechanisms are thus required. Less inequality would appear to be reasonable. It seems to me that globally, those who are doing the worst off in terms of trade are rural farmers in low and middle income countries. They are the custodians of the environment, and our providers of food.  And yet the way that trade works means that they generally get the least share from everyone. And they have hardly any voice. Is this going to be allowed to continue for ever?

Anonymous from
Sat, January 26, 2013 at 03.47 am
TECHNOLOGY\SKILL TRANSFER

 

As Post2015 events unfold ,we from Project Hope Nigeria recommends deliberations and priority efforts on Strenghtening Skill and Technology Transfer to developing nations as a dependable way of poverty reduction and wealth creation.

 

Growth and Global Development can hardly take place when nations, organizations and individuals who are privilege to have skills horde or keep such only to themselves. We need to distribute knowledge globally if we must remain one indivisible family

 

John Fajimi

Project Hope Nigeria 
Anonymous from
Fri, January 25, 2013 at 05.24 pm

1) What are the employment implications of current trade patterns? Which groups and sectors are the most affected in different countries, and how is this affecting political and social responses?

Neither employment nor trade should be the goals behind economic relations. The question wrongly suggests that they are the only goals. Instead economic relations should be aimed at achieving greater equality and equity among states and among all individuals. Current trade agendas that focus on employment creation or growth in trade often entrench inequalities. While we accept that employment is one means of providing individuals and families the resources they need to live well, it is not the only way nor is it often a fair way. For example, someone who works for a company that exploits natural resources in an unsustainable manner while earning a living wage, might actually be causing significant harm to society. Strategies should be encouraged that educate people longer and better, encourage non-paid contributions to society, and conserve resources.

Current trade relations create a bias against the most vulnerable (least paid, least trained) workers who are often least able to voice their need for a political and social response that provides protection for their basic human rights.

2) Given the current state of the Doha Round, is there an alternative trade agenda that can be pursued at the regional and international levels in support of inclusive and sustainable development?

Instead of a trade agenda that entrenches inequalities, we need an agenda that seeks to overcome them. This requires the introduction of measures to put people first and not merely strive for economic growth. Such a trade agenda should be explicitly dreiven by concern for equitable sustainable development for all people and restrained by international human rights law.

3) What reforms to the international financial system are needed in support of an inclusive and sustainable development agenda? Are such reforms possible given the power and influence of financial markets?

First, we need to agree on a definition of inclusive and sustainable development that is based on a holistic concept of human development. Second, we need to put significant controls on financial markets and those who benefit most from them to ensure a more equal distribution of global wealth. Third, we need to ensure that excess profits are eliminated and that profits from the use of our planet's resources are distributed more equitably.

Concretely, such achievements will require serious consideration of taxes to redistribute income, the acceptance of the fact that we live on a planet of finite resources, and acceptance of the fact that sustainable development therefore requires significant concessions by those who currently use a disproportionate amount of our planet's resources.

4) Is there really a crisis in economic multilateralism? If so, where does responsibility lie? Can the UN play a more positive and dynamic role in revitalizing the multilateral economic architecture?

There is an economic crisis because of our commitment to a model of economic relations that does not serve he majority of people, but instead best serves a small number of elites. The UN is a forum that must play major role in eliminating the inequalities inherent in our current economic system and creating a more equitable system of economic relations where by the success of the system is measured by how well it protects the most vulnerable and ensures them a quality standard of living. 

Yorgos Altintzis from
Fri, January 25, 2013 at 04.34 pm

Hi to everyone,

I would like to kick off the conversation starting with question 1. I am coming from the international trade union movement, so, in my response I am focusing on trade and employment.

From experiences and research it seems that trade opening has mixed results on employment. ICITE was a collaborative initiative between many international organisations that tried to answer this question. The results show that trade opening in general creates some skilled jobs in both trading parties, although mostly in the most developed. It also dislocates or makes technologically obsolete many more jobs that were held by unskilled or low-skilled persons. The biggest impact and adverse effects are on unskilled persons. Also, given this group's inelasticity to re-education (mainly because unskilled people are not well educated and often illiterate) the impact on them could be catastrophic for their livelihoods. Usually they are driven into a situation where they would accept to work for less. Similarly, companies (usually MSMEs) that cannot compete after the trade opening retreat in the informal sector so as to survive by avoiding taxes, employment contracts and other costs. 

I am sure that trade opening should be accompanied by strong social protection, active labour market policies and public spending that creates jobs but this is only the half truth. The other half would be that countries should seriously assess trade-opening impacts before they decide to open up new sectors, remove 'obstacles' to trade, lower tariffs and ban export duties. These are all measures necessary for structural transformation. Trade may create new wealth, but it doesn't tell us who owns this new wealth. 

On questions 2 and 4, I would simply point to the name of the round: the Doha Development Agenda. It is imperative that WTO starts discussing development including LDCs, flexibilities for developing countries, agriculture, asymmetric and less-reciprocal committments for these countries that are not yet competitive enough to open up. Concensions there would create a more positive climate to discuss anything that lies in the back of the head of developed countries.

Question 3, I note with interest the way the question is put.. "given the power and influence of financial markets". Well, I want to believe that I live in a world where governments regulate and exersize their powers for the benefit of their people. On the other hand, sovereign states failed dramatically to change the 'busines as usual' model even when popular pressure was on its peak (in 2008-2009). Those who are too-big-tofail are also too-big-to-jail. People are still furious for they had to pay the excessive risk-taking and unresponsible practices of the financial sector. Well, I won't say more on this, except that some shy steps are now taken at the FSB. However, a failure for the FTT on global level, continuous tax evasion/avoidance, tax heavens, secrecy jurisdiction does not give much space to be an optimist.

I will be glad to hear from you. 

best,

Yorgos

 

 

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