Presentation at the Conference Sponsored by the GUE/NGL Group of the European Parliament, “The Fight against Poverty in the Least Developed Countries – Proposals and Realities”, Brussels 2nd May 2001,
It is most encouraging to read in the 5th April 2001 European Parliamentary Resolution on the forthcoming UN Conference on Least Developed Countries, that it is seen to be necessary to “go beyond diplomatic declarations” and create “a new international economic order” based on “equality, sovereignty, interdependence and mutual interest” between nations and peoples throughout the world. It is in this spirit, too, that this paper aims, through analysis of European proposals in the context of the realities, to carry forward the fight against poverty throughout the world; and to do this by moving the discussions and actions from focusing on symptomatic manifestations …. towards dealing with systemic factors and forces.
The nature and causes of the deepening poverty and social and environmental stresses in the world, and the proposed solutions can be dealt with under ten key headings, responding to the main focuses in the international debates and the most common solutions being proposed. Within each of these areas of focus it will be evident that the strategies of the European Commission, many of the positions supported by the European Parliament, and even many of the proposals by non-governmental agencies in Europe (and elsewhere) - while expressing a commendable concern with poverty, human suffering and insecurity - are in the main focused on the symptoms rather than the underlying systemic sources or causes of the problems.
Many of these causative factors are internal to the so-called Least Developed Countries (LDCs) and these have most fundamentally to be dealt with by - and between - their governments and peoples. But it is essential that it be recognised internationally that there are complex interactions between internal and external factors and forces. As this paper will demonstrate, it is
- the distorted nature of the economies of both the least developed and the so-called 'developing' countries (1) , especially in Africa; and
- the dependent nature and subordinate insertion of these countries in the global economy,
as well as
- the nature and functioning of that global economy, and of global institutions,
that also have to be recognised and decisively dealt with internationally.
1. “Market access’ …..or effective trade roles and rights?
In a world system in which international trade has expanded by 29%, between 1994 and1999 since the Uruguay Round, the combined share of global trade of the broad band of ‘developing’ countries has gone down from 49.6% to under 44% ; in which that of Africa as a whole has declined from 8% to 2%, while for the LDCs this is now less than 0.4%. The Quad (the EU, the US, Canada and Japan) between them enjoy approximately 56% of world exports. In this context:
1.1 A common proposal is that the weaker trading countries must be given improved “market
access” into the economies of the richest countries. The EU has, with much political fanfare, produced a unilateral offer of apparently duty-free and quota-free access for all the exports of all LDCs into the European markets (2)
. The EU parliament has welcomed this so-called Everything But Arms (EBA) offer (3)
, but this proposal has various qualifications and limitations, in that improved access for some key LDC exports (bananas , sugar and rice(4)
) will only be introduced gradually between 2006 and the later part of 2009, and until then will continue to be under quota constraints and pricing pressures. What is more, in relation to these and other products, the EU still maintains ‘safeguard’ provisions to ensure that its producers will be protected against “import surges” from LDC producers/countries, even though their total combined exports amount to less than 1% of EU imports. This latest manifestation of long-established and wider protectionism within the EU is a major challenge to all those Europeans genuinely concerned about inequities and poverty in the world.
1.2 It must also be noted that during the years between 2001 and 2009, this improved access or
‘preferences’ for LDCs will undergo a wider “erosion” through the continuing trade liberalisation that is taking place globally. This is precisely the argument against continued preferences which the European Commission’s own officials frequently point to in the context of the negotiations over the future of the Lome Convention. What this ‘erosion’ means is that the LDCs have, in fact, been given a very narrow window of opportunity by the EU. Even before 2006, and certainly before 2009, stronger exporters from other countries will be moving rapidly towards the same market access; many confronting LDCs with heavy competition in the same areas of export interest to them.
1. 3 Even more significantly, the EU is putting increasing pressure upon African, Caribbean and
Pacific (ACP) countries to provide the EU with “reciprocal” trade access into their markets under the terms proposed in the new Cotonou Agreement that is replacing the old Lome Convention. The 40 LDCs amongst the 77 ACP have apparently been given the option of continued preferential treatment (as above?) but it is quite clear that the major thrust from the EU side is towards reciprocal trade liberalisation within so-called Regional Economic Partnership Agreements (REPAs). If these are to be based upon exisiting or emerging regions between the ACP countries themselves, such as the Southern African Development Community (SADC), these inter-regional (eg EU-SADC) reciprocal free trade agreements will include LDCs as well as non-LDC ‘developing’ countries (5)
. It is proposed by the EU that this ‘reciprocity’ will begin to come into effect from 2008. From that date the increasing competitive pressures from EU exporters into these regions/countries will be a further counter-effect against their hypothetical gains that are expected from the EBA - for some from 2001 and for others between 2006-2009.
1.4 Over and above the EU’s targeted use of tariff barriers, there are other major trade
impediments into EU markets. These are the Technical Barriers to Trade (TBTs) which confront LDC and other developing country exporters with more covert but very difficult non-tariff barriers (NTBs). These include, for example, Sanitary and Phytosanitary Standards (SPSSs) which can certainly be justified, in and of themselves, and within the context of the demanding standards of richer economies. But they impose further heavy technical and economic burdens on lesser developed countries. They also require – not coincidentally - that these countries import yet further products and technologies from the industrialised countries in order to satisfy their demands on products and production measures (PPMs). Even more significantly, such standards are often manipulated by the companies and governments of the richer countries as disguised protectionist devices. In response to the technical and economic problems that these raise, and the political challenges that are posed, the standard answer is to offer ‘increased technical assistance’ (but see 2. below).
