New Internationalist

State Of The World Report

Issue 287

State of the World Report

The tracks of the new global economy are full of danger for the poor, as Chris Brazier explains.

Every three seconds a child under five dies: a child who would still be alive had the world taken the same responsibility for all its citizens as it takes for those born in Toronto, Edinburgh or Sydney.1

This is the kind of terrifying fact which brought the New Internationalist into being around a generation ago. There are two possible reactions. The first is to recoil from the immensity and the awfulness of the idea, feeling you can do nothing else but hunker down and get on with your own life ­ cultivate your garden, as Voltaire had it. The second is to get angry and start doing your own bit to help change the world that allows such a state of affairs.

The New Internationalist arose as a flagship magazine for people who responded with righteous anger ­ but also as a popularizing, educational bridge that might get people from the first, dispirited, camp into the second. The magazine still broadly aims to perform both these functions. But the world that we report on has drastically changed.

front cover of NI 287

When the first NI editors wrote their passionate indictments of world hunger and the terms of trade they would never have dreamed that the world 25 years later might have changed as it has. They were percipient in their early assessment of the environment as one of the major threats to the world and its people. And they were certainly sceptical about the ability of the global economic system, in all its manifest inequality, to deliver social justice and the basic needs of the poor.

But they were also children of their time who saw themselves as part of a movement for change and 'progress' that had not only right but also a certain historical inevitability on its side ­ 'development' was an idea whose time had come. The early 1970s were still really part of the 1960s, that decade of optimism and expansiveness in which the Wind of Change that blew through Africa seemed ready to send a cleansing breeze through the citadels of power and capital.

Notwithstanding the gulf between rich and poor, the genuine achievements of development in human terms were starting to be notched up: people were living longer, levels of infant mortality were falling and more children were finding their way into the classroom. The social mood was hopeful and progressive: people tended to accept movement towards greater justice and equality as almost a scientific rule. Meanwhile, developing countries took their place on the world stage full of confidence that they could use the UN, in which they now formed a majority, as a forum that might guarantee the basic needs of their citizens. And this high tide of optimism found expression in a series of landmark UN conferences in the early 1970s which articulated the potential shape of a fairer, better world: on Population, Environment and Food the ideas seemed new and the promises seemed deliverable. In the boldest of these conferences, in 1974, there was a ringing call for a New International Economic Order that would transform the outmoded and unjust trading patterns inherited from colonialism.

In retrospect what seemed then like a grand beginning was actually a rather sad end. The OPEC oil-price hikes of the mid-1970s plunged the world into a recession which effectively put a full stop to the expansive atmosphere of the 1960s. Arab potentates pocketed the proceeds and stashed the money in private banks. The bankers had no idea what to do with cash on such a vast scale and started offering it by the barrowload to any old developing- country government they could find.

This was the origin of Third World debt. The money was almost entirely wasted: in very broad-brush terms we might suppose that a quarter of it went on increased oil bills; a quarter on rotten, misconceived development schemes (dams and other sources of prestige for budding megalomaniacs); a quarter on the military; and that the final quarter found its way back to banks in Switzerland or the Caymans via the deep pockets of corrupt leaders. Debt piled up, the repayments turned into mountains to climb – the more so as the commodity prices that most developing countries depend on to pay their way in the global economy sank through the floor (by the middle of 1987 they were at their lowest level for 50 years2).

In the 1980s, now routinely characterized as 'the lost decade’ of development' all thought of funding a radical transformation of society, of delivering the basic needs of all, came to seem fantastic beside the grim reality of the bailiffs at the door, demanding repayment.

Debt and fashion

These days, starting a magazine article with the idea that there is a child dying every three seconds is a deeply unfashionable thing to do. Of course it is outrageous that fashion should play any part in such matters but it does.

Debt is also an 'unfashionable' issue. Ten years ago this was an issue of massive moment which would have made anyone’s list of the top problems in the world. Now it barely crawls out of the ghetto inhabited by specialists and dedicated campaigners. In 1994 Britain's Lloyds Bank (one of those which had foisted truckloads of cash on all-comers) wrote to its customers that 'the debt crisis that began ten years ago is largely over', quoting the World Bank as its source.

Yet not only has the core issue not changed ­ countries in the Majority World are still massively in debt and running to stand still ­ the debt problem is now greater than it has ever been. Since 1980 debt to multilateral institutions like the World Bank has increased five times. In 1995 alone, severely indebted low-income countries paid one billion dollars more to the IMF than they received from it.3 Countries are having to fork out a bigger percentage of their export earnings to repay debts than they were in 1980 ­ and the most indebted countries of all see a debt hulking over them which is many times the size of their entire annual income.

