Viable, popular national economic alternatives require conditions to help build and sustain them. An independent, accountable government can ensure supportive institutions, including laws.
National economies
For the Global South, globalization has often meant renewed foreign domination. While dating back to the age of empire, foreign domination is less evident in post-colonial times, making it more difficult to organize against it.
National sovereignty and independence are necessary to develop and sustain viable popular economic alternatives. This requires addressing contemporary realities. Some unexpected opportunities may even emerge from the new challenges faced.
Cooperation among significant national social forces must be maintained for an alternative to be popular and sustainable. Negotiating, preserving, strengthening and ‘updating’ such collaboration is necessary to advance popular national interests.
This becomes challenging when those involved are not on a level playing field. After all, we live in a world dominated by powerful private interests, typically working through corporations, with transnational ones being the most influential.
Most people know that such domination is exercised via economic assets. But it has increasingly also involved control of the main means of communication. Global public discourses have thus been reshaped, even in multilateral institutions.
Thus, for example, the unrepresentative corporate-dominated Davos World Economic Forum sets agendas for multilateral conferences in the interest of the ‘lords of the universe’. More than seventy heads of government and state attended the last Davos event, many more than the UN General Debate.
Can developing alternative means of communication better shape our discourses, as our interests rarely coincide with those effectively in control?
Rule by law
Katarina Pistor has shown how law is hardly neutral but instead crucial to capitalism’s functioning. Thus, setting and enforcing rules privileges the interests shaping them.
Law is made by the powerful to legitimize their interests and practices, e.g., by enforcing contracts, property rights, etc. The legal framework defines how we operate, what is considered legal and illegal, and what is licit and illicit.
The African Union-Economic Commission for Africa study, chaired by former South African President Thabo Mbeki, recognized that many illicit practices are not illegal. Such massive illicit financial outflows characterize most of the Global South.
Such hemorrhage has worsened in recent decades as developing countries competed to attract foreign investments. In recent decades, they opened their capital accounts, believing economists who claimed finance would then flow ‘downhill’ into them. Instead, it flows ‘uphill’ from ‘capital-poor’ to ‘capital-rich’ nations.
Finance has transformed economies and communities in recent decades. The growing influence of such interests has increasingly constrained national monetary and financial authorities’ ability to manage interest and exchange rates.
Hence, only governments and multilateral financial institutions can create arrangements enabling preferential access to concessional finance. Inclusion and accountability can help ensure governments better serve the public interest.
Taxation
The Independent Commission for the Reform of International Corporate Taxation recommended a minimum universal corporate income tax rate of 25%.
US Treasury Secretary Janet Yellen later proposed 21%, the current US rate, to minimize political opposition in Washington. However, UK Prime Minister Boris Johnson cut this to 15% at the G7 meeting he hosted.
The OECD-G20 Inclusive Framework for Base Erosion and Profit Shifting (BEPS) seems to share the OECD view that such tax revenue be distributed by the country of sale, not production.
Developing countries lose out as they generally produce much more than they can afford to consume. With foreign advice shaping developing countries’ policies, their tax rates and revenue shares of output have fallen for decades. Hence, indebted nations believe they have to cut government spending.
Unsurprisingly, most developing countries have supported the African group’s resolution to make the UN the sole legitimate body for international tax cooperation, thus undermining the Inclusive Framework’s pretensions.
Trade liberalization bias
Trade liberalization is a double-edged sword. It can enhance exports to earn more foreign exchange but also destroys economic capacities, e.g., for industrialization and food security.
Rich countries – including the US, the world’s biggest agricultural exporter – have sustained food production with government support using protection and subsidies. But while such subsidies are allowed, developing countries have been stopped from using tariffs for food security.
The US subsidies maize production for corn oil to make bioethanol. Corn syrup and chicken feed also get subsidized in the process. Consequently, US chicken exports have wiped out many poultry farmers worldwide.
Food prices increased sharply for some months after the Russian invasion of Ukraine. Jayati Ghosh showed these food price spikes were mainly due to speculation and price manipulation rather than wartime supply disruptions.
Futures markets once reduced commodity price fluctuations but have had significant disruptive effects more recently. This is mainly due to the changed nature of commodity spot, futures and options markets, especially with massive programmed financial speculation using algorithms and artificial intelligence.
Jomo Kwame Sundaram is a prominent Malaysian economist. He is senior adviser at the Khazanah Research Institute, visiting fellow at the Initiative for Policy Dialogue, Columbia University, and adjunct professor at the International Islamic University.
