Lonely on the right side of history?

Written By: - Date published: 11:07 am, April 17th, 2023 - 18 comments
Categories: afghanistan, Austerity, China, Economy, grant robertson - Tags:

Musing after the recent IMF/World Bank meetings, Former White house economist and US Treasury secretary Larry Summers said “it’s looking a bit lonely on the right side of history..as others are increasingly banding together in a whole range of structures.”

Summers has form, too much to go into here, but he’s not wrong about what he has noticed. Summers was speaking on the sidelines of the spring meeting of global finance chiefs in Washington,

where the key theme has been a warning about “fragmentation” of the world economy as the US and rich-world allies aim to reshape supply chains away from China and other strategic competitors.

Summers agreed there was a growing acceptance of fragmentation in the world economy and even more troubling for the US, a growing sense that ‘”ours may not be the best fragment to be in.” he tells an anecdote about someone saying to him when China talks to us we get an airport, when the US talks we get a lecture. We refer your values, but we prefer airports to lectures.”

Deepening links between the Middle East and Russia and China — which recently brokered a rapprochement between Saudi Arabia and Iran — are “a symbol of something that I think is a huge challenge for the United States,” Summers said.

“We are on the right side of history — with our commitment to democracy, with our resistance to aggression in Russia,” he said. “But it’s looking a bit lonely on the right side of history, as those who seem much less on the right side of history are increasingly banding together in a whole range of structures.”

Washington will need to consider how to address this new challenge, he added. The structures of the IMF and World Bank will also be a key longer-term issue, he said. “If the Bretton Woods system is not delivering strongly around the world, there are going to be serious challenges and proposed alternatives.”

The issues in question for the IMF and the World Bank are questions of debt and development, and most importantly in the current geopolitical environment, questions of debt relief for countries such as Sri Lanka and Argentina. These issues also surfaced in the discussions, a theme that played out in Washington DC last week during a high-level sovereign debt round-table on the sidelines of the World Bank and International Monetary Fund Spring meetings in Washington.

In a fascinating dialogue between Radhika Desai and Michael Hudson, Desai outlines the key issues relating to world debt:

RADHIKA DESAI: Well I think that the whole issue of debt, world debt in particular, has become a really important issue at this point, and it’s become an important issue because precisely now China is such a large part of the scene.

I remember going back to the earliest days of the pandemic when Third World debt had also figured as a major issue. Already at that point, the key reason why the debt issues were not going to be settled is because the West could not come to terms with the fact that it had to deal with China, and that it had to deal equitably with China.

Because what the West wants to do is precisely to get China to refinance the debt owed to it so that Third World debt repayments go to private lenders.

And China is basically questioning the terms of all of this, because for example China is saying, “Why should the IMF and the World Bank have priority? Why should its debt not be canceled?”

And the West is saying, “But this has always been so.”

And China is saying, “Well, if you don’t want to reform the IMF and the World Bank, then we are not going to accept their priority. If we have to take a haircut, they will also have to take a haircut.”

They simply do not accept that these institutions, the Bretton Woods institutions, have any sort of priority.

And this is part of the undermining, as you were saying. This is one of the biggest changes since the First World War. And part of these changes is that the world made at the end of the Second World War by the imperialist powers, who are still very powerful, is now increasingly disappearing.

This is the challenge that China is presenting to the so-called ‘rules-based order’ based on Bretton Woods arrangements which favour the rich world.

The whole discussion between Radhika Desai and Michael Hudson, one in a series of fascinating conversations, is well worth reading or listening to. Desai had just been in Russia and pertinent to this post mentions how in some discussions economists were describing the geopolitical shift as one to the “majority.” Also pertinent to Summers’ comment, she says:

All the West has to offer is sticks. Whereas China comes loaded with all the carrots that you can imagine. The juiciest carrots that you can imagine.

All the non-Western world, the World Majority, can see these carrots, they are responding to these carrots. And the other interesting thing is that these carrots are not neoliberal carrots. That is very clear.

In a brainstorming session in which the purpose was to say, Russia is not the Third World, Russia is not the developing world, Russia is part of the post-communist world, so how do we conceive of a single entity of which Russia is now a very active part, and where it is going to be one of the leaders, somebody came up with this idea of the World Majority. Increasingly the Russians are thinking of themselves not as being part of the West, whose attractiveness is shrinking and whose borders are also rather small.

