Interview - Mr Dov Zerah, Directeur général of the AFD
Mr Dov Zerah, Directeur général of the Agence Française de Développement (AFD), tells us more about the new challenges of global governance as his new book, L’exigence d’une gouvernance mondiale, comes out in shops.
Warning Signals: How would you describe current world governance?
Dov Zerah: Current world governance was built on the aftermath of World War II. Its founding fathers, amongst whom Henry Baxter (USA) and John Maynard Keynes (UK), wanted to promote trade and cooperation as the two pillars of lasting peace. They realised that global institutions were needed to organise the collective management of the planet. To reach that goal, the United Nations, the International Monetary Fund, the World Bank and the General Agreement on Trade and Tariffs were set up.
As time went by, the international community realised that other issues – the environment, human rights…– called for supranational dialogue. By the end of the 60s, the first international summits were held. Some of them were milestones such as the 1992 Earth Summit held in Rio. In parallel, a first attempt to create a world government was made in 1974 with the G5, soon to become the G7. Over the years, other institutions were implemented: the World Trade Organization replaced the GATT in 1994; the International Criminal Court was set up in 2002…
These initiatives favoured an unprecedented period of economic growth, known in France as “les Trente Glorieuses” – the Glorious Thirty. Although the world population has soared, poverty has receded, along with hunger; access to drinking water and electricity is also on the rise.
The mechanisms set up during the second half of the twentieth century also prevented the protectionist movement and the competitive devaluations that amplified the 1929 economic crisis from reoccurring. In other terms, this world governance has been a great success.
W.S.: Then why advocate for a new world governance?
D.Z.: The world has changed. In 1945, when the UN was created, it only counted 50 members; the overall population stood at 2.5 billion; China, India or Brazil were insignificant as regards their economic weight. Seventy years down the line, there are about 200 countries in the UN, the world population reaches 7 billion, while China, India, Brazil, Mexico and Indonesia represent a quarter of the global wealth – and a bigger share of the global economic growth!
What’s more, humankind faces new challenges. The population will grow up to 9-10 billion inhabitants by 2050 – a 2 billion increase in less than forty years! Current economic models are not compatible with a world endowed with limited natural resources. The flawed regulation of financial flows has led to situations of extreme volatility that nearly swept the whole system.
This new world calls for new rules. Tomorrow’s governance will be based on two principles. First, one should never forget that we do not own this world: we only rent it. One should tap the planet’s resources bearing in mind that there are other generations to come. The second principle is that in an interconnected and globalised world, cooperation strategies are the only ones that can lead to a win-win situation. The world will be stronger if we all walk in the same direction.
W.S.: Thanks to the economic crisis, institutions like the IMF have gotten their second wind; others have been created, such as the G20. What will become of them once the crisis is over?
D.Z.: The crisis which started in 2007 proved that the G8 rich man’s club was no longer sufficient. The G20 was promoted to correct its flaws by allowing emerging powers to be part of this “world government” so as to better reflect the world as it is today. A country needs a government; our planet needs one too. If the G20 is profiled to ensure a fair representation of all, it can act as a global executive power.
In the wake of the subprime crisis, a second storm started: the European sovereign debt crisis. The tensions on European sovereign bonds markets demanded a financial strike force which could only be supplied by the IMF – and Europe. The IMF’s financial resources were thus expanded to reach an overall loan capacity of 1,000 billion dollars.
Institutions such as the G20 and the IMF are absolutely necessary for the international community to have a grip on the course of globalisation. With time, their roles will undoubtedly be reinforced.
W.S.: What about emerging powers? Will they play by the rules in place? Will they continue to consider the current system as legitimate or will they create institutions of their own?
D.Z.: The emergence of new powers is completely reshuffling the balance of powers. Not only are countries such as China, India, Indonesia or Brazil significant in terms of economy: they also have ambitious foreign policies. They have developed proactive bilateral diplomacy: their networks of embassies are rapidly growing; they direct more and more aid to poor countries to develop their infrastructure…
Institutions such as the IMF or the World Bank need to be adapted to the world as it is today. Their systems of quotas and votes are obsolete. Until 2003, Belgium represented a group of countries that weighted more than China and India put together! A reform is undergoing which will have a great impact: China will become the IMF’s third most important member; Brazil, India and Russia will be among the top ten shareholders; on the contrary, Europe will lose two of its representatives at their boards. More should be done in that direction.
W.S.: What are the other features of the future world governance?
D.Z.: Establishing a real world government by reinforcing the G20 and modernising existing institutions such as the IMF, the World Bank, WTO or ILO, are the first two pillars. Where current institutions are too weak, new ones should be implemented. This is the case as regards the environment: a UN agency in charge of the environment should be created instead of the current UN programme.
The other two pillars consist in reviewing the functioning of world summits and fostering regional integration.
World summits are often criticized. Doha, Cancun, Copenhagen, Rio… these names are synonyms with failure. They remind us of the difficulty, sometimes the impossibility, for the international community to address global issues. Yet, world summits remain essential. They ensure that these issues stay on top of the agenda. They maintain public pressure on political leaders. They contribute to building a shared vision at the international level. However, their functioning must be reinforced to make more room for civil societies. Scientific and technical groups, such as the IPCC for the climate debate, have an important role to play as they are the only ones that can provide an unbiased basis for discussion.
