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African Entrepreneur Wants to Bring Order to Urban Chaos

By David South, Development Challenges, South-South Solutions

SOUTH-SOUTH CASE STUDY

All over the global South, urban and semi-urban areas are growing at a furious pace. Great swathes of mega-regions – places where large cities blend seamlessly into smaller towns and villages creating a giant economic hub – are becoming key economic and opportunity drivers in developing countries. One of the downsides of this rapid growth and economic vitality is the chaos and confusion brought by frenetic change. Into this busy landscape steps the fast-moving new world of everywhere computing, where computers exchange information with almost everything in the environment. A Ghanaian information technology pioneer and entrepreneur is changing perceptions about Africa by using the new technology of Semacodes – and proving a semblance of order can arise from the chaos and bustle of the street.

Semacode – a smart 2D barcode – was developed by Canadian Simon Woodside and is a tool to make everywhere computing a possibility. It works by embedding a web address into a 2D barcode called a tag which can be affixed to buildings, street lamps, and other landmarks. If one would like to know more information regarding the area they are in, all they need to do is find the nearest Semacode and use their internet-enabled camera phone to scan and read the code. A camera phone containing the Semacode’s Software Development Kit (SDK) detects and decodes the tag and sends the user the web address using the phone’s built-in browser. The user quickly learns what businesses and services are in the area and what the current street name is.

With code developed in Ghana called Semafox, one can create Semacodes for objects and contexts using a web browser – (http://sohne.net/semafox/). It is now being adapted by Ghanaian entrepreneur Guido Sohne to solve the common African problem of chaotic cityscapes brought about by rapid change, high turnover of businesses and changing street names. This handy tool has the power to revolutionise how people communicate and do business in the South, and a rival technology using a similar concept – QR code – is already widespread in Japan. Semacode also has its own user-contributed community website, Semapedia, to produce semacodes for any object or building.

*~~~~~~~~~~~~~~~~~~~~~*

Sohne is a computer code developer working for CoreNett – a Ghanaian electronic transaction processing company – and has been working on developing the code underlying the semacodes, and also piloting its application on the streets of Accra, the capital. Sohne (a former Kofi Annan ICT Centre for Excellence developer-in-residence), is an excellent example of how an IT innovator in the South is linking up early in a new technology’s development to help develop and evolve it.“It is rare to find African-created technology being used today in Western cyberspace,” concludes Sohne. It “is indeed a step forward for African technology as well as an indication of the benefits of collaborative development based on liberal software licensing such as open source software.”

Published: June 2007

Resources

  • You can download the Semacode reader software, here. This includes software for mobile phones and computer servers.
  • The latest stories and updates on Semacode can be found here.
  • A thorough explanation of rival technology QR Codes and their impact in Japan and how they work, can be found here. At present, QR Codes are used in a variety of ways, from linking to content and advertising in magazines and newspapers, to food product labels, public transportation signage, and as a way to communicate between people on the street.
Creative Commons License

This work is licensed under a
Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 License.

ORCID iD: https://orcid.org/0000-0001-5311-1052.

© David South Consulting 2021

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‘Jacked! | The Taking of the American Order

“We will be asking: is bribery business as usual at the UN?”, US Attorney Preet Bharara, October 2015

“If proven, today’s charges will confirm that the cancer of corruption that plagues too many local and state governments infects the United Nations as well.”, US Attorney Preet Bharara, October 2015

“Corruption at any level of government undermines the rule of law and cannot be tolerated. But corruption is especially corrosive when it occurs at an international body like the United Nations. By paying bribes to two U.N. ambassadors to advance his interest in obtaining formal support for the Macau conference center project, Ng Lap Seng tried to manipulate the functions of the United Nations. The sentence handed down today demonstrates that those who engage in corruption will pay a heavy price and serves as a reminder that no one stands above the law.”, Acting Assistant General John P. Cronan, May 2018

“It is important to send a message, to the people at the UN itself and to other institutions in this country, that perverting the decision-making or attempting to pervert the decision-making through bribes will not be tolerated.”, US District Judge Vernon Broderick, May 2018

It first came to light in 2015. Arrests by the FBI (Federal Bureau of Investigation) in New York – steps away from the headquarters of the United Nations – began a journey of discovery that led to a remarkable story of global order and power upended. Since World War II one country alone reigned supreme over the global economy and the rules and norms that underpinned it: the United States.

In this brief taster, I will flesh out what I have learned to date, framing it in the context of the post-WWII global order.

“We lead double lives. We deal in sex and beautiful women,” Burke’s Law, ‘Who Killed Alex Debbs?’, Episode aired 25 October 1963

Chapter One

The Strange Saga of ‘South-South News’ https://davidsouthconsulting.org/the-strange-saga-of-south-south-news/

It is a story that has it all: the gambling sin-bin of Macau, human and sex trafficking, bribery, corruption, money laundering, spies, and, if they are to be believed, naive UN officials hiding behind their laissez-passer passports who knew nothing about all of this but were happy to take the money for a five-star conference and a trip to China (and a free iPad). How the UN ended up in this quagmire leaves many puzzled and perplexed. Then there is a so-called “21st century” media service that really is a “conduit” for bribery and money laundering (and possibly fake news), and who to this day is still reporting from the United Nations.