1. 5 In addition to all the above, however, there is an even more fundamental misconception or fallacy in the proposed reliance upon the (highly exaggerated) gains predicted from ‘improved market access’ as a response to the economic problems of LDCs. The fundamental problem is that most of these countries actually have little capacity to take advantage of whatever greater ‘opportunities’ may eventually emerge. Trade barriers are certainly a problem, but the greater and more serious problems of LDCs, as well as most non-LDC ‘developing’ countries in Africa, lie in their own export limitations, the limited range, low-volume and non-competitive character of their “supply capacities”. Once again, the common answer from the European Commission, and elsewhere, is that this can be solved with more technical assistance.
2. “Technical assistance" ... or independent policy rights!
The standard interpretation by international agencies, such as the IMF and World Bank, the WTO and the International Trade Center (ITC), and even UNCTAD to some degree, is that the limited capacity of LDCs and other developing countries to take advantage of global trade liberalisation can be dealt with by ensuring that they are provided with better ‘market information’ and by training them in greater ‘marketing skills’. This is not incorrect as far as it goes, but it is a very superficial and certainly an insufficient response to their problems. The European Commission, similarly, has long been engaged in various programmes of technical assistance to the ACP countries but, like the major international agencies, they largely miss the main problems:
2.1 The first mistake is the assumption that the solution to the low levels of external trade of such economies is simply to encourage and assist them to produce more, or more efficiently, what they have always produced – pursuing their so-called Comparative Advantage. This is what the World Bank and other neo-classical trade theorists have long advised and insisted upon. The effect has been to aggravate the over-supply of the commodities produced and exported by countries in Africa, Asia, Latin America and the Caribbean into the markets of the richest countries. The resultant depression of prices has contributed to the catastrophically deteriorating terms of trade - at the cost to developing countries of an average of US$ 20 billions annually (6)
2.2 The real answer to the so-called ‘supply capacities’ of the LDCs lies in dealing with their
productive incapacities and these are structural in nature. On the one hand, LDCs, and indeed most countries in Africa, are characterised by a heavy dependence on one or two commodity exports and this makes their entire economies very vulnerable to shifts - and manipulations - in international commodity markets over which they have no control or even influence. The basic solution, obviously, is to diversify their economies and thus their potential exports. But the fuller challenge is also to reconceive the role of trade in their economies and to diversify their trade orientations. The policies of European governments, the Commission and the Lome Convention have reflected and reinforced an excessive ACP focus - and dependence - on European markets. But it must be added that responsibility for this also lies with ACP governments which cling to the perceived guarantees in the status quo and are reluctant to try venturing down new paths or even implementing more independent and appropriate programmes while still using Lome supports.
2. 3 Yet, most such governments do recognise that they urgently need to improve the range and quality, and not just the quantity, of their exports. That entails more advanced levels and forms of production. Processing or beneficiation of their commodities would provide much greater value-added to their products with many benefits to their domestic economies, above all employment creation. However, the paradox is that if countries do manage to move higher up the ladder of economic performance, and out of the LDC category – which surely is the aim of all, including the Commission - they would, like the other ‘developing countries’ in Africa and elsewhere, face high tariff peaks and soaring tariff escalations in the most industrialised economies against their manufactured products and even their quite basically processed agricultural, mineral, and other commodity exports. This is further evidence of the self-serving protectionism within the EU and other highly industrialised countries, particularly the US and Japan.
2.4 Furthermore, if the less developed countries are to move into higher levels and forms of
production, that cannot happen without strategic state support to small and medium domestic producers … and to even larger. This is historically what has been done in all the most highly industrialised economies as well as the newly-industrialised economies, although the means and methods have differed from one country to another and over time. The most serious difficulty for LDCs and other ‘developing’ countries is that they are hoping, and expected, to improve their production and productive capacities in this neo-liberal era - in which they are barred from using the targeted governmental policy instruments and practical supports that all economies have hitherto enjoyed and many still employ (see 6. below). The challenge to the EU and other highly industrialised countries and the international institutions they dominate, above all the WTO, is whether they are prepared to accept the repeated proposal from poorer countries (7)
, that they be allowed to use tariff measures and other state supports such as production diversification instruments and their own type of “non-actionable” subsidies (allowed to the most developed countries (8)
) for their own development
2. 5 In addition to all the above, the most serious failures of the ‘technical assistance’ offered to the LDCs and other ‘developing’ countries, especially in Africa, is that this has been totally inadequate, not forthcoming, or simply wrong. Persistent demands have been made by these countries since 1994 for the effective implementation of undertakings made to LDCs and other developing countries, for example in the Marrakesh Decision of Ministers in Favour of LDCs at the end of the Uruguay Round. These were supposedly intended to off-set the recognised difficulties for them and “possible” negative effects of the UR agreements. However, the long-awaited joint Integrated Framework (IF) of technical assistance by a range of international agencies that has – very belatedly – emerged, is based on the assumption that what these countries need is more ‘integration into the global economy’; whereas it is precisely the current nature of that global economy and the proposed terms of that integration that are the most fundamental problem. And it is these that have to be challenged and changed (see also 9 below).
3. “Financial aid” as political device ... or human obligation?