The bulk of the GDP and people in the world are outside the West. The West now accounts for about 30% of world GDP, so the rest is 70%. And it’s only going to grow. Meanwhile, the West’s neoliberal policies are accelerating the decline of its share.

Unthinkable even five year ago, massive changes are  happening all over the world. The dollar is losing its preeminence as the currency of choice, and the world’s majority prefer co-operation and development to endless war and unpayable debt. New organisations are rising and growing: SCO, EAEU, BRI, BRICS+. OPEC+, RCEP, as well as older ones such as ASEAN. NATO wants to come into our backyard, having just withdrawn precipitately from Afghanistan. That last deserves a separate post.

Grant Robertson attended the World Bank meetings. It will be interesting to hear what he took out of the discussions.

In my opinion we also need to give some thought to which side of history we want to be on. We are lucky in that we still have some choices for our future.

18 comments on “Lonely on the right side of history? ”

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  1. Tiger Mountain 1
    17 April 2023 at 11:54 am

    Rich in irony. The international trade orders (WTO, IMF, World Bank etc.) were obviously ushered into existence to shore up Western and US Imperialism in particular.

    When US corporates moved production offshore in the interests of globalisation (cheap wages really, due to Marx and Engels’ prediction of the tendency for the rate of profit to fall) little did they think it would bite them on the arse as it is now doing.

    New Zealand should move on from the Anglosphere, leave 5 Eyes, steer clear of AUKUS & NATO, and do the obvious–become genuinely non aligned and pursue bilateral mutually beneficial trade and cultural agreements with all nations that desire the same.

    The funny thing with China is that the country (generalising) is very patient, with expert tactical and strategic skills. Building infrastructure where ever they go rather than invading has to be a good thing.

    • SPC 1.1
      17 April 2023 at 1:13 pm

      The deconstruction of a global order is the equivalent of libertarianism in nation states.

      Bi-lateral agreements require the stronger party to act in good faith, it does not make for a rules based regime.

      • Tiger Mountain 1.1.1
        17 April 2023 at 1:24 pm

        Don’t get your contention there SPC. The epitome of libertarianism is surely the volumes of rules attached to the likes of the TPPA/TCTPP that were exposed on Wiki links.

        I support rules based for most things including international relations–but once you get to trade and commerce it is really rules for the benefit of private capital and finance capital.

        • SPC 1.1.1.1
          17 April 2023 at 1:36 pm

          Criticism of the multi-lateral trade agreements on those grounds also applies to criticism of nation state governments for operating in the same way. The latter does not delegitimise the worth of nation states.

          WTO rules and other regional trade deals should include labour and environment standards and such things as carbon taxation in trade to encourage a shift to renewable energy.

  2. Ad 2
    17 April 2023 at 12:19 pm

    The weird joy of New Zealand is that it poses itself to be any identity that it needs to: pro-China, pro-Australia, pro-Europe, pro-UK, pro-Pacific, pro-South East Asian.

    New Zealand has the most pronouns of any country.

    This enables New Zealand to trade with the most mercantile of international morality. Prime Minister Fraser would be spinning in his grave at our lack of principle.

    By being a diplomatic palimpsest New Zealand gets less and less influential in any of them, every year. Neutrality is invisibility.

    We stand for nearly nothing other than when war breaks out, so we recede from the world other than through our dozen dominant exporters who intersect meaningfully with the world as trading partners. The Lowy Institute influence rankings show us continuing to recede year after year.

    • Francesca 2.1
      17 April 2023 at 12:49 pm

      Do you honestly think other countrys' trade policies are run on morality lines?

      • Ad 2.1.1
        17 April 2023 at 1:08 pm

        I honestly think New Zealand has nothing but virtue, milk and scenery to sell.

        Others can afford to trade without virtue, but we are one of the countries that is most vulnerable to obeying and sustaining a rules-based order. Which is why our trade deals are way, way more important than any other relationship we are in.

        For all our clean, green, highly moral liberal society, we are decreasing in our influence, in our strength, in our trade, and in our awareness of pressures in our part of the world.

        Whether we are or are not on the right side of history, we are one of the loneliest and by choice one of the least.

        • SPC 2.1.1.1
          17 April 2023 at 1:27 pm

          The problem is our partners gave the fingers to multi-lateralism.

