Might radical reform of multilateral institutions help develop a fairer global economy?

In 1997, radical economist Samir Amin wrote the classic analysis of the modern economy – Capitalism in the Age of Globalisation: The management of contemporary society – which has recently been updated and republished. In a slightly abridged extract, Amin describes how reform of the Bretton Woods institutions – the World Bank and the International Monetary Fund – could bring about radical change in global economic systems. Given events since 1997, it is a fascinating insight into how events could have transpired, and yet might.

It is not possible to review all of the proposals put forth in recent years for reform of the Bretton Woods institutions. They are too numerous; moreover they are derived from theoretical and political perspectives that are extremely diverse. I will, therefore, confine myself to a small sample of proposals made from a resolutely progressive point of view – that is, they start from the objective of a renewed development throughout the world, and especially in the Third World; they give this development a popular content (elimination of poverty, expansion of social services, reduction of inequalities); and they allow unity to be re-established between the economic and the political sphere (which means, among other things, allowing democracy to take root among peoples).

I certainly have a great deal of sympathy for these proposals – not only for the general spirit animating the solutions advanced, but even, in many cases, for the detail of the reforms suggested at three levels of necessary action: local, national and global. To support transformations of attitudes and organisation of responsibility at the base, to enable people at this level to become genuine agents of economic initiative and thus create a link between the economic sphere and political, social and cultural life, to free them from the status which capitalism confers on them of reducing workers to their labour-power and citizens to consumers – these are, without a doubt, essential conditions for better development.

Keynesian approach

There are some radical proposals that call for a return to Keynesianism, this time on a world scale: a redistribution of income to the benefit of Third World peoples and workers in every region of the world. According to their advocates, these proposals imply major reforms affecting the international economic institutions:

(1) The transformation of the IMF into a genuine world central bank with the power of issuing a real currency that would replace the dollar standard, ensure a certain stability of exchange rates, and provide developing countries with the liquidities needed for “adjustment within growth”.

(2) The transformation of the World Bank into a fund that would collect surpluses (from countries such as Japan and Germany) and lend them not to the United States, but to the Third World. This operation, intended to trigger growth in developing countries, would simultaneously force the United States to reduce its deficit. It is hoped that this reduction would not be obtained through US neoprotectionism associated with an aggressive exports policy. But how else would it happen?

(3) The creation of a genuine international trade organisation (ITO). In this area, in general, the principle of free trade as advocated by GATT-WTO is not questioned. The ITO might even be bolder than GATT-WTO, which is always forced to manoeuvre in a context of compromise, and might succeed in imposing out-and-out multilateralism. As a counterpart to the benefits that developing countries would receive from the genuine opening of northern markets, they would be asked to make concessions in the area of services. The experience of the EC [ie European Union], which has actually succeeded in liberalising and multilateralising intra-European trade while excluding unbridled competition (for example, by imposing standards of respect for the environment and social protection), is often mentioned in this respect. It is also argued that the ITO would temper the negative aspects of the creation of regional units by preventing them from becoming fortresses, protected within and aggressive without. The ITO would have other objectives such as the stabilisation (or revalorisation) of raw materials.

(4) Consideration of environmental issues might become an internalised feature of the World Bank’s loan system. One might take this even further by setting up a world tax on energy, nonrenewable resources, etc, that would increase the resources available to the Bank (or the fund that would take its place), allowing it to subsidise respect for environmental concerns in poor countries.

(5) Reform of the economic institutions would be accompanied by a heightened political role for the United Nations. Development having been revived, the project of making it the basis for the progress of political and social democracy could become more than a pious wish. Development aid, multilateralised within this framework, might not only be conditional on respect for individual rights and political democracy, but also support progressive social policies (making sure that wage increases parallel increases in productivity, providing for a more equal distribution of income, etc). In the same way, the national political dimension of globalised development, co-ordinated in this way, would allow for the respect of legitimate interests. For example, food self-sufficiency would be accepted, but it would be offset by a tax paid to the world community by the country benefiting from the protectionist measures. The tax would be collected by a world development fund which would be the major lending institution for Third World countries.

Income redistribution

In my opinion, this is a very fine project for reform of the world economic and political system. It proceeds from a central idea that strikes me as incontrovertible: that development can only be revived by a redistribution of income both at the global level (in favour of the peripheries) and at the social level (within centres and peripheries, in favour of workers and the popular classes), and that world trade and capital movements must be subordinated to the logic of this demand-side approach to trade.