As with technical assistance, the financial assistance provided by the rich industrialised countries to LDCs and other ‘developing’ countries is totally inadequate to their needs, frequently misconceived, misapplied, and invariably conditional, controlled and controlling. Even in mere quantitative terms, so-called Overseas Development Assistance (ODA) declined sharply during the hey-day of the neo-liberal 1990s. As the EU MEPs observe, ODA was reduced by 45% during the 1990s and is now back to the levels of the 1970s. The European Commission itself acknowledges that, whereas ODA was of the order of US$32 per person in 1990, this had gone down to US$19 per person by 1998. Against this background:
3.1 The agreed UN target, endorsed by the EU Parliament, is for the OECD countries to
contribute 0.7% of their GDPs to developing countries, and 0.15% specifically to LDCs. Very few European countries are anywhere near this target, although those that have made the effort should be acknowledged (9)
. More importantly, however, it must be recognised that this has always been a minimal gesture from the rich economies to the poor and is even more inadequate in the context of the vast and growing disparities in income between the industrialised countries, on the one hand, and the LDCs and weaker ‘developing’ countries, on the other. As the UNDP has demonstrated in its Human Development Reports over the past decade, the disparities of income between the poorest 20% and the richest 20% of the world’s population has worsened from 1 : 61 to 1 : 84 during the decade of the 1990s. And, as the EU parliamentary resolution notes, with average annual per capita income in the LDCs standing at a mere US$287, and that in the industrialised countries at an average of US$27, 402 , the gap is of the order of nearly 1:100.
3.2 The notorious conditionalities of blatantly self-serving ‘tied aid’ of previous years have, under intensive scrutiny and criticism - both in the recipient countries as well as by European NGOs - been replaced by more subtle methods. However, European governments continue to direct major proportions of so-called ‘overseas’ aid into their own national economies and companies. For example, a considerable part of such aid and ‘grants’ actually go towards Export Credit Guarantee and Investment Guarantee schemes to support and promote exporters and investors in the ‘donor’ countries. The EU Parliament seems to recognise the seriousness of this in recommending that, not only should such ‘aid’ be increased, but “at least 50% should be spent in the LDCs themselves”. This reflects something of the real nature and direction of ‘aid flows’.
3. 3 In terms other than the quantitative, there are many problems with the EC’s procedures and processes of disbursing aid, which entail inordinate delays and actually place additional bureaucratic and technical burdens on the over-stretched, under-equipped recipients. More importantly, this aid continues to be attached to a host of complex conditionalities, some of which are justifiable technical requirements of accountability and reporting. But others go much further to set, directly and indirectly, much more questionable economic policy demands and political conditionalities (see also 8 and 9 below). These supposedly ‘technical’ requirements are integral to the fuller picture of “the reality of aid” as analysed by independent European researchers (10)
3. 4 Aid is rarely, if ever, entirely disinterested. It is always utilised tactically by the donors, however indirectly, and it is inherently more advantageous to the aid provider. Even where it is – hypothetically – given with the best of intentions, aid reflects and reinforces the objective power relations, the hard realities - and political psychology - of dependence in the recipients. Aid can only be justified if it is conceived and shaped as a short term transitional measure to overcome specific hurdles or reach specific targets; and if it is explicitly designed to change the nature of the relationships and end the very need for aid. There is an unfortunate tendency, even among those sympathetic to LDCs and the ‘developing’ countries, to view aid as a long-term or indefinite relationship and as a self-evident ‘good’. It is seldom this - in practice or in principle and this must be taken on board by all well-meaning supporters of the weaker parts of the world. However, it must also be noted that a different and crude counter-argument to the manifest problems intrinsic to ‘aid’ - namely, the view of neo-liberal theorists that ‘trade is better than aid’ - is both ineffective (as in 1. above and 6. below) and even more basically self-serving.
3. 5 In contrast to either of these views, the more fundamental issue about financial aid from the rich to the poor is that it should be neither ‘well-meaning charity’ nor ‘misdirected pandering’. Aid has to be accepted as the obligation of the enriched countries to the impoverished, and as a profound human necessity and forward-looking strategic responsibility of all of humanity in a highly interdependent and increasingly socially and environmentally unstable world. This strategic and moral obligation exists because
- against the historic background of colonial and neo-colonial plunder and exploitation, and the
creation - and longstanding deliberate maintenance - of distorted and dependent economies;
- in the context of unequal power relations and the unprincipled exertion of power by the rich
and powerful when necessary to serve their own interests;
- under the pressures of biased international institutions controlled by the powerful and the
rich, and through the resultant imbalanced international agreements,
…….the poor have been made increasingly poor as a result of the rich making themselves increasingly rich. This is the systemic underpinning to the deepening poverty, increasing and profound incapacitation of greater swathes of humanity than ever before in history.
4. “Investment flows” ... economic gains, or systemic dangers?
The irony is that one of the solutions to poverty most commonly promoted actually reinforces this system by proposing increased reliance of the poor on investment from the accumulated resources of the rich. The assumption, even amongst some progressive analysts, and within UNCTAD itself, is that although foreign investors are, of course, motivated by their own business interests, the ‘marginalisation’ of poorer countries from such investment flows is even worse and is a major part of their crises. As the UNCTAD 2000 report on LDCs points out, foreign direct investment (FDI) in the 48 LDCs in the world declined by some 30% during the 1990s to a mere 1.4% of the total FDI going to all the developing countries. The whole of Africa, which includes 34 of the current 49 LDCs, receives less than 5% of all FDI to developing countries, and most of that goes to a half a dozen, mainly oil producing countries (11)
. The EU parliamentary position supports the EC offer of ‘incentives’ to encourage European investors, but there are a number of questionable features and effects of FDI:
4.1 The European Commission portrays such incentives as a part of its assistance to LDCs and
the ACP in general, but it has to be clearly recognised that such incentives are internal to the EU and are a matter between the EC/European governments and European capital – and between them and the citizens of Europe since it is public money that is so used. On the other hand, the overwhelming gains of foreign investment accrue to the investors and the main costs to the ‘host’ countries receiving FDI. UNCTAD points out that although very little FDI goes to African countries, that which does, routinely receives profit returns of almost 30% pa which is very much higher than profit rates even in the ‘emerging’ economies in Asia or within the EU itself.
