[AS PREPARED FOR DELIVERY]
Ladies and gentlemen,
It is a great pleasure for me to open this Special Session on the Global South Agenda for a Sustainable World. This session also serves to commemorate the 50th anniversary of the Non-Aligned Movement (NAM), which has played a crucial role in making the voice of the global South heard in multilateral fora since its foundation. UNCTAD, perhaps more than many other institutions, has a particular link with the movement as it was created precisely to give a voice to the concerns of the Global South in the world economy. To this day, UNCTAD strives to support the creation of a more development-oriented globalization. Of course, the global context has changed significantly in the last 50 years, and particularly in the last decade. Yet, as I will argue, some of the NAM´s basic concerns remain valid.
We are, as our Chinese friends say, facing "interesting times". Just a few years ago the discussions of sovereign debt crises, crony capitalism, lost decades, failed States, structural adjustments were exclusively focused on the developing world. This is no longer the case. Indeed, if anything the world has turned upside. As the advanced countries struggle to extricate themselves from the biggest debt-fuelled consumer boom in history, attention is focusing on the shifting of economic power and influence to the developing world, and in particular to the new growth opportunities provided by a group of emerging economies.
Many developing economies have weathered the current global crisis better than the leading industrial economies. This comes on top of a decade when the developing world grew, on average, at a much faster pace than the advanced economies, and during which South-South trade and investment flows have been on a strongly rising trend.
As a result, there is a growing belief that developing countries have finally decoupled their growth prospects from their developed country partners and are looking forward to closing longstanding economic and social gaps in the years ahead. Indeed, with the North facing a difficult period of adjustment, the emerging South has been proclaimed by some as the "new engine of global growth".
I do not intend to go through a lengthy data review with you this morning, other than to note that the rise of new growth poles in the South does herald a shift in the global economic and political landscape. China has already become the world´s second largest economy and its largest exporter, and India has now posted two decades of strong growth and is steadily climbing the export ladder. Growth in other large developing countries, such as Brazil and Indonesia, also picked up in the second half of the last decade. Trade and investment patterns have shifted accordingly with developing countries now undertaking more trade with each other than with their traditional Northern partners. These developments offer real grounds for optimism.
However, a degree of caution is also warranted. To date, this shift has been uneven, with large differences between developing regions and among individual countries; many of the least developed countries (LDCs) have seen the income gap between them and other developing countries widen further during the past two decades, suggesting polarization pressures that continue to shape global economic relations.
Moreover, many emerging markets remain much more dependent on the leading economies than the idea of decoupling sometimes suggests and are vulnerable to changes in policy and economic conditions in those economies. Indeed, the potential impact of the Northern debt crisis on developing countries will need to be monitored carefully.
Some observers have already gone much too far by talking about "the end of the third world" and a "league of networks" in a multipolar world to replaces traditional multilateral arrangements. There is a danger here of using ideas of decoupling, convergence and new global growth generators to take attention away from the fact that we continue to live in an interdependent world economy in which the advanced countries continue to hold the upper hand, where inequalities within and across countries remain huge and where basic development gaps, with respect to income, infrastructure and technology, are still to be addressed. In this respect, the emerging South is still a work in progress and new forms of cooperation and partnership will be needed to consolidate recent gains and meet the challenges ahead.
It is an interesting feature of the debate on the emerging South that the leading financial institutions in advanced countries have been in the vanguard of discussions. This is not a bad thing per se and these institutions certainly have a good deal of research capacity which could be usefully deployed in the examination of development challenges. However, their motivation is not developmental but driven by the need to meet the financial ambitions of their clients. Moreover, given their track record over the past decade we should be a little bit wary of their predictions and the policy advice they attach to them.
I am sure everyone here is familiar with the BRICs, a category invented by Goldman Sachs. We have pointed out in UNCTAD that these are four very different economies with different initial conditions and growth paths and very different impacts on neighbouring countries and the global economy. But to give you a more recent example of the confusion between development and financial interests, HSBC recently announced the discovery of a new set of emerging economies which it calls the CIVETS, which includes Colombia, Indonesia, Viet Nam, Egypt, Turkey and South Africa. It notes that these countries have a combined average growth rate of 5 per cent per annum, considerably faster than the advanced countries, and has already designed an investment fund linked to them. But this is classification is a pure statistical artefact with little meaningful economic content whatsoever and HSBC has made no attempt to examine the development challenges facing what is a very heterogenous group of economies.
