PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay in Washington.
At recent international meetings, such as the G-20, there’s been all kinds of talk about the need to regulate finance, particularly as it affects commodity prices, especially food and energy. There’s been a lot of talk about regulating finance, but there’s been very little concrete results. Countries like China, India, Brazil, and to some extent Russia (although Russia’s a littleâ€”has a foot in the other court) have been pushing for finance reform that will at least to some extent control the price of food. And in upcoming G-20 meeting expected in Mexico in June, a lot of focus will be on whether or not finance, and as it affects commodities, will be controlled.
Now joining us to talk about this is Vijay Prashad. Vijay’s a professor of international studies at Trinity College. He’s written the books The Darker Nations: A People’s History of the Third World, and more recently Arab Spring, Libyan Winter. He joins us from Hartford, where he teaches at Trinity College, in Connecticut. Thanks for joining us again, Vijay.
VIJAY PRASHAD, PROF. INTERNATIONAL STUDIES, TRINITY COLLEGE: Thank you.
JAY: So there’s a sort of fight developing here between these BRIC countries and other developing countries and the developed (as they like to call themselves) countries over finance regulation. How is it shaping up for G-20?
PRASHAD: Okay. Let’s go a little back to where I think this phase of the story begins. In 2007-2008, during the financial crisis, there was a lack of confidence among the G-7 countries, the Group of Seven countries. Particularly the French, the English, and the Americans seemed uneasy about the scale of the financial crisis. So at the G-20 meetingâ€”that is, the G-7 countries, the main Western European countries plus Japan, and then a wider array of countries from across the so-called emerging world, you know, including Brazil, India, China, Indonesia, etc. So at the G-20 meeting in London, the powers from the North Atlanticâ€”the Americans, the British, and othersâ€”said, you know, maybe it’s time to wind up, to close down the G-7 and have the G-20 be, as it were, the executive of the planet, and that we as the G-20 will come up with new rules for international finance and various things. And at that time, a plea was made to countries like China and India to put some of their surplus capital into the IMF to improve the problem of global liquidity. And that’s exactly what India and China did. You know, it’s grossly ironic that India and China, countries that still have very large numbers of people in poverty, were essentially creating a fund to stabilize the world financial system. But that’s what happened.
Well, very soon after 2009, as things began to settle down a little bit in the world of finance, this promise of winding up or closing down the G-7 was forgotten, and certainly very quickly it was considered to be gauche to raise questions of financial regulation. So over the course of theâ€”toward the end of 2011 and into 2012, as the preparatory meetings were going on for the UN Conference on Trade and Development meeting, which will be held in April in Doha, Qatar, for the Rio+20 meeting, which is more about the concept of sustainable development, which is going to take place in Rio de Janeiro in June, and for the G-20 meeting which will be held in Los Cabos, Mexico, again, in June, the preparatory meetings, the countries of the Global South have once again introduced questions about financial reform, about how to deal with this kind of incredibly toxic financial superstructure which is eating away at the economies not only of the South, but also of the North.
JAY: And just to be concrete, the part of this they’re particularly concerned about is how it affects the price of commodities, first and foremost food, ’causeâ€”and energy, because everyone that studies thisâ€”or I should say almost everyoneâ€”says that speculation and the role of finance is artificially creating price bubbles, both in food and energy, and that’s what these countries are saying they want to deal with. Is that right?
PRASHAD: That is precisely the problem. I mean, some of them have a, as it were, philosophical problem with having index investors, commodity speculators, and others enter the food futures market. And the philosophical objection they have is very simple. They say that speculators, or indeed index investorsâ€”pension funds and things like thatâ€”take a long-term position in food prices, and they would therefore like to see their holdings improve in value. In other words, what these kind of investors would like is an inflation in prices. And that works against the idea of a financial market for food which is to create stability in food prices, not to create inflation as a necessary part of the food pricing structure. So some people have this kind of philosophical problem with investors in the foodâ€”particularly food commodities section.
