Following on from the pro- and anti-corporatism discussion, I found
this very interesting review in the latest edition of the Guardian Weekly:
What the world needs now
Michael Meacher is convinced by George Monbiot's radical argument to reform trade and finance systems in The Age of Consent
Saturday June 21, 2003
The Age of Consent
by George Monbiot
288pp, Flamingo, £15.99
This is an extremely important book. The biggest single geopolitical issue today is the overweening power of the US in a unipolar world and the problem of how it should be handled by all other nations. No political leader can be said to have satisfactorily resolved this problem.
George Monbiot offers a searchingly rigorous analysis of the sources of American power and presents a package of proposals that would radically redraw the present world order. It is breathtaking in its radicalism, but for anyone who is serious about tackling the current US hegemony, it is difficult to fault the logic.
His basic thesis is that the institutions set up in the past 50 years to run the world in a democratic fashion are in fact deeply undemocratic. The UN General Assembly is dominated by the Security Council's five permanent members, who can veto whatever they don't like. If any attempt is made to remove their dominance, they can veto any attempt to remove their veto.
The International Monetary Fund and World Bank are dominated by the G8 nations, which hold 49% of the votes, though that suggests that if all the other 176 nations voted together, they could still overturn the richest nations. However, all major decisions require an 85% majority, so the US, which alone possesses 17% of the votes, can veto any significant resolution it wishes, even if the resolution is supported by every other single country.
The World Trade Organisation has an aura of democracy in that every nation belonging to it has one vote. However, before a new round of trade talks begins, the agenda is fixed by the "Quad" - the US, EU, Canada and Japan. Together with a small and variable number of poorer countries, they decide all the main business of the new trade round in a series of "Green Room" meetings. The WTO is therefore as exclusive as the UN, with the Green Room acting as the WTO's Security Council and the Quad its permanent membership.
The consequences of this system are clear for all to see. The US goes to war with Iraq without a second resolution in the Security Council, defying three of its per manent members and most of its temporary members.
The World Bank and IMF have become the bailiffs of the world economy, putting the whole burden of maintaining the balance of international trade on the poorest debtor nations. Sub-Saharan Africa paid twice the sum of its total debt in the form of interest between 1980 and 1996, yet still ended up owing three times more in 1996 than it did in 1980.
Equally, the WTO enforces free trade on weaker nations according to rules with which the richer countries, especially the US, do not comply. Debtor nations are required to remove barriers to trade and capital flows, to liberalise their banking systems, reduce government spending on everything except debt repayments, and privatise assets for sale to foreign investors. By contrast, the US, after the so-called Doha development round in 2001 aimed to liberalise trade and increase access to western markets, raised farm subsidies to its own farmers by 80%, thus massively cutting world prices and bankrupting tens of millions of farmers in the poor world.
Monbiot's solution to this behemoth of growing world inequality in wealth and power is not tinkering with the existing institutions but replacing them wholesale. The key to his proposals is a return to the brilliant innovative insight of John Maynard Keynes in 1943 in preparation for the Bretton Woods conference, which determined the postwar international economic architecture that has prevailed ever since.
Keynes's idea was a new global bank called the International Clearing Union (ICU) with its own currency, the bancor. Every country would have an overdraft facility in its bancor account no more than half the average value of its trade over the previous five years. The system he devised gave a strong incentive to both deficit and surplus countries to clear their bancor accounts annually, ending up with neither a trade deficit nor a surplus.
Deficit countries would be charged interest on the overdraft, rising as the overdraft rose; they would have to reduce the value of their currency by up to 5% to promote exports and would have to prevent the export of capital. Keynes's innovation was to apply similar pressures to surplus countries too. Any such country with a bancor credit balance more than half its overdraft facility would be charged interest (or demurrage) at 10%. It would also have to raise the value of its currency and permit the export of capital. But if this was not enough and its credit balance at the end of the year exceeded its permitted overdraft, the surplus would be confiscated.
Keynes's system would, quite simply, maximise worldwide prosperity and level the power of nations. The ICU would entail no forced liberalisation, no penal conditions on the poorest countries, no engineered opportunities for predatory banks and multinational corporations, no squashing of democratic consent. But the obvious question remains: how can the rich nations, especially the US, be made to accept it?
Monbiot's answer is to turn the instruments of rich nations' power against themselves. The poor world's debt to the commercial banks and IMF and World Bank, at some $2.5 trillion, is nearly twice the combined reserves of all the world's central banks. In effect, as Monbiot himself puts it, "the poor world owns the rich world's banks". But he is not recommending a mass default. Rather, he proposes that the indebted nations, which can never repay their debt, should demand a conditionality for their compliance - exactly as the rich nations do - namely the replacement of the institutions causing the problem (IMF and World Bank) by arrangements that automatically achieve a balancing of trade (the ICU). Blackmail, of course, but if well orchestrated it might just conceivably work.
He rounds off this central theme with two other radical proposals. One is that a Fair Trade Organisation (FTO) is needed to govern the rules of trade very differently from the market fundamentalists of the WTO. Following the precedent of the rich countries, which in nearly all cases (certainly in the case of the US) got rich initially through protectionism, the FTO would permit the poorest countries to defend infant industries with tariffs, other import restrictions and export subsidies. Foreign investors would be required to leave behind more wealth than they extract and to reimburse for any destruction, environmental or otherwise, that their trading produces. Rich nations would be required to remove all barriers to trade - tariffs, import restraints and perverse subsidies that keep out imports from poorer nations.
Again, what hope in hell is there of such a radical (and utopian) system beng accepted? Monbiot's reply is unequivocal: a fair trading system should be added to an ICU as a condition of refraining from a mass coordinated default.
Linked to this is Monbiot's final major proposal - a democratised UN General Assembly where votes are weighted by size of population and in accordance with a global democracy index, to incentivise high standards of governance. This restructured assembly would also take over the functions of the UN Security Council which, as Monbiot says, has already largely been sidelined by US actions over Iraq.
Again, there is a breathtakingly radical sweep to all this. But before it is dismissed as the rabid fantasising of the Global Justice Movement, certain caveats are in order. This is not a whinge, but a very well argued statement of a positive alternative agenda. And if it is far too radical for some tastes, can they suggest any lesser options that will produce the same vast improvement in world justice and prosperity? The floor is theirs.
· Michael Meacher was environment minister from 1997-2003, and is MP for Oldham.