Towards a different economic order: A vision from the South

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Diego Borja

May, 2024
MUSIC:
The deglobalisation process has been evolving on its own for some time. It was aggravated first by the COVID-19 pandemic in 2020 and then by the West’s confrontation with Russia. These recent events accelerated regional consolidation dynamics in the region commonly referred to as the Global South, not only economically but also commercially and financially.

As a matter of fact, it is the overall supply of products and resources, as well as financial exchanges between countries around the world, is being transformed. The emergence of new forms of South-South trade, the shaping of differentiated responsibilities with the world’s most industrialised nations in how to address and mitigate the climate crisis, and the shift towards nationalisation of industries and resournces are some of the demands of emerging countries now reshaping the global landscape. In this article we will analyse the implications and potential outcomes of these developments.


The International Financial Architecture: A Sword of Damocles Over the Global South?

The global financial architecture, based on the post-World War II Bretton Woods institutions, continues to loom like a Sword of Damocles over the countries of the Global South. These institutions perpetuate a form of neocolonial domination over the world’s least developed countries, urging them to adopt policies that favour extractivism and hinder technological advancement. Exploiting the oligarchic and exclusionary economic structures of these countries of the South, the Bretton Woods system enforces economically detrimental policies that further exacerbate the vulnerabilities of these nations.

Photo_ Serge Saint_ CC BY 2.0

A case in point is Argentina, which has suffered significantly under neoliberal stabilisation and adjustment policies overseen—and sometimes mandated—by the International Monetary Fund (IMF). These policies, which could aptly be described as destructive, have not only devastated societal cohesion and the nation’s productive fabric but also undermined its institutional and financial systems. They are life-destroying policies with severe ecological implications as well.

Indeed, when addressing the shared challenge posed by the climate crisis, it is crucial not to overlook the injustices perpetrated by the international financial system in itself. The stark income disparities between the Global North and South, the persistent levels of exclusion in the South in the 21st century and the global inequality, undergoing a substantial deepening since the 2020 pandemic, these factors all constitute a crucial backdrop to the environmental crisis. In a world marked by significant disparities in access to health, education and security—among other fundamental rights—between the least and most industrialised nations, responsibilities must be appropriately assigned.

Although the challenge of preventing the destruction of humanity due to global warming is one shared by the whole world, the responsibilities of more industrialised nations must be different from those of their less industrialised counterparts. It is grossly unacceptable that the oil extraction activities in a developing country like Ecuador (which has not achieved a development level comparable to any industrialised nation and where substantial population groups still live below the poverty line) should be held to the same standards as the those of major powers like the United States, China or Western Europe, for instance

It is unlikely that the US will dispose of its influence in Latin America now we are witnessing a still-veiled war over lithium.

Therefore, it is crucial to advocate for “shared but differentiated responsibilities” in addressing the civilisational challenge of the climate crisis. While undeniably a global challenge that demands collective action and global decision-making, the climate crisis also highlights stark differences in immediate responsibilities.


The Geopolitics of Latin America: Between Anti-Sovereign Rightists and Neo-Colonialism

It is essential to keep global asymmetries and imbalances into sight when holding the countries of the world accountable, but also because the Global South remains a geopolitical prize for many world powers, still undeniably marked by neocolonial dynamics.

Contrary to appearances, when comparing our times with other recent historical periods, the United States has not neglected Latin America. While US foreign policy towards what it considers its “backyard” was more overt in the twentieth century, the US still has significant direct interests in the Latin American region. These interests became evident in the recent political and economic developments in countries such as Bolivia, Argentina and Chile. The most illustrative example may be Bolivia, where, following the 2019 coup that ousted the indigenous-populist government of Evo Morales, it became apparent that the US had a vested interest in a vital raw material essential for numerous industrial processes: lithium. We are unlikely to see the US relinquish its influence over a region that holds more than half of the world’s total deposits of lithium, a highly coveted mineral. [1][1] U.S. Geological Survey, 2023, Mineral commodity summaries 2023: U.S. Geological Survey, 210 p. Available here: https://doi.org/10.3133/mcs2023 Much like the 20th and early 21st centuries were marked by wars in various parts of the world over oil, today, we are witnessing a somewhat covert war over lithium. This conflict manifests throughout the globe, but is particularly acute in Latin America. The geopolitics of commodities continues to impact our continent profoundly.

