Bewilderment, incomprehension, despair, rage; there’s plenty around at the moment, both inside the privileged halls of the Davos World Economic Forum and outside, where more humble folk gather. If you want to know why, then a good place to start is this piece by Larry Elliott of the Guardian . We don’t want to put a spoiler on Larry’s article: but we note the following, just to ease you in:
1 The old liberal rules-based order is creaking because it’s really, truly ancient: it was set up in 1944 at the Bretton Woods conference
1.5 2026-1944 =82. That’s a lot of time
2 Emerging countries such as such as China, India and Brazil see no reason why the governance of anything need reflect the world as it was in 1944, rather than as it is in 2026.
2.5 What’s wrong with that?
3 Bretton Woods depended on two assumptions: that the United States was the worlds undisputed hegemon, and that its manufacturing, financial and intellectual leaderships were supreme. And Europe was second. Both of these assumptions have since become laughable.
4 It’s one thing to have a lovely, cosy, open, democratic, liberal,swinging, rules-based order or whatever, when everyone is doing well out of it. But quite another in a world where the rich are getting richer while those on middle incomes and below are struggling, as Larry points out.
5 At Bretton Woods Keynes saw two institutions as vital: the World Bank and the IMF. The latter, he insisted, could only succeed if both creditor and debtor nations had a role to play. Especially the Creditors who by increasing imports, would help Debtor nations to overcome problems like balance of payments crises. Instead the US as the world’s creditor par excellence decided they weren’t going to risk their own surpluses to help anyone else. Let them adjust for their feckless ways with budget cuts, austerity monetary discipline and lovely lower living standards!
5.5 There is a delicious irony here: for despite doing all that, the US has still wound up importing gargantuan quantities of goods from poorer countries, And its trade deficits, government and private debts are equally a source of domestic shame and international amusement.
6 Larry concludes “ A properly functioning rules-based system would remedy this defect.”
You know our thoughts on that gentle readers.(LSS 16 1 25 et seq) But this is not the time to blow our own trumpet. In fact, we forbid you to read those blogs! Instead click to Larry’s article. Read it. Read it again. And you shall understand.
#economics #international relations #world economic forum #BRICS #finance #IMF #JM Keynes
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