Guest blogger Jean-Pierre Lehmann sets out the challenges and priorities for the G20 and developing countries amidst the global economic crisis.
In the last 30 years since the onset of the Chinese open economic reform program, the world has experienced profound systemic shifts, with arguably more in the past two centuries. Much of this change/transformation has had highly positive impacts. The misnamed “emerging economies,” many of which in fact are old civilizations with long histories of sustained and dynamic trading activities, have definitively ended the long period of exclusive Western global economic dominance. As the global market has expanded well beyond anyone’s imagination, the world, especially the developing world, has experienced unprecedented rates of growth. However, as Jean-François Rischard has argued in his compelling book High Noon: Twenty Global Problems – Twenty Years to Solve Them (2002), while markets and new information technologies experienced exponential change, the development of institutions and mentalities has been linear at best. This dissonance is at the origin of the gaping global governance gap that characterises the world today; it is well illustrated by the continued failure of the WTO Doha Round negotiations, extending over eight years-in fact, for virtually the whole of the 21st century to date! This is not an auspicious first decade to a new century.
In the high growth era, to many, the governance gap seemed not to matter. In the triumphal phase of an open market and seeming unfettered business opportunities, talk of governance, institutions, and rules was perceived as boring, passé, and irrelevant. At the “high level” trade session in Davos in 2006 – during the summer of which Doha experienced one of its regular annual “collapses” – Brazilian Minister Celso Amorim noted how the room was virtually empty, with the audience limited to officials and policy wonks.
In 2008, however, in addition to the underlying systemic shifts, the world experienced the most powerful seismic shocks since the Great Depression. Never has the world economy simultaneously entered such uncharted and turbulent waters. Today, it is clear that the global governance gap matters a lot! Though the G20 smacks of ad hocery and is lacking in institutional and legal foundations, it is about as good as we are going to get in the near term. One must hope, therefore, that this governance gap will at least be partially filled and that the right policies and actions will emerge.
In doing so, it is especially important that the G20 displays the ability to think in the reasonably long term. Whatever the scenarios may be, the systemic shifts will continue. These refer not only to the new economic players, but also to issues related to the environment, health, employment, migration, and notably to demographics. By 2015 (a mere six years away), the population of the developing world will have increased by 750 million (which is 30 million more than the current total population of the G7), 150 million of which will be born in the world’s poorest countries. In sharp contrast, over the same period, the developed world will see its population increase by 30 million. These demographic forces clearly have immense implications in every respect. Employment is obviously one. It has been calculated that in the Middle East and North Africa some 100 million jobs need to be created over the course of the next two decades simply to maintain the current level of employment.
A point should be made here that especially the G7 European members should consider. Europe also experienced demographic growth in the past comparable to what one sees today in the developing world. Between 1750 and 1950 Europe had the old world’s fastest rate of population growth, having expanded by more than a multiple of three. An important safety-valve for Europe, however, was migration to the “new world.” In 1750, the total population of the “new world” (including the Americas and Oceania) was 20 million. Two centuries later, it was 352 million-an expansion of over 330 million. While some of that increase was accounted for by domestic births and part by the slave trade, overwhelmingly the growth came from European migration. The safety-valve notwithstanding, during these two centuries Europe still managed to have a series of bloody revolutions, wars, and scenes of savagery beyond human imagination.
A major preoccupation of Europe’s G7 members at the G20 meeting therefore must be to recognise these demographic forces and pressures. G7 members must also remember that a combination of forces in the 1930s – including demographic pressures in Europe and Japan, rural unrest, poverty, and the social and political crises generated by the economic crisis of 1929 and the protectionist policies that ensued – plunged all seven of them, along with Russia, into the most horrific periods of ideological extremism, human savagery, and war that the world has ever witnessed. There was also a gaping governance gap in the 1930s. This was not, however, due to the fact that institutions were lacking – there was the League of Nations – but that the legitimacy and credibility of the institutions was lacking. In their excellent book, Power and Plenty: Trade, War and the World Economy in the Second Millennium (2007), which G20 leaders should read, the authors Ronald Findlay and Kevin O’Rourke note how the League convened a series of conferences “which had as their explicit goals the abolition of [trade] restrictions” and which invariably produced pious declarations. They quote a League report retrospectively written in 1942: “the international conferences unanimously recommended, and the great majority of the Governments repeatedly proclaimed their intention to pursue, policies designed to bring about conditions of ‘freer and more equal trade’; yet never before in history were trade barriers raised do rapidly or discrimination so generally practiced” (p.444).
