Can economic democracy emerge from the wreckage of financial colonialism?

Gustavo Petro, president of Colombia, uttered some strong words during the COP28: "what we see in Gaza is the rehearsal for the future." 

We are living in an incredible paradox: where, on one side, the world economy we know is massively productive due to the easy accessibility of resources, technology, factories, energy, and materials. Yet, ironically, the vast majority of humanity lives in the condition of massive deprivation. What on earth could explain this? 

The answer ultimately lies in our system of production. The social and ecological crisis the world and its people are facing is often implied to be unresolvable. That's a massive lie, because these can not only be addressed but also resolved rapidly. So far, we have not been able to achieve it because we do not possess control over our own production capacities and system. That is what is called a lack (or even absence) of economic democracy. 

Some of us live in political democracies, where from time to time we get to vote for and elect our government officials. But when it comes to economic democracy, not even the pretence of democracy is allowed to exist. 

This is a serious crisis, and its root can be traced back to capitalism. The antidote to capitalism is economic democracy, which means we should have collective democratic control over what we are producing, what the goals of our production are, who gets to benefit from it, etc. 

But many nations, specifically from the global South, do not have the power to do it because we lack economic sovereignty. The world, while acknowledging the global North's responsibility to address the climate crisis, also expects the South to get involved with impactful climate crisis mitigation talks and initiatives, but how are they supposed to do that when they do not have sovereign control over the labour market, land, and energy? 

This is not a mere coincidence. We need to understand that the struggle for economic democracy in the South is fundamentally antithetical to the capitalist world economy, the global North. This is because capitalism thrives on cheap labour and resources. So any attempt by the periphery (the global South) to achieve economic independence, to use their own resources for their own betterment, is destabilising for capital at the core. 

History shows that capitalist patrons react with the most extraordinarily violent backlashes when this is attempted. Now it's happening in Palestine; before it was Syria, before that, it was Iraq, and before that, it was Congo, and it never stops. 

For example, the situation with Palestine now is not only diabolical on moral grounds, as common folks think about it. For the capitalist world power, it's a matter of suppressing and crushing liberation movements because a liberated Palestine means a liberated Middle East, and a liberated Middle East means capitalism faces a serious catastrophe. That, they will never let happen.  

To achieve economic equality and to close the global inequality gap, often developing nations turn to international institutions, i.e the International Monetary Fund (IMF) and the World Bank. These are key institutions for macroeconomic development that get to decide the rules of the global economy and also the domestic economy rules through structural adjustment programs. What happens inside these giant institutions raises alarming concerns. 

In the case of IMF, the United States for example, has 16% of the votes and veto power over all major decisions, and the global North (Canada, UK, Japan, etc.) has most of the rest of the votes, and the global South, which has 85% of the population, has less than 50% of the vote. In other words, people in developing countries have only about 1/10 of the votes that people in rich countries have on a per capita basis. It is perplexing! To this, some argue that such international institutions provide a safety net against capitalism via providing financial support (foreign aid, loans, etc.). 

Let's assume that by providing financial assistance to the global South, the global North is trying to close the inequality/economic gap. Is it really happening though? Each year approximately $2 trillion flows from the global North to the global South in the form of aid, loans, and foreign investments. The shocking flipside is that $5 trillion flows back in the opposite direction, from the South to the North. This means the global North takes a net total of $3 trillion from the South per year. 

That's 24 times the aid budget than what the South receives. The people of the global South contribute most of the labour and resources that go into the world economy, but the poorest 60% of humanity receive only 5% of all of the income that's generated by global economic growth each year. The rest goes straight to the already rich. 

The point is, rich nations remain rich at the expense of the economic deprivation of the rest of the world. Colonialism in actuality never ended; it just changed form and is well-masked now. Though this '1 to 24 figure' applies more to transition economies like Malaysia, Kuwait, etc, where more capital is going out than coming in, an emerging nation like Bangladesh, which provides a hub for cheap resources and labour, is not out of its reach if due focus is not given.

If foreign aid is not the solution, then what can the global South do to tackle this? As Walter D Mignolo said, "We have to delink from the core." During the 1970s the global South fought back against such institutional apartheid and launched a set of proposals under the name 'The New International Economic Order (NIEO)' in 1974 through the United Nations, aiming to reform the global economy to address inequalities and promote their interests. The NIEO aimed for a more equitable and just world economic system, seeking to improve terms of trade, increase development assistance, and reduce tariffs in developed countries. It faded from global attention during the 1980s, replaced by discussions of structural adjustment programs and the Washington consensus, and that was the end of history for NIEO. Maybe it is time to resurrect the spirit of NIEO to decolonise the economic affairs of developing nations and initiate discussions on reforms to the structure, governance, and norms of the global economy. 

The struggle continues — in Gaza's rubble, in IMF boardrooms, and in the daily resistance of Southern workers. Economic democracy remains both our greatest challenge and only salvation.

Sketch: TBS

S Arzooman Chowdhury is an Alumna at the University of Cambridge and a Human Rights and Research Specialist.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.