Piotr Dutkiewicz, Professor and Director, Centre for Governance and Public Management, Carleton University, Ottawa, Canada and moderator of the round-table opened the event by explaining the origins of the book Mapping a New World Order, The Rest Beyond the West. Contrary to the common argument that we cannot predict future developments, we do know the contours of the future; we know the trends and their socio-political and economic consequences. The question which guided the authors’ analyses was whether we witness convergence or divergence. In particular, the aim was to understand:
- the direction of this process: whether it will happen on a global level or whether it will be regionally based;
- its consistency;
- the depth of the process: whether there will be a similar type of convergence in different regions, or whether different regions will show different convergences with different socio-political and economic consequences in each region, or even each country; also, the long-term consequences – whether this convergence will be a purely economic phenomenon, or whether it will be accompanied by a new institutional and socio-political order;
- the durability of this process: whether or not this convergence is tied to structural deeper phenomena.
The aim of the book, reflected by the word choice ‘beyond’, was to go beyond the fashion among right, left, and centrist authors, i.e., the West vs. the Rest paradigm, in which the declining West is trying to preserve its global domination while the rest are fighting for an alternative global order in denial of the universalisation of Western institutions
Jomo Kwame Sundaram, Former Assistant Secretary General for Economic Development, United Nations, presented the historical development of inequality. He stated that decreasing global inequality is largely due to the rise of East Asian countries, as well as South East Asian countries. Moreover, a large share of global inequality is primarily related to high intra-country inequality. In his eyes, the time between 2002 and 2014 was the only exception, where low-income countries fared fairly well due to high prices for agricultural goods and commodities. Overall, there has been a long decline for commodity prices, and even for manufactured goods, from the Global South. Sundaram is convinced that tax evasion, despite recent revelations (e.g., Panama Papers), is grossly underestimated. He is likewise quite critical towards PPP, as he estimates that the share born by the public partner usually socialises the cost of projects. Another point which Sundaram raised is that of intellectual property rights, especially in the medical sector. He mentioned the case of Martin Skhreli, who raised the price of an HIV medicine from US$13.5 to US$750 per pill. Sundaram underlined that this sharp rise in prices is 100 percent legal. He cited an example from his own country (Malaysia), where a certain Hepatitis C medicine from the US company Gilead costs 84 000$ per course/patient, as Malaysia is not part of the generic licensing agreement which the company has struck with some countries. In Egypt, one of the most affected countries, a-not-for-profit organisation has developed a Hepatitis C drug for 300$ per course/patient, which will be available in 2018.
Vladimir Popov, DOC Research Director and a Principal Researcher in the Central Economics and Mathematics Institute of the Russian Academy of Sciences, Moscow, Russia, started his presentation by stating that in around 1500 AD, average GDP was quite similar between all countries ranging from 500 to 1000 US$ (measured in terms of 1985 US$). From that time on, Western countries constantly increased their GDP while the rest of the world fell behind. In Russia’s case, the catch-up began slowly, with the beginning of communist rule. Economic growth accelerated after the civil war in 1920 and then again started to decrease in the late 1960’s. China was likewise falling behind, until the communist party took power in 1949, when economic growth in relation to the West picked up. In Popov’s view, crucial factors for economic growth are sound institutions. He is convinced that the murder rate, as well as the share of the shadow economy, are central indicators. His data analysis suggests that a low murder rate and small share for the shadow economy is positively correlated with sound economic performance. Besides Western countries, primarily South Asian, East Asian, and some MENA countries have had such strong institutions and this has constituted a basis for positive economic development.
Prabhat Patnaik, former Professor at Jawaharlal Nehru University in New Delhi and the vice-chairman of the Planning Board of the Indian state of Kerala from 2006-11, opened his presentation of the Indian case, stating that the period of recent high growth rates in India has actually seen the setback of the process of democratic revolution. From his point of view, the problem of inequality is linked with the Indian cast system and the endurance of untouchability. He does not share the belief that colonial rule mitigated inequalities. Rather, the independent democratic government reduced inequality and started important social reforms and affirmative actions. It was only during independence that complete equality before the law became a constitutional right. Education was made free of charge, and the state and its institutions were not to be limited by any one religion. An essential example for these equality driven reforms was the principal of one human, one vote, which upset parts of the Indian upper class.
