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'A simple truth: The promise to the world's poor is being broken' -UNDP 2005
The just released UNDP's Human Development report (2005) reviews regional and national progress towards the achievement of the Millennium Development Goals (MDGs), to which as we saw last week the international community has committed itself to achieve by 2015. The report also reviews the global efforts in this direction and concluded that the "diplomatic formulations and polite terminology" used to describe these should not obscure the disturbing truth that there is at present a widening gap between the pursuit of human development and achievement of the MDGs. Indeed as the report puts it diplomatic jargon and obfuscations should not be allowed "to obscure a simple truth. The promise to the world's poor is being broken," which is the caption of this week's article.
This sentiment has been echoed by Kofi Annan, United Nations Secretary-General in his wrap-up of the just concluded 60th UN Anniversary Summit. These views are also similar to those I cited last week, which were expressed by Enrique Iglesias, President of the Inter-American Development Bank (IDB) that the Latin America and Caribbean region's performances constituted at best, a mixed record. That is, there are both encouraging and discouraging signs so far.
Ironically the UNDP begins this year's Human Development Report by highlighting the dramatic contrast exhibited at the end of last year (2004), between what it termed as "the destructive power of nature" and the "regenerative power of human compassion." There the report is referring to the tsunami, which was so destructive; it killed 300,000 persons and left millions homeless and destitute on the one hand, while on the other hand, the response of "global solidarity" to the affected countries, from government, businesses as well as civil society sectors worldwide was immense and unprecedented in its generosity and compassion. The irony is that as I write this article the destructive power of nature is once again strongly evident in the spate of typhoons and hurricanes now wreaking havoc and destruction across some of the poorest and richest nations in both Asia and North America.
Global partnership
As I indicated last week, seven of the MDGs relate to efforts, which countries, rich and poor alike, are expected to undertake within their national jurisdictions. Only one of the eight speaks directly and explicitly to the obligations of the international community and its commitment to forge a global partnership in support of achieving these goals. That eighth goal, however, is the key to the successful promotion of the MDGs. The inescapable truth is that the poor countries cannot achieve the MDGs on their own, without the global community seeking to transform in a fundamental manner the global environment in which nations presently operate.
There are to my mind several concerns, which readers should be aware of as we continue this evaluation of the prospects for achieving the MDGs by 2015. One of these is that the MDGs as I described them last week, do not completely define what development is all about. Although they constitute a set of excellent indicators of quantitative and precise targets nations have committed themselves to, there is much more to the development of, let us say Guyana and Caricom, than are captured in the MDGs. In this sense, therefore, the MDGs provide no more (and for that matter no less) than a 'benchmark' of human progress and development. They do not completely define what these latter are.
Second, the observations coming from the heads of the UN and IDB indicate clearly that there is not much "cause for celebration." The record of progress towards the MDGs is at best, a mixed one. As we noted last week in the Latin America and Caribbean Region, on the one hand the IDB sees progress in the deepening of democracy, macroeconomic stability, liberalisation of markets and reduction of government controls. And, on the other they have noted the slowing of economic growth, limited gains in poverty alleviation, significant levels of inequality of income and wealth, increasing exclusion and social discontent. As I noted last week this is not far removed from what has occurred in Guyana.
In similar vein the UNDP has noted that worldwide in some areas poverty has fallen and the social indicators improved, but in several others they have in fact worsened. That this has occurred despite the unprecedented global campaign "aimed at making poverty history," has led the UNDP in its report to point out: "the overall report card on progress makes depressing reading," as most countries are off-track for most of the MDGs.
The third concern is about Goal 8 itself, which calls for global cooperation. While it can readily be conceded that global cooperation alone cannot substitute for national efforts "to prioritise development, to respect human rights, to tackle inequality or to root out corruption," nevertheless Goal 8 will have disproportionate impact on the outcome of the MDGs by 2015. Recognising this, the UNDP has focused on three "pillars" of global cooperation, which it considers crucial and which are in "urgent need of renovation." These are development assistance, international trade, and security. Much of its 2005 Human Development Report is dedicated to the pursuit of the issues raised by these, particularly the last.
Next week I continue this discussion on the three pillars highlighted by the UNDP.
Aid, global partnership and the development challenge
Last week I had expressed support for the United Nations Development Programme's (UNDP) position that the Millennium Development Goals (MDGs) will not be achieved if Goal 8, which calls for a global partnership to promote these goals is not urgently realised. Summing up the present position the UNDP declared it revealed: "A simple truth: the promise to the world's poor is being broken." I also indicated last week that over the next few weeks I shall be looking at this assessment in regard to what the UNDP has termed the three pillars of the global partnership: aid, trade and security, all of which they claim are badly in need of renovation. This week I examine the situation in regard to aid, or what is sometimes termed overseas development assistance (ODA).
