Latest update June 20th, 2026 1:58 AM
Latest News
- Lindsayca routing US-millions for foreign workers through payment firm, allegedly dodging tax and labour laws
- Exxon refuses to tell Guyanese cost of Ogle HQ being paid for with country’s oil
- Citizens Bank opens new branch in Bartica
- Israel kills ‘a child a day’ on average in Gaza despite ceasefire, UN says
- President Ali unveils bold plan to hand Guyanese greater stake in mining industry
New Global Order?
Last week, Prof Dani Rodrik of Harvard offered the following intervention for purposes of stimulating debate on the present global financial crisis. He made several points that we have reiterated earlier.
There is just possibly a silver lining for developing nations in the present crisis, and it is that they may well emerge collectively with a much bigger say in the institutions that govern economic globalisation. Once the dust settles, China, India, Brazil, South Korea, and a handful of other “emerging” nations will be able to exercise greater influence in the way that multilateral economic institutions are run. And they will be in a better position to push for reforms that reflect their interests.
This will be the result of two related forces. The first is that the US and Europe will come out weakened from their financial crises, both as economic actors and as upholders of the policy of intellectual orthodoxy. They will be unwilling or unable to provide the kind of leadership that sustained multilateralism in the decades that followed the Second World War. Developing nations will have to step up to fill in the gap.
The second is that the relative weight and importance of developing nations in the global economy will have risen even more. Many of the leading financial institutions of the West – those that have not been nationalised – as well as some important industrial enterprises will remain at the mercy of capital from China or the Gulf states. In trade, the present round of global trade negotiations has already demonstrated that if rich nations want developing nations to play ball, they will need to let them shape the rules of the game.
To make the best of this outcome, developing nations will have to have a good sense of their interests and priorities. First on the agenda must be new rules that make financial crises less likely, and their consequences less severe. Left to their own devices, global financial markets provide too much credit at too cheap a price in good times, while they deliver too little credit at bad times. The only effective response is counter-cyclical capital-account management. This means discouraging foreign borrowing in good times, and preventing capital flight in bad. Instead of frowning on capital controls and pushing for financial openness, the IMF should be in the business of actively helping countries implement such policies. It should also enlarge its emergency credit lines to act more as a lender of last resort to developing nations hit by financial whiplash.
Second, the crisis is an opportunity for achieving greater transparency on all fronts, including banking practices in the advanced countries that facilitate tax evasion in the developing nations. Wealthy citizens in the developing world evade more than a hundred billion US dollars’ worth of taxes in their home countries each year, thanks to bank accounts they maintain in Zurich, Miami, London, and elsewhere. Governments of these nations should ask for, and be given, information on their nationals’ accounts.
Third, developing nations should also push for a Tobin tax – a tax on global foreign currency transactions. Set at a small enough level – say 0.25% – such a tax would have little adverse effect on the global economy while raising considerable amount of revenue. At worst, the efficiency costs would be minor; at best, the tax would discourage excessive short-term speculation. The revenues collected – which would easily amount to hundreds of billions of US dollars annually – could be spent on global public goods, such as development assistance, vaccines for tropical diseases, and the greening of technologies in use in the developing world.
Fourth, in trade, developing nations should push to enshrine the notion of “policy space” in the Constitution of the WTO. The goal would be to ensure that developing countries can employ the kind of trade and industrial policies needed to restructure and diversify their economies and set the stage for economic growth. All countries that have successfully globalised have used such policies, many of which are currently not allowed under WTO rules (e.g. subsidies, domestic-content rules, reverse engineering of patented products).
Policy space is also needed to ensure that important social and political ends – such as food security – are compatible with the rules of international trade. Developing nations should argue that recognizing these economic and political realities makes the global trade regime not weaker and more susceptible to protectionism, but healthier and more sustainable.
Share this:
Discover more from Kaieteur News
Subscribe to get the latest posts sent to your email.