The New Global Crisis Requires A Major Revamping of the Global Power Structure

If the 1990s and the first eight years of the first decade of the 21st Century represented an era when transnational terrorism dominated world attention, the remainder of this decade and the next one promise to be a period of a new global crisis, which might be even more obdurate than fighting global terrorism.  Robert Zoelick, President of the World Bank, described this era as marked by the “double-jeopardy of food and fuel prices,” which will defy solution.  These issues will also make a number of countries of Asia, Africa, and Latin America favorite places for the mushrooming of drug cartels, transnational crimes, small arms trade, and even terrorism.  The search for solutions for this new crisis might require a radical reconfiguring of global decisionmaking structures, an issue on which major powers must reflect with utmost seriousness.


Dominique Strauss-Kahn, Managing Director of the International Monetary Fund (IMF), defined the rising global crisis most presciently when he stated, “If agricultural commodities prices continue to rise, even if oil prices remain stable, ‘some governments will no longer be able to feed their people and at the same time maintain stability in their economies.'”  World leaders are beginning to study this newly escalating threat from the perspectives of its impact on global economic and political stability.  The quest is for solutions before a number of countries–including Pakistan and Indonesia–reach a “tipping point.”  Pakistan is a place where the fight between forces of order and chaos is continuing with much ferocity; and Indonesia is where the fledgling democracy–if continued to progress unperturbedly–holds a huge promise of stability and order.


Another sign of the approaching vexing time is apparent in the accelerating spirals of inflation in Asia, which remains the home to “two-thirds of the world’s poor,” and where “protests over soaring prices are threatening to weaken further governments that are struggling to contain unrest, such as ethnic tensions in Malaysia and protests over beef imports in South Korea.”  Inflation in Thailand is around 8.9 percent; consumer prices in South Korea are 5.5 percent higher than a year ago; while inflation in Kazakhstan is around 20 percent; and Sri Lanka is around 28.2 percent.


As oil prices continue to spiral, OPEC states have called for a “solution,” which would include a systematic examination of the role of speculators as well as that of the consuming nations.  However, there have not been any serious attempts on the part of major oil consumers to look into the matter at this point. 


A major source of uncertainty is the widely divergent expectations from OPEC and from the Western institutions that specialize in the future modalities of energy supply and demand regarding the future of energy markets.  OPEC states are of the view that, as a result of major conservation measures that are already being implemented in the industrialized countries, demands for oil and gas will drop sharply in the coming years.  That was why Saudi Arabia did not want to expand its production capacity beyond 12.5 million bbl/d.  The oil states are also unsure how much a variable the biofuels use is likely to be in the global figures of supply and demand.  The Energy Information Administration of the United States is predicting a doubling in the use of biofuels from 2010 to 2030.  Qatar assigns considerable significance to such forecasts, and has postponed expansion of its oil and gas production for now.


The intensification of global economic problems necessitates the emergence of an economic super-structure of nations that can develop serious plans of attack.  We have to move away from the archaic frame of mind that forces us to think that the lone superpower or even a group of major industrial countries (the G-8) alone should play an inordinately significant role in the management of global economic affairs or in finding solutions to current crises.  


Similarly, we have to think seriously about a radical restructuring of the institutions of world governance that were created in the aftermath of World War II.  Those entities are known more for ineffectiveness than for their timely and efficient performance.  As the recent issue of the Economist noted:

The G8 is not the only global club that looks old and impotent. The UN Security Council has told Iran to stop enriching uranium, without much effect. The nuclear non-proliferation regime is in tatters. The International Monetary Fund (IMF), the fireman in previous financial crises, has been a bystander during the credit crunch. The World Trade Organization’s Doha round is stuck. Of course, some bodies, such as the venerable Bank for International Settlements, still do a fine job. But as global problems proliferate and information whips round the world ever faster, the organisational response looks ever shabbier, slower and feebler. The world’s governing bodies need to change.

The winds of change aimed at bringing about iconoclastic changes are accelerating their pace, however.  Today’s powers-that-be–i.e., the five permanent members of the UNSC and members of the G-7 plus Russia, that are referred to as the G-8–are not about to give up their privileged status stemming from membership of that institution and grouping.  Still, some noteworthy progress has been made in the form of the “Heiligendamm summit between the members of the G-8 and the G-5 (Group of five comprised of China, India, Brazil, South Africa, and Mexico).  However, there is little hope that the agenda-promosted G-5 will have much air time during the G-8 summit meeting in Japan on July 7-9, 2008.

Japan is not interested in giving high visibility to the G-5 countries for fear of enhancing the status of China, which is more eligible to be a member of the G-8 than most of its current members.  The Sino-Japanese regional rivalry is the driving force against Japan’s resolve of not only denyng China its legitimate visibility, but also disallowing it a permanent membership in the G-8.  It should also be noted that the PRC has adopted a similar behavior about ensuring that India does not become a permanent member of the UNSC, of which China is a permanent member.

The Helligendamm agenda of the G-5 countries resembes the one promoted by the developing countries in the 1970s under the rubric of the “new international economic order.”  Because it was  perceived as a threat to the privileged status of the industrialized nations at a time when OPEC states were also accumulating “petrodollars” related to intermittent escalations in the prices of oil, it  was not given any serious consideration.  Even though the Helligendamm agenda of the G-5 is somewhat similar to the NIEO agenda of the 1970s, it is not perceived as an ominous one by the G-8 states. 

The G-5 countries want transfer of technology from the developed to the developing countries.  They are promoting the development of an equitable solution to global warming–which is seriously threatening the global eco-system–and advocating the creation of improved health care systems for developing countries.

As previously noted, the chances of launching a serious dialogue between the G-8 and the G-5 counties during the G-8 summit of July 7-9 are mimimal.  Given the fact that the world is facing high oil prices, Saudi Arabia’s participation as the largest oil producer of OPEC is a necessity.  However, if such a participation is expected to be meaningful, OPEC states have to develop their synchronized agenda first, or better still, members of G-5 and OPEC states should first agree on their agenda as a basis for conducting a dialogue with members of the G-8.

Meaningful institutional changes governing the global order is hard to bring about.  Radical changes in that direction are even harder to come by.  However, if the world stands a fighting chance of coming out of the current “double-jeopardy” of food and fuel crises, precisely those types of changes are unreservedly unavoidable.