May 2018 saw the ending of one chapter in the ongoing corruption saga surrounding the executives of South-South News and their alleged bribery and money laundering conduit targeting the United Nations (UN). On 11 May 2018 Ng Lap Seng was sentenced to 4 years in prison for being the ring leader of an elaborate, multi-year, multinational scheme to bribe UN officials and launder money into the United States.

On 28 February 2018 Jeff Yin received a seven-month prison sentence related to the corruption scandal that first erupted in September 2015, with the arrests in New York (home of the UN’s global headquarters) of his boss, Macau casino owner and businessman Ng Lap Seng and assistant, Yin, by the FBI (Federal Bureau of Investigation). Foreign Policy called the case one of “The Worst Corruption Scandals of 2015”. Read the US Justice Department Docket here: https://www.justice.gov/criminal-fraud/fcpa/cases/ng-lap-seng-and-jeff-c-yin.

The US Attorney for the Southern District of New York at the time, Preet Bharara, released a flowchart showing how the alleged bribery scheme targeting the United Nations worked. A series of court trials followed for the various co-conspirators, including senior executives and board members for South-South News, culminating in the 27 July 2017 conviction of the alleged ring leader of the scheme, Macau casino billionaire Ng Lap Seng, on six counts “for his role in a scheme to bribe United Nations ambassadors to obtain support to build a conference center in Macau that would host, among other events, the annual United Nations Global South-South Development Expo“. He used the news service South-South News as a “conduit for bribery and money laundering” at the United Nations, according to the FBI, something admitted to by various co-conspirators in court and under oath.

“South-South staff found him to be ‘humble, very happy to host a meeting and become closer to the U.N.,’ said Inyang Ebong-Harstrup, deputy director of the United Nations Office for South-South Cooperation, a division of the U.N., who met Mr. Ng in August when she traveled to Macau.” The Wall Street Journal (9 October 2015)

Foreign Policy called the case one of “The Worst Corruption Scandals of 2015”.

In March 2015 UNOSSC Director Yiping Zhou (left) signed a cooperation agreement with the Sun Kian Ip Group of Macau to “set up a multi-partner trust fund to promote the cause of South-South Cooperation” (https://usanewsonline.com/2015/03/07/south-south-cooperation-and-chinese-sun-kian-ip-group-signs-cooperation-agreement/). In April 2015 UNOSSC Deputy Director Inyang Ebong-Harstrup (middle) met with the Chairman of the Sun Kian Ip Group, Ng Lap Seng, in Macau (https://www.wsj.com/articles/u-n-team-had-cleared-group-at-center-of-bribery-case-1444432560). “Adam Rogers (right), an assistant director at the UN Office for South-South Cooperation [UNOSSC], said Ng made hosting that UN event possible.” (http://www.uniindia.com/us-charges-expected-in-un-corruption-probe-involving-macau-developer-source/international/news/225908.html). Sources: Statement Concerning the United Nations Office for South-South Cooperation, UNDP (May 5, 2016); United Nations Audit Raises Red Flag: Graft. Complimentary travel and free iPads. And moving project goalposts., Macau Business Daily, April 25, 2016.

Subsequent Roles

Yiping Zhou: Special Envoy of Director General of the World Women Organization/Chief Advisor of the WWO

Inyang Ebong-Harstrup: Chief of Partnerships, ID 2020

Adam Rogers: Board Member, ConnectAID

UNDP’s Office of Audit and Investigation (OAI) recently published an Audit of UNOSSC which rated the Office ‘unsatisfactory’. The Audit makes 16 recommendations with the objective of improving UNOSSC’s effectiveness in the areas of: governance; programme and project activities; and operations.

US District Judge Vernon Broderick: “there was substantial damage done to the UN itself and the image of the UN”.

Read more from Canada’s CBC News: UN internal audit uncovers lapses tied to bribery scandal | Report highlights the need for greater transparency within the United Nations, officials say

“The United Nations’ internal investigations office has uncovered serious lapses and due-diligence failures in the world body’s interaction with organizations tied to an alleged bribery scheme involving a former UN General Assembly president.

The 21-page confidential report by the UN Office of Internal Oversight Services’ (OIOS), reviewed by Reuters, outlines the results of an audit ordered by Secretary General Ban Ki-moon in response to charges against John Ashe, General Assembly president in 2013-2014, and six other people. …

It noted “important deficiencies” in the way United Nations and its staff interacted with non-governmental organizations (NGOs) and oversees UN employees.

It is the biggest financial corruption crisis to rock the United Nations since the Oil-for-Food scandal hit the world body during the tenure of Ban’s predecessor Kofi Annan.” 

Chapter Two: Sustainable Bribery Goals

Chapter Three: Mr Rogers’ ‘Neighborhood’

The Networks

Network 1

Source: The Age, NOVEMBER 11, 2018.

Network 2

Source: The Wall Street Journal, Nov. 23, 2018. “Bribery Trial Spotlights China’s ‘Belt and Road’: Justice Department prosecutes pitchman for company key to Beijing’s global program”.