Handout or hand-up
As the UNDP aptly observes, although the rich countries behave as if aid is charity, it is not. In effect it is an investment on their part to preserve the integrity of the international system and therefore their survival. Rich countries' aid is motivated, or should be, by their self-interest in peace, security and global well-being. In this sense truly as the report points out, aid is not a 'handout' but a helping 'hand-up.' Despite this reality, in the two decades between 1980 and 2001, ODA fell as a share of total net resource flows from rich to poor countries, declining from 46 per cent of the total to 28 per cent. Of late 2002, there has been a turnaround of sorts as aid has increased by about US$12 billion between 2002 and 2004. The US accounted for about two-thirds of this increase (US$8 billion). It remains the largest aid donor in absolute terms, but as a proportion of its gross national income (GNI) it is by no means among the front runners. Many readers may be shocked to learn that it contributes only 0.16 per cent of its GNI to aid, and this figure was attained recently as in 2000 it was low as 0.10 per cent.
Aid target 0.7 per cent of GNI
The target for ODA transfers from rich to poor countries has been set at 0.7 per cent of their GNI. This target was set four decades by the Commission on International Development sponsored by the World Bank and headed by Lester Pearson, the Former Canadian Prime Minister. When the target was set the aim was to have it reached by 1975. Today, 30 years later it is far from being met. In 1992 the target was again revived as the rich countries re-committed themselves to 0.7 per cent of GNI at the 1992 United Nations Conference on Environment and Development. By 1997, however, the hollowness of the commitment was revealed, as aid transfers from the rich to the poor hit an all time low of only 0.22 per cent of GNI.
In the face of long-term declining aid between 1980 and 2001, efforts on the part of the international community led to the convening of the now famous United Nations Conference on Financing and Development in Monterrey, Mexico in 2002. Coming 10 years after the 1992 UN Conference on Environmental Development and with the global commitment to the Millennium Development Goals well in hand, the target was once again proclaimed to the rest of the world, and aid remains a very active issue in global development circles. It is for such reasons no doubt that the UNDP has singled out aid as one of the three main pillars of international cooperation badly in need of renovation.
Coherence in global policy
The shortfall of the rich countries in meeting their own self-determined goals for ODA transfers is not the only serious problem facing this pillar of the global partnership for development. There are several others of equal significance, to which I will briefly draw attention. One of these is the lack of coherence in the various development efforts of the rich countries. A clear example of this is when they provide aid transfers to the poor countries very often at the same time trade and other financial arrangements of theirs cause a greater value of damage to the interests of the poor countries, thereby impeding development. We have a case of this occurring in Guyana and the rest of Caricom, where on the one hand the European Union makes pledges of aid and funding for development, and on the other hand through the use of subsidies and arbitrary changes to its domestic policies affecting trade they cause even more severe damage to the economic interests of the region than the aid funds they have committed. In this particular instance the industries most affected are bananas and sugar.
Next week we shall pursue the trade issue more fully, when we examine the second pillar of the global partnership the UNDP has identified as in need of renovation.
The manipulation of technical assistance and debt relief
Another problem area affecting the aid transfers from rich to poor countries is the manipulation of what is termed technical assistance. This accounts for a substantial portion of aid flows from rich to poor countries. Yet estimates undertaken by aid agencies themselves suggest that over 80 per cent of funds spent on technical assistance in fact go back to the rich countries that provide the funding for the technical assistance.
A similar manipulation can also be found with debt relief. When debt relief is offered (as in the case of Guyana under the HIPC arrangements) it is often presented to the public as if this relief is in addition to other aid that the rich countries are committing to the poor. But this is very often not the case. Debt write-offs are classed as aid and the rising amount of aid commitments in recent times is really going to be debt write-offs, and not a new injection of resources to the poor countries. At the recent G8 Summit brandishments of spectacular debt write-offs were made but these may well turn out to be nothing more than the substitution of debt relief for the provision of the additional resources poor countries need or as bankers put it, "fresh money."
Political objectives
On close examination we also find that in aid disbursements there is a high correlation between political objectives of the rich countries and the national distribution of aid. The key aid recipients are countries like Iraq, Afghanistan, Egypt and Israel. All these countries define themselves as global hot-spots where the vital geo-strategic interests of the rich countries are at stake.
To these I could add a long catalogue of other problems. Chief among these would be the linkage between aid and corruption; the ineffectiveness of aid due to weak institutional, legal and governance structures in the aid-receiving countries; poor targeting of aid transfers; and, the suffocating influence of bureaucratic delays, red tape and humbug in the orderly and smooth deployment of ODA worldwide.
If the achievement of the MDGs depends on the pillar of aid as much as we all believe, then their future is in great doubt, as the foundation of aid is weak and not suited for such momentous challenges.
Pillar or pitfall: Hypocrisy and double standards in global trade
Last week we saw how the rich countries had fallen woefully short of their own self- proclaimed target of achieving aid transfers or official development assistance (ODA) to the tune of 0.7 per cent of their gross national income (GNI) to poor countries. These aid transfers constitute one of the three pillars the UNDP has identified in its 2005 report as essential foundations, if the poor countries are to stand a realistic chance of achieving the Millennium Development Goals (MDGs). This week I examine the second pillar, namely trade.
