Peter Gallagher

Glen Steven’s ques­tions, in his inau­gural War­ren Hogan lec­ture, about the expec­ta­tion of emerg­ing Asia — that they will assume a promi­nent role shap­ing and direct­ing the global finan­cial sys­tem — and about the readi­ness of the West to cede that role to them have been tested in the WTO.

So far, they remain unan­swered there… stalled on the same point Stevens iden­ti­fies in the case of the finan­cial system.

Not least among [these “very impor­tant ques­tions”] will be that, with the rel­a­tive eco­nomic weight of the emerg­ing world ris­ing quickly, and a rise in their finan­cial weight flow­ing from their high rates of cap­i­tal accu­mu­la­tion and increas­ing cred­i­tor sta­tus, they will expect an increased role in global finan­cial gov­er­nance as a con­di­tion of accept­ing more oblig­a­tions to con­tribute to the global com­mon good. The will­ing­ness of the estab­lished, post-war lead­er­ship coun­tries to cede a degree of sta­tus and con­trol to the emerg­ing world will need to increase at the same speed as the emerg­ing coun­tries’ will­ing­ness to grasp and accept their ris­ing respon­si­bil­i­ties. Will this occur? It is hard to judge. Much will depend on whether the var­i­ous par­ties have the same gen­eral ideas about the pur­pose of the inter­na­tional mon­e­tary sys­tem. That is, at this point any­way, not clear.

Extract from RBA: Speech-The Inau­gural War­ren Hogan Memo­r­ial Lecture

The two sides do not, presently, share an under­stand­ing about the pur­pose of the trad­ing sys­tem; that much is clear from China’s first ten years.

But the diver­gence is mutual; it’s not due sim­ply to China’s stub­born­ness. The G7 shaped the global trad­ing sys­tem to their own pur­poses for fifty years. On occa­sions when that model was shaken by con­trary trends in the dis­tri­b­u­tion of wealth, pro­duc­tion and trade — in the 1970s, when the Third World first became polit­i­cally sig­nif­i­cant or in this decade when the WTO’s mono­lithic Sin­gle Under­tak­ing crusehd the Doha nego­ti­a­tions — the West has shown every sign of loos­ing inter­est in col­lab­o­ra­tion (the Tokyo Round codes; the ACTA treaty).

Stevens’ ques­tions more acute now than they were in 1977, when the Tokyo Round was forced to accom­mo­date devel­op­ing coun­tries’ demands, or in 2003, when Doha started to run off the rails. It is no longer pos­si­ble for the West sim­ply to recover con­trol. The irre­sistible engines of demog­ra­phy, pro­duc­tion, sav­ings now demand a realign­ment of own­er­ship, respon­si­bil­ity and entente (to use an antique term). Or…