For 70+ years, development economists have been touting the idea that if lesser developed countries trade and invest collaboratively, it would serve as a pathway out of poverty. But today, the notion of so-called South-South cooperation is facing unprecedented challenges as developing countries confront a series of converging economic, health, and geopolitical crises.
But two economists at the United Nations Conference on Trade and Development (UNCTAD) contend that at the dawn of another Great Power rivalry and massive economic uncertainty, Global South countries working together is now more important than ever.
Richard Kozul-Wright, director of UNCTAD’s globalization and development strategies division, and Alex Izurieta, head of the South-South cooperation unit at UNCTAD, join Eric & Cobus intra-Global South trade provides a critical safety net for some of the world’s poorest countries.
Show Notes:
- UNCTAD: South-South trade agreement holds key to more sustainable and inclusive growth
- Observer Research Foundation: Leveraging South-South Cooperation to Finance the SDGs by Bineswaree Bolaky
- African Arguments: India in Africa: The Changing Face of South-South Cooperation by Meera Venkatachalam and Dan Banik
About Richard Kozul-Wright and Alex Izurieta:
Richard Kozul-Wright is the Director of the Globalisation and Development Strategies Division at UNCTAD. He has worked at the United Nations in both New York and Geneva. He is currently the Director of the Division on Globalisation and Development Strategies and is responsible for the UNCTAD flagship publication The Trade and Development Report. He holds a Ph.D in economics from the University of Cambridge UK and has published widely on economic issues in academic journals, books, and media outlets. He is a member of the Commission on the Rights of Future Generations, established by HH Dr. Sheikh Sultan bin Mohammed Al Qasimi, Supreme Council Member and Ruler of Sharjah.
Alex Izurieta heads UNCTAD’s unit on South-South Cooperation. His area of expertise is the analysis of global economic developments and the evaluation of policy scenarios with the help of macroeconomic and global models. Prior to joining the UN system, he worked as a Senior Researcher at the University of Cambridge, UK, as a Research Scholar at the Levy Economics Institute of Bard College, New York, and as a Researcher at the International Institute of Social Studies of Erasmus University in The Hague. He has published in those institutions and in various international journals.
Transcript:
Eric Olander: Hello, and welcome to another edition of the China in Africa Podcast, a proud member of the Sinica Podcast Network. I’m Eric Olander, and as always, I’m joined by China Global South’s Managing Editor, Cobus van Staden, from Johannesburg, South Africa. A very good afternoon to you, Cobus.
Cobus van Staden: Good afternoon.
Eric: Cobus, today we’re going to get quite nerdy on the economic side. Again, this is really important, in part because of everything that’s going on economically in Africa and throughout the global south. So, today what we thought we would do is we’d try and step back a little bit from the spot news and kind of look into some of the bigger trends shaping the economies of Africa, and again, more broadly throughout the developing world. But first, Cobus, let me just bring everybody up to date on some of the debt issues that we’ve been following in Africa. Some bad news came out for Kenya last week. Moody’s downgraded the country’s credit ratings last Friday and said that the rating’s downgrade is driven by an increase in government liquidity risks. Now, that is French for the fact that there’s a cash shortage in Kenya right now brought about by a number of compounding factors.
First and foremost, they’ve got the debt repayments, which are heading out the door in dollars. They also have a depreciating currency, like a lot of African countries, and all of this together is making the fact that there’s just not enough liquidity or cash in the market to make the credit rating agencies happy. Now, this is the second downgrade that Kenya has received. Fitch has also downgraded Kenya. This was the very thing that the Kenyan treasury and the Kenyan government was hoping to avoid because now it forces up their cost of borrowing, and that is a big problem. One of the things that President William Ruto is trying to do now is trying to do more domestic borrowing so he doesn’t have to go out onto the international credit markets. Now, a little bit of good news for Kenya, also this week, they repaid in full the China Development Bank, all of their non-concessional loans.
Those are the market-rate loans that are a little more expensive than those concession loans that come typically from the China Exim Bank. And so, as a result, they will pay 7% less to China in debt servicing costs beginning in the new fiscal year that starts in July. So, starting in July, the Kenyan government has budgeted $821 million to repay some of their China Exim Bank loans. And again, that’s just for the coming fiscal year. Most of those Exim Bank loans, of course, are tied to the Standard Gauge Railway, so they’re paying down that debt. Meantime, there’s no progress to report whatsoever in Zambia’s stalled debt restructuring process. They have been desperately trying to get the international community to mobilize.
One of the things that we’re hearing is that the complexity of Zambia’s debt situation is what stalling the process. There are so many creditors, so many different styles and types of debt that that is part of the problem that they’re having. Now, in Ghana, it’s a little bit more promising. Just as in Zambia, Ghana’s creditor committee is also chaired by both France and China, and together with other bilateral creditors, they’ve actually cleared the way for a $3 billion IMF financial package. They haven’t gotten that last step yet of the green light, but they’re getting very, very close, and there’s a lot of optimism coming out of there. Also, very quickly, just before we get to you, Cobus, some other quick notes.
