Address to the Executive Committee of the World Alliance

Practically everyone, no matter what their native language, knows the name of the YMCA - the Young Mens Christian Association which now includes women and has gone far beyond its initial role of providing safe, cheap housing for strangers in town, often coupled with sports facilities. I myself learned to swim at the "Y s" pool in my hometown. Now this truly global organisation goes much further afield and recognises that the well-being of young people is desperately dependent on the society in which they must live and work. Members from the South now also have a major influence on the direction of the organisation which is one reason the Y has joined the Jubilee 2000 campaign on debt. As I say at the outset of this talk, I had a very positive experience doing a two-day seminar on globalisation for young people who had been chosen by their peers to attend and were highly motivated. Where else are you likely to meet participants from - taken at random - Uganda, the Czech Republic, Fiji and Burma as well as North America? This talk was for about 80 members of the Executive Committee, a nice mix in terms of gender, colour and age, who were meeting to discuss immediate matters but also to reflect on the broader picture. This I attempted to help them do. Thanks to Helga Serrano for transcribing and cleaning up my spoken prose so that my own editing task took about 10 minutes.

Thank you for having me. I had a first experience with the YMCA two months ago, when I did a two-day seminar for 30 young people, at least two of whom are here. That was a very rewarding experience for me, and I hope for them as well. Therefore I was very pleased when I was asked to come and address this Executive Committee meeting.

First of all it's great that this world-wide movement has joined the Jubilee Campaign. Jubilee is an idea which was first launched easily 12 years ago. I would like to place the debt issue into some sort of historical context, which requires that I tell you a bit about myself.

I started writing on North-South issues in the 70s and published books on world hunger, the North-South divide, and the real reasons for hunger and famine. Then in 1984 we had a world-wide meeting called "The World Food Assembly", with representatives of NGOs. This was ten years after the FAO had held the World Food Conference in Rome in 1974, where Henry Kissinger proclaimed that within a decade no child would go to bed hungry and no person would fear for his next day's bread. After ten years, it was very clear that this promise had not been kept, and everything had become much worse. So in this group of NGO people - about 50 from the South and 50 from the North - we identified the fact that debt was the biggest new contributing factor to world hunger.

The Debt Boomerang

That is why, having worked on world hunger and with a lot of NGOs, I got involved in studying debt. I tried to make a clear explanation of how it was contributing to economic injustice, and the very real effects on human beings: hunger, misery, a much worse life for women in particular, increased crime, riots, conflict, ecological destruction. Debt was involved in all of these issues.

So I published a book in 1987 called A Fate Worse than Debt. There were already at that time a good many campaigns and lots of NGOs were interested in this issue, but it was clear that we weren t getting any involvement from the top people, from either governments, or the World Bank and the International Monetary Fund.

So I wrote another book called The Debt Boomerang with the idea that if the suffering in the South was not enough to move the powers, perhaps it would help if it was explained that the debt was not just a problem for the South, but that in fact it was a boomerang and it was coming back and affecting the rich countries in a great many ways.

It was contributing to ecological destruction: this is one planet. When forests are cut down to sell them off in order to earn the hard currency to pay back debt, that destroys the environment, bio-diversity, etc. It was contributing to the drug problem because one of the only valuable cash crops that people can produce in the South - again to earn hard currency to pay back their debts - is cocaine. And of course there were other things: taxpayers having to bail out the banks that had made such stupid loans. Or the fact that we were losing jobs because the southern countries were devoting so much of their budgets to paying back the debt that they could no longer purchase any products for infrastructure from the northern countries.

It also increased pressure for immigration, because people, particularly professional people -doctors and nurses-, were fleeing the poor countries, simply leaving because the hospitals were no longer functioning, because they couldn t treat patients properly, they had no equipment, no medicines, and the health budgets had been slashed. The same applies for teachers and other professions. So there was - and still is - a huge exodus of the best people from the poorest countries, simply because there was no way they could practise their professions where they were, and this "brain drain" of course then contributed to the misery created by debt, etc.

So all of these things caused me to want to push through all of the possible arguments that I could muster. But what I have to recognise is that apparently no level of human suffering is enough to move the politicians, because it s been well known for many years that more children were dying. UNICEF announced ten years ago that an extra 500,000 children were dying every year as a direct result of the debt crisis, in addition to the usual, terrible mortality rates.

