by Arvind Subramanian, Peterson Institute for International Economics
Op-ed in the Business Standard, New Delhi
April 28, 2010
© Business Standard
The wobbly West and the rising rest. That is now the context to all gatherings of the world's economic policymakers. The monopoly on power and influence wielded by the hegemon (the United States) and by the other advanced economies is being broken for real and for good. Key decisions will emanate less from conversations amongst a few and more from a wider group. It is difficult to predict whether the theater of real action will be the G-20 or some other collectivity. But we can be increasingly sure that the "halcyon" days of the G-1 or the G-7 are behind us.
This makes for both bad news and good news. The dispersion of power will probably make international cooperation more difficult to secure, except perhaps in times of crises as we recently witnessed. More countries having a say means more countries having the right to say no. As more vetoes are exercised, efficient and expeditious decision making at the global level could prove elusive.
But the unambiguously good news is the impact of the demonopolization or decartelization of power and influence on the role of ideas. In the international economic sphere, especially in relations between the West and the rest, power and ideas have interacted in two ways in the past.
In some cases, monopoly power or rather the power monopoly has simply overridden ideas. The best example relates to the intellectual property (IP) negotiations in the Uruguay Round of trade negotiations (Trade-Related Aspects of Intellectual Property Rights [TRIPs]). Then, developing countries, especially the poorest amongst them, had the compelling intellectual case that stronger rules on IP were not in their interest: Up to first order, TRIPs was a rent-transfer mechanism from consumers in poor countries to pharmaceutical companies in the rich world. But the combined commercial might of the United States, Europe, Japan, and Switzerland overwhelmed the developing country case.
That economic power can affect policy and rules is far from new. The really troubling aspect to the TRIPs saga was the intellectual complicity of the World Bank, especially the deafening silence of its research department. At a time when AIDS was ravaging Africa, and TRIPs was threatening to impede access to HIV-related drugs, the World Bank remained a silent spectator, failing to make a clear and unequivocal case about TRIPs' adverse impact.
We will never know whether the intellectual leaders at the World Bank during the TRIPs saga (circa 1990–2003) attempted to speak up but were muzzled by the Bank's political masters (the power monopolists) or did not even attempt to speak up, imposing self-censorship in anticipation of the likely political response (we can rule out the third possibility that they did not see the underlying merits of the developing-country argument as that would have been incompetence). Regardless, this intellectual blight on the World Bank's record illustrates the ability of power to muzzle good ideas.
A second type of relationship between power and ideas is more subtle. Those who have power work to promote a belief system that will ensure the perpetuation of power. Power influences ideas and absolute power ensures that self-serving ideas stamp out all others. One example of this, of course, relates to the finance fetish, domestic and foreign. The links between Wall Street and academia rocket scientists tempted by the lure of astronomical compensation and the funding by Wall Street of universities, in general, and finance programs in business schools, in particular, helped play a role in ensuring that there was enough supply of intellectuals who promoted the veneration of domestic and foreign finance. Intellectuals too have a price, and for Wall Street this cost has been chump change.
Thus, Simon Johnson's energetic call for breaking up the large financial houses in his engaging and feisty book 13 Bankers is as much aimed at attenuating the link from economic power to political power as from economic power to idea power (or, in the case of those doing God's work, from economic power to spiritual power).
In short, as power gets dispersed, the hold of power over ideas gets weakened. Good ideas have a better chance of getting a hearing and bad ones face a greater threat of being flushed out. Can these propositions be validated or falsified in the near future? The fate of two bad ideas (there are several others) could serve as a testing ground for the proposition that the G-20 might be better for the marketplace of ideas than the G-7.
Idea 1: The leadership of the IMF and the World Bank must be a monopoly of the wobbly West. If and when Dominique Strauss-Kahn returns to seek political office in France, there will be a vacancy to fill at the IMF. A class of moderate opinion is lobbying for selection of the IMF's managing director position based on merit without regard to nationality. We must be clear. The selection of a meritorious European simply will not do. There will be no way of distinguishing whether this choice reflected new merit-based procedures or cynical perpetuation of the old. To avoid all doubt, to be more chaste than Caesar's wife, the process must deliver a non-European this time around. Over time, as the process is placed beyond reproach, the focus can be on the process rather than on the outcome.
Idea 2: Completing the Doha Round is indispensable to the credibility of the WTO and the health of the world economy. It is clear to most that the pursuit of Doha recalls the Mallory motive for scaling Everest: because it has been around (and for a long time). Yet, there is collective public denial on this. The most pressing issues in the trading system are not within the scope of the Doha Round as Aaditya Mattoo of the World Bank and I argued last year in a piece in Foreign Affairs. Addressing these issues expeditiously must be the goal. The immediate and public debate to be had is on whether getting there quickly requires finishing the Doha Round and harvesting the modest gains it offers, burying it with the appropriate diplomatic rites, or creatively repackaging it.
So, as the road show that is the G-20 moves on, it is time not just to celebrate the economic rise of emerging markets but also to be hopeful about ideas being unshackled from power and hence gaining their rightful role.