Network 3

Network More?

(Sources: Department of Justice, Federal Bureau of Investigation, Supreme Court of the United States)

Chapter Four: I Spy with My Little Eye

Chapter Nine: Pax Chaotica

Pax Chaotica: A Re-evaluation of Post-WWII Economic and Political Order

Chapter Ten: War, Peace & Development

War, Peace And Development | May 2018

Many books now chronicle the multiple facets of the bribery and money laundering network targeting the United Nations from 2010 via South-South News and other entities. From Baksheesh to Bribery: Understanding the Global Fight Against Corruption and Graft Edited by T. Markus Funk and Andrew S. Boutros, Oxford University Press, 30 May 2019, Chinese Spies: From Chairman Mao to Xi Jinping by Roger Faligot, Hurst, 2019, Historical Dictionary of Chinese Intelligence by I. C. SmithNigel West, Rowman & Littlefield Publishers, 5 February 2021, ONU: la grande imposture by Pauline Liétar, Albin Michel, 4 October 2017, Organized Crime and Corruption Across Borders: Exploring the Belt and Road Initiative Edited ByT. Wing Lo,Dina SiegelSharon Kwok, Routledge, 1 April 2021.
Books covering the 2015 United Nations SDGs bribery scandal: ONU: La Grande Imposture, Organized Crime and Corruption Across Borders, New Humanitarianism and the Crisis of Charity: Good Intensions on the Road to Help, Historical Dictionary of Chinese Intelligence.

Further Reading

Books

From Baksheesh to Bribery: Understanding the Global Fight Against Corruption and Graft Edited by T. Markus Funk and Andrew S. Boutros, Oxford University Press, 30 May 2019

Blood Brothers: The Criminal Underworld of Asia by B. Lintner, Springer, 2016

“From pirates singing Ricky Martin to mob hits carried out with samurai swords, Bertil Lintner offers a fascinating look at organized crime in the Asia Pacific. Both Western and Asian pundits assert that shady deals are an Asian way of life. Some argue that corruption and illicit business ventures – gambling, prostitution, drug trafficking, gun running, oil smuggling – are entrenched parts of the Asian value system. Yet many Asian leaders maintain that their cities are safer than Sydney, Amsterdam, New York, and Los Angeles. Making use of expertise gained from twenty years of living in Asia, Lintner exposes the role crime plays in the countries of the Far East. In Blood Brothers , he takes you inside the criminal fraternities of Asia, examining these networks and their past histories in order to answer one question: How are civil societies all over the world to be protected from the worst excesses of increasingly globalised mobsters?”

Chinese Spies: From Chairman Mao to Xi Jinping by Roger Faligot, Hurst, 2019

Crime and Development in the Global South by Jarrett Blaustein, Graham Ellison, Nathan Pino, The Palgrave Handbook of Criminology and the Global South, January 2018

Criminology and the UN Sustainable Development Goals: The Need for Support and Critique by Jarrett Blaustein, Nathan W Pino, Kate Fitz-Gibbon, Rob White, The British Journal of Criminology, Volume 58, Issue 4, July 2018

Corruption in the Global Era: Causes, Sources and Forms of Manifestation edited by Lorenzo Pasculli and Nicholas Ryder, Taylor & Francis, 2019

“Corruption is a globalising phenomenon. Not only is it rapidly expanding globally but, more significantly, its causes, its means and forms of perpetration and its effects are more and more rooted in the many developments of globalisation. The Panama Papers, the FIFA scandals and the Petrobras case in Brazil are just a few examples of the rapid and alarming globalisation of corrupt practices in recent years. The lack of empirical evidence on corrupt schemes and a still imperfect dialogue between different disciplinary areas and between academic and practitioners hinder our knowledge of corruption as a global phenomenon and slow down the adoption of appropriate policy responses.”

The Foreign Corrupt Practices Act Handbook: A Practical Guide for Multinational General Counsel, Transactional Lawyers and White Collar Criminal Practitioners by Robert W. Tarun, American Bar Association, 2010

Historical Dictionary of Chinese Intelligence by I. C. SmithNigel West, Rowman & Littlefield Publishers, 5 February 2021

ONU: la grande imposture by Pauline Liétar, Albin Michel, 4 October 2017

“Au terme d’un long travail d’investigation, la journaliste Pauline Liétar en dévoile les pratiques hallucinantes… et courantes : les soutiens politiques s’achètent, les gaspillages sont légion.”

