General Disequilibrium
Opinion | India, two anniversaries and a geopolitical kerfuffle
India has a large stake in the global economic order and the way it shapes up over the next 75 years
This is decidedly a strange but momentous week. Two significant anniversaries and one geopolitical incident have collided in the most remarkable manner, highlighting the resurfacing of some old fault lines. India figures in all these manifestations but only as a background player, important yet not taken seriously.
The geopolitical incident first. The seizure of an Iran oil tanker off the Gibraltar coast on 4 July has resulted in Iran capturing a British-flagged oil tanker on 19 July in the Strait of Hormuz. This is the latest provocation in the slow-burn conflict between the US and Iran, ever since President Donald Trump decided to pull out of the nuclear deal. With the 2020 US presidential elections approaching, and Trump likely to make a re-election bid, expect some more global muscle flexing. It also helps to have the support of allies such as the UK, which is trying to make up for its recent diplomatic embarrassments.
Hopefully, things won’t escalate and get out of hand. This becomes manifestly relevant with one of the anniversaries: the world celebrated 50 years of Apollo-11 landing on the moon last week. It was a landmark achievement for humanity and for science. It also marked a significant milestone in the race for space domination between the US and the former Soviet Union, which led to the intensification of the Cold War till its demisein 1989. The confrontation in Iran, juxtaposed against the moon-landing anniversary and Trump’s intensifying rant against imagined global enemies (or fellow lawmakers) as 2020 approaches, is a distinct risk event for the global economy. Which brings us to the other anniversary: the Bretton Woods conference 75 years ago, which ran between 1 and 22 July 1944. With the war still raging in Europe and elsewhere, 730 delegates from 44 countries sat around a table in Mount Washington Hotel, Bretton Woods (New Hampshire, US), to discuss a global economic order that would bring ever-lasting peace and prosperity. Economic and political historians have long laboured over the conference’s transcripts and documents, the contentious agreement that was hammered down at the edges and sold to competing nations, and its afterlife that has seen multiple mutations.
The Bretton Woods economic system and its institutions—the International Monetary Fund (IMF) and World Bank—have played an over-sized role in fostering growth, bringing in a period of multilateralism and a rules-based economic order. Yet, it is a system with inherent shortcomings; it created a global caste system by endowing rich countries—many of them former colonial powers—with a dominant role while denying emerging and poor nations chairs at the high table. The commemorative event to mark the passing of 75 years was also fittingly celebrated by the exclusive Group of Seven (G7) club that comprises Canada, France, Germany, Italy, Japan, the UK and US.
In their speeches, both François Villeroy de Galhau, governor of Banque de France, and David Lipton, IMF’s acting managing director, discuss the challenges that the system must countenance to survive the next 75 years. Yet, both their perorations have a huge gap: they refuse to acknowledge the structure’s innate inequality. Lipton even supports the current unequal quota system, over the one-nation-one-vote system, on the grounds that it “allows governance to adjust to the rising prominence, interests, and responsibilities of fast-growing members”. He does admit that the Fund’s governance system must keep pace with the global economic changes, but all changes must be done through the quota system. Remarks by the US Federal Reserve System chairman Jerome H. Powell focus exclusively on the US monetary policy in the post-crisis era and he concludes by saying: “Tonight let us…strive so that our vision for the future of the global economic and financial system proves as durable and as effective.” The operative word is “our”, appropriating responsibility for the world and its well-being. Ironically, though, there is no mention of, or owning up of responsibility for, the US’s role in the financial crisis and how it has brought the global economic order to its knees.
So, where does India figure in all this?
First, in the geopolitical fuse lit by Trump, the crews of both detained ships have a sizeable component of Indian mariners. There is little mention of what is being done to free these innocent men caught in a crossfire. Will India use its diplomatic clout for them?
But, more importantly, India has a large stake in the global economic order and the way it shapes up over the next 75 years. Admittedly, it has not worked particularly well for India or for other emerging nations. In a recent article, historian Srinath Raghavan highlights how the power play between the US and Britain at Bretton Woods ignored everybody else, including India’s requirements. Even Benn Steil’s book, The Battle Of Bretton Woods, reveals how the conference was actually Franklin D. Roosevelt’s veiled attempt at geopolitical domination, sensing Britain’s economic frailty. The G7 will not give up on that easily. India’s task in the global economic order and its multilateral institutions, including the World Trade Organization, is cut out.
India is now attempting to send a mission to the moon, 50 years after the first lunar touchdown by humans. There is, apparently, a Moorish proverb which seems apt for the occasion: If you have the moon, ignore the stars.
Rajrishi Singhal is consulting editor of Mint. His Twitter handle is @rajrishisinghal
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First Published:22 Jul 2019, 12:24 AM IST
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