September 7, 2003

THE biggest 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. Its radicalism is breathtaking, but anyone who is serious about tackling US hegemony will find the logic difficult to fault.

Monbiot’s basic thesis is that the institutions set up in the past 50 years to run the world in a democratic fashion are undemocratic. The UN general assembly, is dominated by the security council’s permanent members. If a move is made to remove their dominance, the five can veto the attempt.

The International Monetary Fund and World Bank are dominated by the G8 nations, which hold 49 per cent of the votes, though, that suggests that if the other 176 nations voted together, they could overturn the richest nations. However, major decisions require an 85 per cent majority, so the US, which holds 17 per cent of the votes, can veto such resolutions, even if they are supported by every other country.

The World Trade Organization has an aura of democracy as every member nation has only one vote. However, before a new round of trade talks the agenda is fixed by the “Quad” — the US, European Union, Canada and Japan. Together with a small and variable number of poorer countries, they decide the main business of the trade round.

The consequences of this system are clear. The US goes to war with Iraq without a second resolution in the Security Council, defying three of its permanent members and most of its temporary members.

The World Bank and IMF have become the bailiffs of the world economy, putting the 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 owed 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 countries are required to remove barriers to trade and capital flows, to liberalize banking systems, reduce government spending on everything except debt repayments, and privatize assets for sale to foreign investors. By contrast the US, after the Doha development round in 2001 aimed to liberalize trade and increase access to Western markets, raised domestic farm subsidies by 80 per cent.

Monbiot’s solution to this behemoth of growing inequality in wealth and power is not to tinker with the existing institutions but to replace them wholesale. The key to his proposals is the innovative ideas John Maynard Keynes came up with in 1943 in preparation for the Bretton Woods conference that determined the international economic architecture that has prevailed ever since.

Keynes’ idea was a new global bank, 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.

Keynes’ system would maximize prosperity and level the power of nations. The ICU would entail no forced liberalization, no punitive conditions on the poorest countries, no engineered opportunities for predatory, banks and multinationals; no squashing of democratic consent. But how can the rich nations be made to accept such a system?

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 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 that can never repay their debt should make a condition for their compliance — as 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 Organization (FTO) is needed to govern the rules of trade. 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 imports from poorer nations.

Again, what hope is there of such a utopian system being 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 democratized UN general assembly where votes are weighted by size of population and in accordance with a global democracy index, to incentivize high standards of governance. This restructured assembly would also take over the functions of the UN Security Council.

There is a breathtakingly radical sweep to all this, but before it is dismissed as the rabid fantasizing of the Global Justice Movement, some caveats are in order. This is not a whinge, rather a well-argued statement of an alternative agenda. If it is too radical for some, can they suggest lesser options that will produce the same improvement in world justice and prosperity? The floor is theirs.— Dawn/Guardian News Service

 

The Age of Consent

By George Monbiot

Flamingo

ISBN 000-7150423

288pp £15.99

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