We all knew that education and health budgets were being slashed in the name of structural adjustment, and I expect you all know about the austerity plans imposed on indebted governments in order for them to be able to earn the hard currency to pay back their debts. They were supposed to put all of their resources into export production. This, of course, reduced the food supply locally. I won t go into the reasons why the debt was accumulated, except to say that a lot of this was accumulated by local elites and never reached the people at all. In other words, the people who are now being called upon to make enormous sacrifices to pay back the debt are not the ones who benefited from the debt to begin with. Much of the debt was spent on armaments, or on current consumption, or on white elephant projects such as cathedrals in the desert, or never came into the national treasury at all, but simply left in the form of capital flight and went back to the North. So it was quite normal that many countries accumulated an unpayable debt, because debt had not been invested in productive activities.

Every country has a national debt: this is a perfectly normal phenomenon, but it s only payable if the debt is being invested in productive activities which then generate economic growth, which then generate the means to pay back the debt.

So we all knew that structural adjustment was a terrible burden on the poor, and every year the statistics got worse. But, as I said, apparently no level of human suffering was enough to convince either the IMF or the World Bank that they had to change the content of structural adjustment programmes, or that these debts were totally unpayable. These countries were being asked to pay back anything up to, in extreme cases, 80% of export earnings, merely to service the debt. Now the average is between 20-25%.

In contrast, in 1953, right after the war, Germany had been paying back its debt and it was considered at the time that anything above 3% of export earnings was totally unsustainable. However, African and other countries were being asked to pay back between 20-25% of export earnings.

Well none of this did any good and every country on any list you want to name was getting more and more into debt. I did a study about three years ago on 34 African countries and the results showed that although they had made 156 visits to the Paris Club - which is the group of creditors which negotiates public debts - the result were: less than 4% of the debt had been cancelled outright; about 17-18% had been rescheduled (pushed further into the future but not cancelled); and that every single country on the list was more indebted than it had been at the beginning of the period when they started to go to negotiate with the Paris Club. It was clear that this wasn t working.

So at some point you have to come to a political conclusion and you have to say that human suffering is clearly not the point. And I believe - and I hope that I am not shocking you - that debt is an eminently political phenomenon. I don t think it has anything to do with money - at least not for the poorest countries, because what the poorest countries owe is frankly peanuts in today s world. If everything was wiped out today, there would be a blip on the computer screens and then nothing further would happen. And even the high officials at the IMF admit this. They admitted it in private: I asked one of them would it have any effect if this debt of about 225 billion was cancelled. He said, "No, no problem." I said, "Would you like to say that in public?" No, he wouldn t like to say that in public.

So this is an eminently political issue. Why? Because structural adjustment is a terrific tool for keeping countries in line. If you are dependent on the IMF, and you re not going to get your next loan from the IMF unless you behave in a certain way, this is an extraordinarily powerful
lever to make countries behave the way that basically the G7, but chief among them the United States, wants them to behave. And in a Cold War world, you do not neglect that kind of political tool, and perhaps the truth that it is an eminently political issue is that countries which really behaved as they were told to behave did get some relief. In that sense Poland got sizeable relief after the end of the Cold War when it was considered that Poland could not be driven down any further, that there had to be some economic activity in Poland. Egypt got a blanket 25% reduction after the Gulf War because Egypt had fought on the right side. Mexico and other strategically placed countries got some relief because that was where foreign investments were most heavily engaged and therefore there had to be mechanisms to allow those countries to survive to keep on paying and to keep alive the fiction that the debt would some day be paid.

But Africa was not strategically interesting, and therefore only because there has been popular pressure and many other plans had failed, the World Bank and the IMF finally announced the HIPC initiative (Highly Indebted Poor Country initiative). What that meant in practice was that every country among the poorest countries, the highly indebted poor countries, was expected to have to go through a structural adjustment programme for three years. In other words, an extra three years of austerity. At the end of that period, if they got good marks, then they would go through another three year period, and at the end of six years, then they might get some relief. This was supposed to concern 22 countries. So far only three have gone through this terrible period of austerity and I think Uganda, Bolivia and now Mozambique are on this list.

