Alternatives to the Bretton Woods world order
Academic and activist Walden Bello, from the Philippines, is a leading critic of the current model of economic globalisation - who once risked 25 years in prison to expose the extent of how World Bank projects helped support the dictatorship of Ferninand Marcos of the Philippines. He outlines how an alternative to the Bretton Woods institutions is emerging with the expansion of BRICS nations - and other global south-led institutions which are working together to expand opportunities for their economies and to pursue a greener and fairer development model.
From the International Development Economics Associates - a network of progressive economists who centre the perspectives and needs of the Global South.
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Transcript
Hi there, welcome to Economics from the South,
Julians Amboko:where we rethink economics, give a voice to marginalized communities and come up with lasting solutions to
Julians Amboko:ensure a fairer, more sustainable future for all of us.
Julians Amboko:I'm Julians Amboko, a Kenyan business journalist and your host for this International Development Economics Associates podcast.
Julians Amboko:As I wrap up six weeks of conversations that have focused on the international debt crisis
Julians Amboko:and rethinking the global financial architecture.
Julians Amboko:I'm honored to be joined by someone from the Philippines who's put a lot of thought and action into those two issues.
Julians Amboko:Episode six.
Walden Bello:I am Walden Bello and I'm the co chair Of the board of a focus on the Global South, which
Walden Bello:is research and analysis institute based in Bangkok, Thailand, affiliated with Chulalongkorn University.
Walden Bello:And I also have been doing a lot of work on global political economy.
Walden Bello:And also a former member of the House of Representatives of the Philippines.
Julians Amboko:Walden, you were actually quite famous for having broken into the World Bank headquarters one time.
Julians Amboko:Give us some cut line to what really prodded and what that was about.
Walden Bello:Well, we were trying to figure out what was happening with World Bank projects in the Philippines during the
Walden Bello:period of Ferdinand Marcos, the dictatorship from 1972 to 1986.
Walden Bello:And since the World Bank was the biggest donor of Marcos, we felt that we really had to access confidential material.
Walden Bello:At first, we developed a set of contacts within the bank, but it was not enough.
Walden Bello:So, uh, we at that point felt that, uh, we had to just break in and get the documents.
Walden Bello:And, uh, I and my colleagues over a period of about three years went to the bank.
Walden Bello:We post as World Bank project directors coming in from abroad.
Walden Bello:I'm looking very haggard with our ties askew.
Walden Bello:And we were asked for IDs, and we tried to pretend that we were trying to find our IDs in our pockets, and since
Walden Bello:it took such a long time, the guards just let us go in.
Walden Bello:After three years, we were able to sneak out about 6, 000 pages worth of World Bank material, which documented
Walden Bello:in detail how they supported the Marcos government.
Julians Amboko:Interesting.
Julians Amboko:Thank you so much for that insight.
Julians Amboko:Let's come back now and talk about a conference you and I both attended not too far back in Rio, Brazil.
Julians Amboko:And you mentioned a very interesting thing about shifting geopolitics and what you talked
Julians Amboko:about, the giving birth to a new global order.
Julians Amboko:If you could talk a little bit more about this new global order, what it looks like and how
Julians Amboko:it is different from what we have presently.
Walden Bello:What I was trying to show there were several things.
Walden Bello:One was that the old international liberal order presided over by the United States as a
Walden Bello:hegemon is in very deep trouble at this point.
Walden Bello:Uh, it's on the defensive.
Walden Bello:And this order is very much protected by a political canopy that consists of NATO, the Bretton Woods institutions, like the IMF
Walden Bello:and the World Bank and the World Trade Organization, et cetera.
Walden Bello:And of course, US capital as the dominant force, and that has been the reigning world order since 1945,
Walden Bello:46, over 70 years later, we have a situation whereby.
Walden Bello:China has become a major force in the global economy.
Walden Bello:We have the Global South, despite all the difficulties, becoming stronger as a collective
Walden Bello:than it was in 1946 or in 1975, or even in 2000.
Walden Bello:And we have the emergence of the Brazil, Russia, India, China, South Africa, the BRICS.
Walden Bello:So we are in a situation whereby the undisputed dominance of the United States, you know, has really been eroded.
Walden Bello:The erosion has not only been because of the economic challenge that has been posed by China becoming the second biggest economy.
Walden Bello:And by some measures, now the biggest economy, but also because of the military defeats of the United States,
Walden Bello:particularly in the Middle East back in the 2000s.
Walden Bello:So this is now a much, much more plural world in terms of the quotient and the exercise of power.