4. 2 UNCTAD also points out that 27 of the 48 LDCs during the 1990s introduced extensive liberalisation of capital transfers under IMF/WB structural adjustment programmes (SAPs) in order to facilitate repatriation of foreign companies’ corporate profits and thereby encourage greater investment flows. However, contrary to IMF/WB prescriptions and promises, financial liberalisation, while demanded as an essential pre-condition, is simply not sufficient to attract capital to poor countries - other than to extremely profitable mineral and oil extraction enclaves. To attract any investment beyond crude resource extraction, LDC governments have to compete with each other and other developing countries to lure foreign investors with an ever-increasing array of tax incentives, subsidies and other financial incentives. Other inducements required by foreign investors result in a ‘race to the bottom’ in lowered wages and worsening labour conditions, and virtual carte blanche on environmental pollution and other abuses.
4. 3 The further problem is that, even if some LDC and other developing country governments were to be committed - or compelled by their populations - to try to set terms and conditions on FDI in order to prevent such abuses, and to try to guarantee at least some developmental gains to their economies and people, these are now being constrained by the terms of the WTO Agreement on Trade Related Investment Measures (TRIMs). This controversial agreement effectively prohibits performance requirements such as local content inputs to production, foreign exchange earnings from exports, reinvestment of a proportion of profits, the transfer of management skills, technology and labour training. These are alleged to create ‘distortions’ in the ‘international competitiveness’of transnational corporations and can result in damaging actions in the WTO against countries that attempt to place such requirements on international investors.
4.4 The EC has been a major proponent of TRIMs in the WTO and EU member states are also
directly involved, within the OECD and/or the WTO in trying to create a so-called Multilateral Agreement on Investment that will expand even further the freedoms and ‘rights’ of foreign investors everywhere in the world. The EC is also behind the drive within the WTO to force all countries to open up their government procurement sectors to international business competition. If such agreements were to become part of the international economic regime, it would make it ever more difficult for weaker governments to use public tenders, as with other such public policy instruments, as part of their national development strategies (12)
. These are part of the fuller implications of the role of foreign investment and the rights of capital in countries that are being encouraged to look to international capital to solve their problems.
4. 5 The most fundamental problem about dependence on international capital flows is that these are now taking place within the context of extensively deregulated financial markets and inadequately monitored banking and other financial organisations, utilising powerful technological instruments and under conditions of escalating and astronomical global financial transactions. The inter-linkages are becoming more complex - and clearer - between purportedly ‘productive’ FDI ventures, mergers and acquisitions as a one of the main forms of so-called FDI, stock-market trading and portfolio investment and speculative currency operations. And their exploitative and destabilising effects are becoming increasingly dangerous. This is the systemic context within which to assess the very advisability of relying in any significant way on international capital flows in the fight against poverty. The difficult challenge for weaker countries is, of course, how to mobilise more diverse - and mainly internal - financial and other development resources. At the very minimum this would entail slowing down or stopping the longstanding net outflow of financial resources from these countries(13)
including through onerous debt payments.
5. “Debt relief”... or total cancellation ... or repudiation?
Thirty of the 49 LDCs are Heavily Indebted Poor Countries, the so-called HIPCs, The external indebtedness of the countries of Sub-Saharan Africa has trebled over the past decade, and many LDCs spend up to 40% of their GNPs in servicing their debts, as much as four times what they are able to spend on education and health for their populations. It is now widely recognised that this situation is financially unsustainable and a serious impediment to dealing with their dire social, environmental and economic problems. Recently the European Commission announced that it would be canceling all the debts, amounting to some US$ 54 million, of 40 ACP countries linked to the European Development Fund (EDF) under Lome. This apparently generous offer, like many similar, actually poses a number of important questions and challenges:
5.1 The first is that many such offers are made for maximum political ‘effect’ with little real
gain for the recipients of such relief. There is much exaggeration of the real sums involved and much deliberate conflation of terms - such as ‘relief’, ‘reduction’, ‘write-offs’ and ‘cancellation’ - in order to convey the impression that more is being achieved than is in fact the case. The EC offer, for example, is a very limited relief on some of the ACPs’ debt to multilateral EC financial programmes, but it must be kept in mind that this does not deal with the huge bilateral debts that most such countries have with individual EU member states, and even more-so with the IFIs and banks. EU parliamentarians should not only commend the Commission, as they do, but challenge their respective home governments as well. This includes acting on their obligation and power to push the IMF and World Bank to full cancellation of all these countries’ multilateral debt.
5.2 In so-far-as some of the EU member states have undertaken some unilateral debt relief (14)
this, too, is utilised for self-serving political ends, and depicted as carrying ‘costs’ to them, as well as requiring ‘new resources’. There may well be costs to creditor governments and some will indeed have to forgo some income. The alternative would be the morally untenable argument that government coffers in the rich countries should continue to receive such inflows – even though these are minuscule within their overall revenues but huge within the revenues of debtor governments. In fact, the ‘costs’ to the creditors are largely a myth (15)
. The real ‘costs’ continue to fall heavily upon the poorest people and countries of the world. Nothing short of rapid, total and unconditional cancellation of all bilateral and multilateral debts can be acceptable, and it is this that should be supported by EU parliamentarians as well as European civil society organisations.
