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Reforming the WTO is a Long and Complicated Process

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Since early autumn 2018, the issue of reforming the World Trade Organization (WTO) has become an increasingly visible item on the global economic agenda. It was one of the central questions posited in the final communique of the G20 Summit that took place in Buenos Aires on November 30 – December 1, and the parties intend to tackle it again at the next meeting in Tokyo.

The WTO is traditionally considered the third institution of the Bretton Woods system. However, while the first two – the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD) – started functioning shortly after the end of World War II, it took 47 years of excruciating negotiations to create the third part, a universal trade organization. The establishment of the WTO in April 1994 following the Uruguay Round of negotiations (1986–1993) should rightly be considered the greatest event in economic relations in the 20th century. However, the tremendous success had a certain reverse side: contradictions and issues between member countries remained. This predetermined the future need to reform the WTO.

Trade Wars are a Signal for Action

The problem of the institutional reform of the WTO has been discussed at the level of experts for at least the last 15 years. However, it has never gone beyond the scope of an academic discussion, and for serious reasons too. The older generation of trade diplomats and experts remembers all too well the excruciating negotiations at the Uruguay Round, which were accompanied by crippling crises and contradictions between the parties. Hammering out compromises was a Herculean task, and the agreement on establishing the WTO crowned those compromises.

It is precisely because of these features of the WTO’s protracted birth that representatives of various countries, recognizing the need to reform the organization, were fully cognizant of how difficult and risky such a reform will be in practice. That is why each and every time discussions ended the same way: the GATT/WTO system has been functioning for 70 years, and even though it has its problems, no one can guarantee that a reform will not make things worse. Nowadays, the situation has been noticeably radicalized due to the new U.S. protectionist policies and the trade wars it started “with the entire world.”

The Administration of the 45th US President has embarked upon a course of open criticism and attacks on universal trade rules. In late February 2017, the United States Trade Representative (USTR) delivered the Trade Policy Agenda and Annual Report to Congress. The document emphasized that given the “unfair trade practices” of other countries, the United States can disregard the WTO rules and conduct a more “aggressive” trade policy in protecting its national interests.

On June 1, 2018, Washington imposed increased import tariffs on metals from the European Union, Canada and some other countries to 25 per cent for steel and 10 per cent for aluminium. The current U.S. administration believes that domestic steel production has fallen sharply in the recent years, and this threatens national security. However, Europe and Canada see the legal justification for Washington to increase tariffs as being completely unacceptable.

Partners Reject U.S. Protectionist Measures

Within the WTO, each country has its commitments based on the rules developed during the Uruguay Round. These rules allow import restrictions in three very specific situations: in cases of dumping; the use of illegal subsidies; and if there is a threat to national industries due to a sharp increase in imports. In each case, the damage from the above-stated actions of a supplier country must be substantiated. The damage is assessed in the course of an appropriate transparent investigation that involves all the parties. The current U.S. measures do not fit into any of these scenarios, and instead it is being justified by “reasons of national security.” This, however, gives the matter an entirely different legal twist.

The WTO legal framework does stipulate restricting market access for reasons of national security: appropriate measures are possible in cases of illegal trade in weapons and nuclear materials, the danger of armed conflicts, a terrorist threat, etc. Therefore, in such cases, every state itself determines the measures for restricting access to its market under Article XXI of GATT, which is devoted entirely to “reasons of national security.” The difficulty with applying Article XXI of GATT is that its application mechanism is still not quite specific; a state that introduces restrictions under this article acts as the ultimate judge in the dispute.

The United States offers a very subjective formulation of “reasons of national security” that is clearly detached from the current international rules. Washington sees a threat to national security in the sharp drop in domestic metal production, even though such a situation is essentially a consequence of regular international competition.

European countries and Canada were shocked by the fact that the United States imposes tariffs against them out of “reasons of national security.” As the President of the European Commission Jean-Claude Juncker emphasized, “these unilateral U.S. tariffs are unjustified and at odds with World Trade Organization rules. This is protectionism, pure and simple.” President of France Emmanuel Macron called the U.S. administration’s decision illegal and mistaken. Prime Minister of Canada Justin Trudeau spoke rather sharply at the June 2018 G7 Summit in Quebec calling Washington’s measures “punitive,” “unacceptable” and “insulting.”