UNDER A HEAVY SHADOW

nicaragua overshadowed by debt

Countries with the biggest debt-repayment burden
(debt as percentage of GNP, 1994)

Nicaragua 800.6%
Congo 454.2%
Mozambique 450.4%
Guinea-Bissau 340.7%
Cote d'Ivoire 338.9%

Debt service as a percentage of export earnings 1980 & 1994

debt bar chart

So why is this such an unfashionable issue? Why is it not at the top of our agenda as people who care about the state of the world? Why are we not filling the postbags of our politicians, demanding that they do something about it?

One explanation is that the mainstream media are bored by the subject. They have less and less appetite for serious issues, especially gloomy ones that will put people off their breakfast. But they also tend to fit in with the agenda of big business and the free-market establishment.

The reason why debt was such a huge issue a decade or so ago was that the global bankers were worried about it. The commercial banks had loaned out so much so unwisely that they were seriously endangered by developing countries’ unwillingness or inability to pay the debts back. It says something about the instability of the global economic system that it could have been so easily threatened. But we were assured that if two or three big Western banks went down, the whole financial system might go down the plughole with them.

Amen to that, you might say ­ unless you were looking at your own pension provision, of course. When, in the mid-1980s, countries like Mexico and Peru briefly, bravely, started talking about Latin American debtors standing firm together and refusing to make their people pay for debts incurred by defunct dictators and given by foolish financiers, huge shivers ran down the corporate spine.

'The debt crisis' ­ the media story, the phrase on everyone's lips ­ was not the crisis of poor people struggling to find enough money to feed their families or pay for medical treatment. That crisis goes on and is, if anything, even more intense and painful today than it was ten years ago. No, the crisis in question was that of Western bankers and economists worried that the edifice they depended on was going to come crashing down about their ears.

But the rebel countries were cowed back into line. Debt payments were 'rescheduled' rather than reneged on; the Dow and the Nikkei were saved; and the news agenda could move on to other more fruitful sources of panic and fear.

Against the tide in a world gone mad
for privatization, Third World debt is
being 'publicized' ­ put into the reassuring
fingers of the World Bank and the IMF

 

The pillars of global capital can now feel more secure since, in contrast to the trend in just about every quarter of a world gone mad for 'privatization', the Third World debt problem is being 'publicized' ­ is increasingly being taken out of the hands of private bankers and put in the capable, reassuring fingers of the multilateral organizations: the World Bank, the IMF and the regional 'development' banks.

But hold on. Wasn't there a news report last year about a generous cancellation of Third World debt? If you remember the headline without any of the detail that is exactly what was intended. You were meant to think 'ah, at last they're taking care of Third World debt ­ I don't need to worry about that any more'.

At the joint meeting of the World Bank and the IMF in September new ground was indeed broken. For the first time all creditors ­ commercial banks, governments, multilateral institutions ­ joined together in a new framework to relieve the most heavily indebted poor countries (the HIPCs, if we allow them their awful acronym). This is the good news. The bad is that nothing will happen for years and that the initiative applies to far too few countries ­ 19 at the most, and only Uganda and Bolivia, who are in particularly dire straits but are also very 'well behaved', have any chance of qualifying for remission before the year 2000. Worst of all, to qualify countries will have to commit themselves to being under the structural-adjustment yoke for decades to come.

The only reason the Bank and the IMF have moved this far (18 months ago they were adamant that any cancellation of debt was completely impossible) is that it has become plain even to them that the most indebted Third World countries have not a hope in hell of repaying their debts on the current basis. But they have not moved anything like as far as they should. Mozambique's Finance Ministry, for instance, predicts that even after it has benefited from the anticipated relief, its debt-service payments in ten years’ time will be around three times the average in the early 1990s.4

The IMF as colonial governor

Regular readers of the New Internationalist might by now have come to believe that the World Bank and the IMF are the root of all evil, so often do we rail in these pages against their influence. But not to do so would be ourselves to submit to the dictates of fashion: their power is increasing rather than decreasing.