Patnaik is convinced that in the current state of neoliberalism, where capital is highly globalised and thus incredibly mobile, governments can do very little to combat economic inequality. An important step towards curbing inequality is to protect agriculture and petty business from the fluctuations of global capital, e.g., from a sudden fall in prices. An enormous number of peasants are indebted and move to cities or commit suicide because they can’t pay back their loans.
Patnaik likewise argues that while Indian growth rates were as high as 8%, the respective growth in the labour force was merely 0.8 %. At the same time as labour has become more and more casual (part-time work), Indian labour productivity has been growing, which leads to growing surpluses that accrue to the wealthy, and thus higher levels of inequality. From Pratnik’s points of view, equal opportunities are desirable and can be achieved through institutionalising certain economic rights, like the right to employment, food, good quality education, and public health.
Dutkiewicz concluded the presentations with a statement that the book comes with a certain warning: We must realise that in the early twenty-first century, there is to be no catching up with the core, but rather a reconfiguration of the hierarchy of wealth and of non-core locations. Thus, many developing countries will not catch up with the US or Germany, but they will catch up within their own regional clusters, and then become hegemons within regional clusters. This will then create new centre and periphery relations. In this configuration, the West will dominate and we will have regional clusters in which the hegemon will dominate and subordinate other countries within a given region. If this is to be the case, a new divisiveness is coming.
After the presentation of the papers, three commentators were invited to give their views on the chapters presented in the book. Karin Fischer, Head of the Department for Politics and Development Research at the Institute of Sociology, Johannes Kepler University Linz, Austria, directed criticism towards the question of whether catch up via traditional forms of industrialisation is still possible, because she had got this impression from the book. Another important point she mentioned was that a large number of countries have actually experienced deindustrialization, including middle-income countries like Turkey. As she put it, the main reason for this is that countries are integrated within global supply chains where they hold subordinated positions. Fischer also pointed to research conducted by Dani Rodrik where the issue of premature industrialisation has been mentioned and stated that this is a challenging problem which these countries are facing today.
Fischer put forward that the book focuses too much on export-led growth models, and said she would have liked more light to be shed on aspects of import-led industrialisation. Moreover, she perceives that the book presents catch up as a national endeavor in competition with other nations, and she would like to see more of a cooperative approach.
Patnaik responded to this criticism, stating that South-South cooperation is an important aspect of catch up and alternative development paths. Unfortunately, Patnaik sees the world economy in a phase of low economic growth that adversely affects the Global South. The most viable option that developing countries have is to try to strengthen demand in the domestic market. The local agricultural sector should be developed and petty producers, as well as the agricultural sector, should be protected from the free flow of capital and the volatility of commodity prices. Small economies are supposed to form alliances to reach these goals.
Sundaram rejects the principle of global value chains altogether, because they have no bearing on the capacity of the industrial bourgeoisie in these countries, which is an important aspect of capitalism.
Domestic control of agriculture and mining facilities is central for sound economic development. In Malaysia, only after buying back companies in the mining and agricultural sector did a process of adding value begin. The idea of added valued (refining products) e.g., palm oil, became interesting initially after re-nationalisation, which is crucial in economic development, but at the same time access to the Western market was restricted. Therefore, Sundaram believes that the development of strong linkages between agriculture and industry are crucial for sound economic performance.
Sundaram added that unfortunately, the solidarity between the South has declined dramatically. Nevertheless, he sees low cost loans from the Asian Infrastructure Development and the New Development Bank as a good opportunity to strengthen development.
Popov added that there is a theory of development ‘by invitation’. According to this theory, the successful development of some East Asian economies was partially due to the fact that they were ‘invited’ by the West and that access to the markets of the North was a crucial determinant of economic development. This development is not without precedent: Five countries/territories, influenced significantly by the Confucian tradition (Japan, South Korea, Taiwan, Singapore, and Hong Kong) succeeded in catching up with the West, without sacrificing their traditional values. However, there is no doubt that a successful Chinese catch-up will have far greater impact on the world. This is firstly because the previous cases of catch-up were generally supported by the West and were sometimes called ‘development by invitation’, whereas the rise of China did not happen ‘by invitation’ – not by any stretch of the imagination. Secondly, the successful catch-up of China cannot be interpreted as extraordinary or exceptional, due to the sheer size of the country. If successful, a Chinese catch-up will truly be the ultimate and most persuasive evidence of the advantages of institutional continuity.
