Beyond nationalistic rivalries

Economic interdependence can make even bitter enemies cooperate

Hats off to Prime Minister Vajpayee for daring to think of a common market and currency for south Asia. No longer young in years, but in the gleam in his eye he is younger than any comparable political leader.

A true liberal in domestic economic policies, he would also like to bury the hatchet with Pakistan. Early elections or not, his government pursues disinvestment and deregulation, and is not shying away from too many decisions. (What a contrast to the party that initiated economic reforms, but now wants to go back to the womb of jaded slogans!) Vajpayee also envisions economic interdependence between south Asian nations, particularly India and Pakistan, to help overcome nationalistic rivalries over Kashmir.

World history since the end of the Second World War is clearly on Vajpayee's side: increasingly, nations have been preferring economic cooperation over national, "sovereign" rights and privileges.

Indeed, giving up some sovereign rights in the interest of the common good has been implicit to the whole structure of international institutions built after the end of the Second World War "" the United Nations, the International Monetary Fund/World Bank, the World Trade Organisation (WTO) and so on.

All these have created such a strong web of international interdependence that even the world's sole superpower cannot defy the compulsions of cooperation for too long. The US may have ignored the Security Council while invading Iraq, but had to bow to pressures from its trading partners once the WTO ruled that the import tariffs on steel breached its rules.

The superpower needs economic cooperation in other areas as well. Bush recently deputed his father's secretary of state, James Baker, to Germany and France to persuade them to forgive Iraqi debt. The US also needs international help in meeting the cost of the Iraq war, in financing its own gargantuan deficit on current account and in other areas.

Perhaps the most striking example of the need for economic cooperation, and the costs of isolation, evidenced last year was Libya. Led by a maverick dictator for 34 years, Libya had backed radical movements "" and not only in west Asia.

At one time it even supported the Irish Republic Army (IRA) in Ireland. Since the placement of a bomb on a Pan Am jet 25 years ago, the UN had imposed economic sanctions against the country, holding it responsible for the act of terrorism that killed hundreds of innocent passengers when the bomb exploded high over Lockerbie in Scotland.

President Reagan had ordered the bombing of Gaddafi's residence as punishment for the Lockerbie tragedy. Gaddafi just managed to escape.

As an oil exporter, it may be thought that Libya could be immune to international pressures. But no "" in two remarkable back-downs last year, a more mellow and wiser Gaddafi accepted responsibility for Lockerbie, offering to pay $ 2.7 billion to the victims' dependants. More recently, Libya has agreed to dismantle its programme to develop nuclear and other weapons of mass destruction and thrown open its facilities to international inspections "" all in order to get the sanctions lifted.

But the greatest example of the triumph of economic interdependence and cooperation over nationalistic rivalries and confrontation is provided by Europe. For almost 150 years, from the early 19th century to the middle of the 20th century, France and Germany were the two great rivals for supremacy on mainland Europe. Over the period, they fought a series of bitter and costly wars.

If, in the early 19th century, Napoleon defeated Germany, the latter, after its unification by Bismarck, defeated France in the 1870s. In the 20th century, France and Germany were at the heart of two world wars.

After witnessing the enormous destruction of life and property that the wars entailed, statesmen like Jean Monnet and others thought that the only way to end the Franco-German rivalry was to create institutions fostering economic interdependence and cooperation.

The first of these was the six-nation Coal and Steel Community, which evolved into the larger Common Market and then into today's European Union (EU).

Much of the EU already has a single currency, and it would soon have a membership of 25 countries. It is worth noting that France and Germany have been nation states for much longer than India and Pakistan, each proud of its culture and achievements, one a Protestant country, the other mainly Catholic.

The wars led to the border province of Alsace Lorraine changing hands several times, evidencing that there is nothing immutable, or God-ordained, in national boundaries. (India as a nation state is itself a product of the British Empire.) Today, how many remember whether the province is part of France or Germany? Indeed, the two are talking of an even tighter alliance within the EU. A war between France and Germany? Can anyone even think of it?

It is against this historical background that Vajpayee's talk about a common currency needs to be viewed. It is a dream "" but so was the EU at one time. There would be a lot of stages, starting with free trade, lifting of visa restrictions, free movement of capital and so on, before one can think of a single currency.

But Vajpayee's direction is clear and deserves wholehearted support: in course of time, economic interdependence will score over national confrontations.

Email: avrco@vsnl.com