Yet it must be recognised that reforms of this scope clash with the interests of dominant capital, because redistribution reduces profit margins in the short term, even though, in the longer term, it produces more than recovery – a genuine period of new growth that might open perspectives for profitable productive investments. For capitalism is a system based on giving priority to short-term considerations over long-term requirements which, in case of necessity, must be imposed by state intervention. It was the fear of communism and the radicalisation of the national liberation movements of the peripheries that gave rise to the Keynesian policies and development support of the postwar period.

The project is thus a kind of rediscovery of the fact that a different social order – socialism, to call it by its name – is objectively necessary and must be worldwide. It strikes me as evident that the deployment of this project demands deep political changes in every part of the world, the replacement of existing hegemonic social alliances (based on the domination of comprador capitalism in the peripheries of the south and now the east) with different social alliances based on the hegemony of labour and the popular classes. This is the only way in which it is possible to establish the dominance of use values over exchange values, and the integration of long-term requirements (the environment). At the same time, the project requires a different world political order from the one that prevails currently, an order based on the democratisation of all societies and the articulation of their interdependence with mutual respect for diversity.

Advances in these directions are necessary and possible. But I use the word advances advisedly, for realisation of the project as a whole is a long-term affair, the secular “transition” from globalised capitalism to world socialism. Along with the ideological combat that must be fought over the vision of the ultimate objective (as it is conceived, for example, in the project we have described), strategies must also be defined for each step of the way.

Constructive change?

Returning to the project, therefore, I have made it the object of a constructive critique which can be summarised in the following points:

(1) Many of the analyses underlying the reformist arguments are too much inclined to mix value judgments (the current system is “bad”) with explanations of the reasons motivating the decisions of the dominant powers. As I have said, the crisis management system that has been implemented is not absurd: it obeys the logic of dominant interests. I believe that globalisation as it is practised today is not a force imposing itself on humanity from the outside, but fulfils goals that are those of capital.

(2) I do not believe that transforming the IMF into a world central bank, and the World Bank into a fund for development, ought to be the objectives for the immediate future in this long transition to world socialism. Before reaching this point, it is necessary to construct a polycentric world on both the economic and the political levels. To believe it is possible to go any faster is to imagine that the basic political problem is solved, that the contradiction between economic globalisation and the fragmentation of political spaces is already surmounted. But this can only occur at the end of a long transition; it cannot be a condition for undertaking reforms. I am afraid that by setting the bar too high we are condemning ourselves to failure, and in so doing, there is a risk that we will encourage despair and the spread of the “Tina syndrome” (“there is no alternative” – no alternative of course, but to submit to the logic of dominant capital).

(3) Because the status of globalisation has not always been clearly defined (is it a determining objective force, or one tendency among others?) certain elements of the reform project outlined above strike me as doubtful. For example, I do not believe in the virtues of free trade (or in the concessions required of the periphery on its account).

I emphasise actions to be undertaken in the following major directions:

(1) Constructing Third World regions organised to face the five monopolies of dominant capitalism, and therefore capable of limiting their negative effects from the point of view of ongoing global polarisation.

(2) Reviving the European Left and the construction of Europe, enriched by a progressive social content representing an advance, in this region, towards a hegemony of labour, integrating Eastern Europe and the former USSR into this project.

(3) Reviewing the financial and commercial relations between Europe, Japan and the United States in a direction that would permit a relative stabilisation of exchange rates and force the United States to give up its structural deficit; reorganisation of trade relations in this perspective.

(4) Reconstructing the UN system in order to make it the locus of political and economic negotiations to organise the articulation of commercial and financial interdependence between the major regions of the world; opening negotiations on disarmament; taking the first steps towards the creation of a world taxation system organised around objectives of protecting the environment and natural resources.

(5) Reforming the IMF as an expression of these regional/world interdependencies, and not implying its immediate transformation into a world bank.

In conclusion, I will say once again that the realism of this project is based on an understanding of history that does not accept the idea that historical laws precede history itself. What appear as objective forces (such as globalisation) are only the products of a logic specific to a given system (in this case, capitalism), forms which are contradicted by the social interests of the forces that struggle against their realisation. The real result of this conflict determines a configuration of subsystems expressed in a certain manner, depending on social relations of power and the outcome of struggle – thus a configuration which is permanently evolving of its own accord. The strategy of creating a world socialism necessary to avoid barbarism focuses on defining the paths most likely to lead to evolution in the direction of this objective.

This extract is from Capitalism in the Age of Globalization: The Management of Contemporary Societ by Samir Amin (Zed Books, 2014), part of the Critique, Influence, Change series.

 

Bretton Woods institutions  business model  capitalism  Global economy  radical reform