Following repeated attempts to convince Washington that its protectionist measures were unfounded, in late November 2018, the European Union, along with China, Canada, Norway, Mexico, Russia and Turkey, and then India and Switzerland filed a complaint against the United States with the WTO’s Appellate Body concerning the illegality of the steel and aluminium tariffs imposed by the United States. In the complaint, the plaintiffs intend to challenge the U.S. tariffs as protective and simultaneously prove that the United States cannot invoke reasons of national security. This demarche against the United States by nine countries at once is a rather convincing proof that the WTO’s leading members are resisting Washington’s attempts to revise the existing rules of international trade.

Thus, the U.S. administration believes that it can protect its domestic market and ensure its foreign trade interests on the basis of its domestic trade legislation. Over the course of 2018, Washington primarily invoked two legislative acts. Under the Trade Act of 1974, the United States can impose penalty tariffs on countries that discriminate against American goods. The second is the 1962 Trade Expansion Act that allows the United States to restrict import of goods that would “threaten to impair the national security.” This act served as a legal justification for Washington to increase import tariffs on steel and aluminium starting June 1, 2018.

Europe, Canada and Japan believe that using legal acts that are over 50 years old is odd at the very least, since in the intervening decades, international economic regulations have changed drastically, the principal change being the emergence of a full-fledged multilateral regulation institution, i.e. the WTO, which was to a great degree promoted by the United States. Strictly speaking, the moment the WTO became operative in January 1995, the United States did not invoke the provisions of those domestic acts since it believed itself to be bound, like other WTO members, by the WTO’s commitments.

Every Side has its Arguments on Reforming the WTO

In March 2018, the United States Trade Representative Robert Lighthizer presented the latest version of the U.S. administration’s annual agenda in trade policies. The agenda concerns such issues as reforming the WTO, trade agreements with other countries and the application of U.S trade laws. The document is critical of the trade policies of previous administrations and simultaneously claims to reach a qualitatively new level in trade policies under the Trump administration.

Lighthizer’s report states that the U.S. administration is dissatisfied with the existing rules and their application in such areas as labour conditions, competition policies and the medical equipment market. It notes the investigations of U.S. officials into China’s violations of U.S. intellectual property rights. In essence, the report justifies instances of applying U.S. trade laws from the 1960s–1970s in order to protect national security interests, which cannot but cause concerns, since these laws are applied separately from the WTO rules and the commitments that the United States has undertaken as part of the organization.

As for the current multilateral negotiations at the Doha Round, Washington has specific grievances in that area, which may be considered justified to a certain extent. For instance, the United States is not satisfied with their highly stilted character, the impossibility of achieving new agreements other than at the biennial WTO ministerial conferences, and what the United States views as the outdated agenda of the Doha Round.

What is more, in recent years, the United States has not hidden its displeasure with the position of a large group of countries within the WTO which, having joined the organization as developing countries, continue to see themselves as such today, despite the fact that they have made significant progress in a number of economic sectors and even outstripped certain developed countries. In addition to this, many developing countries have non-transparent trade policies. Consequently, those WTO members de facto use privileges that Washington deems to be unjustified, which blocks progress in developing new WTO rules and also impedes further liberalization. This is the essence of Washington’s approach to reforming the WTO: eliminate unjustified and unfair privileges held by a group of developing countries that today essentially paralyse the multilateral trade system.

As for the other major player in international trade – the European Union – it has assumed a highly proactive stance on the issue of reforming the WTO. The European Union was the first to publish a list of specific proposals (a concept) on reforming the WTO. Analysing the entire list is rather a task for trade policy experts. It would therefore be appropriate to single out the key points. Even though the European Union’s stance was originally a direct consequence of the wrongfully protectionist measures of the United States towards European manufacturers, the document contains no direct or indirect complaints against Washington, which is largely reasonable, since reforming one of the key institutions of global economic management is too grave an issue to start it by settling scores with an old trade partner.

Essentially, Brussels shares Washington’s position on the matter, as well as its grievances against that group of developing countries that has reached a rather high level of economic development, but has no wish to part with their previously gained privileges

The EU proposals also note that today’s discussions are frequently dominated by the opinion that global trade rules somehow impede trade and, therefore, developing countries need to be exempted from both current and future rules. In fact, today, the differences between developed and many developing countries are not quite as pronounced as they were 25 years ago, when the WTO was established, meaning that the above-mentioned opinion is fundamentally wrong. Obviously, some flexibility in enforcing the compliance of developing countries with the WTO rules should be preserved, but only in those cases where it is necessary. The proposals put forward by Brussels contain specific mechanisms for tackling this task.