The falling value of the naira against the dollar, we talked about that in Kenya, is also pushing up Nigeria’s borrowing costs. That’s something that’s very concerning in Nigeria. We’re going to keep an eye on that. And then also there’s a worsening situation in terms of debt in both Tunisia and Egypt. None of those three countries, though, has anything to do with China. So, just something very important there. But it does speak to the larger debt issues that are now starting to weigh down a lot across Africa. So, Cobus, G-7 leaders are going to be meeting this week in Hiroshima. There’ve been lots of calls for them to pay more attention to these debt issues and these economic issues in the global south, and in Africa specifically. Based on what we’ve seen over the past three years, though, at the G-20, at the G-7, at any number of these different meetings, there’s not a lot of reason to be optimistic that they’re going to actually do anything.
Cobus: Yes, I tend to not be very optimistic. Mostly, compared to the G-20, which contains some global south members, the G-7 doesn’t obviously, and also China won’t be at the table. I’m sure there’ll be a lot of discussion of China, but less with China. And also, obviously, also the G-7 members are facing the double stressors of the Ukraine conflict and the wrangles around the debt ceiling in the U.S. And that will tend to, I think, kind of absorb all of their energy, and I don’t think global south debt issues will get much air.
Eric: What we want to do today is provide you a little bit of background on some of these key economic and financial issues that are really challenging vast parts of the global south. We also want to talk about what’s being done in terms of South-South cooperation. That’s something that we hear a lot as well. There’s a lot of discussion going on right now about the BRICS and a new BRICS currency. That’s all under the rubric of what they call South-South cooperation. For that, we thought it would be great to have two experts joining us from the United Nations Conference on Trade and Development. Some of you may know that by their acronym UNCTAD.
So, we’re thrilled to have on the show for the first time, Richard Kozul-Wright, who’s the director of the Globalization and Development Strategies Division at UNCTAF. Also, Alex Izurieta, who heads the unit on South-South cooperation, also at UNCTAD. Alex, Richard, thank you both for taking the time to join us.
Richard Kozul-Wright: Pleasure to be here.
Alex Izurieta: Thank you.
Eric: It’s wonderful to have you. The timing is great, given everything that’s going on. Before we get into some of the nitty-gritty and the details about the specific trends that you guys focus on quite a bit at UNCTAD, I’d like to first start with a rather simple question, a very basic question. And it’s a question that again, people talk about South-South cooperation a lot, they talk about the global south, but just the other day, in one of our comments on our social media channel, somebody said, “What is the global south?” Why do you call it that? And so I’m not entirely convinced that everybody understands what South-South cooperation actually means. And so maybe let’s start there. And Alex, you can explain a little bit about South-South cooperation since you had the unit there. And also what specifically does UNCTAD do in this realm?
Alex: Okay, well thanks again, Eric. Indeed, I’ll try to fill in some elements and most probably Richard who has a longer-term perspective, because he has been in UNCTAD for a longer time, and probably he will compliment. The story for us is that South-South cooperation is fundament, it’s intrinsic to the history of UNCTAD itself. If you would remember, UNCTAD was created in the mid ’60s, in the middle of a kind of recovery from the war. And in that context, many policymakers of the developing world, they started to form kind of groups and alliances, trying to reflect on how this new phase of the world economy after the war, how it’s going to benefit them — the countries in the south. I’ll come to the conceptualization of the global south, which is a very fascinating concept anyway. But before that, it’s important to understand that the countries of the developing world were starting to feel that the new advances after the war were not really benefiting them strictly because of the existing asymmetries in trade.
That means that countries in the south were mostly exporting commodities and the prices of their commodities was slowly decreasing vis-à-vis the prices of industrial products that were produced in the northern countries, for example. Another form of asymmetry was the difficulties of countries in the south to trade in their own currency while they have actually to abide to trade in the major currencies, mostly the dollar. And together, without-
Eric: But, sorry to interrupt you, it seems that 60 years later after the founding of UNCTAD, both of those trends are still very much in practice today.
Alex: That’s exactly right. And that’s why we are so proud of being part of UNCTAD because we still feel that we have a very, very important role to play. Now the context then was analyzed in a very simple but very meaningful, powerful concept, which was center-periphery analysis of the world, the economy. One of the figures there was Raul Prebisch, an Argentinian who was the head of the Central Bank of Argentina. He was not a person, a militant from the grassroots. He was a renowned figure of the policymaking establishment of one of the countries in the south, Argentina in that case, who actually devised this analysis; center-periphery. So, the world is not a uniform, all on the same table type of constitution. It was a set of rules through trade and through finance that were separating this periphery from the center in terms of economic analysis.
