Yaroslav Lissovolik, the Program Director at the Valdai Discussion Club, and the Managing Director of Research and Chief Economist at the Eurasian Development Bank (EDB) joins the program.
The first question concerns whether or not we should be concerned about an inward-looking America ceding control of the international order to other countries? Yaroslav says that we should be concerned with the protectionist measures being adopted by some countries. "Trade has traditionally been one of the driving forces of economic growth and prosperity, if this driving force is not there, then there are serious questions that can be asked about future global growth. This is happening even as we are coming to terms with the fact that the world economy is growing at a lower rates than before…" Yaroslav adds that he thinks that the redistribution of economic power and weight from the US to other parts of the globe, is "only natural, and very likely". Yaroslav sees that the protectionist strategy being adopted by the US will limit the possibility of the US expanding economic trade alliances across the globe.
There are problems which are hitting all of us, wherever we live. Namely — climate change and inequality; problems which some say can only be solved by countries coming together and working together. But the world seems to be moving in the opposite direction. Yaroslav says that the problem is particularly acute in the developing world which lacks the structure and coordination present in alliances such as the EU, and this only exacerbates the problem of inequality. One of the points in the paper ‘The New Global Governance: Towards a More Sustainable Framework' written by Yaroslav Lissovolik and Marc Uzan, the Executive Director of the Reinventing Bretton Woods Committee, is that much greater cooperation and integration is needed across the South-South axis between developing countries, even as there is greater protectionist pressure coming from countries such as the US.
We in the West are perhaps aware of the tension between rights of the individual, and the interests of the State. Yaroslav comments: "What is important to bear in mind for the developing countries is that there needs to be a balance of sorts between the growing rights of the individual and that I think is a proper goal for any country. But this shouldn't take place at the expense of other goals. Certainly, on the international arena, the right of the State and its position vis-à-vis other countries, is also very important. In that regard, there needs to be a global mechanism, a governance structure that allows for States, for the developing countries to have more rights, to have more possibilities to express their will and to pursue the policies that are aligned with their national interest. The need for national interest needs to be rediscovered in some ways in the current setting. Obviously with the old system, it was only the advanced countries that had the dominance and the global institutions, and had the possibility to advance their agenda…"
A discussion take place about the degree of sovereignty that developing states will have to surrender to achieve economic integration. Yaroslav comments: ‘We are talking about economic integration, and some degree of loss of sovereignty. The degree of this loss depends obviously on the scale of integration, but definitely integration will involve an undermining of the powers of the State in favor of these regional groupings or these mega blocks that are being built now. At the same time, for the developing countries right now, the questions perhaps is that through these new arrangements, through these new blocks that they are participating in, some of the loss of sovereignty will be compensated for. There will be increased possibilities and sovereignty in other respects because with the old institutions and the old pattern of globalization, there was a loss of sovereignty in terms of the dependency on the dollar and various payment systems. If there is a construct in which the developing countries can have more scope for their own national currencies, for their own payment system, for their own regional institutions, the net effect will be not a decrease in sovereignty but an increase in sovereignty…"
Developing countries will be able to benefit from the experience gained by the EU, which Yaroslav sees as being "one of the most successful projects out there…but if there is an over-shooting of integration, then this involves costs, and this is negative. This negative experience that the EU has had will also be very important for the developing world and the structuring of its own alliances, and this process is only just starting. It's interesting that there is not really a debate within western academia about how the developing world could really structure its alliances along the South-South access."
The development of new alliances is not just limited to Asia, Yarolsav says: "What we are seeing is the possibility for the current projects like BRICS or the Shanghai Organization of Cooperation to be more inclusive and have more of an outreach to the developing world. We may see initiatives such as the SCO + or the BRICS + to try to include more emerging markets and developing countries into coordinating their policies and to having one voice."
There is a danger that the new rich countries such as China could exploit the developing countries in the same way that the rich western countries exploited poorer 3rd world countries. Yaroslav comments: "I think that at the very early stages of the formation of such platforms of integration, this should be one of the guiding questions. There is less chance as far as BRICS countries are concerned of that kind of domination from one country, because it is a multi-polar organization whereby you don't have a core and you don't have a periphery, you have 5 countries from different parts of the developing world advancing their own agenda, acting on the basis of consensus and taking each other's opinions into account… this does not result in the domination of any one single country."
The appearance of new alliances between countries may lead to a new appearance of regionalism. Yaroslav comments: "This is a double-edged sword; on the one hand it is a challenge to the likes of the WTO and other global organizations. It's also a challenge to the sovereignty of individual countries but at the same time this is also a building block for integration that could be very effective and that could be very effective in terms of advancing integration, especially in the developing world where there is tremendous fragmentation and a lack of coordination of economic policy, and this is one of the things we are emphasizing in our paper. We are proposing ways in which regionalism could work in the global setting.
The last theme that is discussed is that of the possibility of co-existence of the old economic structures and the new. "I think that co-existence is possible. This change should not proceed in extreme and dangerous ways….In the Bretton Woods institutions there is, for example, cooperation between the International Monetary Fund and the regional financial institutions that were created in the past decade, and there is significant cooperation between the World Bank and the new development institutions created by China and other developing countries, in co-financing projects. It's starting to work, and I think it is the way forward, that the new institutions will learn from the old ones, and will try to take whatever best practices there are into the future."
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