Cooperation: A Third Way with a Third Force?

01 November 1999

International Cooperation Days. Ottawa, 16-17 November 1999

The Canadian government was host to about 1800 development professionals and supporters, mostly Canadians but a good many from other countries of both North and South. I have to say this speech received a wildly enthusiatic welcome, as if those present had just been waiting for someone to call a spade a spade, or for the Francophones un chat un chat. My only regret was that the Administrator of the UN Development Programme, Mark Malloch Brown, did not hang around long enough to hear it although there were some lesser UN luminaries present. One of the fears expressed here has been confirmed: in June 2000 Kofi Annan proclaimed his Global Compact with transnational corporations including such sterling human rights advocates as Shell, Nike, Rio Tinto and Novartis.

Madame la Ministre, distinguished guests, dear friends,

Thank you for the honour of addressing this gathering. I feel especially proud and privileged to be here with you because I have long been convinced that people involved in development cooperation, whether at the governmental, inter-governmental or NGO level, in North and South have been and remain among the brightest, the best, the most dedicated and the most creative people of their respective generations.

Let me take a quick look backwards before focusing critically on the present and charting as best I can some paths for the future. I would start by pointing out that the idea of development cooperation was arguably the most original concept emerging from the ruins of the Second World War. Leaders and ordinary people were aware that the world had to be organised differently. In 1944, under the leadership of John Maynard Keynes and Harry Dexter White, the free nations of the world established two highly innovative institutions-the World Bank and the International Monetary Fund, set up to provide infrastructure and to keep members inside the world trading system even in times of temporary balance of payments problems. Whatever these institutions may later have become, let us remember that their initial goal was to promote greater equality between North and South through development and short-term trade finance.

Some post-war signs were less auspicious. Colonialism did not die easily and further horrible, bloody and needless wars remained to be fought-in Algeria, in many southern African liberation struggles and above all in Vietnam. Yet despite these setbacks, the age of empires was clearly dying and UN specialised agencies and national development cooperation programmes were already flourishing.

However normal and routine all this may appear to us today, think back to how literally revolutionary these developments were. They launched the world into a completely new era in which we became officially responsible for each others' well-being. And because the new system of cooperation was-or could at least become-revolutionary and progressive, because it promised a more justly ordered world, this endeavour attracted the brightest and best, those creative and dedicated people I alluded to at the outset. In every generation, there is a minority of people who place social justice and honour above money and position and this minority fought for and created and staffed and piloted these new development cooperation institutions.

Of course, poliitics and real-politik also influenced these institutions. Official cooperation funds sometimes supported some extremely unsavoury regimes-the Mobutus and other African tyrants or the Big "S" Men, the Shah, Somoza and Suharto who has only just been toppled. Dubious deals were made as well through export credits and tied aid. We should not discount the downside and the contradictions of development cooperation over the years. But my point is that for easily 25 or 30 years of the post-War period, thousands of professionals, with millions of supporters, passionately believed that a new internationalism was possible, that social justice was attainable, that a world based on solidarity and inclusion could actually, at long last, be built.

They threw themselves into building that world with enthusiasm and tenacity and we should note that some of the most innovative and effective cooperation programmes were those of countries carrying no colonial baggage at all. They had nothing to be ashamed of, nothing to atone for or feel guilty about-they just wanted to help other people and other nations realise their full potential in a spirit of partnership. Let me salute in this connection our host country today, Canada, not alone, but among the foremost.

Then, alas, came the dire decade of the 1980s. Because of inflation in the North, in 1981 under the leadership of Ronald Reagan interest rates were suddenly raised sky-high, triggering the debt crisis which still plagues North-South relations 17 years later. Countries fell one by one under the iron law of the IMF, no longer the benign provider of short-term balance of payments finance but a harsh task-master whose advice was always the same: adjust or else.

The IMF programme was one-size-fits-all: Raise interest rates, open your borders to imports and concentrate your economy on exports, slash government spending and lay off your civil servants, privatise everything in sight and raise the prices of basic necessities like food and energy. Above all, keep paying the interest on your debt. Structural adjustment is the polite name for economic austerity and often unbearable hardship for the poor. Structural adjustment allowed those responsible for incurring the debts of their countries to escape all the consequences and often to enrich themselves beyond their wildest hopes. On the other hand, those who had never gained any benefit from the borrowed money would have to suffer and die in order to pay it back.

And pay back they did: for over a decade, the developing countries as a whole have been contributing $190.000 a minute to debt service, while the poorest of the poor in Sub-Saharan Africa have paid back an average of $20.000 in interest payments every minute. You can build a good many schools and clinics and water-mains and roads for $20.000 a minute, but they did not get built, the children were not educated, the people were not cared for. Naturally, since so many countries were trying to export the same limited range of products to the same markets, gluts developed, prices dropped and poor countries' revenues shrank even as they struggled to produce and export even more.