Walden Bello:And it is also a more dangerous world because a hegemonic power in decline is extremely dangerous because it
Walden Bello:does not want to give out its position on strength.
Walden Bello:The U.
Walden Bello:S.
Walden Bello:now is relying on the area where it still has undisputed superiority over all global powers,
Walden Bello:which is the military to try to arrest its decline.
Walden Bello:There was this great phrase by Antonio Gramsci, the Italian Marxist, during the 1930s.
Walden Bello:He said that the old world is dying and a new world is trying to be born, and this is a time So I guess what it was trying
Walden Bello:to say here is also something that captures the essence of our times, you know, which is there is a new world that is striving
Walden Bello:to be born, but this is also a very, very dangerous world.
Walden Bello:So basically that opportunity and danger somehow seem to be twins.
Walden Bello:You can't have one without the other.
Walden Bello:Why is this conversation particularly important within the context that we now find ourselves in?
Walden Bello:This is extremely important at this point in time because the Bretton Woods institutions have not really been
Walden Bello:responding to This debt crisis, which is, in fact, some people would say it's, it's worse than the 1980s debt
Walden Bello:crisis we have here, not only the least developed countries in Africa and in Central America and in South Asia.
Walden Bello:But, um, you have the so called emerging economies like Argentina, for instance, which has already
Walden Bello:defaulted on its debt back in 2020, 2021.
Walden Bello:So you have a variety of countries that, of course.
Walden Bello:Their debt problems have their own particularities, but the main thing is because they have been brought about
Walden Bello:by their participation in a global economy that continues to condemn them to tremendous trade deficits and to a
Walden Bello:subordinate place in the global economy from which they have tried to get themselves out of through loans, both from
Walden Bello:the private sector and the multilateral institutions, but loans whose conditions have made their situation even worse.
Walden Bello:The World Bank and the IMF in particular have really come out with no new solution except to say, Hey, you
Walden Bello:know, we are going to impose the same conditionalities.
Walden Bello:What is even more tragic at this point is that the IMF.
Walden Bello:And the members of the so called Paris Club and the United States Treasury, uh, are saying that, Hey, the big problem here is China.
Walden Bello:China does not want to participate in a common debt restructuring.
Walden Bello:So it's like a blame game.
Walden Bello:And uh, what China has said is that.
Walden Bello:Hey, we've been forgiving debts on a case by case basis, and they have, they have been forgiving debts, you know, over the last
Walden Bello:20, 25 years, and they don't want to participate in a common debt restructuring that will just impose the same conditionalities
Walden Bello:on the indebted countries and make their situation worse.
Walden Bello:And China's been basically saying, we are not participating in something like that because it's really a development problem.
Walden Bello:And you know what, our aid to these countries is really meant to assist them in really developing in a more autonomous way.
Walden Bello:And we're not going to impose conditions on them that you want us to do that will guess.
Walden Bello:underdeveloped and even further.
Walden Bello:So that's the situation we're in right now.
Julians Amboko:Walden, now that you have mentioned the situation that we are in, and specifically said that, um, the Bretton
Julians Amboko:Woods are structured and not offering solutions, is it a foregone conclusion that the era where we had the Bretton Woods and the
Julians Amboko:United States setting the global agenda as far as the financial architecture and distress resolution is concerned is dying down
Julians Amboko:gradually or do we expect to see still more activity from them?
Walden Bello:These institutions are definitely on the defensive because they know that
Walden Bello:they're suffering from a crisis of legitimacy.
Walden Bello:Uh, not only have their prescriptions failed, and there's hardly any instance of a successful case of structural adjustment,
Walden Bello:which is the neoliberal restructuring of their economies.
Walden Bello:Aside from that, they also have, uh, a problem whereby in terms of the voting shares of these institutions are heavily
Walden Bello:weighted towards the United States and Europe, and the United States in both the IMF and the World Bank, uh, retains,
Walden Bello:uh, a veto power, which gets 17 percent share of the votes.
Walden Bello:We also have this very feudal institution that the only person that can become a president must be somebody
Walden Bello:from the United States and the only person who can be a managing director of the IMF is a European.
Walden Bello:So the big question is how long can they keep on saying, you know, that we're not going to have any significant
Walden Bello:change in this when in fact you have this economies like China, Brazil, India becoming bigger and bigger and bigger.
Walden Bello:And we also are seeing that there have been the emergence of the BRICS institutions associated with
Walden Bello:the BRICS or with China that, uh, have become important channels of assistance to the developing countries.