Organized Crime and Corruption Across Borders: Exploring the Belt and Road Initiative Edited byT. Wing Lo,Dina SiegelSharon Kwok, Routledge, 1 April 2021

Chapter: A hard-boiled Belt and Road Backlash to the UN-Bribes-for-OBOR scandals By Daniel Garrett

The Palgrave Handbook of Criminology and the Global South Edited by Kerry CarringtonMáximo SozzoRussell HoggJohn Scott, 12 January 2018

“The first comprehensive collection of its kind, this handbook addresses the problem of knowledge production in criminology, redressing the global imbalance with an original focus on the Global South. Issues of vital criminological research and policy significance abound in the Global South, with important implications for South/North relations as well as global security and justice. In a world of high speed communication technologies and fluid national borders, empire building has shifted from colonising territories to colonising knowledge. The authors of this volume question whose voices, experiences, and theories are reflected in the discipline, and argue that diversity of discourse is more important now than ever before.   Approaching the subject from a range of historical, theoretical, and social perspectives, this collection promotes the Global South not only as a space for the production of knowledge, but crucially, as a source of innovative research and theory on crime and justice. Wide-ranging in scope and authoritative in theory, this study will appeal to scholars, activists, policy-makers, and students from a wide range of social science disciplines from both the Global North and South, including criminal justice, human rights, and penology.”

Who Blunders and How: The Dumb Side of the Corporate World by Robin Banerjee, Sage Publications, 2019

Wilful Blindness: How a Network of Narcos, Tycoons and CCP Agents Infiltrated the West by Sam Cooper, Optimum Publishing International, May 2021

The role of Ng Lap Seng in the “Vancouver Model” in Canada.
Journalists and scholars alike have probed deep into the criminogenic networks across the global South. Crime and Development in the Global South by Jarrett Blaustein, Graham Ellison, Nathan Pino, The Palgrave Handbook of Criminology and the Global South, January 2018, Criminology and the UN Sustainable Development Goals: The Need for Support and Critique by Jarrett Blaustein, Nathan W Pino, Kate Fitz-Gibbon, Rob White, The British Journal of Criminology, Volume 58, Issue 4, July 2018,
Corruption in the Global Era: Causes, Sources and Forms of Manifestation edited by Lorenzo Pasculli and Nicholas Ryder, Taylor & Francis, 2019, Who Blunders and How: The Dumb Side of the Corporate World by Robin Banerjee, Sage Publications, 2019,
Wilful Blindness: How a Network of Narcos, Tycoons and CCP Agents Infiltrated the West by Sam Cooper, Optimum Publishing International, May 2021.

Media Reports by Month and Year

The Strange Saga of ‘South-South News’ https://davidsouthconsulting.org/the-strange-saga-of-south-south-news/

In the Headlines

Legal Documents

What is the FCPA? “The Foreign Corrupt Practices Act of 1977, as amended, 15 U.S.C. §§ 78dd-1, et seq. (“FCPA”), was enacted for the purpose of making it unlawful for certain classes of persons and entities to make payments to foreign government officials to assist in obtaining or retaining business. Specifically, the anti-bribery provisions of the FCPA prohibit the willful use of the mails or any means of instrumentality of interstate commerce corruptly in furtherance of any offer, payment, promise to pay, or authorization of the payment of money or anything of value to any person, while knowing that all or a portion of such money or thing of value will be offered, given or promised, directly or indirectly, to a foreign official to influence the foreign official in his or her official capacity, induce the foreign official to do or omit to do an act in violation of his or her lawful duty, or to secure any improper advantage in order to assist in obtaining or retaining business for or with, or directing business to, any person.”

The Docket

“As to §666, the Second Circuit
held that the statutory term “organization” covers not
only private organizations, but also quasi-sovereign
public international bodies like the UN
…”

Navigating the Foreign Corrupt Practices Act: The Increasing Cost of Overseas Bribery

“… corrupt payments to officers and employees of public international organizations are prohibited by the FCPA’s anti-bribery provisions. Public international organizations covered by the FCPA include, among others: the United Nations, International Monetary Fund, World Bank, African Development Bank, Asian Development Bank, European Bank for Reconstruction and Development,Inter-American Development Bank,International Maritime Organizations, International Bank for Reconstruction and Development, International Finance Corporation, Multilateral Investment Guarantee Organization,Organization for African Unity,and the Organization of American States.” (Navigating the Foreign Corrupt Practices Act: The Increasing Cost of Overseas Bribery by Robert C. Blume and J. Taylor McConkie)

FCPA Professor: Bribery Involving The United Nations (December 28, 2017)

“The United Nations has a number of anti-corruption initiatives. For starters, there is the United Nations Convention Against Corruption, it hosts the Conference of the States Parties (COSP) (the main policy-making body of the Convention), and the U.N.’s Global Compact states that “businesses should work against corruption in all its forms, including extortion and bribery.”

Instead of looking outward, perhaps the United Nations should look more inward as several Foreign Corrupt Practices Act enforcement actions … have involved U.N. officials or U.N. programs.”

JDSupra: Court to World: Yes, FCPA Is Still Sweeping

“Compliance officers may have seen news of a recent federal appeals court decision that upheld an expansive view of Foreign Corrupt Practices Act enforcement

One said the ruling might be “the tip of the iceberg” that heralds more individuals challenging FCPA enforcement. 

We rarely get appellate court rulings on the scope of the FCPA, so the case spurred numerous headlines. One said the ruling might be “the tip of the iceberg” that heralds more individuals challenging FCPA enforcement. 

For corporate compliance officers running entire programs, however, the case is just more of the same blizzard you’ve been enduring for years – trying to find a steady path forward. 