The 1980s were rightly labeled by UNICEF and others as the Lost Decade for Development. The neo-liberal policies of this decade nearly wiped out the ideals of social justice, because they forced the poor to pay for the mistakes and the greed of the rich in both North and South. Debt turned out to be a fantastic policy tool for keeping third world countries in line. It was not only far more efficient and far less visible than colonialism: it was even profitable. The North, its industries and banks gained through mass privatisations, ongoing debt service and lower market prices for commodities.

International agencies also gained in financial power and political influence. A leading Scandinavian development official complained to me a few years ago that he would feel more honest writing his check directly to the World Bank or the IMF rather than having it transit through the central bank of Tanzania or Zimbabwe.

Meanwhile, the Cold War came to an end-a merciful development in itself. However, it soon became clear that for certain governments, development cooperation had had little to do with poverty alleviation and everything to do with closing third world countries to the influence of the Soviet Union. With the demise of the Soviet Union, their view seemed to be that we could once more afford to let a great many poor countries and regions drop off the map. We are presently living with the consequences of this cynical reassessment of the raison d'être of cooperation as we witness the precipitous drop in budget allocations for development.

As if the debt crisis, structural adjustment, falling commodity prices and dwindling budgetary resources were not enough, the South has been made to suffer further injury in the past few years through repeated financial crises. Volatile international private capital seeking rapid returns has targeted so-called "emerging markets".

According to the Bank for International Settlements, a mere one percent of the funds in the hands of Western fund managers in 1995 was equivalent to 25% of all the stock market capitalisation of all the emerging markets in Asia and equivalent to two-thirds of the market capitalisation of all the stock markets in Latin America. Since these fund managers move in herds and all rush for the gate at the slightest warning signal, it is hardly surprising that meltdowns should have occurred in Mexico, Thailand, Korea, Indonesia, Russia and Brazil. Little did these emerging markets know what they were "emerging" into.

The financial press is now jubilant about what it calls the "recovery" in these countries. This press rarely mentions drastic increases of interest rates and the consequent failure of thousands of small and medium businesses, nor does it devote much space to the millions who have lost their jobs and the social dislocation that has ensued. In Asian countries, a new expression, "IMF suicides", has been invented to describe the desperate actions of workers who kill their families and themselves because they can no longer provide for them. Chronic hunger is returning to parts of Indonesia and in Russia life expectancy has dropped by five years-seven for men-in less than a decade. Human recovery is going to take much longer, perhaps decades.

I am not going to repeat the UNDP figures you all know. Inequalities are on the rise, the North-South gap is becoming a chasm, a few billionnaires have a higher net worth than the entire annual income of Sub-Saharan Africa and so on and so on. We will only depress ourselves further by repeating these figures and this is not my purpose.

I want rather to say that today we have a choice between despair and optimism. If we keep trying to navigate in the same channels or march on the same old paths while repeating the same old mantras, the situation is almost hopeless and we can only stand by and watch cooperation funds dry up and the state of our LDC partners deteriorate further. And yet, strangely, in spite of everything I have said this morning and everything you all know concerning the crisis of cooperation, I am hopeful. If ever there were a time for radical restructuring, it is now. So let me devote the rest of my talk to suggesting how that restructuring might occur.

To begin with, one can make some fairly obvious and straightforward recommendations. First, some aid is still tied and should be untied. Second, LDC partner governments have to deal with too many donors, too many programmes, too many reports. It might cause some job losses among Northern professionals in the field and require more consultation among donor agencies, but it's time to internationalise cooperation and reduce the burden on scarce government human resources in the South. We have to merge our efforts-this is one of the greatest services we can do to the poorer countries.

Third, it's time to be serious about third world debt. We need no further proof of the ravages of debt and the suffering it causes, we have known all about them for fifteen years now, so let's do it! The last G7 meeting in Cologne was described by members of Jubilee 2000 South as a "cruel hoax" because Western leaders went no further than cancelling what the poor countries were not paying anyway, while reaffirming the need for ever-greater structural adjustment. This has to stop: the least developed countries in particular must be freed from debt bondage.

My other proposals are less mainstream, less safe, and I am aware that they will not be popular with everyone. But I would ask those who reject them to explain how they propose to exit from the current impasse or, if they do not intend to try, to state clearly that poor countries and poor people are no longer of any concern to us and we should simply leave these losers, these redundant people, to disappear, from hunger, AIDS or similar scourges.

My postulates for a third way/third force restructuring are the following:

  1. there isn't much point in repeating the time-honoured but worn-out demand for government cooperation budgets equivalent to 0.70% of GNP. This is simply not going to happen and we should stop pretending that it might.
  2. there are still millions of people in both North and South who aspire to, and are working for, social justice and a more equitable world in which every person can live in dignity and which preserves the natural habitat for all creatures, not just for humans.

Now let's ask some apparently naive questions: Where do development cooperation budgets come from? Like any other public expenditure, they come from taxes on the income, property or consumption of citizens and corporations. Today, national governments in the North have reached the limits of the taxes they can levy. Why? Because capital and the real wealth of transnational corporations, more and more escapes national jurisdictions.

