A new world economic order

THE aftermath of great wars and grave crises opens gateways for organisations such as the World Bank and the International Monetary Fund (IMF) to create a new world economic order.

The IMF and its sister institutions are taking advantage of the Covid-19 pandemic crisis to lure affected nations into taking concessional and conditional loans mostly via the Special Drawing Rights (SDRS). A new IMF allocation of SDR, for the creation of $500 billion (R7.33 trillion) worth of new liquidity for the global economy has been established to help Africa and the rest of the developing world.

According to Vera Shongwe, the under-secretary-general of the UN and executive secretary of the UN Economic Commission for Africa, “under the allocation formula, all of Africa would receive $25bn of the $500bn SDR, and the G7 countries a total of $217bn, of which the US would receive $87bn”.

The loan is also a proportional allocation to the quota of countries in the IMF where African countries would receive only 5% of the total and G7 countries almost half of it. This seemingly unfair scheme will mainly benefit the G7 nations and bypass the fundamental question of equity while exposing the hierarchical nature of the loan. As such, the Covid-19 pandemic offers the IMF ample opportunity to establish the scaffolding for a Covid-19 new economic order.

Another justifying rationale for the establishment of the SDRS is that, “as the Covid-19 crisis continues, the economic fallout brings joblessness, hunger and the spectre of more unrest”, in addition to the alarming, misleading and calamitous pandemic projections in Africa by the World Health Organization, that close to a quarter of a billion Africans would perish.

The loan scheme is simple. Covid19-plagued

nations must borrow more money from the IMF to deal with the long-term effects of the pandemic. It is a powerful, frightening, and convincing argument indeed. Which country would not fall under the spell and fear-mongering of such an argument? Can African leaders afford to ignore such stark doomsday warnings? Of course not.

Many believe the new IMF loan scheme is a “sensible and practical suggestion to help get capital to the poorest countries for recovery”.

We don’t. That sort of “doing good” is misleading and misplaced.

There is also no assurance that the loans to African nations would lead to their effective use towards the Covid19 pandemic effects. Moreover, we believe the loan scheme is a patronising and feel-good argument that hides a long-term debt burden subservience of Africa and helps to construct and solidify the Covid-19 new economic order with Africa at the receiving lower hand. But most important, there is a question to ask and ponder. Why should African nations borrow money to solely deal with Covid-19 while other diseases like malaria, tuberculosis and HIV/AIDS also deserve attention?

It is thus tricky to put forward a genuinely convincing general theory of IMF loans and their supporting “geoeconomics” for the world in general and Africa in particular.

The Covid-19 crisis calls upon the world to debate about its impacts on international politics. More importantly, it will determine a new political and economic world order with two prominent catalytic characteristics. The first is an eminent weakening of global governance on health care in which the West is attempting to reassert its dominance via debtdenominated loans, called SDRS, in order to maintain the subjugation of Covid-affected and devastated nations.

The second is a shifting balance of power to the East.

The global crisis also provides a somewhat negative illustration of the great power competition, the rivalry between the US, Russia and China, that is shaping the new economic world order, especially against the backdrop of vaccine production and distribution inequity.

Today, China continues to revive its economy at the time when stock markets are collapsing in the West. In this new world order in the making, China appears undoubtedly as the great power that can assist internationally, as once was the US go-to role globally. Whether or not China will emerge as the next great power remains to be seen.

Sadly, Africa and other developing economies face dangerous risks from these accelerated disruptions of the global economy. But in the long term, we believe the Covid-19 new world economic order, will be shaped by innovative, collaborative, and multilateral nations and not debt-burdened countries, and will favour Africa. Thus, African nations should abstain from the debt burden of SDRS from the IMF and develop their own sustainable solutions in partnership with nations that value the win-win way.

Charles Matseke is a PHD candidate in International Relations and a researcher at the Centre for Africa-china Studies, University of Johannesburg, and Koffi M Kouakou is an Africa analyst and senior research fellow at the Centre for Africa-china Studies, University of Johannesburg.