Thursday, 16 May 2013

BRICS star rises with new WTO boss

By Musab Younis

Last week’s election of Robert Azevêdo, a Brazilian diplomat, to head the World Trade Organisation, has been widely interpreted as an event illustrative of the changing global balance of power. His election represents the first time someone from a BRICS country – and only the second time someone from the Global South – is installed in this powerful position. It took concerted lobbying from developing countries, including a united BRICS group, to thwart Herminio Blanco, the preferred candidate of the US and EU. The Financial Times immediately reported Azevêdo’s election as a “victory for Brazil’s brand of rainbow diplomacy and for the Brics”.

Brazil’s choice is a popular one amongst developing countries. As Shobhan Saxena points out in an illuminating blog for The Times of India:
“In 1997, as Brazil's representative at WTO, Azevêdo had challenged the US and EU over trade subsidies—and won. It's because of his credibility as someone who can protect fair trade (not just free trade) that the majority of WTO members voted for Azevêdo”.
China’s foreign ministry spokeswoman Hua Chunying quickly said that China "welcomes" the choice and the Xinhua news agency called his selection "something worth celebrating". China’s commerce ministry added that it hoped Azevêdo would "prioritise the patching up of differences between developed and developing members”.

Vijay Prashad, writing in The Hindu, called Azevêdo “a defender of the South”, adding: “The world pays a stiff price for the North’s monopoly over political and economic decisions. Global perestroika is needed.”

Azevêdo’s election does not mean the next round of WTO talks, scheduled to take place in Bali, is guaranteed to run smoothly. In fact, current signs suggest that it is improbable that Azevêdo will be able to heal major North-South divides on trade issues. But his election does demonstrate that the BRICS have been able to manoeuvre themselves into the leading position amongst developing countries. It’s now clear that the BRICS can gain broad and decisive support amongst African, Asian and Latin American countries for leadership bids in international organisations.

And we’ve also seen a demonstration of the specific popularity of Brazil, perhaps marking – as Saxena suggests in his blog – a victory for the famous diplomacy of the former President Luiz Inácio Lula da Silva. The news comes as a bonus, too, for the current administration of President Dilma Rousseff, showing that Brazil’s international status has not diminished.

"This is not just a victory for Brazil or a group of countries,” said Rousseff, on Azevêdo’s election, “but for the whole WTO."

Monday, 13 May 2013

The Washington Consensus and democracy

By Carlos Fortin

A recent Guardian article by Walden Bello, comparing the neoliberal policies of the Pinochet dictatorship in Chile with those of Margaret Thatcher in Britain, prompted a debate in the Recovery with a Human Face blog about the Washington Consensus, its policy thrust and its impact on the economies of the countries which adopted it.

Bello's article squarely linked the Washington Consensus with free market fundamentalism, a point contested by Duncan Campbell of the ILO (writing in personal capacity). For Campbell, the Consensus ‘was not doctrine, but became doctrinaire through its misuse in political channels.  The core of the consensus, however, was economic wisdom, time- and context-specific, and the effort …  was for the common good’. Here he echoes the disclaimers of the inventor of the term Washington Consensus, economist John Williamson. Williamson, in a piece written in 1999, inveighs against the fact that the term has become synonymous with market fundamentalism, which he claims it was never intended to be.

Janine Berg, also of the ILO, replied to Campbell’s comment to say that “the ‘Consensus’ was an ideological pursuit based on shaky theoretical grounds”.  She was supported by Robert Wade, with reference to New Zealand’s Big Bang liberalization of 1984. 2
 
Although I agree with Duncan Campbell and John Williamson that the Washington Consensus is not necessarily an endorsement of the most extreme forms of market fundamentalism, its core ideas include:
  • privatisation
  • deregulation
  • liberalisation of imports and foreign direct investment inflows as well as of interest rates
  • a minimal role for the State in the economy.
As all of these beliefs  undoubtedly reflect the essence of neoliberalism, I therefore ultimately side here with Bello, Berg and Wade.