The case itself, U.S. v. Ng Lap Seng, is straightforward. A Chinese national, David Ng, was a wealthy real estate developer in Macau. In the early 2010s he bribed two United Nations officials by giving them sham consulting contracts worth hundreds of thousands of dollars, in exchange for them trying to convince other U.N. officials to declare one of Ng’s convention centers the permanent home for a lucrative annual development conference. 

Eventually the scheme unraveled, and in 2017 a jury convicted Ng in federal district court of violating the FCPA. 

Ng appealed. He argued that any bribery prosecution must meet the high standards of an “official act” as spelled out in McDonnell v. U.S. — a U.S. Supreme Court ruling from 2016 that addresses cases of domestic bribery of U.S. government officials. Ng wanted that same standard to apply to FCPA cases involving bribery of foreign government officials.

Um, no. The 2nd Circuit Court of Appeals ruled against Ng on Aug. 9, noting that the text of the FCPA defines the quid pro quo of bribery much more expansively than other parts of U.S. law that address domestic bribery. Therefore, the narrow standards of McDonnell don’t apply for FCPA prosecution.”

How to Report Corruption and Bribery at UNDP (United Nations Development Programme)

The Office of Audit and Investigations (OAI) “provides UNDP with effective independent and objective internal oversight that is designed to improve the effectiveness and efficiency of UNDP’s operations in achieving its development goals and objectives through the provision of internal audit and related advisory services, and investigation services.”  

They can be directly emailed here: reportmisconduct@undp.org

Ethics @UNDP

“UNDP’s ethical culture demands that we all hold each other to the same standards of behavior. We expect that if integrity pervades the organization and those who commit misconduct are called to task, the message will become ingrained. The UN is looked upon as the standard bearer for ethical and humanitarian behavior. Our personnel have an obligation to uphold that legacy because individual actions affect UNDP’s image, credibility and reputation.

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Pax Chaotica: A Re-evaluation of Post-WWII Economic and Political Order

Paper delivered to the School of Politics and Government, Birkbeck College, University of London, London, UK, 2000

“The strongest is never strong enough to maintain his mastery at all times unless he transforms his strength into right and obedience into duty…Yielding to force is an act of necessity, not of will; at the very most, it is an act of prudence (Rousseau 1762).” 

By David South

This paper analyses the following proposition: the key post-war institutions were neither an intended, nor an adequate, response to the economic and political challenges of the post-1945 world.

There is ample evidence to show that the plethora of post-war institutions were  intended, and were a deliberate consequence of American policy-makers seeking to control the geo-political fallout of the most catastrophic conflict of human history, World War II.

In many respects institutions such as the United Nations, the International Monetary Fund and the World Bank were a sophisticated and modern approach to a new global order minus the old imperial powers. They were an act of significant imagination and inspiration drawn from a long tradition in asserting the rule of law over the rule of anarchy; the rights of the weak over the tyranny of the strong.

However, these institutions have repeatedly failed to meet the economic and political challenges of the past 55 years. The commitment of the United States to these bodies tailed off after World War II, and America displayed a lack of will to mature them beyond a dependence on American initiative and action.

There is substantial evidence to support the argument that the hegemony of Pax Americana over the last half century undermined the evolution of these institutions, sustaining a chaotic world order that has not delivered prolonged peace or prosperity for a large number of the world’s citizens and that these institutions were ill prepared to confront the collapse of the Soviet Union at the end of the 1980s.

This paper will explore the inadequacies of the global institutions to meet two key aspirations of the post-war world: conflict resolution and avoidance and economic prosperity based on free markets and democratic regimes.

I will argue that, while this period avoided a major conflagration on the scale of the world wars, it was not a period of peace. Regional conflicts, costly both in terms of human life and of finance, plagued every one of the years since World War II. This has been called a period of Pax Americana (Knutsen 1999). I will argue that, rather than a period of global harmony and prosperity anchored by the American hegemon, it has been a period of Pax Chaotica, a “macabre dance of death in which the rulers of the superpowers mobilize their own populations to support harsh and brutal measures directed against victims within what they take to be their respective domains, where they are ‘protecting their legitimate interests,’” as Noam Chomsky describes it (Chomsky 1995: 207). Pax Chaotica is a period in which there is an illusion of stability offered by a hegemon, but in which the hegemon’s military, economic and moral superiority is unable to secure actual peace and prosperity in the world. The hegemon is out of balance, its military and economic superiority in predominance, while its moral superiority and credibility wanes and withers on the vine.

I will analyse how adequate the global institutions were in the context of the concept of hegemony — in particular the hegemony of the United States, which has not relinquished this hegemony to the global institutions it initially set up. I will conclude that the 1990s has been a period of half measures, incremental attempts at bolstering the concept of international security by the community of nations, but that those attempts, as in the case of the Gulf War or in Kosovo, have been still under the direction of the United States.