5. 3 On the vexed question of conditionalities, the first point is that these cannot be left in the hands of those that have helped to create the crisis – creditor governments and multilateral agencies alike. It has to be the people of the countries concerned who are empowered to ensure that they have greater future control over their governments on these issues. The main problem, however, is that the European Commission, the Paris Club of government lenders, the UN, the IFIs - and even the EU parliament - link debt relief to a continuation of the structural adjustment conditionalities of the IMF and World Bank. Yet these very SAPs have been the over-riding factors in the deteriorating economic situation of countries under their sway. And they have been used as levers to maintain and deepen the external financial dependence and subordination of indebted governments to external policy controls. This is the aim of the so-called HIPC (SAP) conditionalities, and this is why they are not acceptable to debt campaigners in these countries and worldwide.
5. 4 In the context of discussions on how to end poverty, it is important to note further that HIPC debt relief is now also linked to and conditional upon such countries drawing up so-called Poverty Reduction Strategy Papers (PRSPs). This latest strategy by the IMF/World Bank is apparently commendably – if belatedly - focused on poverty. The PRSPs are also ostensibly intended to be drawn up through processes of broad consultation within these countries, and with ‘national ownership’ of the outcome. However, apart from many questionable features in the process of the formulation of PRSPs, the most significant point is that the whole exercise will actually result in the radical extension of ultimate IMF/WB policy control: from macro-economic and related economic policies to include every aspect of the domestic policies and programmes of poor countries that are indebted to them and desperately need ‘debt relief’.
5. 5 Most fundamentally of all, however, the entire conceptualisation - and myth - of indebtedness of the HIPCs to the IFIs, of debtor governments to creditor governments has to be interrogated and exposed. The net financial flows are, and have long been, from the debtors to the creditors, from the poor to the rich, from the South to the North. And, as campaigners in these countries calculate the many forms of South-North resource transfers, and the manifold costs imposed upon their countries, peoples, and environments, over many years, they justifiably ask “who owes whom?” With the Jubilee South slogan “Don’t Owe! Won’t Pay”, campaigns are developing for debt repudiation by the ‘debtors’ and even for reparations due from the ‘creditors’. These are radical but legitimate positions if no other definitive resolution to the debt crisis is forthcoming. The struggles towards such positions are internal matters between the peoples and governments of the respective ‘debtor’ countries; towards a potential joint response by them all. But, at the very least, EU parliamentarians should be aware of this; and European civil society campaigners should give their active support to their counterparts in the South, as asked for.
6. “Poverty alleviation" or "reduction" or ... elimination!
As the UN prepares to hold its third international conference focused on LDCs, hopefully greater public attention is focused (and, hopefully, not just briefly) on the dire and deteriorating situation in these 49 countries. As the EU parliamentary resolution notes, the gap between the most and least ‘developed’ countries in the world is widening. UNDP global monitoring reveals that 1.3 billion people in the world subsist on less than the equivalent of US$1 per day, that this figure is increasing by 25 million a year, and that 70% of the most impoverished are female. Any discussions on this critical situation, any development initiatives to respond to it have to include critical engagements with the following issues:
6.1 The key component of mainstream debate is that all international and national agencies must concert their efforts to halve global poverty by the year 2015. This is the agreed consensus within the UN, and the EU parliamentary resolution supports this apparently commendable aim. This position may be well-intentioned but, like many others, is unfortunately, marked by further confusion of apparently similar concepts and aims that have differing implications for the policy makers ….. but particularly for the poverty-stricken subjects of the strategy. It is important to be quite clear whether the aim and therefore content of development initiatives are towards simple poverty alleviation, some reduction, or effective elimination? And, if not the latter, how is this to be justified to those hundreds of millions of people who are thereby expected to remain in dire poverty for another fifteen years beyond 2015 … another generation …. another century?
6.2 If the aim is to tackle the most significant bases of poverty within LDCs and other poor
countries, this must start from the fact that in most LDCs up to 80% of their populations live in the rural areas. This is still above 40% even in the stronger ‘developing’ countries in Africa. These populations depend on agriculture for their livelihoods, for family security, community stability and cultural sustenance and much more. In this context, supporting the development of small and medium agricultural production is the essential base for tackling rural poverty. However, even if technically well designed, policy changes are not sufficient without effective political decisions towards resource transfers, above all with respect to land and water resources. The EU Parliamentary resolution seems to recognise this. However, this fundamental change is not happening and will not happen under IMF/WB insistence on ‘market processes’ and ‘private enterprise’, and even the privatisation of communal lands and especially water provision (16)
6. 3 Another impediment to the development of small-scale agricultural production in poorer countries is that they have great difficulty in producing competitively for international markets (as in 1. above). Most seriously, they are faced with insupportable competition from subsidised agricultural exports from the EU. This also affects middle and larger agricultural producers - and agricultural workers - even in relatively ‘stronger’ economies such as Kenya and Zimbabwe, and even ‘middle-income’ South Africa. Subsidised EU exports also confront them all with unfair competition even in their exports into third markets. If EU parliamentarians and other concerned people in Europe are to be really supportive in tackling poverty in LDCs and elsewhere, this has to start by dealing resolutely with what is widely condemned as EU agricultural dumping on weaker producers and the less ‘competitive’ economies of the world.