Perhaps more importantly, I believe the Washington Consensus shares with market fundamentalism an anti-democratic bias. Economic decision making is defined as a technical exercise, in which trained experts identify the "right" solutions and implement them, preferably in isolation from public debate, for the good of all. The crucial insight of political economy –that policy interventions always result in winners and losers - is thus negated. As Joseph Stiglitz puts it, this approach " tried to pretend that there were not trade-offs—a single set of policies made everyone better off—while the essence of economics is choice, that there are alternatives, some of which benefit some groups (such as foreign capitalists) at the expense of others, some of which impose risks on some groups (such as workers) to the advantage of others." 3

The clearest example is the notion –which has gained currency on the back of the Washington Consensus- that the independence of central banks is crucial for ensuring good monetary policy. To quote Stiglitz again, "central banks make decisions that affect every aspect of society, including rates of economic growth and unemployment. Because there are trade-offs, these decisions can only be made as part of a political process"4. The Washington Consensus advocates' insistence that it is a purely technocratic issue, is essentially an expression of their "lack of confidence in democratic processes" 5.

1 John Williamson, “What Should the World Bank Think About the Washington Consensus”, Speeches and Papers, Peterson Institute for International Economics, July 1999. At: http://www.iie.com/publications/papers/paper.cfm?ResearchID=351
2 Bello's article and the subsequent exchange are available at http://www.freelists.org/post/recoveryhf/Neoliberalism-and-the-Global-South
3 Joseph E. Stiglitz, Making Globalization Work. The Next Steps to Global Justice, New York and London, W.W. Norton Allen and Company, 2006, p.xv
4 Joseph E. Stiglitz, "Big Lies about Central Banking", Project Syndicate, 3 June 2003, at
http://www.project-syndicate.org/commentary/big-lies-about-central-banking
5 Stiglitz., Making Globalization Work, op.cit., p. 28

Tuesday, 7 May 2013

Lessons from Bangladesh: building a better boycott

By Noshua Watson

My IDS colleague, Naomi Hossain, has a recent blog about the apparel factory building collapse in Bangladesh and how it symbolises the utter failure of globalisation. Until now, proponents of globalisation have advocated establishing private systems of governance to oversee supply chain compliance in situations that are not easily monitored by national or local authorities. In the case of Rana Plaza, the complex’s owner has been arrested and will be tried for the collapse, which is alleged to be among other criminal activities. Companies like Walmart, Gap, Carrefour and Li & Fung recently met with governments and NGOs to negotiate a plan for future factory safety in Bangladesh. The question for them is what to do going forward in unethical, but less than criminal, circumstances.

One activist approach is to boycott companies. Boycotts vary in their effectiveness due to the amount of media attention they can attract, the extent to which they passionately engage consumers over the long-term, whether they are easy for consumers to understand and whether it is easy for consumers to participate. In the Rana Plaza situation, the goal of a boycott would actually be indirect, to put pressure on garment factory owners by attacking the reputations of the global brands that they supply.

One problem with attacking a brand’s reputation is that reputations are merit-based, on the quality of the product and its past performance. Disparaging a product’s reputation increases a brand’s compliance measures only to the extent that it changes consumer perceptions of product quality or lowers the price premium that a brand can earn for its product. That is fairly difficult in the case of mass-market apparel, where consumers are already distinctly aware of the quality-price trade-off they are making.

Another way to address the situation would be to attack a brand’s status, the non-merit-based, social perceptions that it is better than other brands. The way to damage a brand’s status is to break its relationships with high-status people, drive the brand down in important rankings or challenge brand associations that the brand has cultivated like being ‘cool’ or ‘family friendly’. Given the more intangible and unearned nature of status, this might be an easier route for boycotters to take.

Prior to the Rana Plaza collapse, many major global brands were already minimising their presence in Bangladesh, due to their inability to achieve the levels of supplier safety compliance they wanted. Unfortunately, their departure may have left behind brands with lower standards. For the sake of their industry, the brands that care may want to make it clear who belongs to their club and who doesn’t.