When the NI began it was routine in development-aware circles to talk in terms of 'neo-colonialism'. In colonial times governors were dispatched from the centre of power to act as effective monarchs ­ but governing in the ultimate interest of the ruling nation rather than of the colony's people. Now that Third World nations had gained their independence the system was more subtle: governors were no longer required because the economic system required the poor country to produce exactly the same kind of crops and raw materials as they had under colonialism ­ and to use those earnings to buy from their former masters the machines and processed goods which had previously been supplied gratis.

Nobody mentions neo-colonialism any more, just as they don't usually own up to being Marxist (the source of many of the most important early analyses of 'development'). The overall structure nevertheless remains pretty much the same. But there is a startling difference which nobody seems to have noticed: the colonial governors have returned, this time in the form of the resident representatives of the World Bank and the IMF, dispatched from the new imperial centre of power in Washington.

Like the colonial governors of old they have complete power to dictate what goes on, with the difference that they are ordering around national governments, elected or otherwise. And like the colonial governors, the policies they insist on are imposed not for the benefit of local people but for the greater good of the world they represent, the West. The analogy goes further: just like the old imperial administrators they claim their policies are good for the locals ­ in the modern case the claim is that painful doses of deflation and savage cuts in public spending will render the economy more efficient, more rational, more able to 'compete' in the global market. They may even, like the old India-wallahs, actually believe in what they are doing.

But actually of course they are opening up yet another country for the predatory attentions of the multinational corporations, twisting yet another country further away from the self-sufficiency of its own food production and the nurturing of its own industries.

The IMF and the World Bank appear fairly routinely as twin devils, Tweedledollar and Tweedledosh. But it is worth recognizing that a certain amount of clear blue water is opening up between them at the moment.

The World Bank is the development lender: as such it is responsible for the projects it approves and has to receive the criticism of the people its policies it affects. It takes much too little notice of that criticism, but never mind. When it comes to formulating policy or proposing new programmes, its managers cannot help but be aware of the negative publicity occasioned by the last such dumb move, the last such relocation of thousands of indigenous people. Institutionally they are required at least to pay lip service to partnership with voluntary agencies and UN bodies concerned about human development. And this is certainly more true under the Bank's new President, James Wolfensohn, than it has been before.

When the World Bank comes out with a report on Poverty or the Environment we do well to treat its rhetoric with a considerable dose of scepticism. But at least it has to present itself to the world as a body which cares about such things. And after long years of criticism about adjustment's effects on social spending it has shown signs of concession over the last couple of years. Its latest agreements with countries still call for public-expenditure cuts but try to insist that such cuts should not be in health or education spending.

The gods of the bottom line

The IMF, on the other hand, could not give a damn what you, I or the voluntary agencies think. It sets strict monetary rules and countries must abide by them ­ or else. It does not have to bother to think about 'development' since its gods are higher ones ­ 'monetary parameters' and 'fiscal overhangs'. Development is in the mortal domain: its very nature is open to human debate. But the gods of the bottom line are eternal, immoveable and absolute.

The worrying thing is that, of the two institutions, the IMF is incomparably the more powerful. For example, the Bank actually wishes to start funding the building of schools in Mozambique as part of its belated conversion to the cause of human development. But it cannot because of IMF rules.

More worrying still is that the IMF is now muscling in on development territory, having persuaded the Western powers that it should operate its own soft-loan facility. It has no track record in evaluating development projects, no staff with the expertise to do so. The whole idea that it could fulfil a useful function in this area is laughable.

So that in the turf war which is certainly unfolding at the moment between the World Bank and the IMF anyone with any sanity will find themselves in the bizarre position of having to defend the 'expertise' and 'experience' of the Bank. Now there's a novel thought.

The level playing field beloved of free traders actually has a slope
comparable to a line drawn from the top of the World Trade Center's
twin towers to a pedestrian on the Manhattan sidewalk below

There is now a third pillar of the global economic order: the World Trade Organization, only launched in 1995 but already making its mark as The Enforcer of the GATT 'free-trade' agreements. Structural adjustment, you see, is only part of the bigger picture of 'globalization'. The struggling economies of the developing world are being dragged, kicking and screaming, into a 'free-trade' global economy in which only the fittest will survive ­ and the fittest these days are almost inevitably the transnational corporations. A staggering 70 per cent of all international trade is controlled by a mere 500 corporations.5 The state of our world is increasingly being determined in the boardrooms of these companies rather than by national governments. A fundamental political question for our collective future is by what supranational means such corporations are to be regulated.

For now, deregulation is all and corporations can seek their profit wheresoever they wish in the happy, clappy global market. All too often this means seeking the workers who can be paid the lowest wages.