The EU concept focuses heavily on modernizing the WTO’s Appellate Body, a crucial organ in the mechanism of resolving disputes within the WTO. The European Union’s stance on the matter was supported in November by Canada, India, Norway, New Zealand, Switzerland, Australia, South Korea, Iceland, Singapore, Mexico and China.

In its proposals on the Appellate Body, Brussels largely takes Washington’s grievances against its current functioning into account. In particular, the European Union proposes limiting the appeals term to 90 days, which had been stipulated earlier, yet the parties often failed to comply with the requirement.

The EU concept also contains a series of initiatives on bolstering the multilateral trade system and improving the efficiency of the WTO.

China, which has been striving to form a united front with other countries that condemn Washington’s protectionism, has also called for a reform of the WTO.

While supporting WTO reform, China has thus far limited its actions to fairly general statements, stressing that the importance and inviolability of the WTO’s basic principles and rules. It would seem that Beijing is unlikely to be unconditionally receptive of Washington’s demands that current privileges for developing countries in the WTO be abolished. In contrast, China will rather put forward the need to fight protectionism, which is a threat to free trade.

As for Russia, it wholeheartedly supports the idea of reforming the WTO. President Vladimir Putin and Minister of Economic Development Maxim Oreshkin recently declared this stance. Russia’s trade diplomacy has quite good positions to take an active part in the process.

In conclusion, we need to emphasize that the nascent process of reforming of the WTO cannot be simple and quick, since the list of problems is too variegated. Above, we have outlined only some of these problems. At a certain stage, the most difficult problem will likely be that of transforming the decision-making system. The consensus mechanism that has been in effect in the GATT/WTO for over 70 years clearly hampers decision-making today, as the organization boasts 164 member countries. However, abolishing this mechanism will not be easy either. This is probably the main challenge to the incipient WTO reform.

First published in our partner RIAC

Professor of World Economy and International Affairs Department at Higher School of Economics, Leading Researcher at RAS Institute of World Economy and International Relations (IMEMO)

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International Conflicts from the View of Trade Expectations Theory

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Does economic interdependence between great powers have a significant effect on the probability of war between them? This once seemingly impossible question has become extremely realistic and urgent in the current tide of anti-globalization.

In fact, it is not the first time that free trade has been terminated, as all the great powers in the Western world had abandoned the principle of free trade at one point, such as Germany in 1879, France and Britain in 1881, and the United States as early as the 1860s during the Civil War. Global trade frictions and conflicts have developed from competing for raw materials, energy, and investment to today’s competition for market space (see Chan Kung’s “Spatial Determinism” for details).

There are two views on the relationship between economic interdependence and war. Liberals assert that with commercial ties, trade and investment flows can raise the opportunity cost of going to war and thereby providing a large material incentive to avoid war. Realists claim that commercial ties make states vulnerable to cutoffs, which can devastate an economy that has reoriented itself to rely on critical markets and goods from abroad, and thereby prompt leaders to go to war.

American scholar Dale C. Copeland believes that an additional causal variable, i.e., a state’s expectations of the future trade and investment environment should be introduced to determine whether the liberal prediction or realist prediction would prevail. When a dependent state has positive expectations about this future environment, it is more likely to see all the benefits of continuing the current peace and all the costs of turning to war. Economic interdependence would then be a force for peace. Yet if a dependent state has negative expectations about the future economic environment, i.e., seeing itself being cut off from access to foreign trade and investment, or believing that other states will soon cut it off, then the realist logic will kick in. Such a state would tend to believe that without access to the vital raw materials, investments, and export markets needed for its economic health, its economy will start to fall relative to other less vulnerable actors. If this economic decline is anticipated to be severe, the leaders of the dependent state would then begin to view war as the rational option, the lesser of two evils. Such leaders would consider it is better to fight that being forced to submission.

This argument is similar to the “preventive wars” in the field of international political economy, and Dale C. Copeland calls it the “trade expectations theory”. Copeland believes that in the situation where there are different great powers, the combination of economic interdependence along with expectations of future trade and investment was a critical driving force shaping the probability of war and conflict between these powers.