6. 4 The World Bank solution for weak agricultural production and low rural incomes is to ‘encourage’ countries under their programmes to increase and diversify their cash crop exports. This is also ostensibly designed to increase national foreign exchange earnings but the main purpose of this, amongst other things, is for governments to pay off foreign debts. This cash crop production includes the traditional tropical commodities but also new high-value/low volume specialised crops such a cut flowers and luxury fruits and vegetables for the rich consumer markets of the North. The Bank gives the same advice to dozens of client countries and thus helps to ensure downward pressures on prices through increased market competition. This commercialisation of small-scale agriculture is also adversely affecting the role and status of many rural women as larger, more aggressive (largely male) businessmen move in on the relatively more profitable cash crop sector – and valuable rural land and water - displacing ‘womens’ food production.
6 . 5 This points to the most serious effect of this World Bank approach to agricultural production in these countries. It is directing the rural poor away from domestic food crop production and explicitly advising these countries to import cheaper food staples …. .produced by large-scale agri-business in the most highly industrialised countries! This places additional pressures on the external balance of payments of poor countries. It is also seriously exacerbating the food insecurity of families and communities and the external food dependency of such economies. This highly undesirable and financially unsustainable situation is even worse than originally anticipated during the Uruguay Round. Thus the failure of the dominant WTO members to implement the undertakings, made then, to provide support to Net Food Importing Developing Countries (NFIDCs) is all the more reprehensible. The question is how the EC is contributing to this. As Europe fights to defend its own agricultural interests in the current negotiations on the Agreement on Agriculture (AoA) in the WTO, the question is whether the EU is prepared to heed the call from the Africa group at the WTO that the terms of the AoA must be based on the fundamentally important need and right of all people and countries to food security.
7. “Labour and social development” ... and human rights
A complementary set of proposals to tackle poverty, in both rural and urban populations, focuses on more specific social problems and the necessary counter measures in LDCs and other poor countries. The EU parliamentarians rightly note that, on any of the key human development indicators, the situation in the LDCs is appalling; with infant mortality at an average of 107 per 1000, life expectancy at 51 years, and literacy at a mere 48% (and lower for women). The EU parliament also supports the need for increased resources for educational and health programmes. This is correct of course. But it poses a number of questions:
7. 1 The first point is that the provision of such services has to be viewed, and responded to not only as a development imperative for these countries but as part of the fundamental human rights of their populations. This stands in clear contrast to the World Bank approach which evaluates such services for their contribution to ‘the improvement of human capital’ to attract and make foreign investment more productive. Similarly, the EC position in the WTO of ‘improving working conditions’ also does not explicitly commit to promoting labour rights, whereas the EU parliament explicitly calls for full recognition and implementation of all the ILO conventions. Furthermore, the EC actively defends TRIMs in the WTO which actually discourages, and even prevents, governments from including improved labour rights and conditions in foreign investment agreements.
7. 2 With respect to the provision of essential social services, the fact is that after a period of marked improvement in health, education, life expectancy and other social indicators in the first decades after independence in most of the countries of Africa, these achievements have been seriously undermined under IMF macro-economic constraints on government expenditure and World Bank advice on fee payment or “cost recovery” by governments for education and health services. The inevitable result has been reduced access to such services for the poor, with dramatically adverse effects on all social indicators, particularly for women in health care and for girls in access to education.
7. 3 The further tragic irony is that, just as the World Bank is coming round to (tacitly) recognising and (apparently) modifying such mistaken policies, new threats are facing the public provision of such social services, as well as water and sanitation, public housing and transport and much else. Commercialisation and privatisation under the IMF/WB has already adversely affected access of the poor to these services, and this will be reinforced if the current negotiations in the WTO on the General Agreement on Trade in Services (GATS) compel member countries to ‘open up’ all such sectors to the operations of giant transnational service corporations. The extended GATS would place severe constraints on public policy and government regulation in these spheres within all countries so as not to ‘unnecessarily’ prejudice the interests and rights of global service corporations. European MEPs and CSOs have to challenge the European Commission on its support for GATS in the WTO. This would also be part of an important defence of public social services in EU countries as well.
7. 4 Equally importantly, concerned Europeans have to question the role of the EC in the creation of the WTO Agreement on Trade Related Intellectual Property Rights (TRIPS). As is now widely recognised, TRIPS, amongst many other questionable functions, prioritises the ‘patent’ rights of giant pharmaceutical corporations against the health needs of poor countries and the many millions suffering and dying under preventable diseases. The most dramatic crisis facing LDCs and the whole of Africa is the spreading HIV/AIDS pandemic. The Eeuropean Commission supports the idea of a “tiered pricing system” for countries at different levels of development and with different degrees of health crises. At issue here, however, is not merely the question of cost and the reduction of their charges on drugs by the giant pharmaceuticals which is essentially designed to ‘look good’ while still holding onto their markets. The more fundamental principle is the right of developing country governments to source such necessary drug imports from other developing countries (such as India, Thailand or Brazil), or to have them produced within their own countries under compulsory licensing, without the fear of overt and covert actions being taken against them by powerful governments.