And so it s clear that this initiative isn t going to work either, and wasn t really intended to work. It was really a way to gain time, in my opinion. So to put this in financial terms, for the last 12 years African countries have been paying back $25,000 every minute to their creditors, with no results. Every year the debt hasn t been going up quite so fast, but it hasn t gone down either. So with $25,000 every minute you can buy quite a lot of hospitals, schools, medical supplies, public transport, etc., but you can t if you are still being forced to direct your entire economy towards the earning of hard currency - because nobody s interested in your local currency for debt paybacks.

Jubilee 2000

This is where Jubilee comes in. Jubilee is a campaign which started in a very low key way, as I said, several years ago. But it has been particularly gaining momentum since the British really got together a very high-powered campaign and decided that they would do this with advertising, with popular people in the media, etc. The Jubilee 2000 campaign has been extraordinarily successful because they have brought in groups and people who had never done anything in the way of campaigning before.

I was in Birmingham last year when they brought out between 60.000 people, and there were huge mass meetings in the Cathedral. I asked the audience how many of them had never been on a demonstration before, and almost none of them had. So it s clear that this campaign was making a very great impact among people who had never had the idea to go into the streets, to hold up a sign, to get signatures, to buttonhole their members of parliament, etc., and this is an extremely positive development.

However, the flip side of that is that the campaign is - and I m being extremely frank here and I hope you won t hold it against me - in many ways it has been a lowest common denominator campaign. I don t want to say anything against this campaign; this is certainly not my position, or I wouldn t have accepted to be a patron. But clearly, even if the debt is cancelled outright, this is not going to change the scenario for the two-thirds of humanity who are now being more and more excluded from the world economy. It would be a help, yes. It is a very necessary first step, but I don t think it would be proper of me to encourage you to believe that even if the G7 announces that perhaps $100 billion will be cancelled, this is really going to change the world by tomorrow morning. It would be good news, but don t believe that s enough.

First of all, a lot of the debt is right now not being paid. Countries are being bled and populations are being bled dry in order to pay back the little that they can pay back. Let me quote you a Latin American friend who many years ago said, "For heaven s sake, don t cancel what we re not paying, because all that does is to say okay, we re giving you this break on however much it is, but now you ve really got to pay back what s left." And I remind you that the total debt of the South is two trillion dollars. So even though one hundred billion may sound like a huge sum for the G7, it is not going to empty their pockets by any means. But this is really not the level of Africa s debt, which is 227 billion, so I am sceptical and I am waiting to see what the real decision is. We can say well, we won: we won something, yes, and we must celebrate our victories, because none of this would have happened without the actions of organisations and just plain civil society and ordinary human beings saying, "Enough is enough".

Market Scenario

I would like to go on and talk a bit about your activities after Jubilee. I received your set of organisation review documents, which I thought were really terrific. I don t know any other organisation - and I work with a lot of them - which has gone through this exercise of preparing global scenarios and alternative views of possible futures. I expect you ve all been involved in that exercise, so you all know the "market world", the "fortress world" and the "transformed world", and the votes upon them. When you were asked about what the future reality would be, who would have thought that the market scenario got 8 votes, the fortress scenario 29 votes and the transformed scenario 3 votes?

The first thing I was surprised at was that the market scenario only got 8 votes, because the propaganda that we get every single day of our lives through the press and other ideological media is that the market is really going to take care of everybody. So I was pleased, but also surprised that there were only 8 people who thought that would be true. Normally, if the propaganda had worked, there would have been a far higher vote of people who thought well, let s just let the market get on with it and then eventually everybody will be included, and everything will be sweetness and light.

The market scenario may have worked in some limited areas. I heard before we began that Singapore and Hong Kong had wanted to be the venue for the next YMCA World Council, and those are two places where the market scenario probably worked, with a lot of state direction. It wasn t just the market place operating, the state was also very heavily involved. It worked for a time in Korea. In the case of Korea there was a deep state involvement and they kept the food prices down so that workers could be paid lower wages so that products could be competitive on export markets, etc. I m not going to give you a course in economics - I m sure you all know that. But heavy state involvement plus market forces did transform some areas - very limited areas - of the world. But the four original Asian tigers - Korea, Hong Kong, Taiwan and Singapore - have a total population of about 65 million people, which isn t a very large chunk of the world. And the reality of the market scenario is that unfortunately, states are no longer allowed to direct their economies, if they are under the structural adjustment discipline of the World Bank and the IMF, they are not allowed to direct their economies. They must liberate, they must free up everything, they must accept all foreign investment; wherever it goes they must accept free moving capital on their financial markets, and they are not in a position to direct their economies themselves.