Johannes Jaeger, Professor and Economics coordinator at the University of Applied Sciences BFI Vienna, sees a persistent liberal (capitalist) global regime that exists despite the rise of China and the decline of the US. Similarly to Patnaik’s argument, Jaeger is convinced that the driving force of the current system is global capital that excessively extracts rents. Unlike Patnaik, he holds to the idea that the relative autonomy of a dependent bourgeoisie and (internal) class struggles determine the specific path of development. One of the most important contradictions is in the colliding interests of the rent-seeking and the need-based approach (free access to public goods). Moreover, economic growth needs to positively affect labour conditions. Also, the book should take into account sustainability issues too. Jaeger sees the New World Order, as described in the book, remaining within the framework of general monopoly capitalism, characterised by class struggles and capitalist global institutions.
Following the remarks from Jaeger, Sebastian Vollmer, Professor of Development Economics at the Centre for Modern Indian Studies of the University of Göttingen, and Adjunct Professor of Global Health at the Harvard T.H. Chan School of Public Health, gave his view of the current discussion on catching up. To his understanding, it is very much in line with orthodox economic theory to focus on GDP growth. Other indicators such as life expectancy should have received a more prominent role in the book.
Vollmer is generally critical towards the effects of economic growth on the poor. He cites results from his research findings where there has been virtually no correlation between growth and the malnutrition of infants in a number of countries in the Global South.
He agrees with Patnaik that current growth patterns are not sustainable, with growth rates at eight percent and a rise in employment opportunities of only 0.8 percent. Vollmer argues with regard to the diverging development of rural areas and cities that rural areas fall behind and that this process has to be stopped. He sees a similar development in the North e.g., in the US, where there are also huge differences between the more prosperous West and the North-East coasts and other parts of the country, which has led to a high degree of dissatisfaction in the neglected parts of the country. Moreover, there is no global government that could address the tremendous levels of intra-country inequality.
Popov agreed that capitalism will finally bring the existing economic system to an end. He has researched the correlation between nationalism (Pride index), economic growth, and inequality. Generally speaking, the rise of nationalism is greater where the rise in GDP is lower and the increase in income inequality is greater. Brexit can be explained from this perspective. Britain fell behind the EU in terms of per capita income between 1950 and 1980. From then on, Britiain started to catch up, but rising inequality has led to a feeling of deprivation that has fueled nationalism. Therefore, it has been very easy for ethno-nationalist parties to blame everything on globalisation and to push for protectionist measures that in turn may undermine world trade and give rise to a recession. If one looks at life expectancy, there are some countries that have a higher level of life expectancy than what their overall per capita GDP would suggest. This holds true for Cuba and all former Communist countries, which emphasises the point that the mere measuring of GDP does not tell the whole story about a county’s wellbeing.
Sundaram commented on Johannes’ observations, saying he didn’t see any movement as an alternative movement. Sundaram stated that it is primarily important to look around at which capitalist movements and projects are developing around the world. Sundaram slightly disagreed with Vollmer that the authors of the book treat economic convergence from the perspective of orthodoxy, rather arguing that they do in fact have an alternative approach. Many developing countries are actually not making any substantial economic progress. Referring to Jaegers’ comments, Sundaram agreed that the capitalism introduced and administered by the Communist party is not very different from capitalism in other countries.
Patnaik was broadly in agreement with these comments and said that an exclusive focus on GDP is a hangover from mercantilist thinking. If GDP growth is opposed to the interest of workers and farmers, Patnaik is against it. After decolonisation, the Indian state primarily represented the interests of farmers and petty businesses. Today, the state is mainly concerned with the interest of large capital and financial actors. There the democratic deficit arises. The bulk of peasants have huge problems making ends meet and when labour incomes decrease, all this undermines the basis of political democracy. Patnaik opposes the concept of neoliberal development. Food security is an important area and it is key for larger countries like India to have control over the food sector and to capture their own food rents. At the moment, multinational companies are buying peasants’ land and displacing them; at the same time, peasant children want to move to the cities. The hallmark of modern neoliberalism is that class orientation has changed and now represents global capital at the cost of national petty business and peasant agriculture.