Madhav Nalapat

G8 must make way for new system

By M D Nalapat (China Daily)
Updated: 2010-07-07 07:54

Both the developed economies as well as the big emerging economies need each other for mutual benefit and common prosperity. Both need to work in harmony and conciliation. However, the present situation is that the G8 still seek to impose their views on the rest of the world.

They need to understand that the world has changed since the 2008 financial crisis. Till then, the developed countries could pretend that they were responsible and successful in ensuring steady growth, at least for themselves. They could pretend that they had higher moral standards than emerging nations.

Rating agencies fed such an illusion by giving Triple A ratings to the sovereign debt of countries that we know now to have been bankrupt at the time (and still are), while giving much lower ratings to Asian countries that have a much healthier fiscal record. Anti-corruption watchdogs used to call the countries of North America and Europe highly principled and honest, while they called several Asian countries corrupt. The 2008 crash showed that the extent of corruption and greed in the US, the UK and other so-called "honest" countries dwarfed in its scale the graft that exists in Asia.

How many of the officers of the financial institutions that together cheated tens of millions of investors out of more than $6 trillion have been arrested? Just a handful, while most have got huge bonuses out of their flawed activities, rewards that they have been allowed to keep. Many are still in their jobs, and more than a few are in high positions in governments. In contrast, several have paid a far higher price for graft in China, as have in India. After the unethical underbelly of the developed world has been exposed by the financial crisis, it is no longer possible for them to dictate terms to Asia.

It needs at this point to be remembered that in the 1997 Asian financial meltdown, countries such as Indonesia and Thailand that faithfully followed the advice given by New York and Frankfurt saw an economic collapse, while countries that ignored such advice escaped.

The developed world needs to accept that it can no longer dictate to the big emerging countries. They need to understand that a win-win solution means that both sides share both the pain and the gain.

The G8 needs to disband itself so that both developed and emerging countries can together work to resolve the problems facing humanity. Should it continue, then we need a G12.

The author is vice-chair, Manipal Advanced Research Group, UNESCO Peace chair and professor of Geopolitics, Manipal University.

(China Daily 07/07/2010 page8)