Lynn Fries: Welcome to The Real News. I’m Lynn Fries reporting from the UN Geneva
on the 2017 launch of UNCTAD’s flagship report, The Trade and Development Report as
its main author, Richard Kozul-Wright, is given the floor at the UNCTAD Trade and Development
Board meeting. Here is a clip of that meeting. Richard Kozul-Wright: Finance – not trade,
not technology – has been the dominant force shaping the trajectory of the global economy
over the last 30 years. It would be nice to have a kind of killer
diagram that would kind of summarize our position in one chart. I have not found that killer diagram. We have 3 diagrams that speak to what we think
are the problems with the hyperglobalized world – the problems of growing inequality,
the problems of indebtedness, the problems of insufficient investment and the problems
of increasing insecurity. We think those are 4 common features that
one finds across developed and developing countries in the world that has become hyperglobalized. And to some extent these three charts, and
again in the case for the United States, are an attempt to capture those kinds of dynamics. The first chart on my left hand side is an
indication of the widening gap between productivity – which is the blue line in this chart, hourly
productivity in this case – and wages or compensation. The red line is hourly compensation. And in the case of the United States that
divergence between what people are making and what people are being paid to make stuff
has been rising considerably over the last four to five decades. But quite dramatically over the last 3 decades
as real wages have essentially stagnated, in this case in the United States. The middle graph, the orange line here is
private capital formation. One of the arguments for financializing the
world was this would be good for investors, good for investment. And of course it has been very good for paper
investors, people who make their money out of rising asset prices. It has not been good for people who are investing
long term in people and equipment and machinery which is essentially the yellow trend in the
middle chart which has been declining systematically over the period of hyperglobalization. At the same time, the debt and particularly
in this case household debt has been rising at a tremendous rate in the period of hyperglobalization. So it has not been good for investment and
it has forced people into a level of indebtedness that we think is a source of serious instability. And finally it is a world that doesn’t really
recover very successfully when problems occur. The final graph in this triplet is the recovery
from 3 crises. The blue line is the recovery from the Great
Depression, the green line is the recovery under Ronald Reagan from the post 1979, 1980
crisis and the red line is the recent recovery in the United States. And it has been tepid at best. And it certainly does not compare with the
Reagan recovery, let alone the recovery in the 1930s. And this is the same graph for the United
Kingdom. I apologize that was a bias of my report. Similar kind of…. you see similar trends. There are differences across countries, of
course, the historical and policy differences. But the broad trends are surprisingly similar
across the advanced world in terms of rising inequality, falling investment and rising
debt particularly household debt, and slow recovery from crisis
So that’s our understanding of a hyperglobalized world and the problems that policy makers
should be addressing if they are going to try and build more inclusive and sustainable
economies. Lynn Fries: Joining us now to discuss this
is Richard Kozul-Wright, Director of the Division on Globalization and Development Strategies
here at UNCTAD. Welcome Richard. Richard Kozul Wright: A pleasure to be here. Lynn Fries: A major event in the 2017 launch
of the Trade and Development Report is the presentation of the TDR to the UNCTAD Trade
and Development Board. Give us some context on that. Richard Kozul-Wright: Obviously our immediate
audience for The Trade and Development Report is the members of UNCTAD itself. And UNCTAD is a universal body so it has full
membership of both developed and developing countries. So the report is presented to the full membership
at our Trade and Development Board each year. So they are first consumers of the ideas in
this report. The Trade and Development Report is now 35
years old. Lynn Fries: In the current debate over what
is at the source behind the problems like rising inequality in today’s globalized
world, you do not point the finger at trade or technology, the usual suspects. Comment on that and more broadly on what differentiates
the direction of your report from that of most other international institutions. Richard Kozul-Wright: Well I think we are
really taking the debate away from what we see as a slightly sterile polarization between
trade and technology as the sources of inclusiveness, precariousness, insecurity. And saying, look, the way in which markets
are being structured now by large financial and corporate bodies is at the source of this
polarization and insecurity. And these very large private institutions
have begun in fairly dramatic ways to corrupt the public sector. That’s true both of the public sector at
the national level and the public sphere at the international level. And so we need to find ways of mitigating
that economic power without one hopes damaging the benefits that come with scale. Because there are advantages of having large
big innovative firms that can undertake research and development and innovation. But if they become a law unto themselves rather
than a law subject to wider democratic will and representation, then that is where the
problem lies. So we have to…getting back to the underlying
systemic causes of why people have become disillusioned with the current state of affairs,
it’s not about trade. People are not disillusioned with trade. They know trade brings benefits as well costs. They are not disillusioned with technology. They know that technology has been transformative
even as it has brought challenges to them. What they are disillusioned about is the way
in which political representation has been corrupted by economic power. That is what really disillusions ….this
is what people are finding increasingly difficult to deal with. And they do not trust the people that claim
to be representing them. And that is true at the international level
of course as well as the national level. So the report, I think the real meat of the
report is to get down to the systemic forces that are channeling economic power into political
power and in the process reinforcing the economic power that is increasingly behind this polarized