And that frame or center-periphery analysis was very useful 60 years ago. Now, what happened now is that in the context of precisely the global financial crisis that happened since like 12 years ago, well, actually a bit more, 14 years ago, in this financial crisis, then it became very clear that also the countries in the north were affected by the asymmetries of global finance, or put differently, by the fact that financing was ruling the decisions behind the main economic developments in all countries. And so, in that context, we, in UNCTAD, we responded to various calls of groups of developing countries in various of the conference, United Nations Conference in New York and UNCTAD conferences specific to our institution, we responded to that by amplifying that kind of analysis, but reinstating the fact that there are still asymmetries between the north and the south. So, putting it differently, between the developing countries and the developed countries.
Now, the global south is a way of defining, in a very kind of informal way, a way of defining the countries that are not part of, now that your colleague was talking about the G-7, countries that are not part, the most dominant settings of institutions and groupings that associate the richest countries. So, that concept of the global south, for example, comprises countries as powerful in terms of economic power as China, for example, but whose context in the global economy is different than the context that is enjoyed by the rich countries. That is where we’ve stressed the notion that we must cooperate among countries in the south, but not to be independent from the rest of the world, but be part of the world, but being connected through forms of coordination, through forms of alliances, and through trade, and through finance, but together exercising some levers to make some significant gains in a world in which there are asymmetric forces.
That’s the idea of coordination from the perspective of UNCTAD. It’s a form of creating strong links through trades, through finance, through institutions, through lending, for example, developing banks, etc., that at the same time that help to put forward common interest of countries in the south. They also help to establish a stronger bargaining power in order to relate with the richer countries. That’s basically the way we see it in UNCTAD.
Richard: I mean, obviously the economic imbalances are critical here, and the asymmetries that yeah, Alex has talked about. But of course, there’s a power. I mean, we know very well that the global economy also exhibits very profound power imbalances. And developing countries have constantly looked for ways to correct that by cooperating. And the notion, I think, of solidarity across countries that are very different, but face the same economic asymmetries emerges in the 1950s in the Bandung Conference in Indonesia in 1955, and then in UNCTAD in ’64, and then a whole series of events in the ‘60s and ‘70s, where developing countries came together, despite their differences, to try and build up a level of solidarity amongst themselves to be able to contest the rules of the game that had been shaped fundamentally at the end of the Second World War in Bretton Woods and [inaudible 0:13:50].
And to devise a different way of managing the global economy that would bring advantages to them. And that culminated, in the case of UNCTAD and developing countries, in the idea, I’m sure, of a new international economic order in the 1970s. And South-South cooperation is very much closely associated with that period of developing country solidarity. The basic kind of principles and values of South-South cooperation were constructed in that period in the ‘70s. Of course, the problem was that that turned out to be an ephemeral effort amongst developing countries. The debt crisis of the early 1980s, the forced adjustment through spending windows of the IMF and the World Bank shifted the kind of political dynamics in a very different direction.
The idea of South-South operation very much fell to one side, I think until the late 1990s when we saw the emergence of some key developing countries, some large developing countries, Brazil, China, the notion of the BRICS kind of reinvigorated the whole discussion of South-South cooperation. And I guess where we are today very much reflects some of the shifts in economic power and influence that have evolved in the course of this century. And I think it’s given a new lease of life to the whole notion of South-South operation and the willingness to challenge the rules of the game that have been devised by the advanced economies.
Cobus: Richard, staying on that theme, but kind of moving the timescale a little bit smaller, if one remembers, about five years ago, there seemed to be this moment in Africa particularly, where Africa seems to be moving towards development, there seemed to be quite significant kind of gains in economic growth, anti-poverty measures, and Africa seemed relatively set to leave extreme poverty behind and to move forward. Five years later, there’s a lot of talk about a global recession, and all of these strains seem to have now been reversed. I wonder if you could talk us through what are some of the underlying factors that caused that shift? Like, obviously we know that the COVID pandemic had a big role, but why was the COVID pandemic and other factors like Ukraine, what did they trigger? What underlying factors helped to reverse what seemed to be a very promising trajectory?
Richard: I would probably go back a little bit, Cobus. The revival of Africa really begins in the early two 2000s. Africa was very badly hit by the debt crisis of the ‘80s, and it took a lot longer to recover. The late ’90s, we saw debt relief, as you know, various efforts at debt relief, the HIPC initiative, and other things. And I think the combination of that revival that came from debt relief, coupled with China’s ongoing growth and demand of commodities was a combination that worked very well for many African countries. And if you look at Africa, the growth rate across the continent, the period from around 2001, 2002, that launches a very, a decade really, despite the financial crisis, a decade or more of strong growth. Of course, it was still very commodity driven. I mean, Alex talked about that as being a central feature of an older paradigm.
