A very major event took place in Paris last week, only it got crowded out of the media coverage by Evgeny Prigozhin's weekend non-coup coup attempt in Russia. France's President Emmanuel Macron took the lead in bringing the global community together to develop a new financial architecture for the future and hosted the Summit for a New Global Financial Pact in Paris on 22 and 23 June. Among the attendees were many of the leaders of Western European, African and Latin American nations as well as the heads of the IMF, World Bank, US Department of the Treasury, the ECB and the European Commission.
© Alex Krainer's TrendCompassSouth Africa’s President Cyril Ramaphosa speaking at the Summit For a New Global Financial Pact in Paris, 23 June 2023.
The need for a new Global Financial Pact, supposedly, is due to the risk of climate change and the transition from fossil fuels to clean, sustainable energy sources. Western experts estimate that this transition will require an expenditure of about $1 trillion per year through 2030. That's a lot of money, but it is actually among the more moderate projections of what it will take to Build Back Better. Western leaders are proposing to fund the transition by levying a global tax. The specific objective with respect to climate would be to limit global temperatures to 1.5 degrees Celsius above the pre-industrial levels. Presumably, the new financial architecture for the world would entail a global tax paid to a supra-national governing structure - perhaps the World Economic Forum's partner organization, the UN - who would use that money to fix the climate emergency for us and save the planet.
The global south is not impressed
Now, even supposing that this whole scheme is not another preposterously dumb and fraudulent boondoggle contrived by western financial oligarchy to fleece the rest of the world, the nations of the global south were clearly less than impressed. While paying some lip-service to climate change, many African leaders were appropriately critical of the proposed plans. Zambia's President Hakainde Hichilema warned he'd be a bit abusive to President Macron and pointed out that "Zambia was used, more or less, like a guinea pig" by western powers. He stressed that, "before we talk about financing, more financing, new financing, ... you cannot expect a poor person to carry an additional burden. ... Poverty actually exacerbates the climate change mitigation measures. ... For us as a global community to mobilize resources - yes, but these resources must be invested to help grow our economies."
We were made to feel like beggars
South Africa's Cyril Ramaphosa was more blunt still; recounting his nation's experience with the western powers during the Covid 19 Pandemic, he said that "we were made to feel like beggars... That has generated and deepened disappointment and resentment on our part." Ramaphosa reminded western leaders that the west had promised African nations development funds of $100 billion/year but these funds were never made available. He insisted that now, "we must see action from the west, not just talk."
He proposed a concrete infrastructure project that urgently needed development funding. Ramaphosa said that to this day, 600 million Africans still have no electricity even though Africa has all the resources needed to have abundant electricity, especially from the Congo River. He said that the project of constructing the Inga Dam on the Congo would generate sufficient electricity for 12 to 15 African countries in one go, and called on western leaders to walk their talk:
"If we can do that, then we as Africans will now be convinced that these summits are really meaningful; that we will now go home and say, 'you know what, it's worth while going to these summits, coming to Europe, and to listen to all the promises because they are willing to act on the promises.' This is what, President Macron, I believe would be one of the most important outcomes [of this summit]. The reform of the financial architecture as well as the practical project - infrastructure project that is going to add a lot of value. ... Generating electricity and building power stations on the Inga dam is the most important ... I believe [it] needs to be addressed now. Let's get that done and then we will be convinced that you are serious with the promises that you make."The Inga Dam should be a good test of western commitment to Africa's economic development.
© Alex Krainer's TrendCompass
You are not hearing us!
In referring to the funds collected from the proposed global tax, Kenya's president William Ruto rejected the idea that those resources be controlled by the World Bank and IMF, "because at IMF and World Bank you have the final say, we have no say. We want another organization of equals. ... That is why we are saying, we need a new financial architecture where governance, where power is not in the hands of a few people. ... Talking will not solve this problem; you are not hearing us!"
In all, western powers seem to have shredded their credibility and many nations feel that following the dictates from the West is no longer their only option. Accordingly, they are rejecting it: walk your talk, or we're done with you! Clearly, the developing nations today appreciate that they have a choice. That in itself is a huge, tectonic change from several centuries of western monopoly of power which resulted in a harsh colonial relationship with much of the world, imposed first through military conquest and later through debt clientage.
What having no choice meant for colonized people
In 1791 African slaves in Haiti staged a successful rebellion, and were able to defend their freedom even against Napoleon's large-scale invasion in 1801. Napoleon lost more troops in Haiti than at Waterloo. In spite of that, they ultimately had to submit to France's dictate: they simply had no other way to be connected to and trade with the rest of the world. In 1825 France graciously agreed to recognize Haiti's independence, but only if Haiti agreed to pay an indemnity to France in the amount of 150 million Francs.
How much money was that? For perspective, in 1803, France agreed to sell all of the Louisiana territory to the United States - an area 77 times larger than Haiti - for 80 million Francs. Haiti's choice was simple: pay up, or it's war! Of course, Haiti was unable to pay even a fraction of that amount. Instead, it found itself in debt bondage to French banks which condemned the Haitians to more than two centuries of chronic underdevelopment and abject poverty.
Such remorseless, unscrupulous colonial plunder was only possible for as long as western powers like France and their ruling oligarchies had an effective monopoly on power, both in the military sense and in their control over the global financial architecture. Today however, this is changing, for the first time in centuries thanks to the leadership of Russia, China and other BRICS nations. In his remarks during the Summit in Paris, Zambia's President Hichilema openly praised China for its support and thanked China for generous development funds offered at 1% interest - a sharp contrast to the harsh financing conditions from western financial institutions.
Western capital markets will reap a storm
A mutiny of the global south and abandonment of the western debt servitude risks blowing out much of the collateral that's underpinning the already collateral-starved western financial system. These tectonic shifts will almost inevitably have an earth-shattering impact on western capital markets over the coming years.
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