Finally, the difficulty to achieve global deals creates an incentive for sub-global and regional approaches. While the Doha round has been stalled for many years, regional free trade agreements flourish everywhere on the planet. This movement of regionalisation will not stop. It could pave the way for greater political integration as in the case of the European Union.
W.S.: Is there room for Europe in this scheme?
D.Z.: Europe is in an intricate situation. It is the worst hit by the economic slowdown that started in 2007. There is a widespread impression that the old continent will never manage to get back on its feet. The situation is worrisome: in southern Europe, economic trouble started long before the fall of Lehman Brothers; one could almost say that some countries never really managed to overcome the oil crises…
On the other hand, large regions of the world are growing very quickly. Most of the attention is focused on the BRIC but other countries are soaring: the CIVETS – Columbia, Indonesia, Vietnam, Egypt, Turkey and South Africa - have impressive track records; the African continent, whose situation is all too often grimly depicted, has grown at an annual rate of close to 6% over the past decade.
There is a clear risk or marginalisation for Europe. Still, I strongly believe that the European ideal remains a model for many around the world. The institutional reforms entailed by the Treaty of Lisbon have reinforced Europe’s political integration. The creation of the European External Action Service and of a High Representative of the Union for Foreign Affairs and Security Policy stand as proof that political willingness still exists.
The economic crisis has undoubtedly shown that Europe is a colossus with feet of clay - but the colossus remains standing. In a world where countries that count will have hundreds of millions inhabitants, European countries do not have a choice but to make the European Union work.
W.S.: When it was launched, the Euro was supposed to compete with the dollar as a reserve currency. Ten years later, this is clearly not the case. Does this mean that the Euro has failed?
D.Z.: I do not subscribe to this idea. The economic crisis almost struck the Euro a lethal blow. Yet, European countries did not want a decade of hard work to vanish into thin air. They endeavoured to set up new mechanisms to save their common currency. They showed real political willingness to reinforce cooperation between member States. Four measures were adopted. The “European budgetary pact” was signed in March 2012; it sets the famous budgetary golden rule and reinforces policy coordination between member States. The European Central Bank implemented a series of measures to stabilise financial markets. The European Stability Mechanism came into force in October 2012 with a financial capacity of 700 billion dollars. Finally, the banking union decided in December 2012 will increase supervision in the sector.
These breakthroughs saved the common currency. We are not out of the area of turbulence but these decisions prove that Europe does not consider opting out of the Euro as a credible alternative. Nothing justifies dismantling the Euro. No one wants to opt out and no government seriously toys with the idea of ousting a country from the euro area. Anyway, throwing out a country would cost much more than keeping it on board.
W.S.: Let us turn to a very different topic: how to build a world that stands as one? How shall we bridge the gap between richer and poorer nations, especially in Africa?
D.Z.: Building effective and fair world governance is of course the best way to global solidarity. In the meantime, international finance has a role to play through three canals: foreign direct investment, workers’ remittances and overseas development aid (ODA). I would like to focus on the latter.
OECD’s recent figures show that budgetary constraints in industrialised countries have led to a second consecutive year of negative growth in ODA. In 2012 alone, Italy diminished its aid budget by a third while Spain halved it. Although the overall decrease is limited (-4% in 2012 after -2% in 2011), it proves that the target of directing 0.7% of OECD’s countries’ GDP to support the South is absolutely out of reach: in 2012, ODA represented only 0.42%, down from 0.44% in 2011.
Yet, one could also adopt a more optimistic perspective. ODA remains at a significant level of 126.5 billion dollars. Given the financial distress in some countries, one could argue that a 6% decrease over two years is rather a good performance. The most worrying evolution might actually be that the worst affected countries are the poorest ones. Aid to sub-Saharan Africa has thus decreased by 8% in 2012.
Donors should try to prevent diminishing their aid to Africa as this is where money is the most needed. While hunger has receded at the global level, the number of undernourished people on the continent keeps rising. This is worrying as the African population will double to two billion by 2050. Although economic growth has been dynamic over the past decade, Sub-Saharan Africa does not benefit from globalisation as much as other developing regions. ODA is necessary to better share wealth.
W.S.: Finally, in your view, what can the "West" offer African countries that their new "emerging partners" - India, China or Latin America – cannot?
D.Z.: Emerging countries have relevant experiences they can share with the rest of the world. For example, Latin America is a life-size laboratory for social engineering. Colombia and Brazil have experimented innovative policies to erase poverty. The rest of the world should benefit from this good practice.
This does not imply that France, for instance, is no longer needed in developing countries. French expertise is still recognised in areas such as the environment, urban development, infrastructure…
I do not view the emergence of China, Brazil or India in Africa as bad news. On the contrary: the financial needs are immense and all efforts to fight poverty on the continent are welcome. We should try to better coordinate all these efforts. As I stated earlier: in an interconnected and globalized world, cooperation strategies are the only ones that can lead to a win-win situation.
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