GLOBALISATION OVERSOLD TO PUBLIC, SAYS RICUPERO

12:06 PM Sep 18, 1996

GLOBALISATION OVERSOLD TO PUBLIC, SAYS RICUPERO
Geneva 18 Sep (Chakravarthi Raghavan) -- UNCTAD Secretary-General Rubens Ricupero sees a new consensus emerging in economic policy, with a more balanced approach on the roles of the Market and the State in contrast to the neo-liberalism that has dominated nearly a decade of economic thinking.

Ricupero, responding to questions at a press conference to release the 1996 Trade and Development Report, said that "globalization" appears to have been "oversold" to public opinion with the idea that it would immediately bring about additional elements for economic expansion.

"That has not been so," Ricupero noted.

In recent years for a number of reasons, including globalization, and historical reasons, "we have been seeing in the last seven years or so a rate of growth in the world which is less than the average of that in the 1970s".

This has been due to the unidimensional focus on fighting inflation without a corresponding concern for employment levels or growth. This continuous stance has led to a situation of deflation.

It was not UNCTAD alone that was making the point, but even the Bank of International Settlements, the central bank of the European Central Banks, which traditionally is very conservative. But in its last report, the BIS has quoted Keynes to make the point that it was feasible and appropriate for central banks to fight both inflation and deflation and that "at a time of rapid social and economic change, with attendant implications for social order and relative prices, it is all the more important that price stability be pursued as an anchor for rational and forward-looking decisions on all fronts."

Asked whether he saw any fundamental changes emerging, and away from the current over-emphasis on market forces and neo-liberalism, Ricupero said that UNCTAD message appears to be falling on more receptive ears, and a new consensus appears to be emerging -- a consensus which is more balanced.

For the last few years, he said, there has been a too-exclusive an emphasis on market forces. But attention is now turning to the need for an effective State and good public institutions.

The World Bank, Ricupero noted, was now going to devote its coming World Development Report (in 1997) to the need for reinforcing and developing public institutions that are needed to allow the market economy to function -- the legal framework, regulatory framework etc.

A western correspondent asked what business it was of the World Bank to deal with regulatory frameworks and rules, which was in the competence of the World Trade Organization.

Ricupero said that one would have to await the WDR 1997 and its contents before one could make a judgement, and that he was only going by what the Bank has announced as to what it would deal with in the WDR.

But reverting to his views about an emerging new consensus, Ricupero said that he had attended in Washington a major conference convened by the Inter-American Development Bank (IDB) which looked into the experiences of development in Latin America and around the world and came to the conclusion that in countries that have been successful in their development, both the public and private sectors were acting in complimentary ways, reinforcing each other and where institutions of the State were able to provide the market with what the market needs.

This is what UNCTAD all along has been speaking about. "We did not underrate the role of the market. What we did say was to emphasise that in order for the market to play its role, it needs support from an effective State," Ricupero added.

The UNCTAD head was asked about the view that the South countries, such as in East Asia, were providing a momentum for world economic growth by their increased imports in the face of sluggish growth in the North, and how this could continue for long when the South countries did face trade and balance of payments deficits and would need to sell in the North to earn and import. Also, papers presented by experts at a recent seminar organized by the Third World Network showed that at the current rates of return expected by capital, FDI after three years will have a negative outflow, thus making growth and development based on FDI unsustainable.

Ricupero said that developing countries had to import capital goods and equipment to develop their production and exports and this was bound to result in trade and bop deficits. The fact that their current accounts would not be in balance was not of concern so long as they were able to increase their inward financial flows through FDI and as long as this FDI was invested in developing capacity for exports.

The reason he had highlighted the role of the developing world in providing strength to the world economy was to counter the populist view, due to isolationism and mercantilism in the North that imports from the South are a one-way street.

What the TDR and he had sought to point out was that it was the dynamic markets of the developing countries which were taking in the exports of the industrial world and providing an impetus for growth.

The press conference which started some 15 minutes late was however cut short 10 minutes ahead of time, with the result that several newsmen were unable to get clarifications on the TDR itself. Also, the main authors of the report were not even present at the press conference.