The West Strikes Back

Robert H. Wade, guest blogger

In 2008, Triple Crisis blog partner GDAE gave Wade its prestigious Leontief Prize for Advancing the Frontiers of Economic Thought for his outstanding contributions to the economics of development. Today, GDAE awards the 2012 Leontief Prize to Michael Lipton and C. Peter Timmer for their critical work in the economics of food and agriculture. See full event details.

It is a commonplace to say that the world economy has become “multipolar”, as some developing countries gain a rapidly increasing share of world income. The implication is that the post-Second World War order, in which countries of the West govern the world economy, is now over.  We are in the middle of a transition to a new world order in which governments of developing countries have a substantially larger voice in setting global norms and rules.

The negotiations going on in Geneva over the mandate of the United Nations Conference on Trade and Development (UNCTAD) provide a rude shock to this conventional wisdom. UNCTAD is the UN agency, which, since its establishment in 1964, has been most responsive to the preferences of developing countries on the subjects of debt, trade, and finance. It has often voiced a second opinion about issues on which the International Monetary Fund (IMF) and World Bank – governed largely by western governments — consider themselves to be authoritative.

UNCTAD’s mandate for the next four years is due to be agreed at a ministerial conference in Doha, April 21-26.  The text is now under intense negotiation in Geneva.  The initiating text was prepared by the chair of the Preparatory Committee, which is comprised of a small number of representatives of groups of countries. The draft text authorized UNCTAD to continue its research and advice on subjects including the current Great Slump, destabilizing capital flows, exchange rate misalignments, the volatility and financialization of commodity markets, special and differential treatment for developing countries, regional financial and monetary cooperation, and the need for reform of the international financial and economic architecture.

The western governments are mounting a determined attempt to amend the text so as to exclude UNCTAD from virtually all these issues. They say that these issues are beyond UNCTAD’s “comparative advantage”, that they are the prerogative of the IMF, World Bank and WTO, that having different international organizations saying different things about them only causes confusion. On the other hand, the western governments are keen for UNCTAD to work on new issues including good governance, democracy, freedom, gender, youth, and UNCTAD organizational reform. They have pursued a strategy described by the Swiss Ambassador to UNCTAD in mid March as “creating headaches… but also chaos [which is] the most fertile basis for creativity when it inspires us to find solutions outside the box…”

Unfortunately the developing country group in UNCTAD, known as the G77, is on the defensive, while major developing countries appear to give greater priority to their new opportunities for negotiating in small groups with the major developed countries, including through the G20 process. So the G77 as a group has been largely reactive to western governments’ strategy, and drawn in to negotiate on the West’s chosen terrain without the western countries negotiating seriously on the issues that the G77 want UNCTAD to work on.

In the wider scheme of things this might seem like a storm in a teacup, given that UNCTAD is an ideas and advice organization rather than a spending organization. But to repeat, UNCTAD is the one UN organization which has articulated arguments which qualify the West’s central argument about development, that “what is good for us in the West – free trade, free capital movements, tight intellectual property protection, and the like – is good for you developing countries too”.  Ironically, western governments and western-dominated organizations like the IMF and World Bank, which preach the virtues of competition for others, are trying to close down competition in the realm of policy ideas and advice. Development-oriented civil society organizations in the West should take heed of what is happening now in Geneva, and mobilize their troops to put pressure on their governments to stop trying to silence UNCTAD, which would leave the IMF and World Bank with a monopoly of “official” global opinion about core macroeconomic issues.

Robert H. Wade is professor of political economy at the London School of Economics.

One Response to “The West Strikes Back”

  1. Wade has a crucially important message. UNCTAD provides diversity and competition in the market place for ideas and policies. Diversity and competition are just as important in this market as they are in the markets for goods and services.

    The global financial crisis should teach us that institutions are prone to many forms of “capture” — including regulatory, intellectual and political “capture.” The lack of diversity increases the risk of capture.

    UNCTAD endorsed some of the heterodox approaches to development to which emerging market countries owe their prosperity. UNCTAD’s endorsements were voiced over the objections of institutions which Western governments now claim have a “competitive advantage” in various arenas relating to finance and trade.

    Emerging markets, including those that bring their clout to the G20, have a responsibility to create a “ladder” of development for less prosperous countries to climb. Disabling UNCTAD would be a step toward “kicking away the ladder” (the phrase coined by Ha-Joon Chang). Emerging markets should work with their allies to protect UNCTAD’s existing remit.