7. 5 A related and very fundamental concern has to be how TRIPS actually aggravates the ‘educational deficit’ and the yawning technological chasm that exists, and is widening, between the high technology industrialised and even ‘post-industrial’ societies, on the one hand, and largely pre-industrial low technology societies on the other hand. With the increasing commercialisation of science and technology in the richest countries and control by the biggest corporations, access for poor and weak countries to the resources of human knowledge is becoming increasingly expensive and difficult … despite the much-vaunted claims about the blessings of the latest information and communication technology. Such access is not just a question of ‘networking’ for the ‘fulfillment of individual potentials’. It has been through technological ‘borrowings’ that all societies have always developed. But the flexible ‘permissive’ approach of earlier centuries is being replaced in the 21st century by a tight corporate control and a ruthless possessiveness or protectionism which is in direct contradiction with the claims about the supposedly liberalised ‘open’ global market economy.
8. “Good governance" ... or real democracy and human rights?
In addition to the economic conditionalities of trade and investment liberalisation, services commercialisation and generalised privatisation, the political conditionalities set by the EU and other powerful governments include - apparently sound - demands for evidence of ‘good governance’ and respect for democracy and human rights in countries receiving their aid. The EU parliament, like many well-intentioned European NGOs, supports greater institutional capacity building, legality and accountability of LDC as with other Third World governments. To its credit the EU Parliamentary Resolution on LDCs also notes that such efforts should “reinforce the autonomy” of such countries. This is a commendable observation, but the real aim should be to enable the people and governments of such countries to ‘regain’ from external institutions and governments their own national political and human rights. This raises a number of further issues
8.1 The first is that the current interpretation of the characteristics and essential components
of ‘good governance’ include not only legal and technical qualities of transparency and reliability; but an assumption that ‘reliability’ and governmental ‘soundness’ include tight monetarist fiscal policies, reduction of the expenditure, responsibilities and very role of government, as well as economic policy and financial support to the private sector and a commitment to create “market economies’ in their countries. It is precisely these neo-liberal economic prescriptions in the IMF/WB macro-economic packages that have contributed to the economic deterioration and social crises in countries under their sway (17)
8.2 In so far as European governments focus on more precisely defined governmental issues
within these countries, the emphasis is always almost entirely on the failings and abuses of the political/governing elites. These and other internal factors, such as the general weakness in, or active suppression of independent civil society forces in most of these countries, certainly do demand urgent attention and energetic counter-efforts. But government abuses are both a problem in themselves and an effect of other factors and forces. European and other powerful governments fail to acknowledge and explicitly take on board the role of powerful external forces, above all, within their own societies – economic and political, private and public. These include the role of European and other governments in colluding with or even creating such regimes in furtherance of their own geo-political and geo-economic interests.
8.3 Equally significantly, when the IMF and World Bank rail against corruption in the governments under their sway, they not only ignore the role of outside governments, transnational corporations and banks in encouraging or conniving with such corruption; they also fail to see that their own policies are doing the same. EU governments, directly or through the IMF/WB, insist that governments pursue rapid and sweeping privatisation of their state enterprises or public utilities. The resultant intensified interaction between public and private interests and the conflation of political power/responsibilities with outside economic interests, and with business aspirants within government ranks, is generating greater levels of corruption and abuse of public office than ever before in these countries.
8.4 Furthermore , with regard to such external proposals to create ‘good governance’ in these
countries, it is precisely external policy impositions that have contributed towards the governmental crises, the weakening and, in fact, the de-legitimisation of government in many such countries. The ideological prejudices of the IMF/WB against the role of the state in these countries has for decades blinded them to the necessity of that role, to the justifiable aims and even achievements of state-led development in many of these countries (18)
. This has pre-empted and prevented serious attention and efforts towards to the development of appropriate policies to deal also with the weaknesses and mistakes within state-driven development models. In their zeal to discipline governments, to reduce their spending and entire role, these international social engineers have helped to create externally dependent governments less and less responsive or responsible to their own populations, and have in the process actively undermined real democracy.
8. 5 Most of the above critical observations apply equally to the proposal that peace and stability in these countries is an essential pre-condition to effectively tackling poverty. This is not incorrect, or course, but it is very superficial and fails to focus on the complex interaction of internal and external factors that create social tensions, conflicts, civil and inter-state wars, war-lordism, and even ‘collapsed’ states. The EU Parliamentary Resolution is correct to call for the EU and other governments to stop the legal and illegal sale of arms to these countries. But the more profound and useful observation they make is that “causes of armed conflicts can be economic inequality and conflicts of interest at local, regional and international levels and…. conflict prevention must be defined in such a way as to find solutions to these structural causes”.
Social conflict and violence are both an effect as well as a cause of economic crises.
9. LDC “marginalisation” or "integration" ... or equitable participation in a different global system?
As has been evident throughout the foregoing analyses of the various proposals for tackling the growing poverty and dramatically widening inequalities in the world, there are many international factors and forces which are contributing to these problems and which are countering efforts and possibilities for dealing with them. The role in this of key international institutions such as the IMF, World Bank and the WTO has also been repeatedly referred to. It has also been evident that the EU countries, separately and together, are a major global force in shaping the policies and roles of these multilateral institutions, as well as through their own multilateral and bilateral strategies.
The European Commission, on behalf of the members states, has also been a central player in the creation of WTO agreements and the rules and regulations that provide the legal framework for corporate-serving ‘globalisation’ or the opening up and corporate penetration of all sectors and economies throughout the world. The EU has been a major force, through its member governments and transnational corporations, in the creation of a global economic system that is producing an unprecedented concentration of incredible wealth for a tiny minority and deepening of poverty for the great majority of humanity. And to cap it all, it is the EU, through the Commission, that is now the most active and energetic agency pushing the world towards a comprehensive new WTO ‘round’ of further liberalisations and intensified globalisation.
