Broad Framing North-South economic relations
Part of the Broad Framing Initiative series
This is the third in a series of posts exploring my preference for broadly framing any issue/news story/trend/development in our world. I am on vacation this week.
Coming of age in the late 1970s (see the movie Dazed and Confused for details), I felt myself floating amidst a number of structural changes in the world order. The one that captured my attention most was detente between the USSR and the US leading to this renewed competition for allied states across the Third World (First World = Democratic West, Second World = Soviet East, and so Global South = Third World). This later led me to centering my PhD dissertation on the subject of Warsaw Pact (the Soviet answer to NATO) security relations with the so-called Countries of Socialist Orientation (former European colonies [mostly in Africa] that, despite their lack of economic development, were deemed by Moscow to be good candidates for rapid ascension to “socialist” status; they weren’t, it turned out, and Moscow abandoned the whole effort under Gorbachev).
Having worked out sort of a strategic “tie” with the West on arms control and the like, Moscow had wanted to show that it had an answer to the Global South/Third World’s call for a New International Economic Order (NIEO).
The NIEO, per a UN summary, was:
A set of proposals put forward during the 1970s by some developing countries through the United Nations Conference on Trade and Development to promote their interests by improving their terms of trade, increasing development assistance, developed-country tariff reductions, and other means. It was meant to be a revision of the international economic system in favour of Third World countries, replacing the Bretton Woods system, which had benefited the leading states that had created it – especially the United States.
In effect, the Global South was asking for a new ruleset that prioritized their rapid development, the gist being, you screwed us over on colonialization and now you owe us a better deal.
They didn’t get it from either First World America or Second World Russia. They got a modicum of sovereign debt relief in the 1980s, but that was about it.
The 1980s were the decade of sovereign debt crises throughout much of the Global South but particularly across Latin America, which suffered its “lost decade" then. It was a general, simultaneous crisis and was characterized by public debt and debtor insolvency (clear inability to service the loan).
Then globalization came along and the 1990s were different. The Global South’s financial crises tended to be sequential and largely involved private money being rapidly jerked out of some economy, creating an illiquidity problem (able to pay but not right this minute because of a cash crunch).
Outside of foreign direct investment (FDI, which is private money investing for the long term in an economy), there are four types of North-South money flows:
Official Development Assistance (foreign aid — tends to be steady)
Remittances from overseas workers — also steady but dependent on good economic times up North
Commercial bank loans (longer is better, shorter is more stressing)
Financial markets (bonds in debt markets, equity in stock markets; these come and go at the drop of a hat, so potentially very destabilizing).
If the 1980s featured a lot of sovereign/aid-type debt (ODA and long-term commercial bank loans), the 1990s were more about globalization’s rising tendency to swamp a developing market with short-term capital flows (short-term commercial bank loans and financial market investments) that, in any panic, disappear quickly (stock/bond market flight, short-term bank debt comes due) creating that liquidity problem.
The 2000s, when globalization was rapidly spreading around the planet (bit of a tautology to say that, I realize), featured massive FDI flows from West to East as the global economy expanded greatly (doubling from $33T [2000] to $66T [2010], even with the 2008-09 dip).
Then the 2010s come along and we notice a new dynamic of amRisen East investing in, and issuing loans to, the Global South: China’s Belt and Road Initiative as the big example, making — for example — Beijing the equivalent of the World Bank for Africa. The West, feeling every more competitive with China (and vice versa), worries about China’s global investments and the influence they bring, but they haven’t really sought to change the way they themselves invest in the Global South all that much in response.
Instead, the 2020s has seen the West’s focus shift from further East-West integration to a general strategy of de-risking and de-coupling itself from Risen China, which creates this weird sort of Western detachment from the Global South’s trajectory at a point when those lower-latitude regions are slated to serve as a major driver of global economic growth as globalization’s demographic center of gravity shifts from East Asia to South Asia to Southwest Asia and Africa over the years (with India already starting to cash in its huge demographic dividend).
So, now we have this weird structural imbalance, in my opinion:
A West (US) most intent on containing the East (China) — see horse in distance, empty barn in foreground
An East (China, but also Russia and rising India) far more intent on forging North-South ties (India in economics, Russia in security, China across the board)
But a West that is turning protectionistic vis-a-vis the world, making it no friend of the Global South right now.
Most specifically regarding the US, we’re in a near-shorting phenomenon right now and yet we seem as little interested as ever in integrating with Latin America (our Global South in the Western Hemisphere), whereas China and Russia (and even Iran) evince more strategic attention and ambition right now (in my harsh opinion).
This is the essential broad-framing that I offer in America’s New Map:
Climate change forces North-South integration (migration pressures)
Demographic aging forces North-South integration (need for labor up North)
Rise of the Global Middle Class forces North-South integration (East gets it, West not so much)
Supply chain consolidation enables/exploits North-South integration
Digitalization of global economy enables North-South integration (something China is aggressively pursuing with its Quantum Grand Strategy (described here).
All of these macro trends are fueling the logic of North-South integration. But again, this seems obvious only to the East, where, for example, Xi and Putin speak very openly of their ambitions.
But none of this seems to be sinking in across the West, which is too busy “de-coupling” and “de-risking” and prepping for “WWIII” and reviving “containment” and “Cold War” strategies — all of these responses being brain-dead regurgitations of Cold War thinking from Cold War babies (Boomers, Xers dominating our political leadership class right now).
Honestly, my field of political science/international relations is rancid with this crap right now, to my deep embarrassment and frustration.
In short, the world is on the verge of a major recasting of North-South relations.
The East is up for this and addressing it.
The West seems clueless for now.
We simply lack the broad-framing instinct and thinking on this unfolding strategic reality.
Hence, my life mission seems clear for now.
