A Comprehensive & Coherent Global South Vision

A memo to Global South leaders

The Global South continues to face severe structural economic deficiencies that weaken its economic sovereignty and put it at the mercy of a neocolonial international trade, finance, and investment architecture (we discuss this in detail in the Just Transition report - available in English & French). A colonial global economic architecture that was not designed by and for the Global South, cannot be the same architecture that will get us out of this polycrisis. This can be illustrated with one simple statistic. The global economic architecture annually extracts two trillion dollars of net financial flows from the Global South to the Global North. Therefore, it is critical that we insist on a fundamental transformation rather than reform of the global economic architecture, otherwise the negative net financial flows will continue to spiral out of control.

These negative net financial flows are the direct result of the role that was historically imposed on the Global South which can be summarized as follows. The Global South is supposed to accept its role as: 1) the place where the industrialized world can acquire cheap raw materials; 2) the place where industrial output from the Global North can be dumped in a large consumer market; 3) the place for low-cost tourist destinations; and 4) the place where obsolete technologies, and low-tech, low labor-cost, assembly-line manufacturing can be outsourced to in the name of “development” and “cooperation”, which in fact guarantees that the Global South remains locked at the bottom of the global value chain. 

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If the Global South does not put forward a long-term comprehensive and coherent vision for itself that will propel us into a 21st century of justice, equity, and sustainable prosperity, then we can be assured that we are already part of the strategic vision of other major economic powers that are comfortable seeing us play the same role we played in the past. The good news is that this polycrisis is a reminder that neither the Global South nor the Global North can afford to ignore these major imbalances in terms of financial, social and ecological stability.

The Global South capacity to handle the polycrisis of the 21st century and to reposition itself in the global economy requires laser-focused structural transformation to repair the three major economic deficiencies: 1) the lack of food sovereignty; 2) the lack of energy sovereignty; and 3) the excessive reliance on low value-added manufacturing and purely extractive industries. These deficiencies amount to structural trade deficits that force a depreciation of Global South currencies, which renders critical imports such as food, fuel, and medicine more expensive (imported inflation). This in turn, forces Global South governments to increase food and fuel subsidies to protect the most vulnerable population, and to borrow dollars in a desperate attempt to artificially stabilize their exchange rate. And that brings the Global South into the external debt vicious circle that culminates in sovereign debt crises that reduce fiscal capacities to invest in national priorities, strengthens the griphold of global financial institutions, and further weakens the Global South economic sovereignty.

While the focus on the external debt crisis is important, it is crucial that we recognize that external debt is the symptom of the three economic deficiencies outlined above. So when we speak of debt restructuring, concessional finance, and even debt cancellation, we must acknowledge that without addressing the root causes of the external debt, we are in fact guaranteeing that new sovereign debt crises will continue to emerge and global imbalances will be perpetuated. 

The Global South must continue its demand for a more just global financial architecture, for the $650 billion ins SDR allocations to the developing countries, for the $100 billion in climate finance that was promised and not delivered for 15 years, for more favorable terms of finance, for scaling up funding for the Green Climate Fund, and for an immediate financing at scale for the Loss and Damage Fund.  However, none of this can replace the need for a Global South strategic investments in 1) food sovereignty and agroecology; 2) renewable energy sovereignty; and 3) South-South industrial policies that prioritize high-value added manufacturing. 

With this type of strategic focus, the Global South has the opportunity to put forward a united front with an unbreakable commitment to collective action on debt negotiations, climate finance negotiations, financial architecture negotiations, and most importantly on access and use of strategic minerals that are under the sovereign control of Global South nations and that should be leveraged for South-South industrial policies rather than exported as raw materials to secure the economic hegemony of the Global North.  

Finally, it is vital that the Global South rejects false solutions that have been imposed on us. For instance, policies that encourage tourism end up increasing food and fuel imports to feed, transport, house, and entertain millions of tourists. Policies that encourage exports end up leading to more imports of fuel, capital equipment, and intermediate inputs. Policies that promote foreign direct investment (FDI) end up increasing imports of fuel for energy production and transportation. Policies that encourage outbound immigration in order to increase remittances of foreign currencies end up promoting brain drain. Policies that promote the liberalization of financial services end up hurting domestic investors and inviting speculative attacks from abroad.

All of these policies masquerade as solutions when they are in fact structural traps. These traps are further amplified with a global race to the bottom forcing most developing countries into lower labor and environmental standards, more regulatory and fiscal concessions to foreign investors, and ever more dependence on the Global North. These policies have resulted in an ever increasing amount of net transfer of resources from the Global South to the Global North in the amount of two trillion dollars mentioned above. Continuing with the same policies will not only deepen these structural traps, but will make it impossible to tackle the polycrisis. And it makes you really wonder… After decades of “leadership” by International Financial Institutions with development finance, loans, and technical “assistance” and “cooperation”, the fact that the Global South is stuck in a debt trap means one of two things: a) incompetence, or b) intentional entrapment. Either way, this means that we need to reject their development model, cancel debts, and put forward alternative economic development models of the kind I described above.

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And I will close with this short (2-min) video in which I explain how Global South leaders can deploy these strategies with true partnership with the Global North on non-colonial/abusive terms. A Global South united front for a sustainable future with dignity and prosperity. This is what I want for my continent, for my people, and for my children.