          1. They gave a one party state access to the WTO because of their greed for the China market.
          2. They failed to have a fair contest for POTUS by not completing the recount in Florida.
          3. They rubbed the noses of Russia in the dirt by expanding NATO into eastern Europe.
          4. They betrayed the UNSC when invading Iraq and attacking Libyan government ground forces while operating a no fly zone in Libya.
          5. Their banking deregulaton led to the GFC
          6. Their POTUS tried to undermine the WTO while trashing a FTA with their neighbours.
          7. They advocated for democracy in Hong Kong and forced a Chinese response. Which led to a revaluation of attitudes to the future of Taiwan – given HK was supposed to be a template

          20 or so years of imperial regime incompetence has led us to where we are now.

      • Incognito 2.1.2
        17 April 2023 at 2:18 pm

        No, of course not, who would even make such a silly suggestion??

        https://www.mfat.govt.nz/en/countries-and-regions/europe/ukraine/russian-invasion-of-ukraine/sanctions/

        https://www.mfat.govt.nz/en/peace-rights-and-security/un-sanctions/

        NZ wants to be everybody’s friend with all the benefits that come with such non-committal stance. This only ends well in movies featuring Mila & Justin.

    • Tiger Mountain 2.2
      17 April 2023 at 1:09 pm

      good on you for roaming around the internet, however think tanks are…think tanks…this one with some rather unsavoury links
      https://en.wikipedia.org/wiki/Lowy_Institute

      Aotearoa NZ is a Pacific nation in all reality, bar some elite ties to the Anglosphere–recall that Trumpy would not entertain TPPA/CPTPP let alone NZ dairy access to the US? Time to move on and drop the cringe factor.

    • SPC 2.3
      17 April 2023 at 1:17 pm

      Lowy … the Australians have not won the Bledisloe Cup since some loud mouth said 4 more years in 2003. Not rated for their intelligence.

    • DS 2.4
      20 April 2023 at 6:15 am

      "When the elephants fight, the grass gets trampled."

      Invisibility – and staying out the way – seems an eminently sensible approach for New Zealand.

  3. roblogic 3
    17 April 2023 at 2:53 pm

    You are still more likely to find democracy, the rule of law, and human rights in the western world.

    It is shocking how routine and widespead corruption is in non Western countries, and how low-trust societies are their own worst enemy. As we see from Russia, dysfunction makes progress in anything 10x as slow and expensive.

    The dysfunction includes awful working conditions, deep inequality, failing infrastructure, almost no public services. Healthcare, education, decent transportation are only available to the rich.

    The West needs to rediscover its true social democratic roots and humanistic values if it wants to keep its advantage. Western elites seem to have abandoned these traditions in favour of a pillaging mentality and purchasing bunkers in New Zealand to escape the coming storm.

    • Tiger Mountain 3.1
      17 April 2023 at 3:04 pm

      The USA quite well described there roblogic…

      “The dysfunction includes awful working conditions, deep inequality, failing infrastructure, almost no public services. Healthcare, education, decent transportation are only available to the rich.”

      And sure, if you want to compare Somalia or somewhere the US looks marginally better, but not too much for millions without health insurance etc.

      Agree with your point about rediscovering social democratic roots–but that will take a new political movement.

  4. alwyn 4
    17 April 2023 at 6:25 pm

    Your post quotes Summers as saying "he tells an anecdote about someone saying to him when China talks to us we get an airport, when the US talks we get a lecture."

    Perhaps that is sometimes true but people getting into bed with China should remember what happened to Sri Lanka. They got a port built by the Chinese, called Hambantota. It wasn't economic however and when they couldn't pay the loan the Chinese had made they ended up having to lease it to China for 99 years.

    Please God, don't let Wood get carried away and pay for a foolish light rail exercise in Auckland with Chinese money. Who knows what we would have to hand over when the light rail turns out to be a financial disaster.

    https://en.wikipedia.org/wiki/Hambantota_International_Port

  5. aj 5
    17 April 2023 at 7:07 pm

    “The USA quite well described there roblogic…The dysfunction includes awful working conditions, deep inequality, failing infrastructure, almost no public services. Healthcare, education, decent transportation are only available to the rich.”

    And in most of those areas China is leading. USA bombs, China builds.

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