Let me make clear I am not speaking about small and medium sized businesses but about the top 200 transnationals which by themselves are responsible for about one-quarter of the Gross World Product. The only wealth that national governments can get at and tax is fixed and rooted in a particular place-it's your money and mine and that of national businesses. Corporate taxes as a proportion of national tax revenues are dropping drastically in all the OECD countries because international, footloose money can escape.

If we want more money for poverty eradication, universal health care and education, environmental renewal and sustainable development, then we had better start looking for that money where it really is: in the coffers of transnational corporations and financial operators. The turnover of the top TNCs is larger than the GDP of most governments-of the top 100 economic entities in the world, 49 are states, 51 are companies. They use creative accounting to avoid financing the common good-for example, the CEO of a major automotive company actually bragged that his company did not pay any taxes at all in Germany, its home country. Financial speculation is free to raid the central banks of poor countries, with the active cooperation of the IMF, but it pays little or no tax in any of them.

Let me suggest that if we had been holding this conference a hundred years ago to discuss ways to alleviate poverty and create more just societies, people would surely have proposed a small, flat income tax above a certain level of revenue which could be collected by governments to fund public services and redistribute to people in need. Such proposals would have been criticised by some as outrageous and labelled impossible to implement and politically unworkable. Still, a hundred years later, income taxes are recognised as normal, easy to implement and they are on the whole politically unchallenged. National taxation and redistribution brought forth the Welfare State in northern countries, representing at least one approach to a more just society.

In our own day, "international" taxation and redistribution are goals which are just as worthy as national income taxes were yesterday. The millions who want development cooperation to flourish should be in the front lines in the battle for enacting them, particularly development cooperation professionals. There are several possible taxes of this type-this is not the time or place to go into technical details: the main point is that perfectly feasible methods exist or could be devised for instituting taxes on foreign exchange [or so-called "Tobin taxes"]; taxes on stock, bond, futures and options market transactions; taxes on mergers and acquisitions, on foreign direct investment or on transnational corporation sales at a flat world-wide rate. We can also mention, pour mémoire, eco-taxes to reduce energy consumption and penalise pollution as well as crackdowns on so-called fiscal paradises or tax havens.

The Canadian and Finnnish parliaments have already passed resolutions in favour of the Tobin tax; 120 French deputies have created an inter-party group to push for it and a similar group exists in the European Parliament. Popular movements like ATTAC in Europe are recruiting thousands of members. Yet national and international political will is lacking.

Why? Partly because governments now mostly listen to giant corporations and financial houses which operate in a tax-free international environment and want it to stay that way. They can be counted upon to protest vigorously against any infringements on their costs of doing business, just as potential tax targets have protested for centuries. They are always the first to tell us such taxes are unworkable.

Political will is also lacking, I am sorry to say, because we are in process of losing a major ally. Just when we need it most, the United Nations is reaching out to the largest transnational corporations, including some of the world's worst human rights violators and environmental predators. Under the enthusiastic guidance of the UN Secretary General, the UN, which was founded on a commitment to social justice, is now entering into partnerships with these companies, offering them the prestige and the public relations advantages of the UN flag while getting absolutely nothing in return except vague promises of good conduct which are non-binding and which the UN itself admits it has no capacity to monitor.

Kofi Annan's so-called Global Compact with corporations, the UNDP's new programme with Transnationals called the Global Sustainable Development Facility, the Geneva Business Dialogue organised by a partnership of the UN with the International Chamber of Commerce and the Chairman of Nestlé-these programmes are sprouting like mushrooms and are all in my view ominous signs that neo-liberal, corporate-led globalisation may have triumphed. Let us hope not. However, we are now at the point where something called the Business Humanitarian Forum can be co-chaired by Ms Ogata, the UN High Commissioner for Refugees and UNOCAL, the company currently building an oil pipeline in Burma using slave labour to get the job done.

If the UN wants to reach out to TNCs, fair enough, but it should then make those arrangements transparent and it should invite other groups from civil society to be present in the discussions. It should also drive a hard bargain-for example by enlisting the support of these corporations for international taxation and obliging them to provide material proof of their good faith.

I believe that development cooperation professionals and their supporters must seek out new allies in the vast and growing citizen's movement opposing corporate-led globalisation and the societal destruction that goes with it. They should join hands to convince their own governments that international taxation is the only way to go unless we want a radically polarised world, three-quarters of it chronically impoverished. They should also reach out to that part of the private sector made up of companies, large and small, which actually want to contribute to a more socially just world, not just to their PR campaigns and their bottom lines. We need "trialogues" between citizens and governments and business, not just dialogues between governments and companies.

I am convinced that every person in this room agrees on the goals, on the ends. In whatever words we may express this goal, we all want social justice. Our political consciousness has been defined and redefined in the light of this objective and this ideal. I am asking that you make a radical yet logical leap into the 21st century. We all agree about the "ends". Let us now concentrate together on fighting for the concrete "means" which alone can support our dream for a renewed, effective and honourable development cooperation model.

Thank you for your kind attention.