Dave Phillips of San Francisco's Earth Island Institute, an environmental pressure group, recently told writer Tom Athanasiou a story about the tuna industry which illuminates the globalization process.

'In the old days'’ he said, 'California had the largest tuna-canning industry in the world, but today ­ these are approximate figures ­ the wages in California are about $17 an hour. So the industry moved, first to Puerto Rico, where wages are about $7 an hour, and then, when they decided that was too much, to American Samoa, where wages are about $3.50 an hour. From there it moved to Ecuador, where workers are paid about $1 an hour, and then on to Thailand, where a great deal of the industry is today, and wages are about $4 a day! And now, amazingly enough, there is some movement to Indonesia, where wages are as low as a couple of dollars a day.'6

Wages in Indonesia are so low, of course, because union organization there is weak under the military dictatorship and working conditions are therefore poor. This points to one of the many big problems with the GATT free-trade rules: they operate to the detriment of all the employment, environmental and safety standards that you and I would hold dear. They do so because such standards are considered to be 'non-tariff barriers' to free trade ­ in other words one country's higher standards are restricting the ability of another country to undercut them with more polluting industry, more dangerous and lower-paid jobs.

Already GATT rules have been used, for example: to challenge European restrictions on hormone-tainted beef; to force Austria to abandon its plan for a 70-per-cent tax on tropical timber; and, most outrageously of all, to overturn Thailand's restrictions on smoking so as to open the way for US tobacco companies.6

Yet still the free-trade enthusiasts are everywhere ­ their mantras are repeated endlessly as if they are god-given, incontrovertible truths. Their faith is that when all barriers are removed the economy will function at a height of efficiency and benefit all.

It is folly of the most idiotic and (since most such free-trade prophets live in the rich world) self-serving kind. You only have to look at which countries have been the main beneficiaries of international investment in the last ten years of increasingly unregulated trade to see why the process of globalization is going to result in a world ever more deeply divided between rich and poor.

beneficiaries of foreign investment chart

There is another mantra endlessly repeated and rarely challenged which, like globalization, is likely to characterize our age in the history books of 50 years hence: economic growth. We normally have great difficulty stepping out of our own time sufficiently to understand how future generations will regard us. But there is little doubt that ours will be considered a civilization so blinded by its own technological brilliance and its mania for consumption that it could not bring itself to change course.

The beginning of the 1990s saw environmental awareness at a new height. For a short while it seemed possible that the sheer awfulness of the phenomena we were contemplating ­ global warming, the ozone hole ­ might force a change. Instead the environment became another fashionable idea to be hijacked, harnessed, honed ­ and then quietly dropped off the political-party programme once the media had moved on to the next flavour of the month. As a result there is barely a political party with a chance of forming a national government anywhere in the world which is prepared to challenge the received wisdom that economic growth is essential to our well-being.

This is more understandable in developing countries which look askance at the consumption levels of the rich world and feel they have a right to a piece of the action. But it is nothing short of monstrous that rich-world politicians who consider themselves heirs to a radical tradition and who claim to value social justice are none of them prepared to be the first to say that the Emperor of Economic Growth is wearing no clothes.

Take the two dominant ideas and trends together ­ globalization and growth ­ and it becomes plain that if there is to be a way forward for the world it will lie in a new union of ideas previously labelled separately as Red and Green. The battle to be joined with globalization, the unrestrained market and the transnationals, is one that will come easily to socialists whose traditions are those of challenge to capital. Whereas the perception that economic growth is a dead end has been contributed uniquely by Greens.

It has never been plainer that the two have to join forces and between them work out a radical new alternative. We are not talking about a tactical alliance here but rather an entirely new vision which recognizes that the environmental problem is now inseparable from the movement of global capital, from the appalling gulf between rich and poor on this planet which is growing with every passing second (see chart).

share of global income rich & poor

I cannot tell you how often a billionaire is being created with the certainty that I can tell you how often a child is dying but I can tell you that at the last count there were 358 of them and that they own more between them than countries containing 45 per cent of the world’s people earn in a whole year.7

One day the cows will come home. It may be a major environmental catastrophe that does it ­ global warming producing a rise in the oceans that threatens not just the Maldives or Bangladesh but New York and London, for example. Or it may issue in outright war between the Majority World and the rich minority. But change will have to come.

