Over half a century ago, the Swedish Nobel Laureate Carl Gunnar Myrdal published his three-volume Asian Drama: An Inquiry into the Poverty of Nations (1968), which, based on a decade’s observations of economic growth and development in the emerging Asian countries, ultimately concluded that the vast and growing income gap between these countries and the industrialised nations would prevent them from overcoming the plagues of poverty and stagnation.
Myrdal did not live long enough to see the Asian economic boom in the last quarter of the 20th century, and he would have been astounded by the “Asian miracle” that closed the gap between East and West by leaps and bounds.
The transformation of some Asian countries from developmental misery to miracle was neither a fluke nor the result of large gifts or grants from the West. It was the product of major investments in human capital and infrastructure and of cumulative achievements that were not washed away by changes of government or shifts from wrecked regimes to others.
Myrdal had underscored the significance of values in the formulation of public policies, including economic policies. His lessons were heeded by the Asian leaders who rescued their countries from the triad of poverty, ignorance and disease and the associated triad of upheaval, social fragility and decline in economic performance.
The experience showcased governments that were strong, flexible and pragmatic, all of which are assets in a rapidly changing world that has little time for those caught in the maze of indecision, the inability to act and obsolete ideologies.
We have only to read The Practice of Economic Growth by Goh Keng Swee, one of Singapore’s founding fathers, to understand their rebellion against the ills of the soft state that Myrdal had cautioned against. Their acute understanding of political economy combined with a deep appreciation of the culture and values of their society produced public policies and institutional structures commensurate with the nature of their countries and the modern systems and practices of their times.
This outlook explains the rise of Asia after centuries of suffering and after disastrous debacles in experiments that went by the name of “state-building.” Afghanistan has provided the latest example of the latter. Other failed adventures have fallen under the heading of the “Greater Middle East” and have attempted to take a model of social, political and economic management from one environment and transplant it into totally different environments in terms of values and levels of development.
The result has been chaos that has created nothing but devastation and destruction.
However, if the Asian drama eventually told a heartening story, I doubt we will be able to say the same of what we might call today’s “global drama”. After decades of seeing the gap close between the developing and developed nations, the post-Covid-19 world now threatens to break apart again, which could have grave geopolitical repercussions precipitating spiralling tensions and outbreaks of conflict. It is to be hoped that this spectre can be nipped in the bud.
Many developing nations today have escaped the chains of underdevelopment thanks to integrated national policies and effective institutions. However, what really enabled them to close the gap with the developed nations were open channels for the flow of international trade, foreign investment, the transfer of knowledge, the movement of labour and joint projects.
Unfortunately, we are now seeing ominous signs of growing disparities in growth and income. The average rate of anticipated global economic growth currently stands at six per cent. Many developing countries will not exceed three per cent this year, which will not compensate for the stagnation last year. While 80 per cent of inoculations against Covid-19 take place in the advanced high-income nations, only two per cent take place in Africa. Whereas the developed nations have had the luxury of being able to spend up to 27 per cent of their GDP to offset the impacts of the pandemic, the figure falls to seven per cent of GDP in middle-income countries and 1.8 per cent in lower-income countries.
Meanwhile, direct foreign investment in developing nations is declining, and the ratio of trade to GDP in these countries has barely budged since the last global financial crisis. The spectre of failure to service national debts hovers over many developing countries, especially given the rise in international interest rates as the central banks in developed countries have shifted from monetary easing measures to inflation containment measures when production and supply chains could not keep pace with surging demand as recovery took off.
GROWING DISPARITIES: These features of the global drama are far more widespread than the Asian drama and they reflect disparities both between and within nations.
The figures appearing in a number of international reports published to coincide with the opening of the 76th Session of the UN General Assembly this month drive home the alarming extent of such disparities and the fact that the world is not on target to attain the UN Sustainable Development Goals (SDGs). The blame for this cannot be pinned on the pandemic alone. The underlying problem predated Covid-19 and has worsened as a result of its spread.
UN Secretary-General Antonio Guterres has warned that figures reflecting the implementation of the Paris Agreement on climate change show that at current rates greenhouse-gas emissions will increase by 16 per cent by 2030 rather than decrease by 45 per cent as targeted. He adds that the failure to fulfil pledges to support the efforts of developing nations to reduce emissions will jeopardise the forthcoming UN COP26 Conference in Glasgow.
Seven priorities need to be underlined in order to alleviate the painful global drama that is resulting from the resurgent gross disparities in growth, income and other factors. Practical solutions exist for all seven, but thus far the will to implement them has been lacking.
These priorities are:
1-Bring the vaccination rate against Covid-19 up to 40 per cent in the developing nations by the end of this year. Towards this end, the developed nations need to increase the production and export of the vaccines and relax intellectual property right restrictions within the World Trade Organisation (WTO) framework to make it possible for the developing nations to manufacture the vaccines domestically themselves.
2- Develop a comprehensive sustainability process consisting of concrete programmes to achieve the 17 SDGs adopted by the UN in 2015. The 13th goal, which relates to the Paris Agreement, must be included in this process because to treat climate-change mitigation separately merely creates divisions, diffuses development efforts and wastes resources.
3- Fulfil international pledges to fund sustainability. It is sufficient to mention that a recent Organisation of Economic Cooperation and Development (OECD) report noted at least a 20 per cent deficiency in annual pledges set at $100 billion at the Copenhagen Conference in 2009. This is despite the fact that this amount falls well below the actual costs of climate mitigation and raises questions as to how it was actually calculated. Meanwhile, the amounts of international development aid have remained unchanged at levels that are actually half of declared pledges.
4- Governments must develop national budgets, banking and financial-oversight rules, and monetary policies that comply with sustainability priorities and the realisation of the SDGs by 2030. Until proper budgeting, financial, monetary and oversight policies are in place, there will be little room for encouraging the private sector, soliciting development funding, receiving facilitated loans and, above all, inviting direct investments.
5- The labour market and social-safety nets have both been severely affected by the pandemic, shrinking development and the income disparities that predated Covid-19. This means that growth models need to be revised to make them more comprehensive and able to generate decent job opportunities while strengthening safety nets to avert increased risks.
6- Naturalise sustainable development through major investment in human capital development. Towards this end, education and healthcare infrastructure must be improved with particular attention paid to technological components and digitisation. It is important to give greater focus to agricultural expansion and increasing opportunities to produce added value through manufacturing and innovation at home instead of exporting primary materials, letting others add the value and then importing their products.
Many international trade practices remind one of “a train of camels in the desert dying of thirst while transporting water on their backs,” as an old poem puts it.
7- It will be impossible to achieve any of the above priorities unless measures are taken to alleviate the pressures associated with the current wave, the fourth, of global debt. The three previous waves of debt during the past 40 years all ended in crises that struck the disadvantaged before others.
When financial crises break out, vital resources are poured into handling them. But this should not occur in the absence of the sound management of public debt and activating all possible channels of international cooperation. Sadly, some of these channels still suffer from deficiencies, not least the tendency to offer the bare minimum that falls well short of minimal needs.
* An Arabic version of this article appeared on Wednesday in Asharq Al-Awsat.
*A version of this article appears in print in the 23 September, 2021 edition of Al-Ahram Weekly