Trade: all gain and no pain!
At the outset there should be no doubt that trade has the greatest potential for ending the scourge of poverty, hunger and underdevelopment, which afflict the vast majority of countries and persons in today's world.
Trade is, potentially, far superior to aid as a pillar of global development. In its recent study on trade and development (Making Global Trade Work for People, 2003) the UNDP recognised this essential truth. In a subsequent study of mine published by the UNDP in January of this year (Making Trade Work for People: The Concerns of Small States in the Global Trade Regime) I developed this premise as the starting point of my analysis of the relation between trade and development in small states.
Globalisation and the growing trade inter-dependence of the world has created, and will continue to create, enormous opportunities (benefits) just as it creates enormous risks (costs) for all peoples on earth. World exports have doubled in value over the last decade, reaching a total of US$9 trillion.
The total value of exports has grown faster than output for the world as a whole, as indeed it has also done for all the major regions. Paradoxi-cally, the fastest rates of growth have occurred in the best performing region (East Asia) and the worst performing region (Africa).
In our own Latin America and Caribbean Region the growth has been nowhere as spectacular, but nevertheless it has been significant.
For the world as a whole exports now account for more that one-quarter of world income.
The importance of the right conditions
As I pointed out in the study referred to above, the historical data show clearly that under the "right conditions," the recent explosive growth of technology and know-how, make the potential benefits from global trade truly enormous. We see this manifesting itself already in two clear features of global trade. One is the increasing role that services now play in this trade, relative to merchandise trade in goods and the scope this offers for poor countries. The other is that increasingly trade involves exchanges of products in the same industry, rather than traditional exchanges between different industries. Thus the classic trade pattern of exporting agricultural commodities and mineral products in exchange for manufactures and services has been superseded by these exchanges of products originating in the same industry. This has become possible because of the growing branding and differentiation of the products which dominate sales in the global market place.
This positive role for trade as a pillar of development depends on the "right conditions" being in place. However, the truth of the matter is that the historical data also make it clear that simply liberalising an economy and opening it to world trade does not secure the expected benefits. The reason for this is that trade takes place on an uneven playing field with countries varying enormously in their technical and economic competences to benefit form this trade. Trade rules, which apply to all countries equally, produce distortions, mainly because all countries are not in fact equal. This is where the issue of hypocrisy and double standards arises.
Hypocrisy and double standards
As the UNDP points out the rich countries "Seldom waste an opportunity to emphasize the virtues of open markets, level playing fields and free trade, especially in their prescriptions for poor countries." However, when their behaviour is examined closely we find the same countries also do everything in their power to bend the rules and protect their own industries. This has led the UNDP in its 2005 report in exasperation to declare: "Hypocrisy and double standards are not strong foundations for a rules-based multilateral [trading] system." To take an example of this from my study cited earlier. The data show that although the rich countries call for free trade in agricultural products, they in fact spend more than US$1 billion per day subsidising their own agriculture! This amount was about five times the value of their aid to the poor countries in 2002. The European Union and the USA together account for 60 per cent of the total value of these agricultural subsidies. In practice these subsidies are so biased that over one-half of their value goes to the richest 7 per cent of farmers in these countries.
The hypocrisy and double standards are not confined to subsidies which rich countries give to their agriculture. They also impose, through administrative controls on imports for sanitary, phytosanitary, and technical purposes, considerable restrictions on the access of poor countries' agricultural and food exports to their internal markets.
Not surprisingly, we also find that many of the products poor countries sell suffer a constant undermining of their prices in world markets. In the two decades between 1980 and 2000, world prices for more than 18 major commodities have fallen by more than 25 per cent in real terms (that is adjusting prices for the effects of inflation on them).
Thus the price of sugar fell by 77 per cent; cocoa fell by 71 per cent; coffee fell by 64 per cent; and, cotton fell by 47 per cent. Although the price of oil has today reached US$70 per barrel, yet in real terms the present price of oil is still considerably less than the peak price of the early 1980s (when it was US$25 per barrel).
Conspiracy of silence
In previous articles in this series I had occasion to refer to the virtual "conspiracy of silence" that had befallen the global community about the effects of these developments on commodity-dependent countries. Eventually, however, notice was taken of this and the United Nations passed a resolution which established a Group of Eminent Persons through UNCTAD to deliberate on the concerns of commodity-dependent countries and to make recommendations. I was honoured to be a member of that group, which gave me an opportunity to express these concerns in light of developments in small states like those of Guyana and Caricom; as it has turned out that work aided me considerably in the preparation of the UNDP study, which I have cited at the beginning of this article.
Next week I shall continue the discussion on trade as a pillar of development in the pursuit of the MDGs.