Old concept of “Third World” outdated, Zoellick says

April 14, 2010

Washington, April 14, 2010 — Old concepts of the “Third World” no longer apply in the new multipolar global economy and new approaches are needed to take account for the interests of developing countries, said World Bank Group President Robert B. Zoellick.

In a speech ahead of the Spring Meetings of the World Bank, Zoellick said the global economic crisis of 2009 and the rise of developing countries in the global economy was the death-knell of the old concept of the Third World as a separate entity just as 1989 was for the Second World of Communism. This has profound implications for multilateralism, global cooperative action, power relationships, development, and international institutions such as the World Bank Group, and necessitated approaching problems with a new perspective.

“For decades, students of security and international politics have debated the emergence of a multipolar system. It’s time we recognize the new economic parallel. If 1989 saw the end of the “Second World” with Communism’s demise, then 2009 saw the end of what was known as the “Third World”:  We are now in a new, fast-evolving multipolar world economy,” Zoellick said in a speech at the Woodrow Wilson Center for International Scholars in Washington, D.C., in which he reminded the audience that some saw the actions of the former U.S. president as an opportunity lost. “We cannot afford geo-politics as usual.”

“Poverty remains and must be addressed. Failed states remain and must be addressed. Global challenges are intensifying and must be addressed. But the manner in which we must address these issues is shifting,” Zoellick said. “The outdated categorizations of First and Third Worlds, donor and supplicant, leader and led, no longer fit.”

While poverty and fragile states remained as challenges to overcome, developing countries were growing to represent an ever increasing share of the global economy and providing an important source of demand for the recovery from the recent global economic crisis. This was not only occurring in China and India, but also in South East Asia, Latin America, and the Middle East,. Africa could also one day become a pole of global growth.  Zoellick noted that developing countries therefore deserved greater recognition in the management of the global system and that proposed solutions in financial regulation, climate change and crisis management must reflect their interests. It was important to recognize the implications of the new multipolar world economy for multilateral cooperation and resist the gravitational forces pulling a world of nation-states back to the pursuit of narrower interests, Zoellick said.

“With power comes responsibility. Developing countries need to recognize that they are now part of the global architecture,” said Zoellick.

Following the huge damage wrought by the breakdown in the financial system, it was clear that the world needed better financial regulation, with better stronger capital, liquidity, and supervisory standards, Zoellick said. “But beware unintended consequences,” he warned. “We should not compound costs by encouraging financial protectionism or unfairly constraining financial services to the poor. Regulations agreed in Brussels, London, Paris or Washington might work for big banks in the developed world. But what about the smaller ones, whether in developed or developing countries?”

Climate change posed another challenge where a one-size fits all approach imposed by the developed world will not work for developing countries, Zoellick said. “Climate change policy can be linked to development and win support from developing countries for low carbon growth – but not if it is imposed as a straitjacket.,” he said. “Developing countries need support and finance to invest in cleaner growth paths. 1.6 billion people lack access to electricity. While we must take care of the environment, we cannot consign African children to homework by candlelight or deny African workers manufacturing jobs.  The challenge is to support transitions to cleaner energy without sacrificing access, productivity, and growth that can pull hundreds of millions out of poverty”

A third area where old thinking no longer applied and the interests of developing countries needed more consideration was in responding to economic crises. “In a world in transition, the danger is that developed countries focus on summits for financial systems, or concentrate on the mismanagement of developed countries such as Greece,” Zoellick said. “Hearing the developing country perspective is no longer just a matter of charity or solidarity:  It is self-interest.  These developing countries are now sources of growth and importers of capital goods and developed countries’ services.”

The changes in the global economy and multilateral system have significant implications for the World Bank, Zoellick said. Development was no longer North-South but South-South and South-North. The World Bank must pursue a policy of constant reform, changing to adapt to rapidly shifting circumstances in order to best serve the interests of the poor in the developing world. The institution hoped at its Spring Meetings to announce a shift that would give developing countries at least 47 percent of voting shares, coupled with the first increase in more than 20 years to its capital that would strengthen a balance sheet that has provided more than $100 billion in financial assistance since July 2008. Accompanying this was the most comprehensive program of reform in the institution’s history, ranging from increased access to information to improvements in lending policies.

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