The World Bank sets its sights on alleviating poverty as a rising Asia challenges the United States hegemony, writes Ben Turok
What might have been a rather soporific jamboree of 14000 finance ministers, officials and bankers in Hong Kong last week was brought alive by a rude and abrasive exchange between the Premier of Malaysia, Dr Mahathir Mohamad, and George Soros, the international tycoon.
Each had their turn to address a capacity audience on the nature of globalisation, and what they said had a profound impact on the rest of the conference.
Mahathir complained that although Malaysia had followed sound economic programmes and been very successful over the past three decades, it had suddenly suffered a serious reversal due to currency speculation in Thailand and the rest of the Asian Tigers.
Indeed, Malaysias stock markets have fallen 40% this year and the ringgit was devalued by 20% in a short time. He blamed international currency speculators and called for the control of trading in currencies. He also alleged that the West wanted to stop Malaysia trying to catch up with their superiors.
In a biting reply, Soros argued that it was impossible to ban currency trading; it was intrinsic to the global capitalist system, which brought enormous benefits but was inherently unstable. It is marked by boom or bust patterns and the ever- present risk of breakdown. There is no equilibrium.
This message of the enormous risks of globalisation was then taken up by most speakers curiously enough, even by Michael Camdessus, chief of the International Monetary Fund (IMF), and an arch-exponent of globalisation. The crisis was foreseen and preventable, but still struck with full force, he said. In a special meeting requested by the African delegations, Camdessus reiterated that globalisation was an irresistible process, but each country should follow its own pace.
Before opening up fully, a country should ensure there was sustained stability, that it is competitive, and sound and prudential frameworks were in place. If these conditions are not met, domestic distortions may worsen and have a contagion effect on neighbours.
In an inspired address James Wolfensohn, president of the World Bank, gave a strong signal of a change in World Bank thinking so as to address the needs of the poor. He said that three billion people live on less than $2 a day.
They do not want charity but inclusion in society and an opportunity to earn a living. Since official development aid is now at the lowest level for 40 years, the World Bank had a special duty to direct attention to alleviating poverty, and to do so in partnership with private capital where appropriate.
We are mainstreaming social issues human and social development and the bank is restructuring to achieve these goals.
But Wolfensohn also drew attention to the fact that economics is fundamentally changing the relationships between the rich and poor nations, something that was quite evident at the conference itself. He noted that by the year 2020, China, India, Indonesia, Brazil and Russia would have a 50% greater share of world trade than Europe.
Indeed, Asia took centre-stage at the conference. This was partly because the venue was Hong Kong, partly because of the debate over Malaysias plight, but also because of the sheer weight of Asia in world trade.
But it was the presence of Li Peng, Premier of China, which gave a special significance to Asia. He reported on two decades of reform, opening-up and socialist modernisation, which will continue to establish a socialist market economy growing at 8%.
Sino-foreign joint ventures, which represent a kind of mixed economy now comprise 20% of Chinas total gross domestic product. Further opening-up measures such as tariff reductions will follow. Also, China called on the World Bank to assist it in enhancing its public sector enterprises.
The implications of that statement made by the leader of the largest communist party in the world, which controls a largely public sector economy, took some time to sink in.
But Li Peng went on to warn that the overall strength of developing countries was increasing remarkably and had smashed the monopoly of world affairs by a few countries and lent a powerful push behind the movement towards a multi-polar world.
He went on to advance six propositions, which are worth recalling since they are bound to be taken up at future meetings of Third World groupings, whether at the United Nations or elsewhere.
First comes the need to pay full attention to the needs of developing countries, and the developed world should take a long-term view on this.
Second comes extensive co-operation on the basis of mutual benefit. Bullying of the weaker by dint of ones power or wealth should not go unchecked.
Third, countries should be free to choose their own social system.
Fourth, countries should learn from each other.
Fifth, they should choose a development path suited to their own national conditions.
Sixth, the international community and international financial institutions should play a positive role in maintaining international financial stability.
Li Peng concluded that the World Bank and IMF had played a constructive role in promoting world economic growth and must continue to do so for the benefit of all nations in a multi-polar world.That the role of the fund and the bank, including its surveillance function, will now grow is beyond doubt.
The conference endorsed greater resources for both in quotas and special drawing rights (SDRs) and the IMF will no doubt now be empowered to become pro-active in promoting the liberalisation of capital movements for the first time. It was mooted that a fund of US$100-billion be set up and we shall hear a great deal more about this soon.
For those who have long contested the role of the IMF and World Bank, the new trends in globalisation and the over-arching roles of the Bretton Woods institutions are now beyond question.
With China and the whole of the Third World joining in the same song of globalisation and opening-up, a new agenda has been set for all of us.
But there are some positive elements in this formula for the new world economic order.
First, with the greater participation of China and India in the world economy there is a possibility of multi-polarity rather than total US hegemony.
Second, the Bretton Woods institutions themselves can be forced into more democratic practices by the sheer weight of numbers, and economic power, of the Third World.
Third, the challenges of international economic pressures must have a wake-up effect on faltering countries and their governments, especially in Africa.
Finally, there is great scope for an international role for South Africa both in Africa and in the Third World in espousing progressive developmental policies in the new world order.
The author is an ANC MP and member of the finance committee