Neocon Fantasies of Empire Crushed: the New Global Reality

By Mark Engler, Foreign Policy in Focus. Posted April 21, 2009.

Today, the global economic downturn is giving new life to some of the institutions that did the most to create the crisis in the first place. Critics fear that the Obama administration might use these institutions to reassert U.S. hegemony, albeit in a subtler form. In doing so, Obama would no doubt look progressive in comparison to Bush. But liberal praise would be misplaced if the multilateral institutions he reanimates hold true to past practices.

At the G20 summit, the assembled leaders vowed to channel $750 billion or more through the IMF to support developing countries, tripling the institution’s resources. As the London Independent describes it, "If everyone honors their pledges, institutions that seemed on the verge of redundancy only a few years ago will soon find themselves awash with new cash and new responsibilities…. The Bush-era contempt for the UN and other multilateral forums is a thing of the past. At least for now.”

A positive interpretation of these events would hold that people and institutions change along with political conditions. "The Larry Summers of 2009 is not the Larry Summers of 1999," the argument goes -- positing that the former Treasury secretary, a leading corporate globalist in the Clinton years, will help to advance a far more progressive economic agenda within the altered circumstances that have allowed him to become Obama’s director of the National Economic Council. The IMF might optimistically be expected to undergo a similar rebirth. Although the Fund in the past worsened the Asian financial crisis by making countries cut spending and eliminate economic regulations, it will now be compelled to remake itself as an institution able to stimulate spending and distribute Keynesian largesse to those in need.

This view may not be entirely naïve. In advance of the G20 summit, British Prime Minister Gordon Brown explicitly delineated a break with former practices. "Too often," he acknowledged, "our responses to past crises have been inadequate or misdirected, promoting economic orthodoxies that we ourselves have not followed and that have condemned the world’s poorest to a deepening crisis of poverty." Brown went further at the G20 summit itself, flatly declaring, "the Washington consensus is over.”

The New York Times reported corresponding shifts within the IMF:

There are, however, many reasons to be suspicious. The IMF’s habit of imposing harmful conditionality is hardly ancient history. Bailout deals brokered over the past year with countries such as Hungary, Latvia, Romania, and Pakistan have called on recipient countries to drive up interest rates, reduce the wages and benefits of civil servants, or otherwise prevent their central governments from injecting money into their economies—the exact opposite of what any real "stimulus" plan would demand.

The G20’s embrace of the WTO was similarly problematic. Despite this institution’s history in promoting neoliberal deregulation, the G20 leaders committed to forging ahead with currently stalled negotiations there.

Commenting on the summit’s final declaration, trade lawyer Lori Wallach, director of Public Citizen's Global Trade Watch, argues that "One page of the communiqué identifies ‘major failures ... in financial regulation and supervision' as ‘fundamental causes of the crisis' ... while the next page reaffirms the leaders' commitment to concluding the WTO Doha Round negotiations that require further deregulation of finance."

The international financial institutions’ continued failures relate to their woefully undemocratic structures. At the IMF, reforms of recent years have made token overtures toward increasing the voting power of developing countries. However, the United States, with more than four times the voting shares of China and with sole veto power, is still firmly at the helm. There is little evidence to suggest that either the U.S. Treasury Department or the international financial institutions are capable of nurturing a truly democratic globalization.

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Mark Engler, a writer based in New York City, is a senior analyst with Foreign Policy In Focus and author of How to Rule the World: The Coming Battle Over the Global Economy (Nation Books, 2008). He can be reached via DemocracyUprising.com.

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