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A history of international development – from the UN University Rector Dr. Malone

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As part of the Geneva Lecture Series concepted and conducted by prof. Anis H. Bajrektarevic, United Nations University Rector and Undersecretary General of the UN, Dr. David M. Malone gave a highly mesmerizing and content intensive lecture for the faculty members and Geneva-based diplomats.*  Excellency Malone outlined his view on international development, focusing on how the theory and (especially) the practice of such concept has evolved over the past decades. While international development has done much to improve the socio-economic situation in developing countries, much remains to be done, especially in the wake of the COVID-19 pandemic – Dr. Malone said.

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Talks about international development permeate current debates in academic and policy circles around the world. Yet, decades after its endorsement as one of the international community’s top priorities, the term continues to elude clear and univocal definitions, and it remains a contested concept. Dr. David M. Malone – an expert in international development, currently serving as UNU’s Rector in Tokyo, Japan – talked about his own take on the historical evolution of international development in an exchange with the students of Swiss UMEF University.

In a brief but comprehensive account, Dr. Malone noted that the concept of international development has emerged only fairly recently as a major issue on the world stage. The League of Nations, for instance, was not concerned with development, and even the United Nations did not initially devote much attention to this concept. Similarly, development was not on the agenda of the economic institutions established at the 1944 Bretton Woods conference – notably the International Monetary Fund (IMF), whose aim was to ensure monetary stability, and the International Bank for Reconstruction and Development (IBRD, the World Bank’s predecessor), whose focus was on the post-war reconstruction effort.

How did it happen, then, that these institutions gradually took the lead in promoting and sustaining development worldwide? The key factor underpinning this shift – according to Dr. Malone – is the process of decolonization, which started in the late 1940s with the independence of India, Pakistan, and Sri Lanka. Having freed themselves from the exploitative rule of colonial powers, these countries first sought to launch their first development programs, which often had a focus on agricultural development and famine prevention. At the time, international support to such efforts was very limited, consisting only of some experimental activities on specific technical issues, but with extremely tight budgets.

Yet, things started to change as a “huge decolonization wave” took off in the late 1950s, creating almost 80 new countries in the span of little more than 15 years. As these countries entered the UN en masse, they soon gained a majority in the organization. Questioning the UN’s single-handed focus on political and security issues, these countries – which were then labeled as “developing countries” – started to advocate for their own interest: the promotion of development throughout the developing world, with support from the international community.

These calls were rather successful. Entities such as the IBRD/World Bank, on a good track to completing their post-war reconstruction mission, soon started to shift their attention towards the developing world, ramping up the scale of their previously meager technical endeavors. Even more importantly, international support for developmental efforts started to materialize, both through bilateral agreements between countries and in the form of borrowed funds.

While the calls for international support were successful in raising the attention and the funds devoted to the topic of development, the early developmental endeavors were not always as successful. In a number of instances, the lack of adequate infrastructure prevented these endeavors from yielding the expected results, leading leaders to re-think their focus on what Dr. Malone termed “wildcat industrialization”. In addition, in their effort to finance development (and, at times, to amass personal wealth in the pockets of national elites), developing countries piled up an increasingly serious amount of debt, resulting in the debt crisis of the early 1980s.

The reaction of the industrialized world was mixed. Initially, shock and surprise prevailed, coupled with calls for developing countries to repay their debt at any cost. International institutions such as the World Bank and the IMF asked indebted countries to tighten their belt to free up funds for debt repayment. Lacking alternatives, many countries did so; yet, this came at a serious price over the medium to long term.Over time, however, a more realistic outlook on the issue emerged. Creditors organized in two groups – the “Paris Club” for official donors, and the “London Club” for private creditors – and discussed their response. Eventually, the strategy was two-fold: part of the debt was rescheduled, while another part was outright canceled.

Over the following decades, this major debt-management operation did yield important results – Dr. Malone stressed. By 1995, developing countries were fully out of the debt crisis, and government officials in industrialized countries were less worried about the overall situation. Still, tensions between developed and developing countries persisted, including at the UN. The latter asked the former to contribute to their development as a reparation of past damages under colonialism, while the former accused the latter of mismanagement and claimed full control over the use of their own funds. As of the mid-1990s, this debate had not led anywhere: everyone wanted to move on, and so they did.