Several historical examples from the twentieth century are clear prove of this. Japan’s attacks on Russia in 1904 and the United States in 1941 were intimately related to Japanese fears of future access to the raw materials and trade of the East Asian region. In the first case, Japan witnessed Russia’s steady penetration into economically valuable areas of Manchuria and the Korean Peninsula. After repeated and invariably unsuccessful efforts to convince Russia to pull back, Tokyo realized that only preventive war would mitigate Japan’s long-term economic and military concerns. The closed economic policies of the great powers after 1929 had a devastating impact on Japan’s economy and Japanese views of the future trade environment. Tokyo’s efforts to consolidate its own economic sphere in Manchuria and northern China, spurred by its decades-long worry about Russian growth in the Far East, led to conflicts with the Soviet and Nationalist Chinese governments. When the United States entered the fray after 1938 and began a series of damaging economic embargoes, Japanese expectations of future trade fell even further, prompting a desperate effort to acquire access to oil and raw materials in Southeast Asia. The ultimate result was the attack on Pearl Harbor in December 1941.

During the forty-five-year Cold War struggle after World War II, there was a low level of economic dependence between the United States and the Soviet Union, and the “trade expectations theory” seemed unable to explain the geopolitical rivalry between the two great powers. Obviously, economic relations between states do not explain all the problems of geopolitics, which involves a variety of other issues (e.g., ideological rivalry, mutual military threats, etc.). However, the impact of economic relations can be seen even during the Cold War. In the late 1950s, President Dwight Eisenhower’s unwillingness to relax stringent economic restrictions alienated Nikita Khrushchev and contributed to the extreme tensions of the 1960–1962 period. But in the early 1970s and again in the late 1980s, Washington was more willing to commit itself to higher future trade with the Soviets. This proved critical to achieving an initial détente period and then an end to the Cold War altogether.

In the current tide of anti-globalization, it seems that the phenomenon of “trade expectations theory” can also be seen. The Trump administration, following the principle of “America First”, believes that the major trading partners of the United States have taken advantage of the United States through trade, making the economic interests of the United States damaged, and China has caused the greatest economic damage to the United States. As a result, the United States has adopted a series of crackdowns and sanctions on its major trading partners, including China. The modern world is less prone to war between major powers, but instead manifests in more diverse non-war forms, i.e., trade sanctions, technological sanctions and blockades, financial sanctions, diplomatic recriminations, and geopolitical repression. In the view of researchers at ANBOUND, this overall deterioration in geopolitical relations, triggered by economic ties, is merely an alternative to the “trade-security” model of war. If the geopolitical friction intensifies further and the threshold of a certain aspect is breached, a war of some kind is not out of the question.

The view of defensive realism is that national leaders, aware that their actions can lead to a vicious cycle of hostility, are justified in maintaining their current reputation for neutrality, prudent territorial policies, constant trade with other countries, and a willingness to embrace common international rules in a relatively open attitude. This view helps to create a pattern in which great powers tend to coexist for a long time without serious conflict or war. However, if national leaders take the view of aggressive realism, that in a leaderless world, great powers must always worry about what other nations will do in the future, and prepare for the worst, then they must maximize their power. The likelihood of violent conflict or even war between the great powers would then increase.

How to avoid security conflicts between great powers over trade issues? Some scholars have argued that it depends on the rationality of the national decision-makers, as well as the objective judgment on the strength and determination of both sides in the conflict. Rational actors have an incentive to reach agreements that prevent war from inflicting damage on each other, so that the situation for war does not arise and thereby improving the circumstances of both sides. In the event that if an actor do not understand the true balance of power and the determination of the other side, or do not trust the other side to keep the promises made in the agreement, war may occur.

Final analysis conclusion:

After World War II, the world as a whole has been largely at peace for 75 years (meaning that there was no major war involving a large number of countries). The current tide of anti-globalization and increasing geopolitical frictions is shaping up to be the most far-reaching and influential period of global trade and geopolitical turmoil since the end of the Cold War. “Trade expectations theory” provides an explanation for the current global conflicts, as well as an idea for countries to make rational decisions and mitigate international conflicts.

