October 20, 2007

Developing Countries Return the Favor to Advanced Economies at IMF

On the heels of the warning shot from US creditors, emerging economies now emphasize that the US mortgage turmoil has put global prosperity at risk. The statements of these once-poor countries bear out a long-festering resentment.

There is a lesson here.

Countries do not ever forget an aggressor's humiliating attitude, whether arrogantly projected or misconstrued. Just as the once faltering and newly independent economies are discovering economic stability, autocratic countries will one day become vibrant democracies.

They will democratize on their own bowing to their people's aspirations. IMF and World Bank excesses did not spur economic growth. Similarly, the democratization will not happen because of or under the humiliating duress of American military adventures. When it does, one can be sure those countries will unload years of resentment; especially if the United States goes through a democratic turmoil such as an Abu Ghraib, a Katrina or a sloppy and hung presidential election.

Bloomberg.com: Latin America
``Allow me to point out the irony,'' Brazilian Finance Minister Guido Mantega told the annual meeting of the IMF and World Bank in Washington. ``Countries that were references for good governance, of standards and codes for the financial systems, these are the very countries facing serious problems of financial fragility, putting at risk the prosperity of the world economy.''

At the gathering today, finance ministers and central bankers from the Middle East to Asia expressed resentment at past conditions the U.S. and IMF demanded in return for loans.

``The world is decoupling from the United States,'' said Adam Posen, a senior fellow at the Peterson Institute for International Economics in Washington.

Developing countries are now lecturing the IMF. The G-24 urged the organization to increase ``surveillance of advanced economies, putting as much focus in evaluating their vulnerabilities as it does in emerging-market economies.''

Members of the group include Syria, Ivory Coast, Egypt, Ethiopia, South Africa, India, Iran, Lebanon, Pakistan, the Philippines and Sri Lanka.

This unloading of resentment is not without consequences. Its present form is forceful enough that advanced economies are yielding to restructure the IMF. Increased democratization around the world will also force another round of restructuring of the world order at the UN and in the form of powerful regional alliances that exclude some of the formerly advanced economies.

For sure, there is plenty of economic and democratic reforming to do at home. If not, America will come under increasing pressure from the global opinion. That presents a risk that a future US demagogue will be spurred on an isolationist path rather than playing ball.

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