Other people say that there is just ruthless speculating happening. As people with a lot of money are feeling uneasy about investing in infrastructure or investing in, say, tTeasury bills in economies like Italy or Greece or Spain, or, in fact, even in Northern Europe, as they feel uneasy, they are parking their money in commodities. So for a variety of reasons, these countries of the South say there needs to be some kind of serious thinking about the role of finance in the world today.
And, you know, whereas this had been something that the North had suggested was a good idea at the height of the financial crisis, and had extracted promises from the South based on that promissory note, now they are actually quite aggressively pushing back and saying that, you know, these agencies or these discussion forums need to return to their so-called core competencies. You know, if you’re talking about trade, let’s talk about so-called free trade; if you’re talking about sustainable development, let’s talk about carbon; let’s not, you know, mess all this up with discussions of finance; whereas countries of the South say, look, you know, you cannot discuss questions of trade unless you raise issues of finance.
JAY: And one of the examples of that and the lack of success at regulating this is the fight that took place over whether there would be what they call position limits at the Commodity Futures Trading Commission in the United States, ’cause so much of the world’s commoditiesâ€”not all, but a great deal of itâ€”winds up going through Chicago and the American trading houses. And the idea would be that speculators couldn’t have more than a certain percentage of any commodity in a speculative play. And what they wound up passing, in terms of regulation, people have called Swiss cheese regulationâ€”there are so many holes that it winds up more or less ineffective. But is that whatâ€”that’s the type of thing that these countries are wanting is real regulation on position limits and things like that.
PRASHAD: Oh, I mean, look, that’s just the basic, reasonable kind of suggestion [incompr.] you have some speculators who take monopoly positions on commodities and then drive the prices wherever they wish to. And that, you know, particularly for countries that produce, you know, one major exportâ€”if you are principally, say, a cocoa exporting country and you have, you know, a group of speculators that have a monopoly position in the cocoa market and are able to move the market around, this is affecting, you know, not only the livelihood of cocoa farmers around the world, but there are certain countries in the world that are thoroughly disadvantaged, you know, vis-Ã -vis the role of finance over their main export crop.
So how [incompr.] come to a debate about, say, you know, improving, you know, transaction costs, or how can they come for a debate about, you know, customs union duties and things like that, when the principal problem for them has been taken off the table by the North? So this is a fierce fight. And into this fight, of course, has walked the so-called BRICS countries.
JAY: Now, it’s not like the BRICS countries (or the others, for that matter, but it’s the BRIC countries in particular) are anticapitalist or anti-neoliberal or anything. I mean, these are major global capitalist players, all these countries. I mean, take Brazil, for example. They have perhaps the biggest mining company in the world, Vale, which I think is the number one iron ore company in the world. The Russians are enormous players both in wheat, in energy and oil, and in, you know, aluminum and other things. So they’re playing in this whole sandbox. Butâ€”so then what’s the nature of the contradiction?
PRASHAD: Well, the first thing to put on the table is that the BRICS emerged not simply from their own endogenous economic development pattern, but there’s also a larger agenda at work here. You know, in the 1980s, during the height of the debt crisis, there was a commission founded. The chairman of the commission was Julius Nyerere of Tanzania. And the general secretary of that commission was Manmohan Singh, who is now the Indian prime minister. And they fashioned themselves as the South Commission. They worked for about four years to produce a report called The Challenge to the South, and in that report they had suggested that one of the ways forward for the countries of the South was to allow certain countries, you know, to allow them, I suppose, morally, to, you know, utilize the means of neoliberalismâ€”which certainly means that everybody in that country won’t benefitâ€”but let them become what the South Commission called "the locomotives of the South". At that time, the South Commission championed the creating of the G-15, the main countries of the biggest demographic and economically powerful countries in the Non-Aligned Movement. And it’s out of that political process that the BRICS comes.
In other words, there are two stories of the emergence of the BRICS. One is this endogenous kind of freeing up the capitalists within these countries to privatize various sectionsâ€”you know, the classic neoliberal story. And then there’s the political story, where there was a very deliberate attempt to create a platform to make space for the South in a challenge to the North. That was the general theory.