Walden Bello:For instance, the Asian Infrastructure Investment Bank, the, uh, New Development Bank, which is a multilateral
Walden Bello:institution, one of the products of the BRICS, of course, it's still quite undeveloped at this point in time.
Walden Bello:You have the Contingency Reserve Fund, which would play the functions of the IMF for
Walden Bello:countries that are in emergency conditions.
Walden Bello:Uh, you have the Belt and Road initiative, a more than 1 trillion funded initiative by China.
Walden Bello:It's coverage is in fact, not just Asia, but Latin America and Africa.
Walden Bello:So what we're seeing is that.
Walden Bello:The weight of the Global South, and especially the weight of certain countries like the BRICS in China has become
Walden Bello:bigger during this crisis and that you also have the incipient alternative in terms of a multilateral order.
Walden Bello:So we'll just take a look at the BRICS.
Walden Bello:There are now about 10 countries that fund the BRICS and recently Ethiopia and Saudi Arabia.
Walden Bello:And the United Arab Emirates have joined in.
Walden Bello:And if you look at it, you have this massive, uh, sovereign wealth funds into the hundreds of billions of dollars of
Walden Bello:Saudi Arabia and the UAE, uh, calling in at this point.
Walden Bello:And then you have about another 40 countries in line that want to join.
Walden Bello:So we still don't know the final institutional arrangements of the BRICS.
Walden Bello:We don't know at this point how much of resources the BRICS will bring together and how these resources will be developed.
Walden Bello:But the point is, that I'm trying to make here is that these are real developments at this point that are
Walden Bello:cutting into the power and the hegemony of the West.
Walden Bello:And I think that that's a fairly significant trend at this point in time, because it also responds to the
Walden Bello:political developments in Europe and the United States.
Walden Bello:What you have in Europe at this point and the United States is a contention between the forces.
Walden Bello:Of global liberalism, that's tied to the old order, which was to promote the hegemony of, of Western capital globally and
Walden Bello:the insurgent right wing movements, you know, that seem to be more interested in keeping the United States and Europe as
Walden Bello:fortresses to prevent them from being, you know, uh, penetrated.
Walden Bello:By the Global South, my sense about it in studying this is that when you look at Trump and Vance, their vision
Walden Bello:is a kind of a fortress America, uh, in which they bring American capital back home, they call it reshoring, uh,
Walden Bello:and they, they limit trade, uh, with the rest of the world.
Julians Amboko:Allow me to jump in there with a very quick question.
Julians Amboko:You have given us the shape and form of what the new order looks like, including some of the structures
Julians Amboko:already being set up, uh, under the BRICS initiative.
Julians Amboko:It's been 15 years or so since we had the first BRICS summit, um, in 2009.
Julians Amboko:Skeptics have raised the question as to whether we are seeing the same dominance under BRICS that we saw
Julians Amboko:that we have seen rather under the current structure, where currently the Bretton Woods is heavily skewed
Julians Amboko:towards the United States under the BRICS initiative.
Julians Amboko:If you look at the lending, for instance, people have argued, look, it is still concentrated by China and therefore susceptible
Julians Amboko:to the same challenges we have seen under the Bretton Woods.
Walden Bello:People should, should raise these issues regarding the structure of the BRICS, the dominance of China within it at
Walden Bello:this point in time, the dominance of China in terms of lending.
Walden Bello:You know, these are really very valid questions to raise.
Walden Bello:The thing is, this is a formation that is in flux, that is in the process of being consolidated, and it,
Walden Bello:it has a number of, of members at this point that have to, to work out the, the decision making processes.
Walden Bello:So the process of institutionalization really will be a really big, big challenge, because these are very, Different
Walden Bello:countries, I mean, Saudi Arabia is very different from China, very different from Brazil, but overall, I think
Walden Bello:that institutions like the BRICS, they're really positive in the sense that they now have created more space.
Walden Bello:More resources that can be potentially accessed by the countries of the Global South and not only resources, but also when it
Walden Bello:comes to development models, I think all throughout the Global South at this point, the sort of free market led private corporate
Walden Bello:kind of development is in disrepute because this has been a model that has been tried and Then you look at a state led capitalism
Walden Bello:like China, and it has worked in terms of reducing the level of poverty of China to 2 percent of the population, which that's
Walden Bello:not the Chinese government, that's the World Bank that says that.
Walden Bello:And you know, so by example, countries like China, and not only China, are showing, you know, that there
Walden Bello:is a different path that can be followed and that the Western path is no longer viable in terms of.
Walden Bello:Ending inequality, reducing poverty, and creating more space for the exercise of sovereignty.