The game changer emerged around the turn of the new millennium, when the UN – under the lead of Secretary General Kofi Annan – heavily invested in the creation and promotion of the Millennium Development Goals (MDGs). The goals were narrow but ambitious; and yet, despite this ambition, most (although not all) of them were met by 2015. According to Dr. Malone, this success was made possible by the high growth rates enjoyed by developing countries through the first 15 years of the new millennium – a growth that, among other factors, was enabled by the previous debt-management strategy and by the increasing flow of international capital to the developing world.

The success in achieving the MDGs thus triggered a new process at the UN, which raised the bar and set for the world even more ambitious goals – the Sustainable Development Goals (SDGs). These objectives were underpinned by an assumption that the high rates of growth that had characterized the first decade of the new millennium would continue. As it became clear, however, this assumption was overly optimistic. The 2008 global financial crisis significantly slowed down growth, both in the industrialized world and (albeit to a lesser extent) in developing countries. As a result, international development efforts faced – and still face – increasing challenges. To respond to these challenges, the 2015 Addis Ababa Action plan sought to adopt a more sophisticated strategy to ensure funding for international development efforts. Moving away from a single-handed focus on official development assistance, the plan stressed the importance of multiple funding streams, including remittances and lending instruments. Yet, significant challenges remain as of today, and the path of international development remains uphill.

This is the context in which we can place the advent of COVID-19, which has been sweeping through the world since early 2020. So far, in direct terms, the virus has not affected developing countries significantly harder than developed ones, Dr. Malone noted. However, in a post-COVID world, the needs of developing countries will likely be much more compelling that those of their industrialized counterparts. In short, international cooperation and developmental efforts have achieved a lot over the past 70 years, but much more has yet to be achieved. As we enter the post-COVID era, the world should be aware of that.

United Nations University Rector and Undersecretary General of the UN, Dr. David M. Malone answered the call of the Swiss UMEF University in Geneva on November 05th2020, and gave this lecture under the auspices of so-called Geneva Lecture Series – Contemporary World of Geo-economics. Lecture series so far hosted former President of Austria, former Secretary-General of the Paris-based OECD and prominent scholars such as prof. Ioannis Varoufakis. Some of the following guests are presidents and prime ministers of western countries, notable scholars as well as the Nobel prize laureates. 

Guido Lanfranchi is an international affairs specialist based in Den Haag. He studied at the Dutch Leiden University and Sciences Po Paris, and working with the Council of the European Union in Brussels. His research focuses on the EU, Euro-MED and Africa.

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Economy

Afghan crisis: Changing geo-economics of the neighbourhood

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The Taliban takeover of Afghanistan has caused a rapid reshuffle in the geo-economics of South, Central and West Asia. While the impact on the Afghan economy has been profound, triggering inflation and cash shortage, it’s bearing on Afghanistan’s near neighbourhood has wider far-reaching consequences. The US spent almost $24 billion on the economic development of Afghanistan over the course of 20 years. This together with other international aid has helped the country to more than double its per capita GDP from $900 in 2002 to $2,100 in 2020. As a major regional player, India had invested around $3 billion in numerous developmental projects spanning across all the 34 provinces of Afghanistan. Indian presence was respected and valued by the ousted Afghan dispensation. With the US, India and many other countries deciding to close their embassies in Afghanistan and the US deciding to freeze Afghanistan’s foreign reserves amounting to $9.5 billion, the economy of the country has hit a grinding halt. IMF too has declared that Kabul won’t be able to access the $370 million funding which was agreed on earlier. The emerging circumstances are ripe for China and Pakistan to cut inroads into the war-torn country as the rest of the world watches mutely.

Beijing’s major gain would be the availability of Afghanistan as a regional connector in its ambitious Belt and Road Initiative (BRI) linking the economies of Central Asia, Iran and Pakistan. Afghanistan is already a member of the BRI with the first Memorandum of Understanding signed in 2016. Only limited projects were conducted in Afghanistan under the initiative till now due to security concerns, geographic conditions and the government’s affinity towards India. Chinese officials have repeatedly expressed interest in Afghanistan joining the CPEC (China Pakistan Economic Corridor), a signature undertaking of the BRI. CPEC is a $62 billion project which would link Gwadar port in Pakistan’s Baluchistan province to China’s western Xinjiang region. The plan includes power plants, an oil pipeline, roads and railways that improves trade and connectivity in the region.