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Democracy in decline and its fate after the crisis: Why will the big crisis kill liberalism with or without the demos

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Being praised as never before, democracy was in crisis. The reality of the economic problems of 2008-2020 led to a new critical moment. All this makes us think about the meaning of the word “democracy”, about the economic logic of history and much more.

Twilight of a new big crisis

The countries of the core of capitalism had to face a new big economic crisis in 2008. In semi-peripheral and peripheral countries, democracy was outwardly similar to the central, with the difference that it was much more formal, implicated in falsifications and did not exclude coups and turmoil, though formally they started as a struggle for fair elections. Neoliberalism in a broad sense had no alternative and could only be mitigated in some countries. Therefore, due to its strength and rootedness, the encounter with the crisis was delayed and turned out to be completely unpleasant. In 2020, this story has not yet been concluded.

Neoliberal doctrine and ideology brought market and commercial freedom to the forefront, while public interests were pushed to the background. Under the pressure of neoliberal reforms, the social structures supporting democracy, as known in the 20th century, weakened, mass participation in them declined. People resorted to private life and the elites boldly practiced manipulations. The protest became anti-globalist with faith in social networks and a growing mistrust of “rotten parties.” The criticism of neoliberalism and the democracy that it subordinated, namely liberal democracy by the “stars” of anti-globalism was spectacular. It was not effective, as its countercultural pathos did not prevent it from fitting into the mainstream.

Not everything looked unequivocally gloomy in the era preceding the 2008–2020 crisis. When Bill Clinton came to power in the United States and Tony Blair in the United Kingdom a considerable number of ordinary people felt a certain turn. In France, such a feeling was created later by the victory in the elections of socialists led by Francois Hollande. In Greece by the election of the party “Syriza” and Alexis Tsipras. In practice, the turn did not occur, everything turned into manipulative simulations, convenient for continuing the old course. They undermined faith in the seemingly existing democratic mechanisms. Might the opposition have found a solution to the neoliberal mainstream? Wasn’t there an alternative to the “outdated” base organisations of trade unions and parties, the idea of network organisation? In the 2000s it was widely cherished in Europe and America.

Alas, the networks did not become the basis for the revival of “genuine democracy,” and faith in them only helped conserve the opposition of neoliberalism. In these networks it rotted, telling itself from time to time not to follow the way of old parties, they were all evil, they killed the egalitarianism of a genuine popular movement and not to suggest designs instead of the people and for the people (all these congresses, committees and commissions) for in this way the true spirit of democracy will be completely ruined. As a result, the “genuine spirit” existed only in imagination.

When the time of social networks on the Internet came, it showed how much they enable the control over individuals and how little horizontal connections of individuals mean to them. With such networks it was easy to organize a wave of protests and after a change of power (a coup by order of the United States or the Eurocracy) to return the mass participants to their places.

Democracy in an era of crisis once more in crisis

In 2008, the time of sustainable financial globalisation ended and the great global economic crisis began. The waves of crisis came one after another until 2020. And then it finally became clear that the seeds of the anti-globalist alternative give rotten seedlings even in the United States: Bernie Sanders withdrew from the elections at the most dramatic moment for his people in the 21st century. Before that there was a series of unsuccessful attempts by society to influence the process in Europe. It turned out that he has no structures and understanding of the mechanics of their work and personal work in them, lacks solidarity and understanding of the situation. As a result, the liberal elite retained dominance over “democracy”.

But liberal political constructs have become an obstacle in the fight against the crisis. And if in Russia and China the shift from neoliberalism to a new practice neo-mercantilism started from above, without the help of republican mechanisms set in motion by the people (the starting point were the problems of economic development),  the situation was different in the West. The manipulative liberal democracy preserved the crisis, blocking attempts to change politics. Even Trump, with his conservative transformation plan, came up against the resistance of liberal forces from the Democratic Party and its adherents in the power system. He could not overcome the checks and balances.

An extensive programme about which my colleagues and I in the Department of Political Economy and the History of Economic Science of the Plekhanov Russian University of Economics spoke in the report “Donald Trump and the Economic Situation” back in 2016[1]. In another report, entitled “A Society Without Opposition,” prepared with my participation in the Institute of the New Society, many vices of the left were revealed that prevented them from acting as the main force of transformations[2]. One of the problems lies in the desire to apply ready-made schemes to new historical conditions and the belief that capitalism cannot have anything new in itself, nothing that would not have happened before.

