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US crisis signals second round of globalisation
Secretary General of UNCTAD Supachai Panitchpakdi says Viet Nam should focus on long-term, not short-term, growth during the current global financial crisis.
The collapse of giant American financial institutions has pushed the world closer to a global financial crisis. What do you think the new world economy will look like when the crisis is over?
The world is entering the second generation of globalisation. In the process, we will see the emergence of the New South. It means the New South will be stronger in terms of trading capacity.
As you see, China is now the world’s second largest exporter after Germany. It used to be seventh and eighth some years ago. You are seeing what I called a capital paradox. That is, capital flowing from developing countries to more advanced economies instead of vice versa, which is a normal thing.
In the second generation of globalisation, you will see more inclusive participation of all the regions of the world. It is not a one-way street as was the case during the beginning of globalisation, when companies from the First World would invest in the South.
Now a financial crisis is taking place, which signifies deterioration of the financial system in the more advanced economies. It also signifies the rising dependence of the Western financial system on funds flowing from the South.
We have to encourage this trend, because it is better to share the benefits. Globalisation is more equitable now.
There is a new form of protection in investment areas, which some advan-ced economies are putting up to block investment from firms from developing countries. I don’t think this should be the case.
Some things are now happening in reverse. This has followed the trend I have been outlining.
The right of the financial institutions in developing countries will be quite pronounced.
They have to do better in the light of past experiences because this financial upheaval will come back again. This is a systematic issue.
A few years after this, we will have made some adjustments and assessments. The world economy will bounce back and be stronger. But we need to prevent the unwanted impacts.
In this volatile world, what do you think the consequences will be for issues such as climate change, the Doha Round and the food crisis?
Regarding the food crisis, I don’t think the financial crisis should have any direct implications. What it requires is more awareness.
Developing countries need to do their own agricultural development. They should not rely too much on international markets. I think this signal has already been sent.
The situation is not affected much by what is going on in the international financial system. Food prices will still be high.
Twenty-five years ago, one billion people doing relatively well. Now we have four out of six billion doing pretty well while about two billion live on less than two dollars a day. So the pressure on food prices stems from that.
I am sure that work on food prices and the reduction of food subsidies are still the policies to advance agricultural development. This is something we all have to keep up. We are trying to do that in the UN. So I don’t think there should be any problem.
On climate change, it depends on the new agreements that will be negotiated two years from now in Copenhagen.
This will be the second phase of the Kyoto process which people around the world hope that developing countries, particularly China, will participate in.
The problem is how much will the big economies participate and how far are we going to take the so-called carbon-credit issue, which may be affected by the financial crisis. But the issue of reducing emissions will not be affected.
Regarding the Doha Round issue, this is ironic. In trade negotiations, people keep saying that we need some urgency to finish a round of talks.
When things were going well in the last couple of years with world trade expanding, people did not feel a sense of urgency. When we finished a round of talks in 1994-95, we were just coming out of a crisis.
So I am hoping this would be a blessing in disguise for the Doha Round to progress. People will feel a greater sense of urgency to keep the markets open.
Like I said about the 1997 Asian financial crisis, we came out of the crisis effectively and mainly because the markets were kept open. This time I hope the financial crisis will have positive effects on the Doha Round.
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