What worries me when I look at these exercises in South-South analysis is that the policy conclusions they reach are very much the "business as usual" measures associated with finance-led globalization. In particular, the recommendations of rapid financial deregulation and liberalization along with tight macroeconomic policies are precisely those that created the imbalances, inequalities and instability that culminated in the recent financial crisis.
In UNCTAD we have been consistently suggesting a battery of policy measures and institutional reforms at the national and international levels to support rising living standards in developing countries, build their resilience to external shocks and help them pursue a balanced integration with the global economy. That challenge is less about "getting prices right" and more about "getting development right", through a pragmatic, proactive, and socially inclusive approach to macroeconomic, trade and industrial policies.
Since the crisis, finding the appropriate mixture of reflation, redistribution and regulatory measures to achieve these goals is now the urgent task of policy-makers, at the international as much as the national level. I have chosen the term development-led globalization (DLG) to describe the principles, priorities and policies that need to be pursued to turn tentative recovery into an inclusive and sustainable future.
Such a rebalancing agenda will require that developing countries are allowed the policy space needed to manage the interrelated challenges that they face. This is needed to allow governments, particularly but not only in developing countries, to correct market failures, promote collaboration among enterprises in areas of long-term investment, manage integration with the global economy and ensure the rewards from doing so are evenly shared. To do so, states must forge a coherent and inclusive developmental vision and build a strong compact with different interest groups to better manage the conflicts and trade-offs that change inevitably brings.
This requires a much more pragmatic approach to development policy than the business as usual approach dictated by financial markets. The traditional dichotomies of state vs market, inward vs outward, demand side vs supply side, etc are too crude to deal effectively with the complex challenges facing most developing countries. I have accordingly called for a much more integrated approach to policy making and also stressed the critical role of the developmental state in building balanced growth paths in an economy where the mobilization and allocation of resources must also rely heavily on market forces.
From this perspective the idea that the South has ´decoupled´ from the North is neither particularly accurate nor very helpful for advancing an inclusive and sustainable South-South agenda. It is a very mechanical extrapolation of the South´s performance during the last decade with a tendency to ignore the favourable but unsustainable global conditions that underpinned that performance as well as the varied performance among emerging economies and the serious vulnerabilities many still face.
Even the largest emerging economies have continued to depend heavily on the advanced economies in some key areas, with a good deal of the South´s rising share of global output and trade depending on a debt-driven boom in the advanced countries which has now come to an end. As a result, parts of the South could be very vulnerable to changes in economic policy and conditions in the advanced countries.
Consequently, if we are to advance the South-South agenda we must continue to look at both the growth opportunities but also at the vulnerabilities that accompany the closer economic ties among developing countries. In this sense, we need to use the ongoing financial crisis to raise the question, posed by Sir Arthur Lewis more than thirty years ago in his Nobel lecture, of not whether but how the South can continue to grow as a sufficiently fast pace when its traditional markets in the North are set for a sharp downturn.
Lewis was clearly aware that simply extending the agenda of liberalisation and deregulation to the interactions among the countries of the South was not the right basis for South-South cooperation. Not surprisingly, this is an approach with which UNCTAD strongly concurs. What is needed is a more pragmatic and strategic approach to cooperation among developing countries.
In this respect, I have been arguing that we should, in particular, pay much greater attention to how regional arrangements can help rebalance the global economy in more inclusive and sustainable ways. This has already been receiving increasing attention in the area of finance where developing regions have begun to explore new arrangements to better deal with shocks and to coordinate policies. But the regional agenda goes beyond that. Asian efforts at regional integration, for example, are being pursued under formats that point in the direction of what UNCTAD calls developmental regionalism, including development cooperation in sector-specific areas and in joint management of regional public goods like transportation, environment, water, etc. In Latin America, the MERCUSOR agenda is evolving in a similar direction through what is being called closer "productive integration".
An emphasis on developmental regionalism should help focus more strongly on the challenges of building productive capacities, including with the support of strategic trade and industrial policies, and active financial, labour market and macroeconomic policies, which aim at expanding and diversifying trade amongst developing countries by combining measures to cut trade barriers with efforts to accelerate industrialization.
We have explored some of these issues in our latest Least Developed Country Report and I very much hope that some of these ideas will be further addressed in today´s deliberations.
I wish you all a very fruitful and interesting day´s discussions.