Annex II "Beyond 11 September: Assessive Global Implications"

International Affairs, Peace & Human Security
"Beyond 11 September: Assessing Global Implications"
28 November - 1 December 2001
Annex II

Notes on Issues of International Political Economy Raised by September 11

There is widespread agreement that the terrorist attacks on the WTC and the Pentagon will permanently change international political relations.

An important question is how to classify the terrorist attacks: as a devastating attack in an undeclared war or as a gigantic criminal act? If the latter, then there are many implications for the appropriate response: including that the terrorists are not dignified by being described as warriors and that the appropriate response is to aim to bring the perpetrators to justice, rather than to automatically launch attacks on countries where terrorists might be hiding.

Immediate economic implications

The short and medium term implications for the US economy, and the global economy, region by region, are discussed in the papers from the UN Economic Policy and Analysis Division. One significant change, with both immediate and long-term costs, is the increase in unproductive military and security expenditure.
What are likely to be the implications of the war for Afghanistan? From deaths, social, political and physical destruction and post-traumatic stress? What would be the implications if other countries were attacked, such as Iraq? What could be the economic consequences for Palestine? And for the rest of the Islamic world, which has generally felt politically and economically marginalized during recent decades?
Are there potential benefits for surrounding countries, notably Pakistan and the central Asian republics, from increased aid, debt reduction and economic activity?

Strategic implications

The attack on the World Trade Centre and the Pentagon symbolized more vividly than ever before the growth of global interdependence. It illuminated the impossibility and irresponsibility of US unilateralism. This magnifies the central issue of foreign relations for every country: how to relate to the US? Many countries have responded by acquiescing to US preferences and priorities. Are more consultative, cooperative relationships possible? Is there a change in the stance of the US, towards genuine multilateralism, or is the difference rhetorical rather than real? What levers are available to the rest of the world to constrain the US?
Do factors such as poverty, inequity and political powerlessness contribute to the growth of fanaticism? Would reduction of these injustices contribute to reduction of terrorism? If so, what goals, strategies and policies should be adopted to increase the effectiveness with which these issues are tackled? Do the outcomes of the major UN global conferences of the nineties, which culminated in the Millennium Declaration, indicate a way forward?
What are the implications of the responses to the attack for the relations of market and state? Will the immediate tendency to expand government activity, as normally happens in wartime, be sustained, or will this be a temporary pause in the neo-liberal ascendancy? What are the implications for macroeconomic coherence, financial regulation, and liberalization of trade? Are there damaging consequences of increasing government powers, such as for civil liberties?

Potential Action

What action can churches take at each level of political and economic activity: local, national, regional and global?

Will the political consequences of the attack lead to strengthened commitment by developed countries to support for developing countries? This seems to be starting to happen in Europe; can it be expected in other developed countries? Will this strengthen motivation for concessions at the UN Finance for Development, Children's and Sustainable Development Conferences in 2002?
What should the churches be advocating in relation to:

Revenue raising within developing countries?
International cooperation about domestic taxation policy?
New and innovative sources of revenue?
ODA?
Debt reduction?
Market access?
International migration and refugee policy?
Policy on Ageing, at the World Assembly on Ageing in Madrid in April?

What reciprocal policy changes could be expected of developing countries in relation to national governance, domestic commitment to economic and social policy?
One of the glaring defects of the international institutional structure is the inadequate representation of developing countries? Does this contribute to the sense of powerlessness amongst the intelligentsia in those countries? What institutional evolution is desirable?
What are credible positions to advocate in relation to:
Annex
Some notes on Context
It is worth reminding ourselves of the features of our times that make this discussion so important:
1. Global interdependence is growing strongly.
2. After half century of uneven but often rapid and widespread economic growth, the world is richer than ever before in human history and has unprecedented technological capacity.
3. Yet despite the resulting opportunity to achieve security for all, half of humankind lives on less than $2 a day, in or close to poverty, and so are certainly suffering from deprivation and insecurity of many kinds.
4. Inequality of income, wealth, assets and power between and within most countries is high and generally growing. One simple statistic used by the Secretary-General is enough to illustrate this: the 20 per cent of people with the highest incomes receive 86 per cent of total global income ¹.
Underlying Structures of Globalisation
Despite the general recognition that globalisation has benefits and costs and that these are inequitably distributed, neither the extent of these inequalities nor the strength of the structures underlying them receive enough attention.
Some examples will illustrate:
1. Developing countries account for 85 per cent of the world's population and that proportion is rising. Yet whereas at the United Nations, where each member state has a single vote and developed countries have 17 per cent of the voting power; at the WTO developed countries have 24 per cent of the voting strength; and at the World Bank and the IMF they have 61-62 per cent. At the IMF the US has an effective veto ².
2. Much is made of the opportunities that financial liberalisation is claimed to have created for developing countries to attract foreign investment. Yet in the past year, two-thirds of international capital flows went to the US. A recent issue of the IMF Survey draws attention to this situation with the headline: 'IMF report confirms dominant US position as recipient of international capital flows. 'A striking feature of international capital flows during the year [2000] was the dominant position of the United States as a recipient of flows, compared with 60 per cent in 1999 and an average of about 35 per cent during 1992-97. Net flows to the United States exceeded $400 billion, the report states, including a record level of foreign portfolio investment...³ .
3. The 1997-98 financial crisis was only the most recent example of the growth of international financial volatility. There have been 100 episodes of systemic financial sector crises over the last two decades, with fiscal burdens often exceeding 20 to 30 percent of GDP ⁴.
4. The growth in the concentration of corporate ownership as a result of both corporate expansion and mergers and acquisitions is increasing both market failure and the political dominance of the corporate sector.
5. Income from intellectual property also accrues disproportionately to the developed countries. It is estimated that industrialised countries hold 97 per cent of all patents and that global corporations hold 90 per cent of all technology and product patents ⁵.
6. The benefits of education everywhere flow disproportionately to the developed countries through the immigration of skilled people. For example, of about 5 million people employed in information technology in the US more than a million are foreign born ⁶.
7. The most obvious way of enabling developing countries to help themselves is to ensure they have access to the markets of the developed countries. Yet even there, despite recent reduction in protection announced by the EU, they still face severe discrimination from agricultural and manufacturing protection in developed countries.
8. Despite these enormous benefits, the rich countries have generally reduced compensating flows of aid during the nineties and debt reduction has been very limited. The average ratio of aid to GNP in Development Assistance Committee countries fell from 0.44 per cent in 1986-87 to 0.39 per cent in 2000 ⁷.
John Langmore

Wednesday, 28 November 2001
1. Secretary-General's Millennium Report.
  For much more information see the chapter on 'Globalization and Equity' in the United Nations 2001 Report on the World Social Situation ESA/DSPD/CRP.1. back
2. Quoted by Gerald Karl Helleiner, 'Can the Global Economy be Civilized?'Tenth Raul Prebisch Lecture, UNCTAD, 11 December 2000, from Ngaire Woods,
  'Governance in International Organisations,' International Monetary and Financial Issues for the 1990s, Vol. IX, (United Nations) back
3. IMF Survey, July 30, 2001, p252. back
4. Gerard Caprio and Daniela Klingebel, "Episodes of Systemic and Borderline Financial Crises," World Bank Discussion Paper, 1999. back
5. UNDP, Human Development Report 2000, Human Rights and Human Development, p84 back
6. The International Herald Tribune, Wednesday 4 April 2001, p1 back
7. DAC, Development Co-operation, 1999 and 2001 editions. back
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