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World: Is G-15 Summit A Turning Point For Economic Globalization?

  • Breffni O'Rourke

Prague, 3 November 1997 (RFE/RL) -- The summit of the "Group of Fifteen" developing nations in the Malaysian capital Kuala Lumpur may turn out to be an event of greater international significance than anyone could have guessed.

On face value, the three-day G-15 summit which opened today is much like any other gathering of leaders from countries as diverse as Kenya, Argentina, Indonesia and Algeria. There's even a touch of boredom in the air, in that many heads of state have stayed away, sending their deputies instead. In view of this, the Malaysian hosts have said that future G-15 summits should perhaps be held at longer intervals.

But what makes this summit special is the timing. It takes place amid the economic turmoil which has engulfed the former high-growth states of South East Asia, and it follows by a matter of days the wave of extreme volatility which has swept through the world's stock markets.

So the summit, which in the normal course of events would have tinkered with small steps to improve cooperation between member states, has actually become a forum to air fears about where economic globalisation is leading. Host country Malaysia has suffered very heavily in the regional crash of the last few months, and other leaders gathered in Kuala Lumpur are running scared that the same could happen to them -- fears which are quietly shared in many countries around the world.

Malaysian Prime Minister Mahathir Mohamad, no friend of the free market since his country has taken a beating, called in a keynote speech for a marketplace characterised by "fair" rules, though he did not say what these should be. His speech was as usual peppered with remarks hostile to those holding more economic power -- meaning the West.

But others less given to excess mused along the same lines. India's Vice President Krishna Kant said the swings in the international financial markets highlight the need for some insulation of developing countries from the "whims" of market sentiment. He said given the importance of foreign capital inflows into developing countries, and the global interlacing of the market, a new regional and international approach is needed in managing capital flows.

Indonesia's President Soharto called for an international effort to keep financial markets stable, and he suggested the process of economic globalisation could be managed by the United Nations. Zimbabwe's President Robert Mugabe said globalisation and trade liberalisation has brought mixed fortunes to Africa: a few countries had benefited. And he surmised -- probably correctly - that his continent will be largely ignored by foreign investors.

It has to be admitted that the G-15 is not a grouping which exercises much influence in world financial circles, even though it brings together some of the world's potential economic power houses, such as Nigeria, Brazil and Indonesia. And many G-15 leaders -- Suharto included -- are hardly authorites on how to achieve market efficiency.

However their expressions of concern coincide with similar musings by a man who is undeniably an expert in the market, namely U.S. super-financier George Soros. Soros is the individual blamed by Mahathir for large-scale speculation which helped send the Asian currencies tumbling -- an accusation which Soros denies. Soros' group of funds reputedly lost some $2 billion in last week's roller-coaster ride of the markets.

In a radio interview he said the markets need to be kept under some form of control to avoid wild flucutations -- ideally by an "international authority dealing with supervision." He noted that national central banks are the only institutions able to confront speculators, but he said future reaction needs to be done at international level.

He aired the same thoughts in greater detail in a magazine interview appearing in London. He is quoted as saying that chaotic and unexpected movements of financial markets could ultimately destroy society. He called for a review of the concept of the market, saying global markets are being created without an understanding of their true nature.

Taken together, these calls from East and West could represent the beginning of a turning point in the perception of economic globalisation. That is after all a concept which is still being developed, the last word on how it should operate is not yet said. What Soros is getting at, and what the others are groping towards, is the creation of an even playing field for all players at international level. Mechanisms which intervene to distort and cripple the efficiency of the market are not the answer. Proper regulation of a competitive market, as with a successful domestic economy, is the way to remove the fear of the juggernaut of globalisation.