And I think from, really from 2014, 2015, a combination of falling commodity prices and growing levels of debt put Africa, many African countries into a very difficult situation by the end of the last decade. So, already there were clear signs of significant debt distress across the continent by the end. And of course, COVID comes on top of that and is a major hit for many countries. As we know, the pandemic was not properly dealt with at the multilateral level. And now we’ve got the war in Ukraine and the problem with increasing food prices, the rise in interest rate. This is compounding, I think, underlying problems that were already apparent at the end of the last decade. The international financial institutions had not dealt with the problem properly.
And there’s a growing frustration, I think, not only in Africa but across the continent, but these underlying structural weaknesses have not really been properly addressed by the international community, whether in the context of the IMFs, World Bank, or in the G-20 or G-7 context. I think that’s a real source of frustration across the developing world.
Alex: Just to follow up from what Richard said, it’s very important to remember that there is a common theme in UNCTAD, not only a specific of the South-South unit, but a common theme of UNCTAD, which is more or less defined as the boom-bust cycles of the developing world. And it is exactly as Richard explained, it’s a combination of booms being driven by commodity prices and by the accompanying general support from global finance as commodity prices keep rising and their interest in investment opportunities. As Cobus, I think was also explaining, that has happened, especially in Africa, in the case of Zambia… sorry, of Ghana, is a typical case of a country which is very, especially favorable by global finance when minerals are rising and investments in those sectors of booming.
And then when prices of commodities shift upside down and start to decline, then the same heat in terms of trade in the prices of their exports with respect to the prices they have to pay for imports, the same is accompanied by a reversal of the interest of government investors in this countries, and therefore that is accompanied by capital flowing out of the country, exchange rate depreciations, as also Cobus mentioned, or I think it was you yourself, Eric, that mentioned this before. And so then you have this kind of very uneasy combination of two shocks at the same time, which are unmanageable. And so that is why one of the prescriptions of, or prescriptions of the central policy recommendations in our analysis is that it is essential for countries in the south to move into a phase of industrialization.
But obviously, in order to do that, countries alone, they cannot really compete with the most advanced industrialized countries. And therefore, that is why the concept of cooperation is essential. It’s essential to cooperate in order to trigger mechanisms of industrialization that are also consistent with the rural populations in the countries in the south. That means they are consistent with an agrarian transition, all that. In order to do that, you need to cooperate because countries in the south alone cannot navigate the asymmetries in the world economy that we know.
Eric: But at the same time, you are portraying these developing countries as victims, in some respects, of many of these international trends that, as we’ve talked about the war in Ukraine, about COVID, about all these different things. And I haven’t heard from you, and also I don’t hear a lot in the development discourse how much bad governance has to do with it. So, in the boom and bust cycles that you’ve talked about, when commodity prices are high, you had people like former Zambian president, Edgar Lungu, wasting and frittering lots of money away. And I think we have to talk about bad governance in those boom cycles that didn’t take advantage of that to invest in human capital, to cut down corruption, to make sure that they’re investing in education, healthcare, roads, infrastructure, and other things.
And instead what ended up happening is they took on enormous amounts of debt, and maybe before the pandemic, they were doing well, but there was no shock absorbers in their system. So, the pandemic came and the wheels came off the wagon. At what point do we start talking about global south leaders and specifically in places like Africa, who have robbed their people of their futures, in part because of bad economic decisions that they’ve made?
Alex: Well, intrinsic to the conceptualization of South-South cooperation and integration is the notion that the central divide in the world economy is not between governments of the south and governments of the north. The central divide is between a dominant sector of the global private sector and the peoples of all countries. And these all countries include social countries in the north. And in that context of opposition of interest, say between profit makers at a very large scale, the most concentrated entities, conglomerates of finance industries, and even all the kinds of projects, say platforms, electronic, the famous Google and the likes, so these conglomerates are exercising an excessive power that also shapes the way in which the governments act. It is true that there are instances of corruption, many of them we cannot deny them.
And to be honest, not only in the developing world, but these instances of corruption take place, because the way in which these global corporate forces influence the development of a country are very difficult to manage. And as a matter of fact, as you talk about, for example, countries in the south that get excessively indebted, most of these transfers of funds, say lending, investment from the major economies into countries in the south, they happen first through the private sector where governments have very little to do unless that they establish forms of regulation for which you need also some degree of coordination. But unless they establish some forms of very strict regulation, for example, capital controls, then these funds come primary from global entities to local entities which are also powerful in the country themselves.
And it is very difficult for a government to manage the combination of interest between the domestic influential private sector forces and the international forces that are finding common interest in this indebtness of the country. And then a big part of the high debt that countries in the south have to cope with, it is not only the result of public sector borrowing directly from global investors, but in many instances, it’s the result of countries, governments in the South that have to absorb the unpayable debts that the private sector have undertaken in the past when the booming conditions arose.
To us, it is very important to understand that the major conflict of interest is not really between governments of the north and governments of the south, but it is between very powerful, very, very, very powerful conglomerates of private sector entrepreneurs, so national companies, global finance, as we define it in loose terms, and the participants in the countries, both in the south and in the north, they have to navigate these forces. And yes, there are instances of corruption, inevitably there are, but it’s very difficult to go against the grain when these very, very powerful forces are in play.