Actually, in a world-wide way, over the past 10 or 15 years, the market simply has not worked that way for most people in the world. The globalization scenario with deregulation, with privatisation and with allowing the market to make most of the decisions, has done basically three or four things. First of all it has moved wealth up from the bottom to the top. There are many empirical studies which prove this. A 1997 UNCTAD report based on 2,600 different empirical studies revealed that inequalities have increased in virtually every country in the world, except two or three, particularly in all of Eastern Europe and China. Also in the northern countries of the so-called welfare state, and much more in Britain and the USA with Margaret Thatcher s and Ronald Reagan s policies, and in Australia and New Zealand.

Wealth was being moved up, the rich were getting much richer, the poor were poorer, and the middle class was being "hollowed out", as UNCTAD put it. And I suppose that this kind of polarisation is familiar to you all at the world-wide level. Perhaps you know the champagne glass graph, of the Human Development Report of the United Nations. There it is shown that the top 20% of the world's inhabitants are now capturing nearly 85% of all the wealth, and then the champagne glass goes down and the next 20% is getting something like 11%, and the bottom 20% is only getting about 1.1% of the world s wealth.

You can measure that another way. Right up to the war, the North-South gap was a gap between the top 20% and the bottom 20%. It doesn t entirely correspond to North-South, because there are very rich people in the South and very poor people in the North. But the top 20% of the world and their ratio to the bottom 20% was about 30 to 1; now it is about 82 to 1. In other words, the polarisation is getting much stronger both inside the countries and between the rich and the poor world-wide. If you compare the billionaires in the world and their net worth, the top 3 billionaires are worth as much as the annual GNP of all Sub-Saharan Africa. All of the billionaires in the world listed by Forbes Magazine have a net worth which is equivalent to the annual earnings, statistically speaking, of about half of the people in the world. This is not a scientific comparison, but it gives you an idea of the scale of things and how wealth is moving upwards.

Now that s one thing that globalisation is doing, and it shows something that anybody could say off the top of his or her head, because if you allow the markets just to operate, clearly they re going to reward those who already have something. If you reward the top 10%, they re not going to buy goods and services because they already have most of what they need. They re going to put that money into the stock markets. They re going to create bubbles, that in turn will create financial crises like the ones that we witnessed in Mexico and Russia, in Asia now. I m afraid that this is not the end of it, but that s a different subject. The market rewards does who already, not those who are poor. If you want to make sure the poor are included, then you must have a system of taxation and redistribution.

The other thing that globalisation does is to move power upwards. It moves it up to unaccountable bodies which are not touched by any kind of democratic process, which is one of the reasons we ve had such a terrible time trying to get debt relief. A lot of the debt that is owed by the poorest countries is owed to unaccountable international institutions - the World Bank and the International Monetary Fund - which are not particularly transparent and which do not answer to any kind of elected body. There are no mechanisms to allow public opinion to say, "you stop here, we re throwing you out because you are both incompetent and inhumane". We don t have those mechanisms.

Now I am working on issues related to the World Trade Organisation, which I think is one of the most dangerous entities in the whole world. If the food and agriculture sector is liberalised, it s going to ruin hundreds of thousands of small farmers, for example. Now we are less politically able to control what is going on in the world than we used to be. This is a direct impact of globalisation, because now the markets are dictating to states from outside. It used to be that if states were democratic, they had to respond to the needs of their citizens, because otherwise they would be thrown out. But now we have a kind of virtual government in the markets where if they don t like your policies and if they think that you re not going to be financially sound - and they have their definition of "financially sound" - then they ll just pull out their capital. That s what happened in Thailand and Korea. That s when things collapse and people are thrown out by thousands onto the streets, that s when they lose their jobs. That s why hunger is coming back massively to Indonesia, or half of the Mexican population is now living on less than $5 a day. So this is what some economists have called a "virtual state". Markets vote every day, and they vote instantly and their elections are without appeal. They simply say, okay, we re leaving.

