THE WORLD CALLS TIME ON WESTERN RULES / THE FINANCIAL TIMES COMMENT & ANALYSIS

August 1, 2014 6:45 pm

The world calls time on western rules

US and Europe face challenges over global governance

Two months ago the hands on the clock on the Congress building in Bolivia began to move anticlockwise. This was not a malfunction. The clock is designed as a protest against the domination of the north (more frequently known as the west), in world affairs.

The Bolivian government, which installed the timepiece in June, points out that clocks evolved from sundials – and that the sun moves in a different direction in the southern hemisphere. David Choquehuanca, the foreign minister, remarked: “Who says the clock always has to turn one way? Why should we always obey?”

The strange case of the Bolivian clock should not be dismissed as mere eccentricity. A revolt against global rules designed in the US and Europe is well under way. And its consequences will be felt well beyond the clock towers of La Paz.

The past fortnight has seen the formation of a Brics bank – by Brazil, Russia, India, China and South Africa. This bank reflects exasperation with the IMF and the World Bank, which are both based in Washington and always headed by a European and an American. 

Although the Brics nations now account for about 20 per cent of global output, they get only 10.3 per cent of the votes at the IMF. The new Brics bank will be based in Shanghai.

The desire of the Brics and the Bolivians to rewrite the global rule-book is a backhanded tribute to the continuing power of western institutions to shape the world – and to dish out punishment to those who break their rules. Just this week, Argentina was pushed into a sovereign default, following an adverse ruling by a US court. Meanwhile, the future of Russia’s largest banks looks bleak, after the imposition of EU and US sanctions, restricting their access to western capital markets.

This week, too, India rejected a new trade-facilitation deal at the World Trade Organisation, arguing that richer, western nations had failed to accommodate Indian interests. There is growing talk of challenging US power over everything from the internet to the global financial system.

Shifts in global economic power suggest that changes in institutional power may be logical – or even inevitable. Why should the US set the rules for the internet, when most internet traffic no longer involves Americans? Why should the dollar be the global reserve currency, when the US is no longer the unchallenged core of the global economy?

Ultimately, the only convincing western answer to these questions is to demonstrate that while many global institutions reflect their origins in the west, they continue to operate in the interests of the whole world.

Fortunately, the west’s enduring advantages do not rest solely on economic might. They are also crucially dependent on a reputation for robust and independent institutions that are capable of acting independently of government. It is significant that even as the EU, including Britain, moved towards sanctions on Russia, rich Russians continue to seek visas to Britain and to use the UK courts to arbitrate their disputes.

But if non-western nations decide that the west is abusing its institutional power – by, for example, bugging internet traffic, imposing arbitrary economic sanctions or abusing the courts – they will feel much more motivated to set up alternative institutions, and to redirect the wiring of the global governance system, so that it no longer runs through the west.

It is by protecting a reputation for fair dealing, robust institutions and the rule of law that the west will preserve its strength. China, India or Brazil are not yet close to challenging the robustness of western law and governance. As long as the west protects the integrity of its institutions, the world’s clocks are likely to keep ticking in the traditional manner.


Copyright The Financial Times Limited 2014.