Walden Bello:What are these things which need to be done, or we need to ensure are done under the emerging new order
Walden Bello:to ensure that the Global South gets a fairer deal than what has been there under the present structure?
Walden Bello:And how do we ensure we don't replicate?
Walden Bello:Some of the missteps that we have had under the Bretton Woods led architect, we need to make sure that the
Walden Bello:membership is not just limited to the bigger what they call emerging economies so that, in fact, the criteria.
Walden Bello:For membership becomes something that is not just based on indices of GDP and economic power.
Walden Bello:Secondly, is that in an arrangement like the BRICS, one has to make sure, you know, that voting power.
Walden Bello:Is in fact distributed in a relatively egalitarian way and again, while the size of the contributions of the
Walden Bello:bigger bricks needs to be a factor, uh, in terms of their voting power, it should not be the only one third.
Walden Bello:And I think that one of the things that is very important at this point is that.
Walden Bello:Institutions like the BRICS must have room for civil society from the Global South.
Walden Bello:We should not just be talking about governments monopolizing decision making, but civil society
Walden Bello:organizations from Asia, from Latin America, from Africa, you know, have in fact an input into this process.
Walden Bello:We need to make sure that they do not repeat the same sort of, uh, problems.
Walden Bello:The same sort of inequalities that have been reflected in the Bretton Woods institutions, the kind of, uh, representation
Walden Bello:issues, the kind of loan arrangements and loan projects.
Walden Bello:Like structural adjustment that have discredited the IMF and the World Bank.
Walden Bello:As we seem to be in a transitory phase, where we are exiting the order that has existed under the Bretton Woods and in
Walden Bello:pursuit of a new one, potentially under the BRICS, how do we unlock new financing which doesn't come with all the strings
Walden Bello:attached, as has been the case with the Bretton Woods?
Walden Bello:Well, let's just look at the two models of lending that have been contrasted a lot over the last two decades.
Walden Bello:One is the IMF and the World Bank that basically have a, a set of conditionalities known as
Walden Bello:the Washington consensus, which is basically.
Walden Bello:We will lend you money to meet your emergency needs, but you've got to follow the prescription
Walden Bello:of austerity, austerity, austerity, austerity.
Walden Bello:So, as I said earlier, that austerity measure has not worked.
Walden Bello:It does not work in Africa.
Walden Bello:It does not work in Asia.
Walden Bello:It doesn't work in Latin America.
Walden Bello:It does not work even in Europe, you know, in terms of basically getting economists back on their feet.
Walden Bello:All that he has done is, and just take a look at Greece, for instance, is just Keep countries permanently
Walden Bello:indebted and dependent on loans and aid from the West.
Walden Bello:And it's not only the IMF and the World Bank.
Walden Bello:There's also the institutions like the Asian Development Bank, the Inter American Development Bank
Walden Bello:that are satellites of the World Bank and the IMF.
Walden Bello:And, you know, which followed the same prescriptions with the same lack of success.
Walden Bello:And I would just want to say here that, uh, Albert Einstein's definition of insanity was doing the same thing
Walden Bello:over and over again and expecting a different result.
Walden Bello:So from that perspective, the IMF and the World Bank are examples of organized insanity.
Walden Bello:Now, contrast that to China, basically there's relative autonomy in terms of the application of these
Walden Bello:loans, their implementation and that sort of thing.
Walden Bello:It has none of the economic conditionalities that the World Bank IMF lending has, but it's been criticized
Walden Bello:that, well, China does not make a distinction between.
Walden Bello:Countries that are dictatorships and countries that are democracies.
Walden Bello:And of course, as you know, somebody that favors democracy, that's something that we'd be sensitive to.
Walden Bello:But at the same time, uh, I, I think that if democracy versus authoritarianism were to become a condition, Uh,
Walden Bello:lending, uh, that you impose on a country like China, then it might create a situation where it will be very difficult
Walden Bello:to start making distinctions between democracy, semi democracy, semi authoritarian, authoritarian, uh, and maybe.
Walden Bello:If you look at it from the Chinese perspective, the thing is to, okay, let's just deal with the government
Walden Bello:as it is and, uh, let them make their decisions as to the application of the loans that we give them.
Walden Bello:You know, it's not perfect, uh, but at the same time, I think that's better.
Walden Bello:Then the kind of, uh, uh, set conditionalities that just create even more poverty that you
Walden Bello:have with, you know, the IMF and the World Bank.
Walden Bello:Even just writing off a debt is such a difficult process.