Richard: I think the difficult question, Eric, of course, for us, given our constituency, and I wouldn’t want to shy away from issues of corruption because they are clearly there, but I think the bigger question always here is the question of state capacity, right? I mean, when we look at success stories and try and draw lessons from success stories for other developing countries, and South-South cooperation is an important channel for that dissemination of success stories, at least we think it is. The role of the kind of developmental state and the lessons that we can take is pivotal, I think, to trying to… I don’t like the good governance, but the governance narrative is largely drawn from the corporate sector. I mean, you have good and bad states, for sure, and you have good developmental states that I think you can draw lessons from.
That’s where we try to pitch our analysis, particularly around South-South cooperation. I mean, one thing you have to, I think, acknowledge in this discussion is a lot of countries in Africa that have been for decades under the tutelage of leading international financial institution. I take a country like Congo, for example, which has been under IMF programs for 30 years or 25 years. Most of those experiences have not resulted in the strengthening of state capacity to take on the role of domestic resource mobilization and the diversification of economic activity that we would argue are two of the pivotal conditions for a successful and sustained growth process. So, I know obviously we get a lot, from our partners here, references to corruption and mismanagement in developing companies, which I wouldn’t want to deny, but you got to put it against the context of 20 or 30 years of failed neoliberal policies, not just as policies, but also as state-building programs and experiences.
Cobus: So, in this context, how should we think about development, this kind of bifurcation between global corporate power and the populations of the global south? During the height of the kind of neoliberal era, there was these kind of neoliberal kind of development narratives, which I remember a lot, years and years ago in South Africa, where the concept of development was very explicitly linked to also attracting foreign direct investment, for example, after we’re now in a debt crisis, we’re now in this kind of long hangover after the 2010s. how has the concept of development shifted and/or how should we think about the concept of development now?
Alex: The best way to think of development now is to think it in a global perspective. It has always been the case that development is eventually a way of moving ahead in terms of industrialization, building the institutions, getting the countries free from external debt or moving into levels of external debt that are manageable. So, all these elements which are part of the development paradigm always had to do with some degree of interacting with the world. But in the context of this last three, four decades, it becomes imperative to think of development as a global challenge, in the sense that it is both meaning that it is nearly impossible for a single country, especially if it is small, to sustain a process of development, unless that the entire world economy’s development in a stable way.
At the same time, the concept of global development means that in order for a country to position itself through a strategy of development, it has to consider how to navigate these asymmetries of forces that exist in the world economy. In essence, we think that now, more than ever before, the concept of development has to be attached to a strategy to deal with the global economy. And that’s why there was a very kind of pioneering text written in preparation of the UNCTAD Conference 12, sorry, in 2012, the Conference 13, and in this seminar work, then a kind of new development or a new framework was proposed, which is a framework in which we talk of development-led globalization.
We are not talking of development alone, of countries alone. The hope that a country alone can develop in the sense of getting into a sustained process of industrialization, institutional capacity, productivity, employment, stability, this hope for a single country, it has to be forgotten. There is no way around than achieving a stable and sustained process of development unless that we think of it from a lower perspective. And that’s all the more important nowadays when we realize that climate is becoming a very fundamental issue and climate is also essentially a global issue. So that is all to say that the way in which we think about development is a global concept and, from a policy point of view, has to be sought out in terms of what type of policies are important in order to achieve this kind of global development agenda. And here, again, South-South cooperation is essential.
Eric: Yeah. Richard, let me just follow up on this very quickly. So, Alex is talking about development as a global concept, and I’m going to ask you a slightly awkward question given the position that you’re in. So, I fully expect you to evade, dodge, and bob and weave around this one, but let me just go ahead and put the question out there. We are at the dawn of a new great power competition that was never really foreseen in the charters of the United Nations and the multilateral institutions when they were built in the post-war era. There was a sense that we were done with this, these new institutions were going to insulate us from returning to the bad days. Certainly after the end of the first cold war, that was the assessment. Here we are, yet again, when blocks are starting to form, when coalitions are starting to form, and there’s a lot of tensions, and oftentimes developing countries and global south countries are caught in the middle now of these rivalries that are emerging in lots of different ways.
And also the United Nations could never have imagined that two of its permanent members would be, or three of its permanent members, would potentially be in conflict with one another. Again, we have things that were unimaginable. In that context, are the institutions, including UNCTAD, prepared and qualified and competent to be able to deal with the challenges that we’re seeing today, massive flows of private capital, climate change, great power rivalry, pandemics? So far, I think there’s a compelling case to make that those institutions have failed most people in the global south. What’s your take on that? And again, I do fully appreciate the position that you’re in, so if you want to give a diplomatic answer, you have a way out on that one.
