Irresitsible engines

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…

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