Deals of exclusion – dark prospects for reducing global inequality

By | January 17, 2017

The closer Donald Trump’s inauguration comes, the more fired up the language of all those asking for a global economy based on bilateral deals between the most privileged nations seems to become. There is no glossing over the problematic impact of an unfettered globalisation, dominated by those with the greatest bargaining power and to the detriment of those with the least voice. There are real issues to address in terms of the balance between private and public, social and economic gain, the protection of the interests of those with limited opportunities or a weak starting base, and the safeguarding of the environment. The current World Economic Forum is, as every year, rightly an opportunity to highlight the obscene wealth differentials between nations, and between individuals in the world. Oxfam’s ‘economy for the 99%’ report sets out the case for change.

Yet it also has to be acknowledged that the WEF has over the past years at least put the issues of climate change, global inequality, and development conspicuously on its agenda as a forum. This year the call for responsibility in the exercise of leadership and global governance for equitably shared benefit from the global business community is maybe stronger than ever before.

Yet at the same time major global political actors, China, Russia and now also most likely the USA with its soon to be new President pursue a course of stark national interest.  Smaller nations, and their people, are in for a bumpy ride as it is likely that deals will be prioritised that offer quick benefits to those most equipped to take advantage. Inevitably, preferential bilateral trade agreements will be concluded first between economies with greatest adaptive capacity, which connect well on grounds of culture, language, technological standards, regulation, consumer demand and lifestyles. Having a lot of cash at hand or global credit will be a major asset too.

In turn, building relationships with countries where market opportunities appear attractive, but which are fundamentally different, will be far more problematic. India’s cool response to Ms May’s visit shows that making such deals with different but powerful partners demands complex reciprocities beyond the exchange of goods, services and capital flow. Deals between parties of great difference in terms of strength of their economies risks the weaker parties being exposed to exploitation.

The real losers in a world of bilateral deals will be those who are in want of resources, education, and need access to opportunities at home and abroad to realise their potentials. These countries and people are important as it is their potentials that will be the foundation of a shared prosperous world economy in the future. Powerful nations falling back into the relationships that give preference to those who are like them, and already have assets, and exclude those who don’t have any, and are different, is not going to do much good to reducing global inequality. Yet global inequality remains one of the biggest threats to global macroeconomic and political stability. What is needed are regional and global agreements that are based on fairness and sustainable opportunities for those who today need solidarity and space to develop.

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