Now what is it that they want? Well, naturally they want the maximum of shareholder value. Competition and shareholder value are the key words. In the Herald Tribune about three months ago there was an article about Germany. It said Germany was ranked 24th in the competition sweepstakes by the Davos Group. As you know, the Davos World Economic Forum, brings together about 2,000 of the most powerful presidents of transnational corporations and very large financial houses. Every year they make a list of the most competitive countries, based on various criteria. So why is Germany ranked 24th? Well, it s because Germany was "only" giving a return of 12% on capital. Only 12%. In my innocence I thought that 12% was a pretty good return on capital for an average. But that isn t nearly enough, because if you are among the top competitors - and Singapore is one of them, I think it is number one - there you can get a 20% return on capital.

So, to be competitive and to attract this market funding and to have a good vote from the markets, you have to give that kind of a return on capital. Why not 25% next year? If someone can give 20%, well maybe next year somebody else can give 21%. And then we ll see if there s anything else left over for workers, the community wherever the company is based or if there s anything left over for that matter for taxes to be paid, so that there can be some redistribution and poverty can at least be kept under control.

But none of that is working, and that is the globalisation scenario: you are not competitive even if you are giving 12% return on capital. So naturally, there is an assault against the welfare State in the North. Everybody is saying that the welfare state trying to care for people is much too expensive; bailing out companies that make stupid decisions is not too expensive. There s a kind of socialism for large corporations, at least the losses are socialised: that s for all of us to pay. But the profits are going only to those who invest, in other words, the shareholder value. Those are the big winners.

Finally globalisation creates a huge number of excluded people who are in a precarious situation, in casual labour, in the informal economy, people who do not have a proper job at all and who do not contribute to the global economy neither as consumers or as producers. This can be an individual question, it can also be a regional question. Much of Africa would now be considered by the markets as basically redundant, except for a very few pockets. Much of South Asia also would be considered basically redundant.

Fortress Scenario

The market doesn t work the way that the scenario in your documents describes. It leads much more clearly to the fortress scenario. This is what a very large majority of people in the group recognised, because the present trends are all going towards greater social polarisation, greater movement of wealth upwards, more ecological degradation, and huge numbers of poor people who cannot and will not be included.

This is what my next book is about, which is coming out in September. Because this seems to me to be the absolutely basic problem in a world where in the year 2020 there are going to be about 8 billion people on Earth, at a conservative estimate. Now if capitalism and the market cannot include everyone and if we can t improve technology fast enough to save the ecological degradation and if the system is going to create increasing numbers of excluded - and I think this will be virtually two-thirds of the people on earth in another 20 years - then what conclusion does one come to?

One comes to a conclusion of chaos and perhaps even worse. In my book I have done a scenario where I imagine a group of people representing a group very much like Davos, getting together and saying "what do we do?" "How can we keep this system ticking over, so that our own comfortable lives can go on pretty much as before?" And I think the conclusion that one comes to, weighing the ecological, the technological, the political, the economic and the population factors, are that you ve got to eliminate a great many people.

So that is my fortress scenario, I don t think it will be just a fortress: I think it will be much much worse than that.

I know this is very difficult for Christians to take on board. I think it s almost impossible to understand how ruthless this system can be, because you are all operating in a very different kind of world - as well you should be. You are operating in a world which you want to be inclusive, where you believe that the poor have a value, that every human being on Earth is a creature of God, that we are all brothers and sisters. So I think it is very difficult to realise that this kind of a system is unable to lead to that kind of a conclusion, to that sort of a scenario.

So the real problem is how we re going to act together for the transformation scenario because this is perhaps more urgently needed now than it ever has been. Globalisation is affecting every aspect of our lives: it is affecting work, fewer people are going to have meaningful work, companies are eliminating their employees because that s how they compete, it s affecting the environment, I ve mentioned that, culture, our knowledge, ideology, our natural resources, our governments. And it affects women and young people disproportionately. For the YMCA I think this is a real issue, because I m sure you are aware that young people, even if they are very well educated, are having a much harder time now becoming integrated into society. In France where I live, I would say at least half of them - I don t know the real statistics, but a great many of them can only find casual employment. They don t come out and move into the world. They cannot then found a family, they have no sort of security.