Richard: Yeah, we’re not hugely diplomatic in UNCTAD. In a funny way, I think, there’s a certain sense in which the UN’s effectiveness, international institutions, in general, effectiveness was greater when you had that impeding power relationships, right? So, in the ‘60s and into the ’70s, when the East-West political division was still strong, there was a kind of opportunity there for multilateral institutions to find some space in the kind of power vacuum that allowed them to be more effective in terms of structuring or restructuring the rules of the game in a way that was more supportive of developing countries. I mean, to me, at least, this is my personal view, multilateralism has lost its direction and energy in a world that has gone neoliberal. I mean, it’s not clear that, from a strictly kind of conceptual point of view, you need multilateral institutions in at least economic institutions in a neoliberal world because the market should provide the necessary signals and opportunities for all players to maximize their gains and returns.
I don’t buy the story that the multilateral system has this kind of 75 years of uninterrupted kind of development. I think there was a fundamental change in the effectiveness and operations of multilateralism that came after the shift to a, call while you like, neoliberal finance-driven globalization world. And I think we’re moving away from that world now, as you rightly said. And to some extent, it’s important that the multilateral institutions pick up some of the good traits that I think were apparent in the years and decades immediately after the Second World War and combine those good traits with the new demands that we’re talking about, particularly the climate challenge being the most obvious. I think, to some extent, multilaterals need to rediscover their own history and to draw on the best parts of that history to be able to tackle both the planetary and the developmental challenges that we’re talking about.
And I think South-South cooperation, to some extent, and it’s rebirth is a sign of that. I think that, for example, the reemergence of industrial policy, rediscovered, of course, by the advanced economies, developing countries have argued… I mean, you mentioned South Africa, these are countries that have been long arguing the case for industrial policy, but complaining that the rules of the international economy stop them from doing effective industrial policy. Now that the advanced economies are also finding how the rules of the game are not good for their attempt to revive industrial policy, they’re ignoring the rules of the game that they invented. And I think there’s lots of opportunities in this kind of uncertain and disturbed world for genuine multilateral responses to actually become more effective and more significant, certainly than they have been over the last 20 or 30 years.
Cobus: Richard, as an expert on globalization, I was wondering where you see globalization being now and where you see it moving into the future. Obviously, the kind of dominant debate around this n the global north is that there is this retreat of globalization happening, and it’s frequently linked to other conversations about decoupling from China or then de-risking relationships with China. I think from the global south, the idea that globalization is, or at least the globalization of global north capital, its ending might be overstated, but yeah. So, I was wondering how you see the future of globalization at the moment. And of course, Alex, if you ever want to contribute as well.
Richard: To some extent, I feel that it’s a lazy term, right? Globalization. It’s not really clear what people mean when they refer to globalization often. In UNCTAD, the term that we have always used, and I still think is a better term to describe interactions across borders is interdependence. So, economic interdependence has certainly been a feature of the global economy in the post-war period, but the nature of that interdependence has changed in very fundamental ways over the last 70 years. As Alex mentioned, and is obvious in a way, deregulation of financial markets, the growing increase of private capital flows, the growing significance of debt as an engine of growth are much more significant today than they were in the 1950s or the 1960s, where trade and commodity relations were a more powerful feature of the inter of the kind of interdependence that came out of the Second World War.
And when people use globalization, or even worse, the notion of a rules-based international order, which is an even more slippery concept than globalization, I think, they give this sense that we’ve gone through a kind of seamless kind of history of 70 years, when clearly it’s a very punctuated history when it comes to the interaction across countries. I think you need to recognize that when we are talking about where is globalization going in the future, I think from our point of view, for where development is going in the future, I think the immediate pressures the developing countries are facing — very profound and quite bleak. You began your discussion of the ongoing pressures around debt distress in Africa, and those are clearly getting worse. And at least from the work that we do in UNCTAD, unless we can overcome those debt constraints, it’s very difficult to see how many developing countries will be able to generate the investments that they need, not only to meet their longstanding development challenges, but to combine those longstanding development challenges with the need to [inaudible 0:40:42] on the climate challenge.
I just don’t think it’s possible for many countries to do that given the kind of debt burdens that they currently face and the threats of austerity that those debt burdens constantly bring. The debt issue is a very troubling one. At the same time, I do think that some of these discussions, again, including in Africa around the continental free trade area, a revisiting of the industrialization agenda, which I think is happening in Africa, I think is a real positive step forward. And if you can combine that notion of a regional trading bloc with a serious agenda of diversification and industrialization, then I think there are huge opportunities for countries and governments in Africa to exploit some of the developments that we’ve been [inaudible 0:41:32]. I think right now it’s a very mixed… Development, it’s a very mixed picture now, in response to your question, Cobus. Where globalization features in that I’m not sure because I’m a little bit skeptical of the overuse, to some extent, use of the term globalization.