Ignoring the repeated demands of the majority of ‘developing’ countries for a “review, repair and reform” of the WTO and its agreements, and ignoring worldwide civil society calls for “No New Round” of the WTO and a “Turn Around” of the world system, European governments and the Commission are using every political tactic to get such a new round underway. This includes tried and tested pressures and persuasions, direct and indirect, bilateral and multilateral, to divide and weaken the resistance of developing countries to the European Commission’s aims in and through the WTO. This has already been evident in the blatant attempt by the European Commission(er), in conjunction with the US Trade Representative (USTR) and the WTO Secretariat, in Libreville in November last year, to manipulate African trade ministers into providing an official collective endorsement of the EU’s drive towards a full new multi-sectoral round of negotiations. Although that bid failed, it is very much to be expected that a similar endeavour will be made during the forthcoming UN Conference on LDCs, utilising the even greater economic dependence and political weaknesses of the LDCs to gain their support for a new round.
A ‘multi-sectoral’ round is important for the EU in order to promote its general economic interests and to contrive tactical trade-offs in defence of specific internal interests, above all the EU's illegal and untenable internal production subsidies and external agricultural dumping. The EC has the negotiating skills, political leverage and vast human and financial resources to do this. But the developing countries, and particularly the LDCs, are in no position to cope with yet another such extremely challenging process, especially as they still struggle to cope with the effects of the existing system. Above all, the LDCs, the developing countries - and the world - do not need an extension of the deregulated market globalisation that is intensifying poverty and social polarisation, insecurity and conflict.
The response of globalist theorists and apologists – in the face of the manifest failure of the liberalised global economy to deliver the promised benefits to the whole world - is to argue that the problem of weaker economies is that they are ‘marginalised’ from the trade and investment flows of the global economy and that they need is to be more fully ‘integrated’ into the global system. In fact, the main problem of such countries is that they have been compelled to ‘integrate’ into the global economy through precipitate and sweeping opening up of their national trade and production sectors. In Africa this also means a reinforced extroversion of their trade and production to global markets where the so-called ‘level playing field’ intrinsically favours the strong/er players.
This is why it is not mere ‘integration’ but the nature and terms of their participation in the global economy that is more significant. Even more important is the nature of their national economies and their own independently and democratically negotiated regional cooperation and integration strategies. This is why the current WTO constraints on Regional Trade Agreements (RTAs) have to be challenged and changed in favour of developmental regionalism amongst developing and least developed economies, according to their own needs. And this, too, is why there is increasing emphasis from the developing countries that the Special and Differential Terms (SDTs) for weaker economies, as originally enshrined in GATT during the ‘development’ era of the 1970s, be fully recognised extended and, in fact, made the basis for a much more diversified system of international and regional economic regulations and relations.
These are useful defensive strategies for creating more space for weaker economies in the currently dominant global economic system. But, in the final analysis the challenge has to go further. It is the very fundamentals of the currently dominant market system that have to be challenged and changed towards more balanced, equitable and sustainable alternatives for all countries and peoples, for humanity and our common planetary home.
The current terminology of ‘Least Developed’ and ‘Developing’ to categorise the countries of Africa will be used in this paper, although with strong reservations about their full accuracy and analytical utility, and the artificial divisions created, and potential differences and even tensions fostered. See below.
“Unilateral” because the EU has ‘jumped the gun’ with this offer while it is ostensibly still engaged in a prolonged process of negotiations with the LDCs and all the other ACP countries on the future of Lome Convention preferences and other special relationships (see 1.2 and 1.3 below)
Although the EU Resolution on LDCs also observes that “market access alone is not enough to ensure economic growth, and economic growth does not lead automatically to equitable development”.
Which together could account for some 70% of increased LDC exports to the EU !
D Keet “ Regional Economic Partnership Agreements – Implications for Regional Integration and Development in Southern Africa”, in Occasional Paper #21, ‘Introducing Reciprocity in Trade Relations between the EU and SADC’ Institute for Global Dialogue, Johannesburg, August 1999.
Or, as the EU parliament itself notes, producing a negative effect of some 30% in 1998-1999 alone.
See, for example, Africa Group at the WTO “Joint Proposal on the Negotiations on Agriculture”. 23/3/2001
In the WTO Agreement on Subsidies, and in the Agreement on Agriculture.
Only the ODA of Denmark, Norway, Sweden and the Netherlands is at or above this level.
Such as Mirjam Van Reissen in “EU Global Player”, EUROSTEP, Brussels 1999.
Just as almost 60% of FDI to Asia goes to China alone.
This would prevent even a relatively stronger government, such as South Africa, from using such public policy instruments in affirmative programmes for hitherto disadvantaged sectors of the population.
And the exodus of invaluable skilled human resources
And some governments such as Denmark, France and the UK have – apparently - been quite generous.
Many of the so-called costs or losses would actually be incurred by banks and other private and public financial agencies, such as the ECGB. For commercial banks, this would be further income foregone rather than real losses since most have already been fully reimbursed , often many times over for the loans they provided.
which European companies are actively profiting from.
It is undoubtedly the widespread understanding of this in European NGOs and development agencies that have researched and worked on the ground in these countries that lead them to argue, in their preparatory debates towards UN-LDCs III, that “free market economics should not be defined as part of good governance”.
Including in notable rates of improvement in health indicators and literacy achievements, and even economic growth rates in many of these countries in the first ‘development decades’ of the 1960s and early 1970s ……. that is until the impact on them of the economic crises in the most highly industrialised countries, amongst other factors, during the 1970s.