There was the British Empire on which the sun did not set. Then, there were the Portuguese and the French colonies. South East Asia was under the domination of Japan. The Germans claimed ‘the purest blood’ and thought that they alone had the right to rule the world. The result was World War II which ended with the dropping of the atom bomb on Hiroshima and Nagasaki in 1945. The destruction was such that Einstein, who contributed to the discovery of the bomb, later lamented that he was morally wrong when he encouraged President Franklin D. Roosevelt to develop the atom bomb in 1939. Albrect Folsing, in a biography of Einstein, said: “This weapon was delivered into the hands of the American and the British nations in their role as trustees of all mankind, and as fighters for peace and liberty; but so far we have no guarantee of peace nor any of the freedoms promised by the Atlantic Charter…. The war is won – but the peace is not.”

THE GLOBAL ECONOMY

Whatever be the position, imperialism ended with World War II. The world was restructured, Germany was divided into East and West. Japan and West Germany came under the surveillance of the then newly emerged world power – the USA. East Germany and some other parts of Europe came under the surveillance of the USSR. Great Britain lost the empire. France and Portugal lost their colonies. Korea was divided into North and South. France and England, however, emerged as members of the five member nuclear club. India and Pakistan claimed membership in 1998.

The Post War period saw a new colonialism emerging. While the Marshall Plan took care of the new political and geographic relocation, Bretton Woods gave birth to a then new financial system administered by the World Bank and IMF. ‘One world’ gospel led to one global economy that has led to the present world ethos. The USA has emerged as the single largest economy declaring one of the world’s largest budget surpluses: Europe’s unification with the proposed euro currency was aimed at vying with the world’s largest economy – the USA.

On the other hand, there appeared to be confusion and chaos, not only of socio-political situation but also politico-economic situation in the developing world. The USSR, the former world leader of the socialist economies despite possessing thousands of nuclear bombs, relied on Western help for its own economic survival.

Latin America, particularly Brazil has been suffering since then in meeting the socio-economic needs of its people. South East Asia economies declined – primarily owing to the currency debacle - currency swaps and ‘flight by night capital’ - by the “traditional’ fund managers. While the world organizations have been claiming the growth of the world economy through the opening of national economies, the results so far produced have been the reverse. The World Trade Organization representing in fact, 0.01% of the richest countries and individuals, has led to more protectionism in the real sense of the word through such measures as protection of intellectual property rights, a new mechanism leading to rights to unlimited royalty, technical fees and patents, a high cost of technology and more so for the less developed world. The last conference on the subject at Seattle however utterly failed followed by volatile demonstrations at World Economic Forum, in Switzerland, Bangkok, Thailand and India; wherever the WTO meetings were held that year.

On the other hand, even the developed world was shaken. The Long Term Capital Management Fund worth over US$200 billion (with a paid up capital of US$4.5 billion) managed by the world celebrities including the nobel laureates – Robert Merton, Myron Schole (who invented the ‘options’) and John Meriweather failed the test of time. Many Japanese financial organizations were shaken. The world famous Bank of Tokyo chose to merge with a local bank, the Mitsubishi Bank, followed by several other mergers and liquidations.

The world’s largest brokerage house in USA, Merrill Lynch, posted a loss of $164m in the first quarter of 1998 – for the first time after nine years - and reduced over 300 persons or 5% of its total strength of elite consultants. The world economies generally suffer from current accounts deficit, deficit financing, inflation and un-employment. The question that is being raised is whether the post war political realignment and financial system – the Bretton Woods – has worked well or not!

THE NEW WORLD ORDER

On the other hand, the then US President, William J. Clinton, supported the ‘New World Order’ including the Bretton Woods financial system last year. In a World Bank meeting he said: “The Bretton Woods generation built a platform for prosperity that has lasted to the present day. Economic freedom and political liberty has spread across the globe. Since 1945, global trade has grown many folds. Since 1970 alone, infant mortality in the poorest countries is down by 40 percent. Access to safe drinking water tripled. Life expectancy increased dramatically. Even now, despite the difficulties of recent days, per capita incomes in Korea and Thailand are 60 percent higher than they were a decade ago. A truly global market economy has lifted the lives of billions of people.”