Waiting for the apocalypse to arrive is one of those activities beloved of fringe groups, whether born-again Christians, environmental doom-mongers or communists awaiting the imminent collapse of capitalism. But even if our civilization is unlikely to change course without some kind of major shock we do not have to sit around waiting for it to happen.

On the contrary there is much to be done ­ both to defend the development gains of which we are proudest and to ensure that the human family continues to become more healthy and more educated.

But how are we to do it? As we have noted, the writ of the IMF runs everywhere these days and there is barely a country in the South which is not under the cosh of structural adjustment. Governments in developing countries are now given such small room for manoeuvre that they can achieve very little. Even once-promising radicals ­ Jerry Rawlings in Ghana perhaps (though his star waned long ago now; see Page 42 for what he and the IMF have done to Ghana's health service) or more recently Yoweri Museveni in Uganda ­ wind up slavishly following the dictates of the men in pinstripes.

In this most unjust of worlds, the level playing field beloved of the free traders actually has a slope comparable to a line drawn from the top of the World Trade Center's twin towers to a pedestrian on the Manhattan sidewalk immediately below.

Partners in defiance

Yet what if, here and now, we started to push the idea of a 'compact' between people in the rich world and bold, creative governments in the developing world who would dare to defy the destructive aegis of the Bank and the Fund? A small group of governments which rejected adjustment and committed themselves to meeting the basic needs of all their citizens within ten years ­ and to measuring progress properly along the way ­ would immediately push themselves into the limelight. At least half the world would be watching them, thirsting as it is for a good example, an alternative model.

But they could not stand alone ­ and would need the direct financial support of rich countries themselves prepared to put their heads above the parapet and defy the free-market orthodoxy. This is where we come in. Of course we should be raising our voices against the bigger picture, too ­ doing our bit to persuade politicians and people in general that chasing growth will be ruinous, that free trade is a false religion, that we care more about the survival of the poor than about being rewarded with tax cuts or the latest digital TV set.

But the idea of a compact, a 'partnership for progress', would be empowering on both sides of the divide ­ not least because it would form so direct a challenge to the Washington agenda. The chances of success in pushing for such an initiative would obviously be greater in the most enlightened aid-giving countries like Sweden, Denmark or Holland. What passes for a left opposition in most of the English-speaking countries has hardly inspired us with its boldness or its creativity in challenging the current status quo. But even they might be attracted by the idea of strutting the world stage like a silver knight of human development.

In such a compact, military spending would have to be abandoned ­ or at least drastically reduced. Costa Rica long ago showed that it was possible for a country to relinquish its army, even when it is situated in a notoriously explosive and war-prone region ­ and it is no coincidence that the UN now assesses it, despite its low income, as having a human-development rating higher than almost any developing country and higher than industrialized nations such as Portugal, Russia and the Czech Republic.6

The terms of the compact would encourage home-grown food instead of cash crops for export; they would boost local labour-intensive industries, thereby creating jobs and incomes for the urban poor; and they would rekindle the fires that once burned at the idea of providing health and education for all.

The threat of a good example ­ not least of active and progressive partnership between rich and poor ­ might just work wonders and start tilting back into balance a world that is profoundly out of joint.

Above all, we must not set our goals too low. We must never settle for an 'acceptable' level of absolute poverty or hunger. The world could deliver the basic needs of all its inhabitants within a matter of a few years if only there was the collective will. For example, it would cost six billion dollars a year, on top of what is already spent, to put every child in school by the year 2000. That is an enormous sum. Yet it is less than one per cent of what the world spends every year on weapons.

That is one of the New Internationalist's most famous observations. Yet this kind of comparison between military and social spending is also now somewhat out of fashion. Fashion be damned! We should perhaps make it obligatory that we update these figures every year so as to highlight the skewed priorities involved.

Which brings us back to all the children who have been dying unnecessarily while you've been reading this article ­ and to the millions that have been added to the frankly disgusting fortunes of men like Bill Gates and Rupert Murdoch in the same period. The gap between rich and poor has never been so large in all the world's history ­ and the need for radical change has never been so great.

1 Calculated according to data in State of the World's Children 1997, UNICEF. 2 World Development Report 1989, World Bank; State of the World's Children 1989, UNICEF. 3 Not Waiving But Drowning, a Christian Aid briefing, 1996. 4 Which Way out of the House of Debt? a Christian Aid briefing, 1996. 5 'Whose Common Future?', The Ecologist, July/August 1992. 6 Quoted in Tom Athanasiou, Divided Planet (Little, Brown 1996).

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