The US’s shadow still looms large over Latin America’s natural resources and key geostrategic locations, even in the most remote sectors. This presence occasionally results in conflicts of interest with the European Union (EU). The recent electoral victory of Javier Milei in Argentina, who represents a distinctly anti-sovereign and nationalist right-wing ideology, illustrates this point clearly. In early April 2024, he announced plans for constructing a joint naval base with the US in Argentine Patagonia. [2][2] “Milei anuncia una ‘base naval conjunta’ con Estados Unidos en la Patagonia argentina”, El País [“Milei announces a ‘joint naval base’ with the United States in Argentinean Patagonia”], 5 April 2024. Available here: https://elpais.com/argentina/2024-04-05/milei-anuncia-una-base-naval-conjunta-con-estados-unidos-en-la-patagonia-argentina.html The image of President Milei in military attire in Ushuaia, the southernmost tip of the American continent, alongside the head of the US Southern Command, poses a challenge to British interests in the Antarctic region, where Britain has historically exerted an influence reminiscent of a bygone era, through its control of the Falkland Islands. This neocolonial stance that the United Kingdom continues exerting over the Falkland Islands not only creates a conflict of sovereignty with and within Argentina, but also affects the control dynamics of oil and gas resources in Antarctica, setting the stage for tensions between a European power and the United States.

The neo-colonial stance that the UK continues to exercise over the Falklands creates a sovereignty problem for Argentina but also determines who controls the oil and gas resources that lay in Antarctica.

Geopolitics in Latin America remains not only highly relevant today but also has global implications and ramifications. Furthermore, these geopolitical interests continue to disrupt the forms of integration and joint articulation among Latin American countries. Many of the region’s political failures are incomprehensible without acknowledging the persistent influence of US neocolonial policies on the continent.


Beyond the Dollar: Regional Integration and Alternative Exchanges

US interference has been a major obstacle to political integration in Latin America, compounded by the ideological differences among various governments in the region that have emerged in recent years. The integration process, involving multiple countries, states and governments, faces inherent political disparities. Despite sharing common histories, cultures and languages, the political landscape within the Latin American region was and is distinctly polarised, as evidenced by the alternating reactionary and progressive cycles that shift regional hegemony after each electoral contest.

Nevertheless, these political differences should not be seen as insurmountable barriers to integration. Consensus can be forged on common agendas, such as the protection and sovereignty of natural resources or the necessity for economic and financial integration. For instance, all Latin American countries face economic challenges related to the dollar. This represented a crucial vector for integration in the first decade of the 21st century.

At the turn of the century, Latin America began discussions on the commercialisation of natural resources using national currencies, exploring ways to move away from the dollar not just as a medium of trade but also as a store of value. Financial strategies to make these alternative marketing arrangements viable started to be developed. Trade exchange processes in national currencies became highly significant, equivalent in importance to those in dollars because they marked the beginning of discussions on the nationalisation of resources or strategic sectors.

However, these efforts towards trade and economic integration in Latin America were interrupted by the emergence of a new wave of neoliberalism in 2015. These initiatives encountered the ideological divide between countries that embraced progressive governments and spearheaded changes in the first decade of the 21st century and those that adhered to Washington’s directives and the neoliberal agenda.

The New Development Bank faces the enormous challenge of financing its members in national currencies so that it does not become vulnerable to US dollar domination.

Still, political hegemony in Latin America retains a distinctively cyclical characters, and with the recent rise of progressive forces in several countries in the region, discussions about alternative, non-dollar exchange mechanisms have been revived.

During the interim between these cycles, other regions, such as Asia, began to explore similar questions regarding currency use in trade. Both within the BRICS group (Brazil, Russia, India, China and South Africa) and through bilateral relationships—such as Russia-China, China-India, & India-South Africa—nations that are culturally and socio-economically distinct from those in Latin America have begun to discuss, and are now implementing, the same forms of national currency exchange that first emerged in Latin America at the start of the 21st century. These alternative economic exchanges are proving to be a crucial element not only for the previously frustrated political integration in Latin America but also for nascent integration efforts in Asia.

The political conversation initiated by Latin America in regards to the importance of creating a more uniform region and collaboratively addressing common challenges has found echoes in other parts of the world. In the realm of development finance, the BRICS nations established the New Development Bank, while Latin America has recently initiated the Bank of the South. The New Development Bank, which is already operational, faces the substantial challenge of financing its members in domestic currencies to avoid dependency on the dollar and to find clearing mechanisms independent of the SWIFT system’s control.

This initiative exemplifies how Latin America’s historical efforts of integration serve as a model for other regions of the world to emulate and enhance. The Latin American experience demonstrates the feasibility of what might once have seemed utopian. Furthermore, Latin America is adopting advancements and experiences from other regions. In essence, this represents a dynamic process of mutual learning among various regions within the Global South, centred around a common agenda that transcends political differences.

