Learning from Bretton Woods

http://TheMonfortPlan.com

Jaime Pozuelo-Monfort is the multidisciplinary European and author of The Monfort Plan

The ongoing G20 meetings that started in November 2008 in Washington and continued with the G20 meetings of London (April 2009) and Pittsburgh (September 2010) have emphasized the necessity of moving ahead with the financial reform. In the reform agenda, there are other areas that were not incorporated, areas that are directly related with the origination and perpetuation of poverty.

Agriculture, trade and labour rights, small arms trade, the extractive and mining industries and the brain drain are, along the international financial architecture, the five areas that I identified as being behind the origination and perpetuation of extreme poverty. Any reform agenda that aims at bringing about prosperity to extremely poor countries must face the reality of reform, starting in Europe and North America.

When addressing the issue of whether or not a new economic architecture is needed, the first question raised should review if the Bretton Woods institutions are serving the purpose of poverty eradication. There are new venues that have not been explored by the Bretton Woods institutions, new instruments that could bring about innovation and creativity in the economic policymaking process.

The Bretton Woods institutions have left an empty gap in areas concerning microfinance, agriculture and the delivery of global public goods. There is a need as well as an opportunity for a new economic architecture to propose innovative policymaking in these areas following up from the work of some lucid minds such as Paul Collier, William Easterly and Robert Calderisi.

Unfortunately the value chain of the idea is broken apart because the political elites of Europe and North America continue to maintain a myopic status quo that perpetuates a user’s manual that defends the national interest based on a realist foreign policy agenda. We are in desperate need of new ideas but we are also in desperate need of daring policymakers that look beyond their national interest and start defending an agenda that emphasizes the global priorities.

A new economic architecture can learn from the lessons of the Bretton Woods architecture and the Marshall Plan. A new economic architecture should take off in a group of extreme poor countries that have previously shown a desire to be part of an ex-ante foreign aid conditionality scheme and have shown the ability to cooperate. Last but not least a low political risk and a high peace index would enhance the likelihood that the new architecture is successful.

The willingness to become part of an ex-ante foreign aid conditionality scheme is determined by the compliance with the Millennium Challenge Corporation of the United States (MCC). Out of the ten Subsaharan African countries that were MCC-compliant in 2009 (the eleventh African country was Morocco), five are members of ECOWAS (Benin, Burkina-Faso, Cape Verde, Ghana and Mali) and five are members of SADC (Lesotho, Madagascar, Mozambique, Namibia and Tanzania). Separately, both groups of five countries can be considered to have shown their willingness to cooperate on the economic and trade fronts. Both groups of five countries have also shown their willingness to be subject to ex-ante conditionality in foreign aid schemes. The five SADC countries outperform the five ECOWAS countries in both political risk and peace index.

Three of the five SADC countries rank among the top six of Subsaharan Africa’s most peaceful countries. The United States ranks right below Cameroon, which means that all five SADC countries are more peaceful than the United States. The southern cone of Africa with the exception of South Africa and Zimbabwe is the most peaceful geographic area in the world outside Western Europe and the southern cone of Latin America (Chile, Argentina and Uruguay).

Mozambique and Namibia fought wars against apartheid-backed movements, aligned their struggle, and secured support from outside parties in Angola and Tanzania. This political alignment has brought about a current political elite in the three countries that fought the apartheid regime on the same side. There is mutual understanding among the ruling political parties that not too long ago were, as well, armed Marxist guerrillas supported by Cuba and Scandinavia.

The political alignment is yet more wholistic if South Africa’s African National Congress (ANC) is added to the analysis. Mozambique’s FRELIMO or Namibia’s SWAPO have close ties with ANC that emerged from their common struggle against South Africa’s apartheid. FRELIMO and SWAPO are as a result considered former liberation movements. Other liberation movements include Angola’s MPLA, Tanzania’s Chama Cha Mapinduzi and Zimbabwe’s Zanu-PF. All liberation movements have dominated their respetive national politics since independence. A politics of supranational cooperation is more likely to take off among aligned political forces.