Eric: Alex, we’re running very, very short on time, so if I could just get your final comments just to pick up on what Richard was saying in response to Cobus’s question on the future of globalization.
Alex: Yes. As Richard stressed, so the globalization concept has been abused and, at the same time, it is now being abused the term of de-globalization, in the sense that in reality countries in the north, in the south, and between the north and the south, they are extremely, extremely intertwined in terms of trade and finance and regulations, or the lack of regulations, of their parastatal finance and indebtness. So, the issue is that it has always been through history, through history of the last two centuries at least, always been a realignment of forces between certain countries, and probably trying to confront the dominance of other countries, most surely, and also between the private operators within and across these countries. Without overstretching either the concept of globalization or the concept of de-globalization, the fact is that we are all part of a world economy, which is very intimately intertwined to the extent that, for example, the latest developments in terms of inflation trends that are affecting many countries in the north, for example, they have to do with these functionalities of some of these trades through global value chains, as it is called.
And the same happens, similar instabilities happens in, in particularly, so through finance. Without the stretching either of the two concepts, the fact is that we are part of a single world economy and of a single world climate, and therefore it is essential to revisit the strategy to get into a sustained path of growth, development, prosperity, to get into this path by forms of understanding and coordination for which developing countries in the global south needs to gain this collective bargaining power in order to negotiate better conditions to navigate through a world economy in which we are all part of it and will continue to be all part of it.
Eric: Alex Izurieta is the head of the South-South cooperation unit at the United Nations Conference on Trade and Development. Richard Kozul-Wright is the director of the Globalization and Development Strategies Division also at UNCTAD. Richard, Alex, thank you so much for your time today and for some fascinating insights on these really just monumental issues. And I just think it was great for us to have the chance to step back and to look at this from a much bigger perspective, the way that you guys chew on these issues every day over at UNCTAD. We really appreciate your time today.
Alex: Thank you. And also thank you to the listeners of this wonderful program.
Richard: Eric, Cobus, thanks for the opportunity.
Eric: Cobus, I have to say that I was a little bit surprised to hear the critiques of the neoliberal economic order and the role of private capital and the role of corporations. I guess, in one sense, not surprising coming from an agency like the United Nations, but at the same time, that is just a reality of where we are today. And it’s interesting when you compare what we heard today with the conversation that we had last week with Daniel Runde from the Center for Strategic and International Studies in Washington, who was very much in this neoliberal mindset, very much in blocs, very much in a Cold War kind of framing of things — what a contrast between that conservative American view and what we heard today from two folks at UNCTAD.
Cobus: Yes, it’s really interesting, and both of those conversations provide different interesting perspectives on the issue of private debt, for example, in the global south, which has been a very significant source of funding for African countries, but it’s now also a very significant cause of debt stress in those same countries. So, these kind of broad issues around where we are in terms of development, and whether it’s even possible for individual countries to develop their way out of poverty, that conversation, I think, is really, really crucial, and particularly crucial at this moment of crisis.
Eric: Well, it’s interesting because this whole conversation about private debt and Chinese debt in Africa in particular is provoking some rather uncomfortable conversations in many African countries, and I’m thinking particularly of Kenya and Ghana right now where they’re having to do two things — One is to turn more to domestic sources of revenue, either through domestic bonds. And then the other one, and I know you’re going to find this one very interesting because you’ve mentioned it before, tax collection. And the quantity of tax evasion in many African countries is alarming and in part because ruling power cliques and parties don’t like to crack down on tax revenue because that goes against some of their powerful backers and constituents. But now their backs are against a corner because they cannot raise money on the international markets, they can’t borrow bilaterally from countries like China anymore because China’s just out of that game, so where else you’re going to get money? You’re going to have to get better at enforcing tax collection.
And by the way, this is not uniquely an African problem. This is also a problem in the United States as well, where our tax collections have gone down quite a bit as well. Again, not uniquely a global south problem, certainly not uniquely an African problem, but in the context of Ghana and Kenya, tax collection is one. And then the other one is the amount of cash that leaves Africa every year, illicit or otherwise, is just alarming. And if more of that money and that capital can actually be captured onto the continent, you’d think that that would really help to move things forward.
Cobus: This really plays into this split between global south populations and global north corporate power that Alex was outlining because I recently saw breakdowns of illicit financial flows out of Africa, and I fully expected corruption to really head it, and corruption was significant, but it was actually a smaller factor than tax avoidance by global north companies. The tax not being paid by very large corporate investors to African governments is a really big problem in the African bottom line.
Eric: Can you just explain that a little bit? I’m not following. Yeah, break that down for me a little bit.
Cobus: I’m no expert on this issue, and UNECA, for example, in Africa has done a lot of work on this, but it’s to do with taxes that should be paid, particularly by commodity producers, and that is avoided in different kind of legal and semi-legal and frequently illegal ways. Partly this is because of very kind of corporate friendly tax regimes set up by countries to attract investment. Part of it is by understating reserves or understating profits or exports. There’s a whole bunch of different ways that these companies avoid paying the taxes that they need to pay to African governments. And it’s really is a massive problem.