It s projected that even in a country as rich and with as much social protection as Germany, by the year 2010, half of all the people will only have casual employment. So there aren t any jobs, and the young people that you are dealing with are living in a very different world from the one that at least I grew up in.

Global Alliances

I think there are solutions to this, and the solutions have to do with controlling this international system which for the moment is making a lot of rules. There is no deregulation at the international level, new rules are being made every day, but they are all being made in favour of allowing the markets to work even more freely. This allows a total freedom of goods, services, capital and investments to cross borders, to go where it wants, when it wants, to do what it wants for as long as it wants.

Now the investment chapter is one that we won. We defeated the Multilateral Agreement on Investments, which would have given all rights to companies and no rights to governments and citizens. This we defeated. It s going to come up again at the World Trade Organisation. We ve got to have rules at the international level which are in favour of the transformation scenario and not in favour of the fortress scenario, and this seems to me to be an absolutely vital task that has to involve everybody and particularly Christians and churches.

So these people are not going to change voluntarily. The people who are winning in this situation are very happy to be winning. Most of the international structure has been set up on their behalf. The lobbies that are working are the lobbies of the transnational corporations and the very large financial structures. The rules that are being made are being made on their behalf. It s not worth hoping that the levels of human suffering that will be generated by this system is going to cause them to say, "no, we were wrong all along, and we re going to change our behaviour by 180."

This is going to take a struggle. It s not going to happen without fighting. It s not going to happen without alliances. You are a very large organisation. But even as a very large organisation with a huge coverage of a great many countries, unless you re joining with others on these issues, I don t think we re going to reach a scenario where co-operation could replace competition as the central value, where there would be a much fairer distribution of the world s wealth, where people could be included in the scenario rather than being dropped out of it every day. This isn t going to happen by itself.

Debt is one avenue, getting that debt really cancelled, that is definitely one avenue towards the transformation scenario. Another avenue I think has got to be the fight against allowing the WTO to make all the decisions in all the avenues of human existence, including health, education, farming, genetically modified organisms, intellectual property, etc. Then we ve got to set up an international system of taxation because more and more money is free floating, it s totally escaping taxation and we want redistribution. If we want to close the North-South gap, then the only way to do that is to set up an international system of taxation and redistribution. There are groups beginning to work on this which understand what this problem is and how it has to be handled.

The good news is that there has been one victory against the Multilateral Investment Agreement, which was a coalition of people linked through the Internet, putting together national campaigns and then linking those internationally. The Jubilee is a very good example of what citizens working together can do. I think citizens are beginning to understand that international problems are not out there, but they affect all of our lives.

I see change happening, I see people who two years ago didn t know each other, never worked together, who are working together harmoniously. So please don t think that I m pessimistic. I want to impress you with the seriousness of the situation, but I am not pessimistic because I see things happening. Two years ago if you would try to explain this investment treaty to people, they would have just said oh no, that s too technical, it's economics, I can t understand it, it s nothing to do with me. Now they catch on quickly, and they say yes, this does affect me, this does affect my work, this does affect my ideals, my values, and it is something I have to work on. This is sometimes technical, sometimes some of these issues are a little hard to understand, but I think that people are now willing to go that extra mile and to go towards this kind of understanding and then come together and work on these issues.

The thing to understand is that the system which is being put in place, every day more and more, and which is creating such havoc, and so many human disasters is not an act of God. This is not a natural system. This is not something that has come from the sky and then we all have to say there is no alternative, and we just have to go along with it. No. This is something which is a vast planetary experiment invented by a relatively small number of people who are becoming immensely more powerful and immensely more rich and are benefiting from it, and who really don t care what happens to the rest of the world, and who have a very short time horizon. So, if this isn t a natural system, if this isn t something given by God but something created by human beings, it is also something that other human beings can change.

So that is the message that I want to give to you today: to say, now we ve got to work for whoever wants that transformation scenario, and we ve got to do it together. I congratulate you for taking the entry point with Jubilee and I hope that this will only be an entry point and not an end point.

I think the operative virtues here are inclusion, solidarity and justice, because charity is a one way street: it goes from the rich to the poor. Solidarity is a two-lane highway and it works between partners, and justice - well, I don t have to explain to you what justice is, but it clearly isn't the system that we re setting up now.