Walden Bello:Uh, when it comes to the Western institutions, it's almost impossible.
Walden Bello:Uh, but what you see is that because its main concern is to help countries develop Development capacity
Walden Bello:and policy space, one can appreciate the relatively liberal way that China has been, uh, forgiving debt.
Walden Bello:Why?
Walden Bello:Because I think that it has come up.
Walden Bello:Also as a developing country, and that's why there's a very big difference between that kind of perspective that
Walden Bello:appreciates the constraints on development and that of the IMF and the world bank that basically are a strict bankers
Walden Bello:rule that you pay because you borrowed, you screwed up.
Walden Bello:You haven't fulfilled the conditions of, you know, contracting the debt.
Walden Bello:And, and so you have to suffer for it.
Walden Bello:So, there's a world of a difference between the two.
Julians Amboko:Fantastic.
Julians Amboko:Allow me to draw us to the close of this conversation, Walden, and really just to piggyback
Julians Amboko:on your last point there around debt resolution.
Julians Amboko:Should the Global South detach entirely from the Bretton Woods as they are?
Julians Amboko:Is there a case for deciding that, um, Continuing on this path is a lost cause, let's cut links and find our own way.
Julians Amboko:And why I'm asking that question is because if you look at the countries, for instance, which
Julians Amboko:have fallen into distress currently, you default.
Julians Amboko:And before you ink any deal with your creditors around restructuring, it is almost a precondition
Julians Amboko:that you must have an IMF program on board.
Julians Amboko:So do we detach and move away entirely?
Julians Amboko:What is the practicality of that?
Julians Amboko:And what's the way forward?
Walden Bello:My sense is that rather than the sort of making a clean break at this point in time, I would be much
Walden Bello:more pragmatic and say, let us, uh, just adopt a posture of defending our interests within these institutions
Walden Bello:at this point in time, and also making it difficult for them to operate by pushing that there has to be new ways.
Walden Bello:that relate to the Global South and that they have to jump structural adjustment, they have to change their voting power.
Walden Bello:So my sense at this point is to avoid clean breaks, but stay with a defensive and an offensive strategy, which you
Walden Bello:coordinate with other countries within the Global South that makes these institutions even weaker and weaker and weaker.
Walden Bello:Let me just give you an example.
Walden Bello:The, the World Trade Organization, the World Trade Organization was supposed to be.
Walden Bello:The prime engine of global trade liberalization, uh, back in the 1990s.
Walden Bello:But what happened was that over the last two and a half decades, the countries in the Global South were able to get together,
Walden Bello:uh, work together at every point, whether it was a On the so called new issues like investment, trade related intellectual
Walden Bello:property rights, expanding those on all of those issues where the West was pushing for more and more liberalization.
Walden Bello:They were stymied within the World Trade Organization so that at this point in time, the World Trade Organization has, you know,
Walden Bello:become dysfunctional as an engine of global trade liberalization.
Walden Bello:But None of the countries have left.
Walden Bello:The Global South countries remain to be there in an aggressive defensive mode, because remaining in the institution
Walden Bello:while weakening it as an engine of trade liberalization is, I think, a better strategy than just cutting off.
Walden Bello:Because these institutions Among other things, they provide the fora for the Global South to be able to come
Walden Bello:together to realize that they have common interests.
Walden Bello:It's in the combat within these institutions that cooperation among the countries of the Global South are fostered.
Walden Bello:The experience of having worked together to defeat liberalization within these institutions will be very important.
Walden Bello:for us in the Global South as we create our own institutions.
Julians Amboko:Walden Bello, I like your closing point there.
Julians Amboko:We must have a defensive offensive strategy as we navigate how to work our way into a new dispensation.
Julians Amboko:Thank you so much for your time.
Walden Bello:Thank you, too.
Walden Bello:And thanks for the questions.
Walden Bello:I really, really appreciate them.
Julians Amboko:That's a wrap for this series of Economics from the South from the International Development Economics Associates.
Julians Amboko:All six episodes are available wherever you get your podcasts.
Julians Amboko:As ever, more details in the show notes, including a link to the IDEAS website, where there's a
Julians Amboko:wealth of articles, analysis, and research papers.
Walden Bello:And of course, please do sign up to the IDEAS newsletter.
Walden Bello:I'm Julians Amboko, the producer is Penny Dale.
Walden Bello:The concept is by Charles Abugre, C.
Walden Bello:P.
Walden Bello:Chandrasekhar, and atieno Ndomo of the International Development Economics Associates.
Walden Bello:Thank you for listening.
