International Institutions in a structural crisis

Opinion article by: Carolina Herrera Cano* (caroherca@gmail.com)
International Business student at Universidad EAFIT

The development concept is one that has drastically changed through the years, different social movements and regulations have shaped its meaning and the way in which governments act in its favor. Raúl Prebisch, founder Secretary General to the UNCTAD defined a structural crisis the global economy was facing in 1981 as a result from the accelerated growth in production that created inequality, poverty, and pollution (Prebisch, 1981). The political and economic scenario has changed since the Cold War period, as the bipolar balance of power was reconsidered, but even if some of the development dynamics remain: the disadvantaged conditions of developing countries (what he calls periphery), and its contrast with the levels of consumption in developed nations suggests the existence of a structural crisis, the emergence of some international actors that are modifying how the global system functions is undeniable.

The context of the 2008 Great Recession is an evidence of this structural problem, the market imperfections that created the financial and economic crisis were described by Prebisch about twenty years before the depression: “Two centuries of belief in the regulatory virtues of the forces of the market have caused us to lose sight of the ethics of development...” (Prebisch, 1981, 568). But as it was mentioned before, there are some actors that have become more important no matter the system stagnation. This is the case of the international institutions that respond to the need of collective decision construction at the national and international levels, also proposed by Raúl Prebisch (Prebisch, 1981).

The emergence of international organisms has created an institutional framework legitimated by different countries because of its capacity for action. The role of the WTO (founded in 1995) is an evidence of this trend, in its Report of the Panel on Defining the Future of Trade convened by Pascal Lamy, Director-General, it is highlighted “the role of trade in contributing to sustainable development, growth, jobs and poverty alleviation”(WTO, 2013). And it also agrees with Prebisch’s proposal: “the challenge is to construct coherent national and international policy frameworks that deliver inclusive growth” (Prebisch, 1981).

At a national level, Colombian government has lately organized its development agenda in an international basis. Last month the OECD Council accepted the roadmap for the accession of Colombia to the OECD Convention; this organism promotes good practices towards a better society, and has evaluated Colombia in areas of health, education, environment, trade, investment and fight against corruption (Correa C, 2013). This is a great possibility for Colombia to be part of those international actors that seek a better global system. Despite the criticism about the actual effectiveness of these organisms, it is important to highlight the increasing power they are gaining in the global context, the gap between developed and developing countries is truly a structural problem, but a joint development agenda is an effort to increase possibilities for the least developed nations.

References

Correa C, J. (2013). En un mes comienza la adhesión de Colombia a Ocde. Available in: http://www.portafolio.co/economia/adhesion-colombia-la-ocde. [October 10th, 2013].

Presbisch, R. (1981). Raúl Presbisch on Latin American development. On Population and Development Review, 7, 3, 563-568.

World Trade Organization. (2013). The future of trade: The Challenges of Convergence, Report of the Panel on Defining the Future of Trade. Geneva: OMC.

The impact of trade on development

Opinion article by: Manuela Ramírez Cárdenas (mramir67@eafit.edu.co) *
International Business and Political Science Student at Universidad EAFIT, Colombia

After the Director-General of the WTO, Pascal Lamy, suggested at the organization’s 8th Ministerial Conference in 2011 the importance of the discussion of the world economy and trade related issues by the WTO and members of the multilateral trade system, the Panel on Defining the Future of Trade was created in 2012.

The panel met officially three times and held several meeting with different stakeholders to discuss issues such as the transformations of the world economy, the challenges of global trade opening during the 21st century, trade patterns, the current and future drivers of trade, and how trade can contribute to economic growth, sustainable development, poverty relief and job creation. The report of the panel titled The Future of Trade: The Challenges of Convergence was published earlier in 2013..

There are several aspects that are important to highlight about this report. The first one is that trade is without a doubt a positive practice that if implemented well can lead to growth, sustainable development, cooperation among states, and can have a direct positive impact on civil society. However, there is also the indisputable fact that some developing countries, since the opening of trade, have been negatively impacted and the gap of inequality between the rich and the poor grows wider every day.

The root of that problem is not trade itself; it is the fact that some developing countries lack certain conditions that are fundamental if a country wants to take advantage of the benefits of trade, among them: infrastructure, an educated population that can adapt to the changes and needs of the labor market, access to electricity, etc. Also, these countries face several local challenges, the first being that in most cases the local economy and industry is often precarious, and when faced with competitors that have a strong economic and productive system, then the outcome will unsurprisingly be negative. Additionally, some of these countries are plagued by corruption and governments that apply short-term policies that won´t be efficient in the long-term.

In the global scenario of open trade, the actions of governments become fundamental for a country that seeks to take advantage of the benefits offered by the multilateral trade system. Governments must create long term policies (perhaps adapt strategies that have been successful for other countries) that will allow them to create capacity building, educational opportunities, job creation, infrastructure, but most importantly they must implement policies that will allow them to develop locally first, so they can eventually become competitive in the global market and hopefully alleviate poverty and improve the living standards of the civil society.

Reference:

World Trade Organization. (2013). The Future of Trade: The Challenges of Convergence. Report of the Panel on Defining the Future of Trade.