Geopolitical shifts in the international balance of power have been steadily accelerating, confirming that the current globalised arrangements for trade, investment, finance, and the governance of international institutions are approaching an end and consequentially opening the scope for a beginning of a new era.
There are still attempts to cling to the past, but these have come with unfulfilled promises, poor financing, and limited benefits for the developing economies, as we have seen since the 2008 global financial crisis, which broke the camel’s back.
The 15 years since 2008 have been the leanest years yet in terms of inflation, rescission, and concerns of stagflation. Major crises, not the least of which was the Covid-19 pandemic, have come on the heels of each other, and their repercussions have thrown into relief the inability of the current international arrangements to promote international solidarity and cooperation against such onslaughts.
Can we overlook the huge disparities in the distribution of vaccines during the most critical times, and how the rich nations monopolised them and only tossed the surplus to the developing nations later on? Was the refusal to let the developing countries produce the vaccines domestically anything but a stubborn insistence on prioritising intellectual property rights and corporate commercial gains over the exigencies of people’s health, which demanded only temporary exemptions?
Surely we cannot also forget that after the approval of $650 billion worth of Special Drawing Rights (SDRs) at the height of the pandemic to counter its impacts on international liquidity, the current quota rules made it possible for individual advanced economies to obtain more than all the countries in Africa put together.
Only after a series of summits and conferences was it agreed to recycle $100 billion worth of SDRs to the developing nations through lending arrangements, albeit at relatively low rates of interest. This is not to mention the need to constantly pursue the never fully materialised $100 billion pledge that the advanced economies made in Copenhagen in 2009 to support climate action in the developing nations, whose funding gap is ten times more than that.
The economic and geopolitical impacts of permanent and overlapping crises – the “permacrisis” as it has been termed – have left the developing economies vulnerable to sharp fluctuations in energy prices and a dangerous deterioration in their food security, also the subject of the food systems summit in Rome this week.
The crises have also aggravated these countries’ foreign debt burden, the servicing costs of which in many cases exceed their public spending for education and healthcare combined.
At the same time, the arrangements for handling risks of debt default and needs workout are extremely slow and cumbersome. The G20 common framework for debt treatment still does not officially include private lenders, and it deliberately excludes, so far, the developing countries that fall into the middle-income category.
There have been repeated pleas to revise the loan terms and conditions of international financial institutions, but these demands have not received the proper attention. Among them have been demands for fairer grace and payment periods, a cap on interest rates for urgent climate action projects in developing countries (which, it should be stressed again, did not cause the climate crisis), and the elimination of the surcharges that large borrowers bear despite the unfairness of them and the harm they cause.
The only progress that has been made to date in this regard is the agreement to adopt a facilitation clause in international loan contracts in the event of natural catastrophes, which was already occasionally practised among many institutions.
It is little wonder that performance towards achieving sustainable development and climate-change action have deviated off course and are increasingly unlikely to hit their targets. The 17 UN Sustainable Development Goals (SDGs) contain 169 subsidiary goals. According to the latest UN SDG performance report, only 12 per cent of these are on course, 50 per cent are behind target to varying degrees, and the rest are worse off than they were when the SDGs were set out in 2015.
Meanwhile, the scientific reports produced by the UN Intergovernmental Panel on Climate Change (IPCC) keep warning us that instead of reducing harmful emissions by 45 per cent by 2030 to ward off further dire effects of global warming, we are in fact increasing them.
The speeches and promises made by the leaders of countries that have inflicted the most harm on the climate not to let the planet’s average temperature rise more than 1.5 degrees Celsius above its pre-industrial level ring hollower than ever against the backdrop of the unprecedented heat waves, forest fires, floods, droughts, and desertification that are already wreaking havoc on people’s lives and livelihoods.
The international economic powers were expected to meet their pledges on climate financing, technological cooperation, and binding regulatory rules to curb climate-damaging behaviours on the part of governments, corporations, and individuals. But the reverse has occurred. Most industrialised countries are going down new paths touted as tackling climate change, green initiatives, and support for digitisation, but are also effectively reviving the protectionist practices and trade wars of the old mercantilists.
If the governments of the developing nations assume generous help will come their way as a result of those new measures and policies, the generosity is in their presumption of good will.
Has anything changes that should lead them to expect that old promises will be suddenly fulfilled? Has any significant improvement been recently made on the promise of official development assistance (ODA) that was to flow to the developing countries annually and that reportedly would amount to around 0.7 per cent of the industrialised countries’ gross national income?
If the developing countries expect multilateral financial institutions to fill the funding gaps, it seems they will be in for a long and patient wait until those institutions come up with a new vision and mission for the announced “evolution roadmap” and the mechanisms, resources and substantive capital increase to carry it out.
This critical stage in globalisation prospects demands a different approach based on practical and pragmatic policies of localisation of development. We will discuss this further in a forthcoming article.
This article appeared in Arabic in Wednesday’s edition of Asharq Al-Awsat.
* A version of this article appears in print in the 27 July, 2023 edition of Al-Ahram Weekly