The Rich World’s Veto

Only a democratic revolution can break the grip of vested interests

By George Monbiot. Published in the Guardian 15th October 2002

There was no announcement, no press release, not even an off-the record briefing. But last week the government revealed that it was proposing to rule out forever the re-nationalisation of the railways. If you missed this, you’re in good company: so, it seems, did every journalist, campaigner and parliamentarian in the country. The information is contained on page 52 of a document published last week by the Department of Trade and Industry, called “Liberalising Trade in Services: a new consultation on the World Trade Organisation’s GATS negotiations”. It’s riveting reading for anoraks like me, but it’s not very likely to knock Nigella off the bestsellers list.

“GATS” is the General Agreement on Trade in Services, which is overseen by the World Trade Organisation, the body responsible for bringing down the trade barriers between nations. The new negotiations have been driven, above all, by British corporations, hoping to open up the service sectors of poorer countries.

They are controversial for two reasons. The first is that GATS will prevent poor countries from defending their indigenous businesses, as all the current industrial powers did during their major development phases. The second is that the welfare of the foreign companies’ shareholders often appears to take precedence over the welfare of their customers: following water privatisation in Bolivia, for example, some families had to pay more for water than they paid for food.

The negotiations involve a bargaining process in which nations first make “requests” for the liberalisation of each other’s services, then trade off one request against another. The UK’s problem is that it has already liberalised so much of its service sector that it has little more to give. One of the few chips left is a request to “fully bind [the] existing regime for road and rail”.

“Binding the existing regime” means that the way the railways are run cannot be changed without the payment of special compensation to any foreign companies running franchises, unless the government invokes, in advance, a safeguard clause, which no government has ever used. “Fully binding” suggests both that this exemption is not an option, and that, once we’ve accepted the “request”, we’ll be stuck with the current model, whether the trains run on time or the entire network collapses, forever. The government does not say which nation has made the request, what pressures it is exerting, or what our railways might be traded for. It will, it tells us, “respect the confidence with which these documents have been received from other WTO members.” This tender consideration plainly outweighs its respect for any interest we might have in discovering what the hell is going on.

It is cases like this which have helped to propel the worldwide demonstrations against corporate power and the loss of democratic control. The global justice movement was silenced momentarily by the attacks on New York, but the protesters are now re-emerging in greater numbers than ever before. A report by the World Development Movement lists massive demonstrations against IMF austerity programmes and forced privatisations in 23 poor nations over the past year. The media has lost interest, but the people have not.

Last week on these pages Philippe Legrain, a former official at the World Trade Organisation, argued that this movement is misguided. Globalisation, he maintained, “is a choice, not an imposition … we can to a large extent pick and choose what kind of globalisation we want.” There’s a very small legrain of truth in this. Indeed, the main purpose of the protests is to try to persuade governments and institutions to change their policies. The problem he ignores is the extent to which the dictatorship of vested interests is locked into the system.

Towards the end of World War Two, the allies began their remarkable project to redesign the world order, rebuilding Europe and creating a global community of nations. But they also ensured that the new system would be controlled by themselves. Britain, the United States and the other victorious powers determined that the poor nations would have no say in how the world was run.

The result is that the five permanent members of the UN security council each has the power of veto not only over decisions concerning war and peace, but also over all attempts to amend or review the UN charter. Even if every other nation in the world demanded change, the US or the UK could block it.

Altering the constitution of the World Bank or the IMF requires an 85% vote. This looks achievable, in view of the profound discontent with these bodies in almost every nation in which they operate. Unfortunately they are controlled by the nations in which they don’t. The US alone possesses 17% of the votes: it can stop every measure proposed by other nations, however desperately it’s needed.

Unsurprisingly, as the former chief economist of the World Bank Joseph Stiglitz has shown, the rich nations use this power to run other countries for the benefit of their merchant banks. The IMF helped first to precipitate the collapse of the Asian economies, then to spread the disease to Russia and the rest of the developing world.

In principle, every nation has an equal vote within the World Trade Organisation. In practice, the rich world shuts the others out of the key negotiations. But even if the WTO did what it says on the packet, it could not begin to address the major structural inequalities affecting the balance of trade. The original proposal, first mooted in 1944, was for a body which would deal with such problems as the collapse of commodity prices, the growth of corporate power and the failures of technology transfer. When US businesses objected, the plan was quietly dropped in favour of a “temporary” agreement dealing only with bringing down barriers to trade. Its successor governs globalisation to this day. Even this simple function has been perverted by the rich world, which is now loading the WTO’s agenda with sweeping intellectual property rights for corporations, while refusing to prevent the dumping of subsidised food on the poor world’s markets.

The problem the world faces in contesting these powers is that those best placed to vote for change have the least interest in doing so. The British economy does very well out of our government’s control of other nations — it is, for example the world’s second biggest exporter of services — so it is hard to persuade the people of this country to vote for global democratisation. This is why campaigners have sought to emphasise those cases, such as our loss of control over the railways, in which the people of richer nations can make common cause with the poor.

This, within the current world order, is about as far as our powers to generate change extend. The notion which Philippe and others promulgate, that the old system can be slipped off and a new one chosen as easily as a pair of trainers, is fantastical. There are many of us who have come to see that the only way forward now is a global democratic revolution, which war and a mismanaged US economy could hasten. But none of us are deluded enough to imagine that it will be easy.