China also eyes at an estimated $1 trillion mineral deposits in Afghanistan, which includes huge reserves of lithium, a key component for electric vehicles. This mineral wealth is largely untapped due lack of proper networks and unstable security conditions long-prevalent in the country. Chinese State Councillor and Foreign Minister Wang Yi hosted Taliban representatives in late June in Tianjin to discuss reconciliation and reconstruction process in Afghanistan. Taliban reciprocated by inviting China to “play a bigger role in future reconstruction and economic development” of the country. After the fall of Kabul, China has kept its embassy open and declared it was ready for friendly relations with the Taliban. It had also announced that it would send $31 million worth of food and health supplies to Afghanistan to tide over the ongoing humanitarian crisis. Pakistan, a close ally of China, has on its part has sent supplies such as cooking oil and medicines to the Afghan authorities. Pakistan having strong historical ties with the Taliban will possibly play a crucial role in furthering Chinese ambitions..

The immediate economic fallout of the crisis for Iran is its reduced access to hard currency from Afghanistan. After the imposition of US sanctions, Afghanistan had been an important source of dollars for Iran. Reports suggest that hard currency worth $5million was being transferred to Iran daily before the Taliban takeover. Now the US has put a freeze on nearly $9.5 billion in assets belonging to Afghan Central Bank and stopped shipment of cash to the country. The shortage of hard currency is likely to affect the exchange rates in Iran subsequently building up inflationary pressure. Over the years, Afghanistan had emerged as a major destination for Iran’s non-oil exports amounting to $2billion a year. A prolonged crisis would curb demand in Afghanistan including that of Iranian goods with a likely reduction in the trade volume between the two countries. In effect, Iran would find itself increasingly isolated from foreign governments and international financial flows.

India had been the wariest regional spectator watching its $3 billion investment in Afghanistan go up in smoke. Long-standing hostility with Pakistan has prevented land-based Indian trade with Afghanistan and the Central Asian Republic’s (CAR’s). Push by India and other stakeholders for setting a common agenda for alternate connectivity appears susceptible at the moment. India has been working with Iran to develop Chabahar port in the Arabian sea and transport goods shipped from India to Afghanistan and Central Asia through the proposed Chabahar-Zahedan-Mashhad railway line. India is also working with Russia on the International North-South Transport Corridor (INSTC), a 7,200 km long multi-mode network of ship, rail and road routes for freight movement, whereby Indian goods are received at Iranian ports of Bandar Abbas and Chabahar, moves northward via rail and road through Iran and Azerbaijan and meets the Trans-Siberian rail network that will allow access to the European markets. According to the latest reports, the Taliban declined to join talks with India, Iran and Uzbekistan on Chabahar port and North-South Transport Corridor, which has cast shadow on the Indian interests in the region. India’s trade with Afghanistan had steadily increased to reach the US $1.5 billion in 2019–2020. An unfriendly administration and demand constraints may slow down the trade between the two countries.

With the US withdrawal, the CARs would find their strategic and economic autonomy curtailed and more drawn into the regional power struggle between China and Russia. While China has many infrastructure projects in Central Asia to its credit, Russia is trying to woo Central Asian countries into the Russia-led Eurasian Economic Union (EEU), though so far it was able to rope in only Kazakhstan and Kyrgyzstan. CARs would need better connectivity through Afghanistan and Iran to diversify their trade relations with Indo-Pacific nations and to have better leverage to bargain with Russia and China. Uzbekistan, the most fervent of the CARs to demand increased connectivity with South Asia, expressed its interest in joining the Chabahar project in 2020, which was duly welcomed by India. The new developments in Afghanistan would force these countries to remodel their strategies to suit the changed geopolitical realities.

The fact that Iran is getting closer to China by signing a 25-Year Comprehensive Strategic Partnership cooperation agreement in 2020 adds yet another dimension to the whole picture. India’s hesitancy to recognize or engage with the Taliban makes it unpredictable what the future holds for India-Afghan relations.

The hasty US exit has caused rapid reorientation in the geopolitical and geo-economic status-quo of the region. Most countries were unprepared to handle the swiftness of the Taliban takeover and were scrambling for options to deal with the chaos. The lone exception was China which held talks with the Taliban as early as July, 28 weeks before the fall of Kabul, to discuss the reconstruction of the war-torn country. Chinese Foreign Minister Wang Yi also took a high-profile tour to Central Asia in mid-July which extensively discussed the emerging situation in Afghanistan with Central Asian leaders. Since the West has passed the buck, it’s up to the regional players to restore the economic stability in Afghanistan and ensure safe transit routes through the country. Any instability in Afghanistan is likely to have harrowing repercussions in the neighbourhood, as well.