and fragmented and increasingly distant system that people are experiencing. Lynn Fries: Explain what you mean by a hyperglobalized
world. And why you see the deadweight of austerity,
as you put it, as essentially the default macroeconomic policy of a hyperglobalized
world. Richard Kozul-Wright: For us the hyperglobalized
world is a world in which finance has essentially gained the upper hand in policy making. Finance has essentially followed the idea
that government is not the solution. Government is the problem. And so deregulation, privatization, liberalization
have been the overarching policy mantra of the hyperglobalized world. And in that world when things go wrong, as
they inevitably do, the macroeconomic response is always to cut – to cut government expenditure,
to cut social services of one kind or another, to clamp down on wages even when the source
of the problem is not spending of that nature. Cutting spending always becomes the default
policy solution. And we have seen that again since the 2008-2009
crisis particularly in the advanced economies. And it has not worked. Inequality has continued to rise. Growth and the recovery have been historically
slow. These are the slowest recoveries from an economic
crisis that we have seen in the modern era. And finance has been able to resist any sort
of serious attempt to rein in its influence. There have been attempts in the Basel discussions
in the Financial Stability Board etcetera. So there has been an attempt but it’s been
weak and it’s already being rolled back. So austerity is this kind of broad policy
brush against which business as usual – the kind of predictable neoliberal policy agenda
has been able to survive even as its impact has been shown to have been negative and destructive. Lynn Fries: Comment on the outlook as you
see it for moving beyond austerity towards the kind of Global New Deal you outline in
the TDR. Richard Kozul-Wright: You have to change the
narrative. Obviously we are 30 odd years into a narrative
about the world economy and related policy challenges that have been driven by the neoliberal
agenda. That agenda has been challenged in recent
years. I mean the financial crisis being the most
obvious challenge to that but also the weakness of the post-crisis recovery. All pose a big challenge to this dominant
narrative. But you can only move forward of course if
you have an alternative narrative. And it is the job, I think, of an institution
like UNCTAD and The Trade and Development Report to try and fashion an alternative narrative. And that is what the report does speaking
primarily to policy makers at the national level of course. Because that is …they are the policy makers
that can actually enact the changes. So the aim of the report is very much to change
the narrative – that there are alternatives to neoliberalism both alternatives that we
see today and also drawing on historical lessons. In this report, we hark back to New Deal,
the 1930s effort in the United States to refashion the relationship between the economy, society
and its citizens. Because we feel many of the imbalances and
challenges of the 1930s have their analogue in imbalances and challenges today. And if it was done before in the 1930s why
can’t it be done again today. And that is where the report kicks off from. Obviously a Global New Deal is not going to
take place overnight. It is not something that one can wave a magic
wand and shift 35 years of neoliberalism into a different direction. That is clearly not going to happen. But the kinds of pressures and tensions that
we are describing in the global economy we think are forcing policy makers, often against
their wishes, to think differently from the last 35 to 40 years. And it is to play on those concerns and those
opportunities I think UNCTAD as an institution needs to do more of. I think the important thing is not simply
to focus on immediate political shocks – Trump or Brexit. I mean this is a problem that has been decades
in the making. It is not something that has suddenly emerged
in 2016 as a series of problems. The negative impact of austerity has been
felt in developing countries beginning in the early 1980s. It was there in the debt crisis in Latin America
and Sub-Saharan Africa. It resurfaced again after the Asian crisis
in 1997. Austerity has a much longer history than the
last few years. And looking at all those experiences I think
we can comfortably say that it has not delivered on the promises that it claimed it would make
which is to make a healthier and more dynamic and more productive economy. And so I think the – there is no alternative
– which is a phrase that was hatched by Margaret Thatcher in the early 1980s has outlived its
relevance in terms of the kinds of challenges – the problems of inequality, of instability,
indebtedness, insecurity – that policy makers are grappling with today
There isn’t an international governance system separately from the nation states that
make up that system. And therefore you have to be talking, you
have to persuade nation states that they need to change if the international governance
system is going to change. That’s clear. So you are pitching an argument not at some
airy fairy level about the independence of multilateralism. It’s how can governments… what do national
level governments particularly the systemically important governments have to do to change
the system in a way that we can begin to see improvements in the area that we are outlining
in the report. Pressure is building up to try alternatives. I think that is clear. One can see that in efforts in the United
Kingdom… in the recent election. One can see it in the efforts of the European
Commission to clamp down on monopoly power of leading IT companies, of tax evasion efforts
that you see in the OECD, in the EU. There are efforts to address some of the kinds
of abuses of power that we highlight in this TDR. Obviously, this has yet to amount to a concerted
move away from neoliberalism. It is still picking at the edges but it is
a mood shift. And I think it is the job of a report like
the TDR to build on that change of sentiment and to offer a bolder vision about how these
individual or isolated efforts to deal with the consequences of neoliberalism can be woven
into a larger narrative and a broader set of policy initiatives which if implemented
in a more concerted manner can provide the necessary policy alternative to deliver the
inclusive and sustainable outcomes that governments have expressed their desire to achieve through
theSustainable Development Goals
and other platforms. Lynn Fries: Richard Kozul-Wright, thank you. Richard Kozul-Wright: Thank you
Lynn Fries: And thank you for joining us on The Real News Network.

