A World Divided or Coming Together?

A World Divided or Coming Together?

The International Monetary Fund (IMF) warning of a possible world recession came in parallel with fears expressed at the World Economic Forum (WEF) in Davos about the spread of protests across the world. Given that Oxford Research Group (ORG) has long argued that the widening wealth-poverty divide is both damaging to communities and a danger to peace, do the current protests, such as the "Occupy" movement, point to a larger global trend or are they isolated, short-term and probably irrelevant? To examine this, it is helpful to look at Western protests in relation to more deep-seated problems in countries, such as China and India, and to put this wider view in a broad historical perspective.

Relevant History

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At the global level, the past thirty years has seen a widening of the divide between about one-fifth of the world's people, who have benefited significantly from economic growth, and the great majority, who may not have grown poorer, but have faced a widening gap between them, and the wealthy minority. In terms of income, the most successful fifth has about 84% of the total, and if the measure used is household wealth, then the concentration is even more extreme. The gap has grown markedly wider in recent years, but even this recognition is in the context of a longer-term historical context of around six decades from 1950, and it is appropriate to divide this into two periods - the first thirty years through to 1980 and the period since then.

The late colonial and early post-colonial period from 1950 to 1980 saw most of the western world and much of the ‘Global South' run on the basis of variably mixed economies, with strong elements of social welfare in the wealthier states. The Soviet Bloc was organised far more centrally, and the challenge it presented in the era of decolonisation was sufficient to encourage western states to support aid programmes, including some welfare provision, in many developing societies. Furthermore, in the immediate aftermath of decolonisation by the early 1960s, newly independent states were determined also to gain a degree of economic independence in a world trading economy largely dominated by the wealthy industrialised states of the North.

The first UN Development Decade of the 1960s achieved little, but the UN Conference on Trade and Development (UNCTAD) tried persistently to facilitate North/South negotiations that would ensure fairer terms of trade for the Global South, thereby helping to aid development. Such improvements might include commodity agreements, as well as associated buffer stock and compensatory finance arrangements, tariff preferences and schemes for regional industrialisation. The peak of these efforts followed the sudden fourfold increase in oil prices in 1973-4 and the temporary and unusual weakening of the terms of trade for the northern states. This was sufficiently serious for a bloc of developing countries to consider the idea of a New International Economic Order (NIEO), based primarily on a grand plan for world commodity trade, known as the Integrated Programme for Commodities, with its associated Common Fund to finance the necessary buffer stocks.

If the NIEO had gone forward, then UNCTAD trade economists argued that this would greatly aid the development prospects of much of the Global South, but the stagflation and subsequent collapse of commodity prices that followed the oil price hike meant that by 1976, the industrialised North had largely lost interest in trade reform. Not only that, but the economic problems of the late 1970s were to usher in a radically different approach to the global economy, one focused primarily on the free market. The administrations of Ronald Reagan and Margaret Thatcher led the way in this, and the ideology was effectively imposed on much of the Global South by the conditionality represented by the "Washington consensus" and the loan and financial activities of the IMF and the World Bank. By the late 1980s, this approach was embedded in large parts of the world economy, with emphasis on privatisation of state assets, the liberalisation of trade and the freeing up of labour markets. One event of particular significance was the so-called "Big Bang" in 1986 - the deregulation of financial institutions centred on London, with other financial centres following suit.

Paul Rogers is Professor of Peace Studies at the University of Bradford and Global Security Consultant to Oxford Research Group (ORG).

Copyright © Oxford Research Group 2012. This briefing is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Licence.

 

 

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