While preparing a reading list for The Whistle Library monthly post exclusively for subscribers to The Whistle (my blog’s free monthly newsletter), I realized that this June and July have been months of intense international summitry around the world. From the G-7, NATO and SCO to the BRICS summit, an EU Summit, and the 4th International Conference for Financing Development (which I didn’t know of before), it’s been two months of world leaders and policymakers gathering to agree on some issues no matter how much they disagree the rest of the time!
What emerged from most of these meetings and whether any real progress is being made, is yet to be seen. But just the fact that world leaders, policymakers and multilateral institutions are talking and keeping the dialogue going at a time of heightened geopolitical and geoeconomic tensions can only be a positive development. What went largely unreported is that the G-7 countries in their recent summit caved in to US pressure to exempt American multinationals from the global minimum corporate tax of 15% that around 140 countries around the world have agreed to implement. In this article by Bruegel, you can read the details of reasons why they have yielded to US pressure, but it also reeks of unprofessional PR agency idiot bosses’ nonsense in pitting the G-7 against the G-20. In my previous Owleye column, I had written on why I think that the G-20 is the only fit-for-purpose international grouping for today’s world economy. What is awful is that my country, India, too has not yet implemented the Global Minimum Corporate Tax, along with US, China, Taiwan and a few other countries.
Unfortunately, what seems to be the common theme in recent meetings of western countries are around two issues that, although necessary, create problems for these very countries and for the rest of the world in the future. The first is the substantial increase in defence spending, not just because Trump demanded it, but because of the perceived and real threat from Russia especially to European countries. The second issue is over immigration that seems to be a response to the rise of the political far-right in much of the western world. The two issues, although separate, become connected the moment the question of how to fund the rise in defence spending comes into the picture.
I think the dramatic rise in defence spending from the required 2% of GDP under the NATO agreement – which very few NATO member countries meet – to 5% of GDP under the newly agreed rules at the most recent NATO Summit held at The Haigue will pose problems. Even if they have given themselves time until 2035 to comply with these requirements, most of these countries are going to have to cut spending in their domestic budgets and/or raise taxes, given the huge fiscal deficits and debt mountains they have piled up. And as America and the UK have already indicated, it is coming at the expense of welfare spending on the poor and disadvantaged groups of people. What’s more, international aid assistance is also being cut back, in order to provide for the greater defence spending. And finally, leaders of these western nations must realise that 5% of ever slower-growing GDP is going to prove onerous and unsustainable in the years to come. Of course, a consequence of all this defence spending and cooperation will mean big business for America’s military industrial complex, which is perhaps what keeps Trump interested in NATO.
Whether these world leaders realise it or not, such policies will make the economically vulnerable sections of society even more disadvantaged, and further increase the chances of immigration, while also increasing the possibility of famine, poverty and pandemics around the world. It could mean a significant reversal or undoing of all the good work done in previous years on the UN’s SDGs (sustainable development goals). In this context, the 4th International Conference on Financing Development assumes greater significance, as it works towards reforming multilateral financial institutions, as well as creating possibilities for private capital to also finance economic development especially in poorer and developing countries. You may read economist, Jayati Ghosh’s piece in Project Syndicate about this conference, although I do think she dwells too much on “without America”, instead of offering her ideas on how it can be made to work better.
Then we have the ongoing trade negotiations between the US and several countries. In the on-off, pause, and rollback of tariff threats that have been issued thus far by the Trump administration, the world economy continues to face huge uncertainty and volatility. You could say that at least trade talks are going on, but the world knows that these decisions are unilateral, and the trade talks are bilateral giving Trump a chance to arm-twist other countries into submission. In his first term itself, he proved not good at – and not interested in – multilateral engagement. This time, he is at least trying a little harder. Anyway, the larger question remains of how all this fits into the WTO trading system.
Most of the recent conferences ought to have at least focused on defusing tensions and ending the two wars that have been raging for years. Thanks to the unprovoked attack on Iran by Israel the world and the media have taken their eyes off the main Israel-Gaza conflict, which is said to have reached dire stages. With humanitarian aid not reaching the Gazans, and with Israeli settler violence on the rise in the West Bank, the world needs to refocus on this conflict and prevent Netanyahu from indulging in more ethnic cleansing. While the NATO declaration mentions support for Ukraine, America stopped supplying air defence equipment to Ukraine – ostensibly because of inadequate stockpiles – which Russia took as a cue to bomb Kiev massively with drones. Now, America is sending those missiles to Ukraine, as part of an arms sale to NATO, which Europe is having to pay for.
Something tells me that the way Trump is going about his peace mission, it only aggravates the conflict. He takes Israel’s side in the attack on Iran’s nuclear program while wanting a deal with Iran, and it leads to Iran’s parliament voting for Iran to stop cooperating with the IAEA. The next step will be for Iran to quit the NPT agreement, which is not what the world wants. He has a conversation with Putin and then doesn’t send defence assistance to Ukraine, which is a chance for Russia to pound Ukraine. I wonder if Trump isn’t actually using these kinds of pressure tactics to force the weaker, aggrieved nation under attack to just crumble and surrender under pressure. In this scenario we all have greater reason to worry for Gazans and for the fate of millions who just need to have their own state of Palestine and be able to live in peace. But the two-state solution seems to be fading away into the distance in our rear-view mirrors and the danger is nobody knows what lies ahead.
So, while all this talking and conferring at summits is good and the world certainly needs more of it, we also need cooler heads to think deeply and plan long-term about the kind of world we wish for, and need, and how we can all work towards achieving peace and shared prosperity at the same time.
The animated owl gif that forms the featured image and title of the Owleye column is by animatedimages.org and I am thankful to them.
Peripatetic Perch 