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Turkish Economy as the Reset Button of Turkish Politics

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Democracy has a robust relationship with economic growth.  Barrington Moore can be seen as one of the leading scholars focusing on the relationship between political development and economic structure with his book titled “Social Origins of Dictatorship and Democracy” first published in 1966. According to Moore, there are three routes from agrarianism to the modern industrial world. In the capitalist democratic route, exemplified by England, France, and the United States, the peasantry was politically impotent or had been eradicated all together, and a strong bourgeoisie was present, and the aristocracy allied itself with the bourgeoisie or failed to oppose democratizing steps. In Moore’s book, you can find out why some countries have developed as democracies and others as dictatorships.

It can be argued that economic development facilitates democratization. Following this argument, this article is an attempt to address the Turkish case with the most recent discussions going on in the country. One of the most powerful instruments used by the political opposition today is the rhetoric of “economic crisis” that has also been supported by public opinion polls and data. For instance, the leader of İYİ Party Meral Akşener has organized lots of visits to different regions of Turkey and has been posting videos on her social media account showing the complaints mostly centering around unemployment and high inflation. According to Akşener, “Turkey’s economic woes – with inflation above 15%, high unemployment and a gaping current account deficit – left no alternative to high rates.”

Another political opposition leader, Ahmet Davutoğlu raised voice of criticism via his social media account, saying “As if monthly prices hikes on natural gas were not enough, they have introduced 15% increase on electricity costs. It is as if the government vowed to do what it can to take whatever the citizens have.”

A recent poll reveals that about 65 percent think the economic crisis and unemployment problem are Turkey’s most urgent problems. Literature on the relationship between democracy and economic well-being shows that a democratic regime becomes more fragile in countries where per capita income stagnates or declines. It is known that democracies are more powerful among the economically developed countries.

The International Center for Peace and Development summarizes the social origins of democracy in global scale as the following:

“Over the past two centuries, the rise of constitutional forms of government has been closely associated with peace, social stability and rapid socio-economic development. Democratic countries have been more successful in living peacefully with their neighbors, educating their citizens, liberating human energy and initiative for constructive purposes in society, economic growth and wealth generation.”

Turkey’s economic problems have been on the agenda for a long time. Unlike what has been claimed by the Minister of Interior Affairs Süleyman Soylu a few months ago, Turkish economy has not reached to the level which would make United States and Germany to become jealous of Turkey. Soylu had said, “You will see, as of July, our economy will take such a leap and growth in July that Germany, France, England, Italy and especially the USA, which meddles in everything, will crack and explode.”

To make a long story short, it can be said that the coronavirus pandemic has exerted a major pressure on the already fragile economy of Turkey and this leads to further frustration among the Turkish electorate. The next elections will not only determine who will shape the economic structure but will also show to what level Turkish citizens have become unhappy about the ongoing “democratic politics.” In other words, it can be said that, Turkish economy can be seen as the reset button of Turkish politics for the upcoming elections.

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Finding Fulcrum to Move the World Economics

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Domenico Fetti / Wikimedia Commons

Where hidden is the fulcrum to bring about new global-age thinking and escape current mysterious economic models that primarily support super elitism, super-richness, super tax-free heavens and super crypto nirvanas; global populace only drifts today as disconnected wanderers at the bottom carrying flags of ‘hate-media’ only creating tribal herds slowly pushed towards populism. Suppose, if we accept the current indices already labeled as success as the best of show of hands, the game is already lost where winners already left the table. Finding a new fulcrum to move the world economies on a better trajectory where human productivity measured for grassroots prosperity is a critically important but a deeply silent global challenge. Here are some bold suggestions

ONE- Global Measurement: World connectivity is invisible, grossly misunderstood, miscalculated and underestimated of its hidden powers; spreading silently like an invisible net, a “new math” becomes the possible fulcrum for the new business world economy; behold the ocean of emerging global talents from new economies, mobilizing new levels of productivity, performance and forcing global shifts of economic powers. Observe the future of borderless skills, boundary less commerce and trans-global public opinion, triangulation of such will simply crush old thinking.