That has indeed come into play now, where the BRICS countries are positioned to stand up against the G-7. Now, they don’t stand up with an alternative. They don’t have institutional or ideological alternatives to change things in the world. But what they have created is some space. Now you have a powerful enough actor from the South that is standing toe to toe against the North. And as long as they genuinely stand toe to toe, they might open some room up for genuine discussions to take place, which have not taken place for 30 years. For 30 years the UN Conference on Trade and Development has been paralyzed, and as a consequence of the BRICS, new questions are being asked about the role of international trade and such like. But that is the most that one can expect from this challenge.
JAY: I mean, standing up toe to toe, though, in the sense that they have such a conflict of interest themselves, these BRIC countries, and that many of their elite are fully involved in all the derivatives and speculations and finance, and many of the top elite in all of those countriesâ€”I would guess including the Chinese, for that matterâ€”have all kinds of investments in exactly the finance institutions that are playing these games. And as I said before, these countries are big commodity producers; they’re fully integrated in this global system. So how do they really go toe to toe when they’re so enmeshed in it all?
PRASHAD: This is exactly the position we are at now. It should be said that in many of the countries, the regimes are deeply nationalistic. So they have put national interests above the interests of, say, you know, global finance as a class in itself. In other words, you know, I would make the case that the United States government in these forums frequently represent international financiers, international, you know, business people, etc., much more than they represent the national interests of the people who live in the United States of America. You know, with Brazil, for instance, it is a complication, because the Brazilian government at present, which is separate from the state, the regime, all the classes inside, the government has commitments to a kind of national development model, which is slightly contradictory. And I think, as I said, this is notâ€”they are not coming in the BRICS to create some massive institutional alternative to neoliberalism, because they have all these contradictions. You know, even the Indian government remains verbally pledged to rural India, and that drags the government into these forums where they have to argue against the North on things like subsidies to agriculture in the North.
So in the conflict, spaces opened up. You know. And hopefully when that space opens up, countries fromâ€”much smaller countries from the Global South will be able to jockey just a little bit. You know, for 30 years there’s been suffocation in these debates. All we have now is the first few breaths of air. And one doesn’t know where this is going to go because of that, because it’s so new.
JAY: But to some extent one part of this we kind of do know where it’s going to go, and that is there is no sign of any serious regulation of finance coming in the United States, especially on commodities. There’s people fighting for it, people fighting for reforms, but they are, so far, completely overwhelmed by the lobbyists and money of the banks and the commodity traders and such, and it doesn’t matter [incompr.] Democrats or Republicans. The Democrats seem a little more inclined to some regulation, but it’s hard to know if that isn’t just good cop, bad cop, because they know it’s not going to pass under this current Congress anyway. So doesn’t it reach a point where these countries with these big, big populations, with so much poverty and so much hunger and starvation and malnutritionâ€”if there’s any seriousness about defending stabilized food pricesâ€”or some people call it food sovereigntyâ€”don’t they have to break away from this, at least as far as it regards food?
PRASHAD: If these were revolutionary governments and if they had a revolutionary position, that I think is where they would go. I mean, you know, this is not a forum dominated, say, by Bolivarianism or the kind of agenda that is there in Venezuela. This is a very modest kind of equation that they have. Where they are able to open spaces, they have. And when they promised, for instanceâ€”because they have been jilted, especially around governance issues at the IMF and the World Bank, you know, their feelings are hurt, as it were.
They have now promised to open two avenues which I think are very interesting and bear notice. One is they’re studying the creation of a Bank of the South. You know, this isâ€”if it is similar to what the Bolivarians have done, which is to create Banco Sur, then there are maybe some possibilities to this as an alternative to the World Bank, drawing a few lessons from the Chinese heavy investment, investment in places like, you know, Africa and Southern Asia, etc. This might be an interesting thing to look at. The second thing that they have talked about is to move away from using the dollar to denominate the trade between their countries. They want to start doing more local currency trading. This is also very interesting. You know, if this is not a challenge to neoliberalism directly, this is certainly a challenge to U.S. dominance over the world economic order.
JAY: Thanks for joining us, Vijay.
PRASHAD: Thank you so much.
JAY: And thank you for joining us on The Real News Network.
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