You can sometimes deceive some people.
But you can’t fool everyone all the time.
Bob Marley / Peter Tosh, get up

Bob Marley died on May 11, 1981 a few months after Ronald Reagan became President of the United States. Marley, the Southern countries’ first true superstar, was both a musical innovator, as his canon remains immensely popular, and a champion for the rights of the oppressed and those abused everywhere.

Reagan, once a shill paid for American businesses, also claimed to speak on behalf of those suffering under the heavy hand of the state. His “new start“Would, he promised, roll back” unnecessary and excessive government growth. ” That same year, Reagan dashed the hopes of developing country governments for a better say in world affairs and instead called on them to “”liberate people by creating incentives to work, save, invest and succeed”.

The trajectory of multilateralism and the “New Deal”

Multilateralism had arrived four decades earlier, in 1941, with an Atlantic Charter signed by the United States and the United Kingdom, launching a united front against fascism and promising “A better future for the world”. But the post-war order, the foundations of which were laid at the Bretton Woods conference in 1944, never lived up to Franklin Roosevelt’s ambition to internationalize his New Deal.

The push against his New Deal by American companies had begun even before Roosevelt’s death in April 1945, and the desire of Secretary of the Treasury Morgenthau, host at Bretton Woods, to lead “the usurers of the temple of international financeAnd putting capital at the service of “general welfare” has only been partially satisfied.

Yet what emerged from Bretton Woods advanced the cause of building a more inclusive global economic system. In this results-oriented order, economic relations would tilt towards the goals of full employment, the welfare state and decolonization. And while growth in advanced economies has reached historic highs over the next 25 years, progress has been made on all fronts.

But as the countries the United States had helped recover from the world war hit their stride, a growing current account deficit exposed the tension between ensuring international financial stability while ensuring economic prosperity for the country.

In response, Richard Nixon dropped the old, suspending the link between the dollar and gold in 1971, and disrupting the system of fixed exchange rates. The resulting instability in international markets has only worsened growing distribution struggles. Rising prices and rising unemployment seemed to discredit Keynesian growth strategies.

Developing countries saw an opportunity to complete what the The New Deal internationalists had started using the weight of numbers at the United Nations to rebalance the global economy in support of their own needs and ambitions. With the resumption of growth in the countries of the South, thanks to the rise in the prices of raw materials and an inflow of cheap capital from recycled petrodollars, the hope of a new international economic order were high.

A period of gloom

The political pendulum in the United States was, however, turning towards organized capital. The draconian interest rate hikes by Federal Reserve Chairman Paul Volcker not only pushed inflation out of the system, but has also profoundly changed the balance of power in the world’s largest economy and beyond.

A sharp rise in borrowing costs has stifled access to credit, leading to a contraction in construction and manufacturing. In the recession that followed, unemployment skyrocketed, erasing the bargaining power of workers. With double-digit interest rates, a “managed disintegration of the international order” also paved the way for a renewed role for the dollar, with Wall Street bankers eyeing new profit opportunities in global markets.

A tidal wave of unpayable debt, the refinancing of which Volker had made prohibitive, swept across the South from Mexico’s 1982 default. the Washington consensus opening up the market, in the hope that international financial support would keep them solvent. A lost economic decade regular; discussions on overhauling global economic governance have faded.

In the meantime, another multilateral order was emerging, focused more on rules than on results, through institutions like the new World Trade Organization, and in accordance with the triumphant forces of hyperglobalization. Loose capital was again “on the lookout for ever cheaper sources of labor”. Its predatory instincts stalked both heavily indebted governments and cash-strapped households, but also preyed on small businesses with digestible assets.

Reagan’s promise of a fresh start had turned into a rentier economy “the winner takes everything”. Productive investment stagnated as financial markets focused on short-term returns and large corporations spent their growing profits on share buybacks, dividend payments and excessive executive salaries. When growth picked up, it came about through credit-fueled speculative booms, with gains skewed toward those at the top, while those at the bottom bore the costs of the collapse that inevitably followed.

It all ended in spectacular fashion in 2008 with unprecedented bailouts from over-indebted banks that had grown too big to fail. Reforms promised but quickly abandoned in the face of resistance from powerful financial interests and the lingering confidence of policymakers in the efficiency of markets. A mix of austerity and cheap money allowed financial markets to recover, but recorded the slowest decade of global growth since the end of World War II.

Towards a resilient future

Four decades of misplaced trust in markets shaped by entrenched interests have taken their toll on working populations in advanced and developing economies. But the Covid-19 crisis has forced Reagan’s successors to abandon inherited dogmas and use the power of their purse to provide relief and revive the recovery.

With climate catastrophe looming, there is hope that a more resilient future will follow. But, so far, the developing world, facing another lost decade, has been left on its own, deprived of vaccines to fight a dangerous mutating virus, and its fiscal space constrained by global contraction and crisis. sea ​​of ​​unpayable debts.

Marley begged us not to give up the fight, to believe in the cause and take the blows that inevitably follow. It will take no less to build a truly inclusive and resilient international economic order.

Richard Kozul-Wright is the Director of the Division for Globalization and Development Strategy, UNCTAD, Geneva.

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