Archimedes yelled, “…give me a lever long enough and a fulcrum on which to place it, and I shall move the world…”

After all, half of the world during the last decade, missed the entrepreneurial mindset, understoodonly as underdog players of the economy, the founders, job-creators and risk-taker entrepreneurs of small medium businesses of the world, pushed aside while kneeling to big business staged as institutionalized ritual. Although big businesses are always very big, nevertheless, small businesses and now globally accepted, as many times larger. Study deeply, why suddenly now the small medium business economy, during the last budgetary cycles across the world, has now become the lone solution to save dwindling economies. Big business as usual will take care of itself, but national economies already on brink left alone now need small business bases and hard-core raw entrepreneurialism as post-pandemic recovery agendas.

TWO – Ground Realities:  National leadership is now economic leadership, understanding, creating and managing, super-hyper-digital-platform-economies a new political art and mobilization of small midsize business a new science: The prerequisites to understand the “new math” is the study of “population-rich-nations and knowledge rich nations” on Google and figure out how and why can a national economy apply such new math. 

Today a USD $1000 investment in technology buys digital solutions, which were million dollars, a decade ago.Today,a $1000 investment buys on global-age upskilling on export expansion that were million dollars a decade ago.  Today, a $1000 investment on virtual-events buys what took a year and cost a million dollars a decade ago. Today, any micro-small-medium-enterprise capable of remote working models can save 80% of office and bureaucratic costs and suddenly operate like a mini-multi-national with little or no additional costs.

Apply this math to population rich nations and their current creation of some 500 million new entrepreneurial businesses across Asia will bring chills across the world to the thousands of government departments, chambers of commerce and trade associations as they compare their own progress. Now relate this to the economic positioning of ‘knowledge rich nations’ and explore how they not only crushed their own SME bases, destroyed the middle class but also their expensive business education system only produced armies of resumes promoting job-seekers but not the mighty job-creators. Study why entrepreneurialism is neither academic-born nor academic centric, it is after all most successful legendary founders that created earth shattering organizations were only dropouts.  Now shaking all these ingredients well in the economic test tube wait and let all this ferment to see what really happens.

Now picking up any nation, selecting any region and any high potential vertical market; searching any meaningful economic development agenda and status of special skills required to serve such challenges, paint new challenges. Interconnect the dots on skills, limits on national/global exposure and required expertise on vertical sectors, digitization and global-age market reach. Measuring the time and cost to bring them at par, measuring the opportunity loss over decades for any neglect. Combining all to squeeze out a positive transformative dialogue and assemble all vested parties under one umbrella.

Not to be confused with academic courses on fixing Paper-Mache economies and broken paper work trails, chambers primarily focused on conflict resolutions, compliance regulations, and trade groups on policy matters.  Mobilization of small medium business economy is a tactical battlefield of advancements of an enterprise, as meritocracy is the nightmarish challenges for over 100 plus nations where majority high potential sectors are at standstill on such affairs. Surprisingly, such advancements are mostly not new funding hungry but mobilization starved. Economic leadership teams of today, unless skilled on intertwining super-hyper-digital-platform-economic agendas with local midsize businesses and creating innovative excellence to stand up to global competitiveness becomes only a burden to growth.

The magnifying glass of mind will find the fulcrum: High potential vertical sectors and special regions are primarily wide-open lands full of resources and full of talented peoples; mobilization of such combinations offering extraordinary power play, now catapulted due to technologies. However, to enter such arenas calls for regimented exploring of the limits of digitization, as Digital-Divides are Mental Divides, only deeper understanding and skills on how to boost entrepreneurialism and attract hidden talents of local citizenry will add power. Of course, knowing in advance, what has already failed so many times before will only avoid using a rubber hose as a lever, again.  

The new world economic order: There is no such thing as big and small as it is only strong and weak, there is no such thing as rich and poor it is only smart and stupid. There is no such thing as past and future is only what is in front now and what is there to act but if and or when. How do you translate this in a post pandemic recovery mode? Observe how strong, smart moving now are advancing and leaving weak, stupid dreaming of if and when in the dust behind.

The conclusion: At the risk of never getting a Nobel Prize on Economics, here is this stark claim; any economy not driven solely based on measuring “real value creation” but primarily based on “real value manipulation” is nothing but a public fraud. This mathematically proven, possibly a new Fulcrum to move the world economy, in need of truth

The rest is easy  

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