Making up a master plan: The deliberate development of the institutions

The post-war master plan was comprehensive, and included the International Bank for Reconstruction and Development (World Bank), the International Monetary Fund, the International Trade Organisation (superseded by the General Agreement on Tariffs and Trade as the instrument of freer trade) and the United Nations. A clutch of security organisations was also established after the war, including NATO. As Knutsen aptly puts it:

WITH MEMORIES OF THE INTERWAR RECESSION AND THE NEW DEAL FRESHLY IN MIND, ALREADY, IN THE FIRST YEARS OF THE WAR THEY BEGAN TO DESIGN STABILISING POSTWAR INSTITUTIONS OF INTERNATIONAL FINANCE AND TRADE — THE IBRD, THE IMF AND THE ITO. … THEY SOUGHT TO SET UP THE MOST IMPORTANT POSTWAR INSTITUTIONS BEFORE THE CONDITIONS OF PEACE WERE EVEN RAISED. THEY RUSHED THE CONFERENCES ON THE UN, IBRD, IMF AND ITO INTO SESSION BEFORE GERMANY AND JAPAN SURRENDERED. (KNUTSEN 1999: 203)

The founding of the United Nations and the Bretton Woods institutions (the International Monetary Fund and the International Bank for Reconstruction and Development, later the World Bank) marked a turning point in world history. The United States had been attempting to exert greater control on the global order since the first 14 proposals of President Woodrow Wilson during World War I. As European powers declined at the beginning of the 20thcentury, liberal American policymakers saw an opportunity for the US to assert its hegemony over the world and re-write the rules of economic engagement along American lines. The two world wars only made the US wealthier and wealthier: in World War I, by providing armaments to both sides of the conflict; in World War II by joining with Canada as the armament and resource engine for the allied war effort.

In many ways, the new institutions represented a forward-thinking and idealistic policy compared to a global order marked by imperial rivalries. It captured contemporary ideas on economic theory, projected a universalist Lockean ideal that all men from all nations are equal, and it was injected with the idealism and energy of the world’s largest democracy and the strongest market economy.

Franklin Roosevelt, like Woodrow Wilson, saw America’s engagement in the world  war as a struggle to contain European-style militarism, imperialism and exclusive trade blocs. America’s aim, in both wars, was to preserve the conditions for liberal world order — for a democratic system of politics and an economic system based on free-market principles. Wilson and Roosevelt both sought to liberalize world trade. And they both sought to use America’s leading position in world politics to bring other countries into line with America’s policy. (Knutsen 1999: 193)

These institutions ensured that the US had an influence on every facet of world affairs post World War II. It could merge its political and economic goals and ensure it had a stake in the recovery from the war. This played very well when it came to shoring up domestic support in the United States.

Under a World Bank controlled by Americans, development assistance could be focused precisely where America’s core corporations saw the greatest opportunity. And so long as the recipients of America’s foreign aid used it to buy American exports core corporations could venture into global trade confident of receptive markets. Through such means, the playing field of global commerce was sufficiently tipped in America’s direction so that by the mid-1950s even the National Association of Manufacturers could be persuaded to support tariff reduction. (Reich 1992: 64)

The institutions were philosophically strong, too. Learning from Machiavelli that human relations can be cynical, ruthless and riddled with power agendas, the United Nations offered a peaceful forum to resolve these disputes and a theoretically far more transparent alternative than what had come before. As Weber emphasised, modern states helped to promote capitalist development. With that in mind, the Bretton Woods institutions laid the groundwork for a global financial structure pegged to the US dollar and promoting an American view of free markets.

Hegemony theory and Pax Americana

I argue that these global institutions have shown themselves to be hampered and inadequate when faced with serious political and economic challenges. The root cause is a weakness that is most often cited as their strength: the United States.

Hegemonic stability has been characterised by the emergence of successive dominant liberal powers (Gilpin 1987: 66). What Strange calls “structural power” is essential to the establishment of hegemony over world affairs, since it “confers the power to decide how things shall be done, the power to shape frameworks within which states relate to each other, relate to people, or relate to corporate enterprises (Strange 1998: 25).”

The post-World War II global institutions are an excellent example of the intersection of politics and economy; institutions like the United Nations seek to wield influence in both the political sphere and the economic, most particularly through the Bretton Woods institutions. Hegemonic world order exists, Knutsen suggests, “when the major members of an international system agree on a code of norms, rules and laws which helps govern the behaviour of all. This agreement reflects the rhetorical skills of a particular great power (Knutsen 1999: 49).” This is what happened towards the end of World War II, as the United States wrote the new world order according to its own rules.

As further evidence of US supremacy, the new global rules were constructed so as to force America’s superpower rivals, the USSR and China, to join “its” institutions, not the other way around (though Taiwan stood in for the People’s Republic in the United Nations, against the protests of the USSR, until 1971).

The US became the hegemon because the Soviet Union had very little to offer, either in terms of economic assistance or of political freedoms.

Historians now understand that potential clients encouraged the United States to become a hegemon at the end of World War II: the term “empire by invitation” has come to characterize what happened. The Soviet bid for postwar influence lacked any comparable legitimacy, and so quickly came up against a condition that creates major difficulties for hegemons, which is lack of consent. (Gaddis 1992: 177)

Do as I say, not as I do: The rise and fall of the hegemon’s moral advantage

A large part of the credibility of the US hegemony was bolstered by its moral advantage vis-à-vis other nations. A heady cocktail of democratic freedoms, economic success and military might led many other nations to believe the US and its institutions had got it right where others had failed.