Eric: It’s the same kind of thing where Apple is an Irish company actually because Apple sets up its corporate headquarters in Ireland, or FedEx didn’t pay any federal tax in the past couple of years. Amazon the same way. It’s shocking how little tax they pay. So, you’re right, the corporate entities are kind of working in a world that’s of their own making. But I want to get your take on this question that I put to Richard and Alex about whether or not you think these institutions are wired for the 21st century and the challenges we face today. I don’t have a lot of confidence that they are, I don’t think that the founders of these institutions, these multilateral institutions had any idea what was coming right now. They couldn’t have foreseen artificial intelligence, climate change, all of these pandemics, and things like that. And then we see that when he talked about the 1960s and Richard talked about how there was more enthusiasm for the multilateral system, well, that was all because the United States at that moment in history was fully engaged right in the Cold War, in international development.
Kennedy had launched the Peace Corps at that time, and there was this real excitement for the United States to be out into the world. Let’s take the news this week — Joe Biden canceled his trip to Papua New Guinea and to Australia this week because of the debt limit crisis in Washington that he has to attend to. So, he’s going to go to Japan for the G-7, but he’s going to cut short the trip and come home four days early, in part because of American dysfunctional politics. And I’m not sure the United States is that committed to being the role that it was in the 1960s. I don’t see the body politic in Washington being aligned on this. And so, it makes me wonder whether or not these institutions, without a strong U.S. backing and U.S. support, can really do anything, or they’re just going to be ripped apart by the geopolitics. I’d be interested to get your take on that.
Cobus: Well, there are, to a certain extent, obviously forums for geopolitics as well. We’ve heard a lot of these anxieties expressing Western capitals around the increase of Chinese influence in multilateral institutions, for example. So, they are as much kind of actors and affected by geopolitics, but they’re also staging areas for geopolitics. So, that kind of complicates their position. I think another factor is what happened between the 1960s, that kind of moment of American internationalism, and the current moment we are in, was a massive neoliberal deregulation-led, kind of neoliberal boom, where Western companies were massively empowered as international actors. And what you see in the process is, therefore, a kind of a splintering of Western power itself.
Western power shows up in different ways in the global south. And Western governments is one of those ways and Western companies is a different one of those ways. I think the difference between the 1960s and now is that western governments are not these kind of sole actors, also sole authors of western power. Like, they are co-authors with Western companies and other kind of Western entities. In that sense, I think it’s just a much more kind of complicated space. Because even as we see, and we track this on a daily basis, on a very kind of like minute data point basis every week, is that even though western governments and western politicians are fully pulling back from ideas of globalization, fully talking a lot about decoupling and pulling French shoring and nearshoring, and pulling supply chains in and so on, but that’s not necessarily the consensus among American companies.
And even if it is, that it shows up in complicated ways around, for example, diversifying their business a little bit in China, a little bit in Vietnam, or like some in China, some in India and so on. That’s a kind of a long-winded way of saying that Western power itself has become so diversified, and with it, Chinese power, Indian power, Russian power, and others have similarly become splintered in these kind of ways where you’re dealing with lots of different at once that sometimes align into a single entity and sometimes they don’t. So, it’s just a much, much more complicated global system than it used to be. And therefore, I think these institutions themselves have to make this kind of quantum leap forward in order to deal with this complexity. But we are not 100% how they would do that.
Eric: And to be sure, we haven’t seen them do that at this point yet. I mean, look at the WTO process that it was supposed to be fixed, but the United States and the big powers aren’t keen on fixing the WTO process. I’m not entirely sure that, or anywhere near as optimistic, I guess in some respects as others that these systems are going to work. Let’s very quickly, just want to give a big reminder and a big welcome to some of our new institutional subscribers. So, if you are a student, faculty, or community member at the University of London, at Boston University, or at William & Mary College, you have free unlimited, unfettered access to the China Global South Project. Just go to the site while you’re on campus and you can sign up for our newsletters, you can access all of the information. So, we’re thrilled to have all of our new subscribers from the School of Oriental and African Studies at the University of London, also William & Mary, and BU as well.
It’s great to have so many universities join our community of readers. If you would like to find out all the great work that Cobus and the team at the China Global South Project are doing every day to inform governments, the United Nations Universities, scholars all over the world, then go to chinaglobalsouth.com/subscribe, and you can sign up either for monthly or for annual subscriptions. They’re very affordable. We also have half-off discounts for students and teachers, so please email me, eric@chinaglobalsouth.com, with your school address, and I will send you those discount links for you to join our community of readers. So, let’s leave the conversation there. Cobus and I will be back again next week with another edition of the China in Africa Podcast. For Cobus van Staden in Johannesburg, I’m Eric Olander — thank you so much for listening.
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