It is an inspiring collective resolve among the Global South to see ourselves as countries and regions with shared interests amid the evolving shifts in global power structures.

Photo_ Serge Saint_ CC BY 2.0

Insecurity and Tax Havens: The Political Economy of Drug Trafficking

An essential item on the Global South’s agenda, amidst the shift towards multipolarity, must be financial regulation. Much is said about the growing public insecurity in most countries around the world, yet it is seldom acknowledged that this increase in crime and delinquency is largely related to the world’s tolerance when it comes to so-called tax havens. Hegemonic powers have not only tolerated but also used tax havens, integrating them into the global financial power structure.

The distinction between legal and illegal activities becomes meaningless in systems that allow illegal transactions to be filtered, laundered and processed. Money laundering epitomises this issue: profits from entirely unethical activities—such as human, organ, arms or drug trafficking—are legitimised through the laundering systems of permissive countries.

The hegemonic powers have not just tolerated tax havens; they have used them, making them operational within the global financial power structure.

The existence of tax havens and other forms of money laundering across various socio-economic and territorial areas today is intimately linked to the increase in marginalisation and insecurity. These socio-economic spaces, which tolerate illicit activities, finance further illicit activities in more affluent socio-economic areas, creating a vast network that becomes a political economy of its own, favouring criminal endeavours.

In Ecuador, a small yet highly polarised country with an annual Gross Domestic Product (GDP) of approximately 120 billion dollars, it is estimated that 4% of the GDP is laundered through the national financial system. [3][3] CELAG (2023), Cuánto dinero se lava en el sistema financiero ecuatoriano. Una aproximación desde las cifras macroeconómicas. [How much money is laundered in the Ecuadorian financial system. An approximation from macroeconomic figures] Available here: https://www.celag.org/cuanto-dinero-se-lava-en-el-sistema-financiero-ecuatoriano-una-aproximacion-desde-las-cifras-macroeconomicas/ This laundering contributes significantly to the financing of illicit activities that have sharply increased citizen insecurity. A few years ago, when President Rafael Correa left office, we had a homicide rate of five per 100,000 inhabitants. Just six years later, we have almost 40 homicides per 100,000 inhabitants. [4][4] Observatorio Ecuatoriano de Crimen Organizado (OECO) (2023). Boletín semestral de homicidios intencionales en Ecuador, Enero-junio de 2023. [Ecuadorian Observatory of Organized Crime (OECO) (2023). Semi-annual Bulletin of Intentional Homicides in Ecuador, January-June 2023] Available here: https://oeco.padf.org/boletin-homicidios-intencionales-ecuador/

This stark example vividly illustrates the clear and somewhat hypocritical relationship between insecurity and the global tolerance of illicit financial activities. The significant power groups associated with banking and major export businesses, traditionally linked to these illicit activities, exacerbate the problem by enabling the proliferation of money laundering. The persistence of this social degradation, whether in Ecuador or any other country where financial deregulation creates a conducive environment for trafficking and criminal enterprises, will continue unless decisive actions are taken to directly confront tax havens and the extensive money laundering systems they support.


Conclusions

Inequality, marginalisation and the emergence of illegal economies expose some of the most severe problems persisting into the 21st century, such as modern slavery, human & organ trafficking, which represent formidable challenges that any agenda for genuine transformation must address.

The rise of the Global South is indisputable, not only de facto but also legally.
However, there are also reasons for optimism. The increasingly evident consolidation of multipolarity amid the current trend towards deglobalisation is a positive sign. The Global South is making strides not only de-facto but also legally, with initiatives within the BRICS, the G77 and the Association of Southeast Asian Nations (ASEAN) contributing to a more balanced global scenario.

Emerging countries’ readiness and openness to discuss the nationalisation and strategic control by societies and states over their critical resources mark a significant shift in the international economic order.

Likewise, the approach to the climate crisis is evolving, driven not only by the imperative of increasingly visible environmental impacts but also by the Global South’s refusal to accept the same responsibilities as more industrialised countries in curbing global warming.

This critical reassessment of both the international financial order and the global management of common challenges could reshape the neocolonial relationships that the world’s most developed countries still maintain with regions like Latin America.

The Global South appears to be designing its own agenda, independent of the geopolitical oversight of major powers; though not devoid of sovereignty conflicts, it is poised to embrace regional integration.

Such integration will likely be economic rather than political, encountering ideological obstacles that have disrupted similar endeavours in the past. But today’s efforts represent the promise of a fairer world, characterised by a more equitable distribution of power.

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