As Strange notes: “President Truman had followed up in his augural address to the Congress with the firm promise of American help to peoples seeking freedom and a better material life. Moral authority based on faith in American intentions powerfully reinforced its other sources of structural power (Strange 1994: 32).”

Supporters of US hegemony, like John G. Ruggie, believe the hegemon must be liberal-minded. Otherwise:

IF THE OTHER STATES BEGIN TO REGARD THE ACTIONS OF THE HEGEMON AS SELF-SERVING AND CONTRARY TO THEIR OWN POLITICAL AND ECONOMIC INTERESTS, THE HEGEMONIC SYSTEM WILL BE GREATLY WEAKENED. IT WILL ALSO DETERIORATE IF THE CITIZENRY OF THE HEGEMONIC POWER BELIEVES THAT OTHER STATES ARE CHEATING, OR IF THE COSTS OF LEADERSHIP BEGIN TO EXCEED THE PERCEIVED BENEFITS. (GILPIN 1987: 73)

The US steadily weakened its credibility and moral advantage in both the areas of conflict resolution and avoidance, and in promoting economic prosperity.

Conflict resolution and avoidance

The US was seen as willing to distort global institutions to fight its ideological — and real — battles with the Soviet Union, and its proxies around the world. The US’s credibility as a promoter of peace and security was severely hampered by the Korean War, the Vietnam War and a dubious record of support for undemocratic regimes and guerrilla movements. These conflicts were intended to “contain” the Soviet Union and the spread of communism and to support regimes that were friendly to free markets. This was played out in a cynical cat-and-mouse game with the Soviet Union, where both sides avoided direct confrontation with each other and used third countries to wage their ideological battles.

Gaddis takes an overly generous view of the Cold War high-wire act, but it is worth being reminded:

BUT THE 1950S AND 1960S DID SEE A REMARKABLE SEQUENCE OF POTENTIALLY DANGEROUS CONFRONTATIONS — DIENBIENPHU, 1954; QUEMOY-MATSA, 1955; HUNGARY-SUEZ, 1956; LEBANON, 1958; BERLIN, 1958-59; THE U2 INCIDENT, 1960; CUBA, 1961; BERLIN, 1961; LAOS, 1961-62; THE CUBAN MISSILE CRISIS, 1962 — EVERYONE OF WHICH WAS RESOLVED WITHOUT MAJOR MILITARY INVOLVEMENT BY EITHER SUPERPOWER. THE SAME COULD NOT BE SAID OF KOREA IN 1950, OR OF VIETNAM AND AFGHANISTAN LATER ON. (GADDIS 1992: 33)

Other than actually being drawn in as a combatant, as in the case of the Korean War, the UN became more of a sideline observer and critic than a robust resolver of conflicts. The UN was critically flawed from the beginning and abrogated its commitment to collective security. It also proved ineffective when confronted with crisis. As Strange points out, one of the biggest weaknesses in the founding of the UN was the Charter. In Article 2, Paragraph 7, all matters of domestic consideration were the business of a state, and in Article 51 states were allowed to form alliances for individual or collective self-defence, “thus reopening the door to a security structure based on alliances and counter-alliance rather than on collective responsibilities for the maintenance of peace between states (Strange 1994: 52).”

The UN was also hampered from developing a collective security maturity by the Security Council. The five permanent members used the veto to control resolutions, with the USSR and the US the most prolific abusers. The US had a total of 69 vetoes from 1945 to 1994; the USSR had 116.

The fall of the Soviet Union at the end of the 1980s marked the beginning of a new period of instability in large parts of the world. The spotlight is once again on the UN to become an arbiter of conflict; once again it is most active when it is pushed by the United States to act when the US feels there is an interest to be served. This has been the case in the major UN missions in the 1990s, from the Gulf War (oil reserves), to the former Yugoslavia (European security). The UN proved to be ineffective where there was no naked US interest putting pressure on the organisation to act, as in the case of Rwanda. Strange remarks that this has had a demoralising effect on those who seek a security structure upholding international law and the universal rights of man.

The fear that either the world organization would merely be the tool of one or other great power (as indeed it was the tool of the United States in the early 1950s) or that it would be ineffectual — as both the League and the UN have proved to be in the face of grave threats to international peace and order — have been enough to kill any realistic hopes of managing a transition from the present security structure to a multilateral or confederal one. (Strange 1994:52)

Economic prosperity

The second half of the 20th century has been hailed as a period of unprecedented global prosperity. Global gross national product rose from US $300 billion to US $2 trillion from 1945 to 1970 (Reich 1992: 64), though much of this was concentrated in a handful of countries. The major challenge of the 20th century has been the task of spreading prosperity around the world; to more evenly distribute the gains than can be reaped from advances in science and technology. The collapse of the colonial powers left large numbers of underdeveloped nations grappling with independence.

With the collapse of the Bretton Woods arrangements in the early 1970s, and the emergence of deregulation in financial flows in the world, the US abrogated much of its responsibility for micro-managing global development. The market was now to do all the work, and being the modern age, rapid capital flows were to make the market work efficiently.

