Manipal, India — It must be wonderful to believe that the rest of the world shares one's own self-perceptions of omniscience. Weeks after Western financial institutions and instruments cleaned out thousands of clients in the Middle East, China and Russia, French President Nicholas Sarkozy and British Prime Minister Gordon Brown, at last weekend’s Asia-Europe Meeting in Beijing, offered Asia a simple prescription: Trust us and follow our lead unquestioningly, so that the non-Western part of the world can earn the tag of being "responsible (to the West) stakeholders."
It is unlikely that Asian governments will follow this advice and pour billions of dollars of their capital into two institutions controlled by North America and Europe – the World Bank and the International Monetary Fund. After the recent banking meltdown in the United States and the European Union, it is not only small children in the rest of the world who can see that the emperor has no clothes.
What has astonished many in Asia is the way in which Western governments are acting as accomplices to what looks like the perfect crime: the stealing of trillions of dollars in value from pockets across the world. This was done not simply by getting the unwary to invest in assets known to be dubious, but by gerrymandering increases in the prices of commodities, notably petroleum, which has gouged economies such as China and India.
This columnist would like to repeat his advice to the oil economies to install gold statues of U.S. Vice President Dick Cheney in prominent locations, for it is the policy pushed by that distinguished international statesman that caused oil prices to rise far above what market fundamentals dictated.
In 2002, the George W. Bush regime inspired a coup attempt against President Hugo Chavez in Venezuela, thus affecting the country's oil industry. In 2003 came the invasion of Iraq, whose oil economy has not recovered even to the pathetic level caused by sanctions in the 1990s. Next, it was the turn of Iran to be taunted, and finally Russia.
Had the economic crisis not supervened, this year might have seen an attack on Iran and next year the introduction of oil-restricting sanctions against Russia. These actions would have pushed oil prices to new levels, and put paid to the ambitions of India and China to catch up with Europe.
Even a pickpocket gets a jail term, but not apparently those friends of U.S. Treasury Secretary Hank Paulson who presided over the biggest bust in financial history. Neither the United States nor the European Union appears ready to hold accountable those responsible for this disaster.
Indeed, the subject has been totally avoided in the eagerness to find "solutions," which in the main are funneling vast sums of taxpayer dollars to the care of the very individuals who were part of the core team of the guilty. Bush, Cheney, Sarkozy, Brown and German Chancellor Angela Merkel apparently believe that the reduction in annual bonuses from an average of US$60 million to a mere $20 million is punishment enough.
The rest of the world disagrees, and until the perpetrators of the meltdown are identified and punished, few governments or investors in Asia would be willing to risk their funds being parked in New York, London or Frankfurt. The chances are that intra-Asian investment will rise as a result of the crisis, rather than a perpetuation of the dominance of Western financial institutions.
Although the international economy has changed in the 64 years since the World Bank and the IMF were set up, these institutions have not. Both are run by and for the United States and the European Union, although they have a sprinkling of other nations, almost all of whom subscribe to the doctrine of the International Bank for Reconstruction and Development and the IMF: "West knows best."
Changing the basic structure of these behemoths to better fit current reality would be far more difficult than the countries of Asia – and perhaps Africa and South America – setting up institutions of their own, with countries such as Russia entering the mix. A multiplicity of institutions, and competition between them, is preferable to the monochrome texture of the international institutions set up in 1944 and 1945.
In the largest of these, the United Nations, unsurprisingly there are two European countries (besides Russia) in the list of just five veto-wielding Security Council members, with China and the United States being the other two. A structure in which India and Brazil have no place, while Britain and France do, cannot be deemed representative of anything other than nostalgia.
The financial collapse of the past weeks has exposed the greed and absence of ethical restraints of institutions in the West, and it is ironic that Bush, the individual summoning the world's leaders to a conference on solutions next month, is the very person under whose watch the calamity occurred.
If Nicholas Sarkozy and Gordon Brown are serious about wanting the rest of the world to trust them once again with their savings, they will need to inflict severe punishment on the many within their own councils and relationship networks who have so selfishly brought the international economy to the edge of disaster, rather than allowing them to escape to their tax and other havens.
-(Professor M.D. Nalapat is vice-chair of the Manipal Advanced Research Group, UNESCO Peace Chair, and professor of geopolitics at Manipal University. ©Copyright M.D. Nalapat.)