SOMETHING momentous happened in the month of Julius (July is named after Julius Caesar) in 1944 that has a direct bearing on Zimbabwe’s economic recovery prospects.
The Brett Chulu Column
Understanding the brass tacks of the liberal world order is essential to evaluating the prospects of Zimbabwe’s economic recovery — an unavoidable ritual in current business strategic thinking.
In 1944, from July 1 to 22, a total of 730 delegates from 44 allied countries gathered at Mount Washington Hotel (whose postal address incorporates Bretton Woods) in the United States to consider proposals on a new international economic order. Two proposals were considered, one from Britain’s foremost economics intellectual and chief negotiator, John Maynard Keynes and the other from a senior US bureaucrat and principal negotiator, Harry Dexter White.
White prevailed over Keynes, owing to the fact that the US at the time was the most powerful nation, militarily and economically. In short, White’s proposal formalised the liberal world order as the rallying vision of a post-World War II world. In the international arena we have rule-makers, rule-shapers and rule-takers, reflecting the descending order of economic and military power. That’s the reality. Owing to its economic and military supremacy, the US dictated rules of the then emerging international order.
According to the World Economic Forum, that liberal world order has three pillars: liberal economic order, liberal political order and international security or strategic order. By default, the US became the custodian and guarantor of these three orders. It is very critical to understand the significance of this custodianship as it shapes how the powerful world forces and their institutions think and act. Simply put, the Western world and its institutions will vigorously defend the liberal world order.
Nations that violate principles of the liberal world order are flagged and pressured to respect the three pillars of the liberal world order. This is what is at the heart of Zimbabwe’s conflict with the Western world and our economic recovery is predicated on how we relate to this so-called liberal world order. We can’t wish this away.
The liberal economic order pillar is applied through principles such as free markets and free trade. These principles were adopted within a historical context. A consensus was reached that the period between WWI and WWII had been marked by destructive protectionism characterised by ruthless trade wars and beggar-thy-neighbour practices.
The interlocutors at the 1944 Bretton Woods conference agreed that extreme protectionism had contributed immensely to sowing the seeds of WWII. Powers had formed trading blocs along colonial ties and simply shut out other nations.
Germany, without a colonial trading bloc, resorted to invading weaker European neighbours. As history attests, Germany’s territorial invasions triggered WWII. In addition, mechanisms to balance trade such as the gold exchange standard had failed. Trade-surplus nations failed to expand money supply as required, deliberately stoking up inflation, thereby helping trade-deficit countries reduce their trade deficit.
Predictably, trade-deficit nations balked at the requirement to continue deflating their economies with the attendant politically suicidal increase in unemployment while trade-surplus nations were not playing by the rules.
The collapse of the gold exchange standard saw nations inevitably turning to beggar-thy-neighbour policies.
Consequently, the Bretton Woods conference viewed the establishing of a liberal economic order as critical to preventing another world war. This is why the Bretton Woods institutions unambiguously run with the mandate to defend and preserve the liberal world order. The liberal economic order is inextricably tied to the liberal political order.
The liberal political order is aimed at promoting the so-called democratic governance principles applied through such practices as “free and fair” elections, press freedoms and many other democratic practices that fall under the rubric of freedoms. Put more plainly, the liberal political order is opposed to what adherents of the liberal world order classify as dictatorial governance tendencies (sometimes overlooked as long as a nation strongly adheres to the liberal economic order).
It should be clearer why politics and economics always come into play when Zimbabwe’s economic recovery is discussed internationally. In the case of Zimbabwe, it seems an unremitting insistence on a liberal political order is seen as the only gateway to a national liberal economic order. Plainly put, small nations that intractably refuse to acquiesce to the liberal economic order are pressured to yield to the liberal political order as a prerequisite to getting economic assistance.
China’s ascendancy as an economic power was built on its voluntary undertaking to accept the liberal economic order by formally adopting free market and free trade policies as evidenced by its accession to the World Trade Organisation. Without accepting the liberal economic order, it is most likely China will still be wallowing in poverty.
In the case of Zimbabwe, a perceived violation of the liberal economic order was the mid-wife to our current economic malady and we are paying dearly for it. By dumping the willing-buyer-willing-seller principle, an unambiguous liberal economic order principle, tied with our refusal to compensate farmers for the loss of farms we were seen as enemies of the liberal world order — a very serious sin in the books of the liberal world order adherents. It’s not surprising that the Bretton Woods institutions and Western politico-economic institutions were urged or legally nudged not to extend financial assistance to our state-related entities.
The truth of the matter is that the custodians of the post-WWII liberal world order do not care about the identity of who rules us — they are ready to support whoever promises to subscribe to the liberal economic order. Zimbabwe’s current efforts to re-engage the Bretton Woods institutions and the Paris Club by promising to pay our long overdue debts are a necessary but not sufficient step. The Bretton Woods and the Paris Club are custodians of the liberal world order and our interaction with them will always be guided by liberal world order fundaments. They will surely be exultant to get back their money.
However, fresh loans will be based on how as a country we stack up against the benchmarks defining the liberal economic and liberal political orders. These codes will always be the elephant in the room as far as our economic recovery is concerned. Our action plan for compensating farm losses will eternally be a central point of interest in normalising relations with the custodians of the liberal world order — compensation will not be allowed to fall between the cracks.
When we joined the Bretton Woods institutions on September 29 1980, we were signing up to adhere to the liberal world order codes irrespective of whether we fully understood this or not. We are still a member of the IMF and our membership is still predicated on the understanding that we have to subscribe to the liberal world order. This is the only game in town, unfortunately. China wised up to this reality a long time ago and embraced the liberal economic order. Look east.
Short of an unambiguous commitment and action plan to implement the liberal order, our economic recovery will be tantamount to climbing a greasy pole. We don’t have to toss a coin.
Chulu is a management consultant and classic grounded theory researcher. He has published research in an international peer reviewed academic journal.