“Revolution or reform?” and myths about the ways

The disappointment in democratic mechanisms brought the old question, which in 1918 was included by Rosa Luxemburg in the title of her pamphlet “Reform or Revolution”, back to life. Reforms over the past 40 years have been neoliberal, and therefore the word “reform” often evoces negative emotions in people. In Russia, it is difficult for many citizens to accept the fact that the socio-patriotic reforms that are taking place in the country are not liberal, they are not shattering, but strengthening society. Therefore, the question remains valid.

But this question is false. However, it seems logical to many, as since the 1980s it was suggested that there are two ways that contradict each other: a seemingly tough and a seemingly soft one (identical to liberal democracy). In another interpretation: a progressive and an opportunistic, destructive or reactionary. Neoliberal reforms inspired the latter understanding, as they were destructive and antisocial in nature everywhere. However, under the influence of the global crisis of 2008-2020 at its very end, that is presently, reforms of a different type are now becoming possible. They are associated with the need to overcome the protracted era of economic crisis and the resumption of a sustainable growth and development. Naturally, they should increase the stability of the states in which they are implemented and, as a result, make them stronger in international rivalry.

Reforms of a new type and dictated by the new era became possible. In Russia they have already begun and with them another social reality started to form. But what about cliches? And what about the vulgar, but in practice voluntaristic understanding of revolutions based on disappointment in liberal democracy?

In the book “Capitalism of crises and revolutions how formation epochs alternate, new long waves are born, restorations die and neomercantilism advances” I devoted many pages to the complexity of such a phenomenon as the great modernisation revolution, as well as the Great Russian revolution. Here there is a unity of both revolutionary, evolutionary and reformist stages (not methods!). Voluntarists of “revolution” will never understand nor accept this. For them, all sorts of reforms of Russian or other capitalism will be a deception of the masses, and their support will be a betrayal of the “cause of the liberation of the working people” or a reactionary measure. There is no dialectic in such a vision of history. That is why voluntarists, adherents of maximalist phrase, are not related to real social revolutions with their complex diverse consequences.

In the United States, Britain, Western Europe and Japan, the situation is special. There neoliberalism has gone far in influencing society. From manipulations with the help of liberal institutions, it proceeded to the destruction of the basic norms of morality and relations, not centuries-old, but largely cultivated in the 20th century. Nuclear family was attacked as “slavery of the patriarchy”, trade unions as fetters to the market, the right of the majority to laws in its interest as the anti-democratic egoism of white men, discriminating minorities. Minorities themselves were nurtured and helped to fragment a society in which, as the events of 2008–2020 showed, no forces were found to overturn neoliberalism from the bottom in a left, reformist or more radical way.

Without being defeated, neoliberalism will die from the fact that its time has passed. This is already evident in some parts of the world, but not obvious in others. However, the impossibility of overcoming the crisis on the basis of neoliberal policy is the absolute proof of this thesis. And then what about democracy?

Neo-mercantilism is approaching

Left-wing intellectuals love to write phrases like this one: the struggle for social and cultural reforms, for another world with opportunities for every person to creatively find themselves, to be free, to control power and not be afraid to be poor, will continue and lead the world to success. In parallel, they can criticize the national conservatism of the “right”, and talk about the benefits of diversity in society, without which there can be no democracy. But truth requires adding at this point the story of Socrates. Athenian democracy did not at all tolerate his liberties and forced him to drink poison. His disciple Plato was forced to behave more carefully with the people. In modern realities, we must be prepared for a democratism that is conservative in spirit.

Neoliberalism has created a moral opposition in society, the foundations of which are considered traditional. The liberal left is indignant about this unrighteous, in their opinion, way of denying globalisation and the ideas of “free trade” in all spheres of life. However, conservatism is very limited here. It is not very religious, since society in countries with developed markets is not very religious, and the protection of family values and the importance of marriage is more like the defense of the Soviet understanding of relationships and lifestyle; it should be borne in mind that the emancipation of the 20th century is irreversible, universally recognised and inseparable from society, and these are not “patriarchal mores,” but the product of modernisation. Though this modernisation took place not so long ago. Therefore, anti-neoliberal conservatism does not at all refer to old morals, and only because of the love of religious justification of its position can be called right. However, there is also a reference to the national values and interests of nations, opposing the interests of global financial structures. And here it is important to finally accept the fact: neoliberalism hit the organised working class, the old class and left structures (including their structure) so hard that it left only a limited number of means to eliminate itself. The dismantling of neoliberalism is not a socialist act, but a bourgeois measure ensuring the further development of society. Another thing is that in the process in some countries a revival of the social state is possible.

