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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