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14 thoughts on “Finance Has Become the Dominant Force in Shaping the Global Economy”

  1. The problem is greed. Take out greed from the rich, and the problem will be solved. But again this will also be doing an impossible task

  2. When are the Governments going to Wake Up to learn that their policies have failed to live up to ideals, ethics, obligations & morality of their professions. It seems they never will until all is lost for themselves and the People of the World.

  3. This guy has got his finger right on it. Finance provides nothing, other than the means of exchange. It creates wealth from inflated paper, does no work, provides no goods nor commodities of its own, but has the power to corrupt the public weal. It has done so, and Obama is only the latest example.

  4. I agreed with and I was enjoying Richard Kozul-Wright’s explanation up to the point where he said, 13:00 “If it (The New Deal) was done before in the 1930s, why can’t it be done again today?” Richard, the answer is simple; since the New Deal the capitalists have been working very diligently to ensure their power would never be challenged again. This is evident from the 1933 coup against the Roosevelt administration which Smedley Butler exposed; from the American Liberty League and the National Association of Manufacturers that implemented a Christian propaganda campaign on the American people; from the implementation of the 22nd Amendment to limit terms should any president again threaten their power; to the Powell Memorandum that gives clear insight about the intent of the corporate sector when published in 1971. Combine that with Jimmy Carter stating the US is no longer a democracy but an oligarchs and the Princeton statistical study showing negligible correlation between the majority’s wishes and government policy, and I hope you may retract your idiotic statement and think again. Might I ask you how the majority vote in a representative that will implement their wishes when the oligarchs have engineered the western electoral system and everyone is trapped in a choice between corporate left and corporate right? Even a blind man can see the corporate sector has disabled US democracy and taken over all branches of government so why do believe we can implement something akin to the New Deal. Surely you’re joking Mr. Kozul-Wright. Where is Paul Jay when you need him?

  5. The interesting chart was the one that showed the recovery after three Economic downturns (1929, 1980 and 2008). WW2 turned around the 1929 crisis, Reagan opening up the Oil Spigot turned around the 1980 crisis, so what do we have to jump start the 2008 crisis. If the UN knows what the problem is then so does the rest of the world. Maybe that is why China and Russia are creating a parallel Economic system one thats not based on Greed, Fraud and Deception.

  6. its a pity soo many voices of reason, people with good intentions and heart in the right place like Richard kozul wright have to deal with institutions dominated by realist, neo-liberals, American/britian/western firsters and even when a tidal wave of reform is pushed for justice in Palestine, to ending austerity and so fourth the powers to be in the security council for example can just end that or withhold funding to much needed operations globally.

  7. This isn't a new phenomenon. It began early in the 20th century. Lenin laid it out in his pamphlet "Imperialism: The Highest Stage of Capitalism". The five key characteristics of this late stage of capitalism includes finance monopoly. Here they are:

    1.Concentration of production has lead to monopolies.

    2.The merging of bank capital and industrial capital to form finance capital used by the monopolies

    3.This finance capital being used to export capital, which gains prominence over the export of commodities

    4.The development of international capitalist associations that divide the world

    5.The territorial division of the world is completed

  8. 1: American (North-Latin-South) ($): 2: BSR (British Ireland/Scandinavia/Russia) (£): 3: EUAF (EUROPE AFRICA) (€): 4: AIOP (Arab India Oceania Pacific) (¢) (Arabia ¢/€):::

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