The era of globalisation has taught many people to view democracy as something universal. Neoliberalism has replaced the dictatorship of modernisation in the countries of the semi-periphery and periphery of world capitalism. There was not much personal freedom and public freedom in them. But with neoliberalism, the local elites were able to cover up their rule with the word “democracy”. The plans of the elite of the countries of the centre did not include the transformation of part of the countries of the production periphery into new centres of development of capitalism, as candidates to play part in the core of the global economy. It was not part of the plans of the old centres that the local top officials should search for support in the “lower strata”, largely due to the rejection of the neoliberal course and reliance on social and patriotic measures. And the bold and independent behaviour of the highest bureaucracy, grand bureaucracy, is absolutely perceived in Washington and Brussels as a riot.

But it is precisely this rebellion that sets the limit to neoliberalism politically. Leaning or trying to rely on the majority of the country’s population (especially in Russia), it is democratic in its own way, reflecting the demos’ requests for social policy, the revival of national pride and the growth of prosperity based on the patronage of the state to its market, production and its mass buyer. This turn from neoliberalism, however, is not a turn created from below, that is, formally democratic, organised not under the pressure of society, but by society itself. In this regard, it is necessary to acknowledge the failure of attempts to end neoliberalism from below in many countries. With a firm commitment of the “upper strata” to this policy, it is not eliminated from above either. Even the split of the upper strata in the United States with the advent of Trump to the White House did not lead to such a development of events, the processes were blocked. Therefore, neoliberalism has not yet completed its history, it simply has lost economic efficiency and cannot be the basis for the exit of certain countries from the era of the great crisis. But this is not its complete end.

Democratism instead of democracy?

Nevertheless, the end of neoliberalism is inevitable. In some cases it will come in the form of a conservative in shade, and a socio-patriotic in form turn. In another case, problems in the economy will bring about movements that can either be such as in countries claiming to be new centres (Eurasian countries), or society will be able to move from an unstable and weak in content movement like the French “yellow vests” to something stronger and more productive. Finally, there is a scenario where popular intervention in politics will be like an outbreak such as in Argentina in the early 2000s. But in this case, progressive shifts will be the fruit of a new grand bureaucracy, simply not neoliberal.

All these paths are not easy. Democracy in them will probably be expressed not in procedures, but in mass support for the new agenda. It is hardly to be expected that the “lower strata” will restore the forms of organisation and practice that were characteristic of the 1930-1970s. In this sense, the prospect of the triumph of “pure democracy” soon seems doubtful. Republican procedures and structures will live, as society is agitated everywhere. However, even overcoming neoliberalism from above to a greater extent than from below will become a common scenario for overcoming the era of the great crisis, it should be taken into account: economic growth and social development in general will work for future democracy.

Formal Republics, where development does not stop and degradation does not happen (which is possible for some countries) will become more social. Relying on social unity, on the construction of nations and their associations, for example, during the Eurasian integration process, administrations will awaken reformist activity in society. As a result, formal Republics will move towards real Republics, where people influence processes not only through expression of mood. This will be the beginning of a new revival of democracy.

Here it is necessary to summarise. It was said enough by virtue of what economic processes neoliberal democracy (the right format of ideas and practice) found itself in a crisis, and was unable to provide a mechanism for leading the countries of the old core of capitalism out of the crisis and ensuring a change of power in Russia, China and other Eurasian states, claiming to be new centres of capitalism. There, the neoliberal “democrats” at the top are increasingly oppressed by the neo-mercantile grand bureaucracy. It can restart the growth of economies and this growth will continue for about 25 years. The big crisis will end and a new upward wave of development will begin; only shortly will commercial crises interrupt it, none of which will be similar to the era of 2008–2020. The establishment of a non-mercantile economic reality in the world launches a mechanism for mastering the practices and ideas of democracy in the conditions of strong national states of Eurasia, solving the tasks of continental integration and rivalry with the old global leaders. How the process of democratisation or the revival of democracy will develop is not yet clear. But economic recovery will be a better environment for this process than the last big crisis.