Like the experience with conflict resolution and avoidance, the economic project has been mixed. A dependence on the market has not avoided a dependence on the economic fortunes of the global hegemon. As the US ship rises and sinks, so does the rest of the world. The Global economic system, Panic notes:

WAS RUN BY THE DOMINANT ECONOMIC POWER AFTER THE SECOND WORLD WAR: THE UNITED STATES. IN THAT SENSE, ITS FORTUNES, LIKE THOSE OF THE CLASSICAL GOLD STANDARD, WERE DIRECTLY LINKED TO THOSE OF THE RELATIVE ECONOMIC PERFORMANCE AND POLICIES OF THE COUNTRY RESPONSIBLE FOR THE LARGEST SHARE OF WORLD INDUSTRIAL PRODUCTION, TRADE, AND FINANCE AT THE TIME — PRECISELY THE OUTCOME THAT THOSE ATTENDING THE BRETTON WOODS CONFERENCE HAD BEEN ANXIOUS TO AVOID. (PANIC 1995: 46)

By 1994, total world exports were more than 14 times greater than in 1950; output was five times greater than in 1950 (Dicken 1999: 24). But the economic achievements ring hollow if the well-being of the whole planet is taken into consideration. By 1995, 60 percent of the manufacturing in the world occurred in three countries — the United States, Japan and Germany (UNIDO 1996). While manufacturing in developing countries had quadrupled to 20 percent of global output, it was concentrated in a few developing countries with strong ties to the US.

There is a direct connection between US interests and who does well economically. Western Europe was reconstructed rapidly with US money, and Germany became an industrial powerhouse again. The defeated Japan was restored as Asia’s wealthiest nation with American investment and advice. In 1945, 71 percent of world manufacturing was concentrated in four countries. Developed countries were host to 2/3 of foreign direct investment (Dicken 1999: 21). Most FDI is now concentrated in industrial, developed countries.

There is a direct link between the failures of the UN and the global economy. The weakness of the international security arrangements also have an impact on economies. Vast sums of money are re-directed towards weapons purchases and away from human needs. For many smaller economies, this is a punishing drain on national resources and the funds are often borrowed from elsewhere. As Chomsky noted in the 1980s, “The fact is that both of the superpowers — and many lesser powers as well — are ruining their economies and threatening world peace, indeed human survival, by a mindless commitment to military production for themselves and for export (Chomsky 1995: 209).”

There are concrete examples of developing countries that have achieved significant development gains, reaping the gains of peace and freer world trade. A group of 18 developing countries enjoyed growth rates in the 1990s of over five percent (DFID 2000: 66). This is attributed to more open trade policies compared to other developing countries (though many other countries have been equally open to trade, like Mongolia, but have not reaped the same benefits). China has enjoyed unprecedented growth, but it also has increasing rates of unemployment and violent unrest in its western regions. Sub-Saharan Africa’s 600 million population generates exports no greater than Malaysia’s 20 million (DFID 2000: 67).

In regard to the World Trade Organization (WTO), the majority of its 140 members are developing countries. Not a perfect organisation, its agenda is dominated by a few wealthy nations, but the alternative of a world of bilateral trade deals hangs as a spectre if it fails. As the DFID report, Eliminating World Poverty: Making Globalisation Work for the Poor, points out:

DESPITE PROGRESS OVER THE LAST 50 YEARS, DEVELOPED COUNTRIES MAINTAIN SIGNIFICANT TARIFF AND NON-TARIFF BARRIERS AGAINST THE EXPORTS OF DEVELOPING COUNTRIES…TOTAL DEVELOPING COUNTRY GAINS FROM A 50 PER CENT CUT IN TARIFFS, BY BOTH DEVELOPED AND DEVELOPING COUNTRIES, WOULD BE IN THE ORDER OF $150 BILLION — AROUND THREE TIMES AID FLOWS. (DFID 2000: 69)

Conclusion

The postwar world order and the use of global institutions to build it, was a deliberate policy of the United States. It, however, proved only a half measure and the over-dependence on the United States ensured that these institutions were hampered when confronted with economic and political crises. As I have argued, a state of Pax Chaotica was the result.

For Pax Chaotica to end, there needs to be a renewed effort by the United States to shore up global institutions and to develop a concrete plan to ensure that the global institutions become the global hegemon in every sense of the word. There have been incremental moves in this direction, including attempts to pay dues owed by the US to the UN.

There needs to be a complete shift from the realist American interests of Pax Chaotica to the interests of the community of nations. In fact, there is an opportunity for a convergence of core American values — respect for individual liberty, freedom of expression, democracy — with the goals of the global institutions.

As for international institutions, they must show themselves to not only be just, but also to be seen to be just. Institutions can no longer work in the shadows as they have in the past. Well-educated, wealthy protesters in Western countries will no doubt continue to demand transparency.

In The Interests Of The Exploited?: The Role Of Development Pressure Groups In The UK

A Steppe Back?: Economic Liberalisation And Poverty Reduction In Mongolia

The Sweet Smell Of Failure: The World Bank And The Persistence Of Poverty

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© David South Consulting 2017