Tuesday, January 15, 2008

For a different world view

Remember James Wolfensohn? Yes, I am referring to the former Word Bank President. A piece written by him is printed in today’s ET. I strongly recommend reading it once. Do so here.

He suggests in his article that the notion of a divide between the rich developed north and the poor developing south has become obsolete in the context of globalization. The dynamic process of globalization has heralded the emergence of four inter-connected tiers of countries in the world.

The first tier comprises of the affluent countries – notably the US, EU, Australia and Japan. These countries which have relatively smaller populations and have contributed significantly for the world GDP in the last 50 years are now increasingly seeing a challenge from the second tier countries.

The second tier comprises of the emerging economies which account for roughly 50% of the world’s population. Though these had smaller growth rates in the region of 3.5%, they have learned how to integrate optimally with, and leverage the global economy to catalyse their development.

The third tier is made up of roughly some 50 middle income countries which continue to depend basically on their natural reserves. These ‘rentiers’ have not been able to translate rents of their natural resource wealth into sustained economic growth.

The fourth tier comprises of the laggards – the world’s poorest economies which continue to stagnate or decline economically. These are mostly located in the sub-Saharan Africa and they face crucial developmental challenges.

This emerging four tier world presents 3 key challenges:

First, is ensuring that the laggards no longer are left behind.

Second, is that the old powers need to accommodate the rise of globaliser economies by reforming the international order.

Lastly, the rise of the globalisers also has not been able to make any dent in the unequal world. The existing disparities in wealth or wealth creation capabilities continue to rise. Therefore, there is a need to create a more equitable world by scaling up the traditional levers of development such as trade, investment, aid and migration by reforming the global institutions.