The then Chairman of the Executive Board and Managing Director, International Monetary Fund resigned as a protest against the system particularly for the collapse of the South Asian economies. The World Bank President, James D. Wolfensohn, supported the contention. He remarked: “…searing images of desperation, hopelessness and decline - of people who once had hope, but have it no more: Today, while we talk of financial crisis 17 million Indonesians have fallen back into poverty; and across the region a million children will now not return to school. Today while we talk of financial crisis – an estimated 40% of the Russian population now lives in poverty! – across the world, 1.3 billion people live on less than $1 a day.

What should then be done? Certainly not to repeat either the old colonial rule in the deprived nations with minimum guaranteed law and order and socio-physical infrastructure - that is, some hospitals and some schools, while the bulk of the wealth is accumulated in the developed world or should it follow the rule of the new colonialism, which in the garb of one global economy, has, in fact, led to greater protectionism and regionalism if not nationalism, to say the least. According to the Economist, 4/5th of the world industrial production is confined to a thousand largest corporations of the world.

The role of European Union expanded in Europe. The USA chose to join NAFTA. There were increasing restrictive trends over quotas and further limitations on imports from the less developed world. Only the raw materials are welcome. Manufactures and even semi-manufactures are restricted. USA was no more a free economy, nor any other country of the world!

ECONOMIC INTEGRATION

The solution lay in integration of the economics – of the developing world, starved of capital, value added trade and industry with those of the developed world. The salvation of any country lay in the adequacy of capital and growth through value added trade and industry; it is industry which produces goods, develops the know-how, generates employment as an antidote to deficit financing, trade imbalance and inflation from which the economies of all these developing countries generally suffered. Industry cannot work without capital and technology – financial capital co-related with intellectual capital.

Availability and cost of capital is increasing with severe conditionalities. Technology is rarely available; whenever it is available, it is given at a high cost - incompatible to indigenous genius and purchasing power. The technical fees, royalty and remuneration of the technical experts make indigenization a much more difficult task. On the other hand, industrialisation, per se, primarily should be where the product is primarily used as understood and franchised by some of the multinationals more particularly Japan. And, since hi-tech industries cannot be located in every region or country there has got to be a trade-off in terms of what can be indigenised and at what cost?

Whatever be the merits and demerits of this, no country may be deprived of the contribution of local genius and aspirations: otherwise, it generates no harmony of co-partnership in terms of benefits. And it is in this context that the ‘foreign’ is distinguished from the ‘local’ or ‘developed’ is distinguished from the ‘less developed’ or ‘old colonialism’ is distinguished from the ‘new colonialism’.

‘Aid or trade’, too, has been a traditional issue worldwide. While the days of ‘aid’ seemed to be over, trade is now being promoted. Every country protects its political sovereignty. Every country has to look after the socio-political and socio-economic needs of their people. The developed world has secure economies and most of the developed intellectual capital and therefore they have an inbuilt protection in their favour. There is a growing demand for removing the tariff walls at the cost of the developing economies. On the other hand, there is a flood of smuggling emanating from all these developed countries.

When heroin is smuggled there are strong demands to “nip the evil in the bud” – where it arises. Similarly smuggling should be checked from where it originates. Smuggling destroys all the efforts which go into the development of an economy at the cost of the socio-economic well being of the people and hence the disenchantment of the people at large. Slogans of a better quality of life through human rights, availability of clean drinking water, elimination of child labour, better rights for women, better education and health care –so vehemently chanted by the more fortunate educated elite the world over only led to increased frustration:

(World peace lies in being kind to friends and foes alike)

The Writer is the Chairman of Honda Atlas Group.

yhs@atlas.com.pk