If this sounds eerily familiar, it is because it is eerily familiar. G8 meetings have been prone to pious declarations with no ensuing action. How often have G7 leaders expressed their “strong commitment to a rapid and successful conclusion of the Doha Round”? And the refrain appeared yet again in the Washington, DC November G20 declaration, notably in the section entitled “Commitment to an Open Global Economy” (paragraphs 12 to 16), all of which are blessed with fine words and good intentions, without, however, any noticeable progress having been made.
To quote one example of the piety: in paragraph 14, the G20 leaders “reaffirm the importance of the Millennium Development Goals (MDGs).” What does that mean? It is now five months since this noble affirmation, the deadline for meeting the MDGs is only some six years away, clearly they are important, and yet…
An additional critical point has to be made. It was noted above that Europe in the past experienced population growth comparable to what is seen today in many developing regions and that in Europe in the past, as in Latin America, Africa, and Asia today, this resulted in socio-political turbulence, ideological extremism, fanaticism, and warfare. One major difference, however, was that the climatic conditions and the environment generally were quite benign. Of course Europe – and subsequently the United States and Japan – began fouling up the environment in the course of the 19th and early 20th century revolutions, but this had only marginal effects at the time – the cumulative effects came later. The planet did not face imminent environmental catastrophes or climate change as we know the world faces in the 21st century. And we also know that some of the regions that are both poorest and with the highest population growths are also the most vulnerable to climate change.
To dismiss warnings of possible disasters on a hitherto unknown and unimaginable scale is blatant irresponsibility. This does not mean the world will forcefully meet its apocalypse. But it does require that leaders coordinate policies and especially that rhetoric should not remain un-translated into reality. The words in paragraph 13 of the November G20 summit are quite explicit and strong with respect to seeking conclusion of the Doha Round. However, a month later, WTO Director General Pascal Lamy renounced the plan to convene a ministerial meeting on the grounds that political will was lacking. Did the political will suddenly evaporate immediately after the meeting? Or was it lacking from the beginning and hence the words were meaningless?
The Doha Development Agenda, as has often been stated by Lamy and others, is a key barometer of global collaboration. To ask whether we can meet the quite daunting challenges of the Copenhagen climate agenda if we cannot meet the far more straightforward challenge of the Doha trade agenda has become somewhat of a sutra. But it remains highly apposite.
The challenges the planet faces on all fronts are truly daunting. A priori there is no reason why we cannot envisage a far better world emerging from this crisis. But this will depend on the quality and especially acts of global leadership. Rarely since the end of World War II can a meeting have been as important as the one being convened in London on 2 April. Joseph Stiglitz in 2002 (in Globalization and Its Discontents) wrote that the global market economy finds itself at a crossroads, as it did at the time of the Great Depression. The direction that the world takes, which road it will embark upon, will very much depend on decisions taken and implemented by the G20 in April. They must be conscious of the mammoth task that faces them and also of how history will judge them.
Following the fiasco of the WTO ministerial in Seattle in 1999, the consensus among pundits was that the Doha rendezvous would be a failure. In fact, it was quite a success: China was formally admitted as a member of the WTO after sixteen years of complex and protracted negotiations, and the Doha Development Agenda was launched. Of course what the pundits had not expected was that just a few weeks before there occurred 9/11. The crisis of September 11th provided the opportunity for the world to demonstrate solidarity and the political will to move the agenda forward. Alas that window of solidarity/commitment was shut soon afterwards and in Cancún in 2003 it was bolted.
The current crisis is obviously very different from that which followed 9/11. However, it is a crisis and people, including G20 leaders, repeat another current popular sutra, namely that a crisis represents an opportunity. Thus the London G20 should completely and irrevocably commit to completing Doha by the summer. To that end, it should convene a small committee of perhaps a dozen Eminent Persons (someone like Amartya Sen would make an ideal chair), who would be mandated to provide a final conclusion to Doha, which WTO members would accept without further discussion and implement.
Concluding Doha is important for global trade, but it is far more important as a symbol and signal of international cooperation. It would unplug a major bottleneck in global public policy and could serve as a model, and certainly an encouragement, for cooperation in other areas. There will be much resistance and no doubt the usual suspects among G20 leaders will say they cannot accede to such an act or relinquishment of sovereignty. As this will be Barack Obama’s first major global policy meeting, all he need say is: “Yes we can!”
Jean-Pierre Lehmann is Professor of International Political Economy, IMD, and Founding Director, The Evian Group.
This article is part of a forthcoming compilation on a trade agenda for G20 leaders edited jointly by Dr. Carolyn Deere Birkbeck (Global Economic Governance Programme) and Ricardo Meléndez-Ortiz (International Centre on Trade and Sustainable Development (ICTSD)). The compilation will be published in mid-March 2009.