On the whole, the history of democracy is not only incomplete, but by and large is just beginning. And if in most countries in the era of neoliberalism democracy was a pure imitation, in a different era everything will be different.

 From our partner International Affairs

[1] Report of the Department of Political Economy and the History of Economic Science of the Plekhanov Russian University of Economics “Donald Trump i ekonomisteskaya situatsiya: strategiya kandidatov v presidenty i Vroraya volna krizisa v SSHA”  // Institute for globalisation and social movements. – URL: http://igso.ru/trump_situation/ (publication date: 28.10.2016; reference date: 27.08.2018).

[2] Report of the Institute of the New Society “Society without Opposition: the crisis of the left in the era of neoliberalism and afterwards”// Institute of the New Society. – URL: http://neosoc.ru/%d0%be%d0%b1%d1%89%d0%b5%d1%81%d1%82%d0%b2%d0%be-%d0%b1%d0%b5%d0%b7-%d0%be%d0%bf%d0%bf%d0%be%d0%b7%d0%b8%d1%86%d0%b8%d0%b8/ (publication date: 28.10.2016; reference date: 27.05.2020).

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Economy

New trade rules vital to protecting the planet

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As satellites from NASA zipped over the planet Earth yesterday, they saw what they have seen every day for months: fires, hundreds of them, tearing through virgin rainforest and other vital ecosystems.

Many of the blazes, which come at the tail end of a devastating fire season, are believed to have been set by farmers eager to clear land and sate the booming global demand for beef and soybeans.

A new United Nations Environment Programme (UNEP) report, jointly produced with the International Resource Panel, says that type of unbridled international trade is having a damaging effect not only on rainforests but the entire planet. The report, which called for a raft of new Earth-friendly trade rules, found that the extraction of natural resources could spark water shortages, drive animals to extinction and accelerate climate change – all of which would be ruinous to the global economy.

“The economic fallout of COVID-19 is just an overture to what we would see if the Earth’s natural systems break down. We have to make sure that our global trade policies protect the environment not only for the sake of our planet but also for the long-term health of our economies,” said Inger Andersen, Executive Director of UNEP.

The environmental toll

The new report, titled the Sustainable Trade in Resources, was unveiled Monday by UNEP Executive Director Inger Andersen at a meeting of the World Trade Organization.  

It found that in 2017, 35 billion tonnes of material resources, from oil to iron to potatoes, were extracted from the earth specifically for the purposes of trade. While that helped create millions of jobs, especially in poor communities, the report found it had a profound effect of the planet. Resource extraction was responsible for 90 per cent of species loss, 90 per cent of water stress and 50 per cent of greenhouse gas emissions in 2017.

With the demand for natural resources set to double by 2060, the report called on policy makers to embrace what is known as a “circular” economic model.  That would see businesses use fewer resources, recycle more and extend the life of their products. It would also put an onus on consumers to buy less, save energy and repair things that are broken instead of throwing them away.

The benefits of going green

Those changes could pay big dividends for the planet, the report found. By conserving resources, humanity could slash its greenhouse gas emissions by 90 per cent.

While the circular model could have “economic implications” for countries that depend on natural resources, it would give rise to new industries devoted to recycling and repair. Overall, the report predicts, a greener economic model would boost growth by 8 per cent by 2060.

“There’s this idea out there that we have to log, mine, and drill our way to prosperity,” said Inger Andersen. “But that’s not true. By embracing circularity and re-using materials we can still drive economic growth while protecting the planet for future generations.”

Some countries, both in the developed and developing world, have embraced the concept of a circular economy. But the report said international trade agreements can play an important role in making those systems more common. It called on the World Trade Organization, which has 164 member countries, to take the environment into consideration when setting regulations. It also recommended that regional trade pacts promote investments in planet-friendly industries, eliminate “harmful” subsidies, like those for fossil fuels, and avoid undercutting global environmental accords.

“Re-orienting the global economy isn’t an easy job,” said Inger Andersen. There are a lot of vested interests we have to contend with. But with the Earth’s population expected to reach almost 10 billion by 2050, we need to find ways to relieve the pressure on the planet.”

UN Environment

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