he onset of globalisation in the late Twentieth Century promised greater freedom in the economic sphere by restraining the power and role of national governments in financial governance. The new system was touted as a harbinger of liberal democracies, economic prosperity, predictability and sustainability.

It was believed that the age of imperialism and bloc politics had ended and the dawn of a new liberal world order, ensuring a level-playing field for all nations and peoples was about to break.

Francis Fukuyama spelt out his thesis that liberal democracies were the ultimate fait accompli for the developing world. International financial institutions were presented as the benign saviours tasked to bail out cash strapped economies of the Third World with alternative – viable and better – economic plans for their recovery.

It was hoped that politics will not precede the economics and that international markets, instead of global politics, will determine the fate of the developing countries. The rosy picture of equitable access to international markets, where everyone would be free to sell their products as well as ideas of art and culture, and the claim for a fair share in the global trade was in vogue around the world.

However, with the progress of history the pleasant picture of the utopian Freed New World became distorted and the dream of a freed and just world evaporated. Instead of exercising more liberty, the economies of the developing world as well as their polities seem to have taken a turn in the opposite direction.

In just over two and a half decades, it seems that they are being besieged by other means. If earlier economies were enslaved by nationalisation, today they are clubbed by globalisation. Even in this globalised world, the economies are subject to both domestic and external politics.

External factors like the influence of the IMF and other multi-lateral donor agencies, have become a permanent feature of these economies. They are also held back by regional and global economies.

The international financial institutions have done poorly in terms of achieving their stated goals of reducing global poverty and improving people’s living conditions and standards; supporting sustainable economic, social and institutional development; and promoting regional cooperation and integration. In fact, they have ended up further complicating the problems and giving them the character of a multi-headed hydra.

economic liberalisation at the international level has proved detrimental for poor countries. It has compromised their economies on many fronts.

The concepts of conditionalties and Structural Adjustment Policies (SAPs) have become the hallmark of the so-called benign international financial institutions. These conditionalties and the surveillance activities to monitor the implementation of the policies by the Fund, increasingly touch upon economic policies like privatisation, economic deregulation and tax reform that have deep socio-political impacts.

International political crises and the vagaries of climate then push the recipient countries deeper into financial crises. Ultimately, the countries end up at the doors of the lenders they were meant to avoid. This entrenched inter-connectedness of the states’ economies with the global economy does not allow the states to seek isolated solutions to their economic ills.

The economic stagnation caused by the Sino-US trade war, followed by the disruptions inflicted by the pandemic and the Russia-Ukraine conflict have exacerbated crises for cash-strapped countries like Sri Lanka, Pakistan and Egypt.

The corrosive impact of the intertwined nature of the economies is not limited to the financial sphere; it also leads to humanitarian emergencies. The case of Afghanistan is a glaring example of this fact.

Once an economic crisis reaches the level of a humanitarian emergency it starts breeding other socio-political ills like lawlessness, militancy and terrorism. These provide a pretext to the global powers to intervene. The impact of exogenous factors on regional economies, such as the South Asian nations, has been brutal.

This does not exonerate the host countries from their internal responsibilities. Structural changes on the domestic front must enable the economies to sustain short-run emergencies and supply chain disruptions without falling apart. Resilient and timely policies protect countries from extreme external dependence by increasing the efficacy of their domestic production and consumption processes.

There is no one-size-fits-all approach to coping with these multi-pronged exogenous economic stresses on states economies. However, the lessons learnt from the crisis in Sri Lanka and Pakistan should be tailor-made to the circumstances of others facing similar situations.

Reversing the process of globalisation will not solve the problem of poverty. The world needs a new approach to globalisation that exploits its energies to improve economies and promote human welfare. In order to carry the process forward and build support for a better globalisation, a common political understanding must be developed about how to maximise the benefits while minimising the risks.

Problems arise when debt is high and resources from new loans are not spent wisely (including because of corruption and weak institutions), or when a country is hit by natural disasters or economic shocks, such as exchange rate movements or sudden reversals of capital flows, that impair its ability to fully capitalise on the dividends of economic internationalism.

Owing to the inherent and structural problems in the Third World countries, economic liberalisation at the international level has proved detrimental for the poor countries. It has compromised their economies on many fronts and has relegated them to besieged economies. A rethinking and rewiring of the global financial regime may free the small economies from the danger of neo-imperialism.

The writer is a  lecturer. He is based in Islamabad Owing to the inherent and structural problems in the third world countries,