9:24 AM Feb 23, 1995
THE BUTTERFLY IS FLUTTERING OVER THE AMAZON
Geneva 23 Feb (Chakravarthi Raghavan) -- The uncertainty principle of the quantum theory in physics was explained in a popular British TV programme in terms of a butterfly fluttering its wings over the Amazon forests in Brazil resulting in a typhoon off the coast of China -- an extremely fragile global ecosystem that is easily disturbed by something as remote and little as a butterfly over the Amazon. Each in their own way, the Mexican peso crisis and Wednesday's French announcement that five US nationals, including four diplomats (agents of US Central Intelligence Agency, which having lost its cold-war rationale is trying to find one in the New Order), have been ordered out for "spying" (by offering bribes) to get sensitive information, would perhaps come to be described in the future as an example of the "uncertainty" principle in the non-physical world (of politics and economics). The Mexican crisis has created major "disorders" in the Bretton Wood's non-systems, and the French action may further complicate efforts in the WTO to organize itself for business. Everyone involved in the Mexican crisis has been trying to deny any "Tequilla effect" by explaining away the crisis in terms of the particular failures of Mexico (that they discovered only now or discovered earlier but could not disclose). But they have been unable to explain why then the Mexican crisis should affect all the other Latin American countries, and even the other emerging markets in Asia, just as the neo-classical trade and market economists, despite their ever-increasing complicated econometric models, are unable to explain the growing global unemployment. Only Indian Finance Minister Manmohan Singh, in explaining some differences of Indian policy (on short-term money market or share-market investments) visavis Mexico's, recently suggested that the crisis showed the "extreme fragility" facing all countries, implying no single country or groups can cure this "fragility". Whatever the explanation, the continuing Mexican crisis (despite the $50 billion of special loans and conditions) seems likely to overshadow the unchallenged forward march of the Fund/Bank "market-friendly" theories of growth and development or the laissez faire neo-liberal order in its trickle-down effects bringing benefits for all in the future (including the growing unemployed and poor). The crisis also came at a time when the new WTO trade order was being ushered in, with the theoretically democratic WTO taking its place side-by-side with the oligarchical BWIs to run the new international economic system. The Mexican crisis -- apart from its challenges to the theories of money, finance and free capital flows (emanating from the right radicals in the BWIs) -- has also created a shock for the WTO system and its premise that free trade coupled with free capital movement will result in welfare maximisation. But the attempts of the WTO system to cope with this challenge, and try to explain or explain away the "facts" and keep the "faithful" in the flock, have been hampered over the last several weeks in the search for an executive head to fill the post -- even though the 'rule-based' system in the WTO agreement provided little scope for such an executive head or his initiatives. On Wednesday, the WTO diplomats were reluctantly moving to the view that their search for a person to be chosen by consensus out of the three contenders was getting nowhere. Though no one at the informal heads of delegations meeting would express it, and there were only calls for "reflection", several key delegations for some days have been saying that the deadlock cannot be broken and was bringing the institution into disrepute, and that all three contenders may have to withdraw (for no fault of their own) before a new choice, by a different process, can be made. The "new process" being suggested, namely not to invite countries for fresh names, but pick on someone else and ask others to approve it -- in effect a case of the US and the EU choosing a candidate that others would accept by consensus -- would be contrary to the 1986 decision of the GATT Contracting Parties. But trade officials have never been bothered by GATT rules, and no one seems anxious to point out the rules. The US Ambassador to the WTO, Booth Gardner, came out of the informal meeting Wednesday to sound off, to the newsmen around, the idea of all three candidates quitting the race, and also announced that he himself had been asking the USTR Mickey Kantor to initiate a dialogue with the EC Commissioner Leon Brittan. On Monday (when Gardner was in Washington), one of his deputies suggested at an informal meeting of a few key delegations that contrary to an earlier understanding the result of the Kesavapani "headcount" should not be publicly announced -- and reportedly gave as his explanation that Kantor and Brittan were already in touch and their efforts to find a solution should not be complicated. The EU Amb. Jean-Pierre Leng, after checking with Brussels and assured there had been no contacts, is reported to have come back and said the 'head-count' announcement should go ahead, which is what the WTO Council Chairman, Amb. Kesavapani of Singapore, did Wednesday. After the Wednesday meeting, on hearing of Gardner's comments to the media, several other trade diplomats said it would be impossible to find a new choice by the 15 March deadline. They envisaged several scenarios -- asking incumbent Peter Sutherland to continue for a term (but not on another ad hoc short-term), but without necessarily expecting him to announce his candidature nor of the CPs "appealing" to him to continue. They also discounted the European generated view that in such a contingency, Sutherland would demand "impossible terms" about the powers of his office. The US itself is said to favour Sutherland being named for a term, and allowing a quieter process of selecting his successor after the election heat now generated cools down sometime next year. The EU, which still believes that its candidate having the "majority" could still be elected, if a crisis is created by having a situation where the WTO has no head, appears to be disfavouring Sutherland being asked to continue for a term. It has been reportedly floating the idea of either the General Council Chairman holding the post temporarily (contrary to the GATT rules) or of one of the Deputy Directors-General asked to occupy that post as "officer-in-charge" -- a contingency envisaged under the rules. But all these and other choices and processes may have been further complicated by the French announcement about US spying, and pinpointing it as related to the US attempts to find French positions visavis the WTO negotiations (on films, telecommunications etc). The French action in ordering out the American diplomats, and its public announcement now -- is being explained away in terms of the political benefits for French President Edward Balladur's re-election campaign and the embarrassment to his interior minister Charles Pasqua facing public charges of illegal wire-tapping of close aides of Balladur's rival Chirac. Interestingly, the American side has not denied the charges -- presumably on the basis that such 'spying' is the order of the day that all have to live with, and when found out by "friends" calling only for quiet withdrawal of the diplomatic spies. They have only complained about the publicity by the French that might force them to retaliate. But whatever the motivations and the reasons for the French going public, with the implosion of the former Soviet Union and its ideological challenges to the West, the basic conflicts and contradictions within the West seems to be coming to the fore. One observer noted that in the inter-war period, it took nearly two decades after Wall Street set off the process (by withdrawing capital from Latin America in search of higher profits to be made by lending to US and Europe, including later for rearmament) and triggering the subsequent competitive devaluation and economic crisis and the political conflict. Now under the New Order, the conflicts are moving faster, he said. Thomas Friedman, a columnist in the International Herald Tribune, wrote Tuesday about the current economic order, and its bond market ruled by Moody (the rating agency) and citing a Polish graffiti -- "we wanted democracy and got capitalism" -- said he would refine it into "We wanted a Parliament and ended up with the bond market". And the bond market, with the electronic movement of money, acts after all at lightning speed.