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Fighting poverty

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					                                   Fighting poverty

                                 Progressive summit

                  Progressive Summit, Pretoria, February 11, 2006




Introduction

Two facts :

   -   Inequalities between countries have reached phenomenal proportions: the
       inhabitants of the world’s poorest country (Sierra Leone) are on average a
       hundred times less rich than those of the richest country per capita
       (Luxembourg) ;
   -   And these inequalities are getting even wider: poor countries aren’t catching
       up with richer ones, despite a few exceptions whose demographic weight is
       remarkable (China, India).

These inequalities must be corrected :

   -   It is obviously in the interest of developing countries.
   -   But it is also in the interest of rich countries. For moral reasons: I do not want
       to live in such an unfair world. But also for political reasons: the obscenity of
       those wealth gaps, made all the more visible by the circulation of information
       and images in the modern media, is one of the causes of the South’s
       resentment towards the North– one of the reasons behind September eleventh.

We are now at a crossroads in the development policies countries of the North have
implemented.
These policies have failed because they were wrong. There are three convictions I
would like to express here:
   - We are helping poorer countries less and less
   - We are forcing an ill-adapted development model upon them
   - We are doing nothing to integrate them in world governance.

The misleading accounts of official development assistance

The reality of public funding is overestimated

- Debt-reducing operations artificially boost ODA figures through mere accounting
effects

       Cancelling the debt has become the main lever (30% of today’s ODA) through
       the “heavily indebted poor countries” initiative (HIPC). And when the debt is
       cancelled, the crediting country counts as ODA all the interests that are still to
       come. Additionally, the crediting country adds up 100% of the debts it has
       waved: even though those that were cancelled in the framework of HIPC were
       in fact only worth 28% of their initial value.

   -   The ODA is also artificially increased by the cancellation of commercial
       debts. This system serves first and foremost the interests of the Northern
       countries’ exporting companies. Disjoining the ODA from such policies is a
       necessity.

   -   The ODA is also boosted by various other artificial means: for instance, the
       inclusion of schooling (costs linked to the acceptance of foreign students, even
       though they don’t always go back to their home country after their studies), or
       counting refugee funds as part of the ODA (do they really contribute to a
       country’s development?)

Debt cancellation, which is at the heart of ODA, isn’t adapted:

   -   Debt relief efforts aren’t generous enough. Many countries, which have
       benefited from such cancellations, are still very much indebted, as the first
       studies made by the Bretton Woods institutions have shown (IMF and World
       bank).
   -   Cancelling the debt is unfair. It only affects the poorest countries: intermediate
       countries can’t profit from them, even though their wealth is mostly in the
       hands of the richer few. Moreover, they serve no useful purpose for those
       countries that are very poor but only marginally indebted. Is it really ethical
       for Myanmar, ruled by a military junta, to get international support while
       Haiti, which is very poor but has a very small debt, still can’t get this kind of
       aid?
   -   The primacy given to debt relief is in itself a problem. In 2005, general
       development funding outside of debt relief has gone down in most Northern
       countries. “Hard money” is disappearing…


A few directions for reforming public development

Setting up a global endowment for development

       The promises States make in favour of development are seldom followed
       through, notably because they can be revoked annually during budget
       negotiations. The ODA must be set free from those national budgetary cuts,
       and regular instalments of “hard money” must be secured. The solution can be
       a new tax (some people have proposed taxing plane tickets), but the question
       at hand isn’t technical: either there is indeed a political will to make ODA
       transfers perennial, and any type of levy will do (for instance raising the tax on
       companies by a few points), or there is no such will and whatever technical
       solution we find won’t make a blind bit of difference.

Creating differentiated mechanisms for debt relief

   Reducing the debt is made even more of a necessity when economic growth is
   weak. I therefore find it advisable to favour, in the future, types of indebtedness
      whose financial charge evolves according to the macro-economic conditions faced
      by the developing countries. In this way, when they are affected by external
      shocks (if the rates of their exporting products go down, if it doesn’t rain enough,
      if they are infested by locusts…), the weight of their debt will go down. Financial
      engineering must be put to the service of development, and allow the debt to play
      an anti-cyclic role by lessening shocks instead of a pro-cyclic one which increases
      their repercussions.

The development model stemming from the Washington consensus as mirage

Through the “Washington consensus”, the North has forced upon the South– or at
least, it has “strongly suggested”– a development model based on two pillars: on the
one hand, a complete opening up of their markets to international trade; and on the
other a modest state with a limited fiscal and social system. This model is a failure.

The economic model: promoting asymmetrical commercial openness

Dani Rodrik has shown it1 : it is rather intriguing to observe that those developing
countries which have most successfully developed these past few years didn’t
particularly put into practice the advice given by the Bretton Woods institutions:
China has only slightly opened its inside market to imports, its currency changing
policy isn’t liberal, its financial markets only slightly more so, property rights are
defined in a very “artistic” fashion and state companies haven’t been privatized!
South Korea, Taiwan have relied on many importation quotas and export subsidies;
and their control over the movements of capital has been very strict! India is also a
largely protectionist country.

The lesson we can draw concerning development: we must suspend WTO rules when
they are harmful to the South’s development. This philosophy is new. World trade is
indeed, and in practice, asymmetrical: developing countries, particularly the most
behind, import our goods without being able to export theirs for a profit. In such
conditions, international commercial law mustn’t be the same for all, it must also be
asymmetrical so as to correct this unbalance. This is the rationale behind the “special
and differential treatment” that is being discussed in the “millennium round” of WTO:
developing countries must be allowed to maintain derogatory rules for their imports
(customs fees, quotas, protections…) while profiting for their exports from the
commercial openness WTO rules create. This is also the rationale of the European
initiative everything but arms. The idea is to grant a zero-percent-rate access to
Western markets for goods from less developed countries, without reciprocity. Let me
salute the author of this initiative, Pascal Lamy.

The development model: promoting a strong state that can ensure the emancipation
of its citizens.

The South’s development mustn’t be limited to the economy. It must also aim at
emancipating humankind: fight against inequalities, health, education, culture, a
protected environment, the respect of human rights. All this requires a strong state. It


1
    The New Global Economy and Developing Countries: Making Openness Work.
has been the case for western countries, with the welfare state, and it is now the case
for Asian countries.

I would like to develop two examples: health and democracy

   -   health

Health is the single most fundamental condition of development. In Africa, the aids
epidemic strongly challenges any attempt at development. Here, in southern Africa,
life expectancy has gone down ten years–all in ten years. Seroprevalence can rise up
to and beyond thirty percent. Each year, the epidemic kills over three million men and
women. The World Bank has shown that economic growth per capita in Africa would
be three times what it is now were it not for the devastating effects of aids.

Beyond aids, other epidemics take their heavy toll. We had thought polio to have
completely disappeared, but now it is rampant in Uttar Pradesh. Malaria costs
ecnomic growth one point each year.

There are three propositions I’d like to make:

   a) access to generic drugs for poor countries

   We all know he WTO agreement is too restrictive on this. The “Doha declaration”
   allows emerging countries to produce and export towards less developed countries
   generic drugs, with a “compulsory licence”, which goes against intellectual
   property rights. But the complexity of this mechanism is such hat it has never
   been used. We absolutely must simplify it.

   b) creation of a world public fund to ensure basic universal health

    Being able to access patented treatments through generic drugs is a good thing.
    But it isn’t enough. Twenty-five percent of all children in the South, mainly in
    Africa, don’t have access to standard vaccines (in the public domain). The
    problem is simple: even for the price of generic drugs, the poorest countries can’t
    afford to buy medicines. There will also still be the need to build systems to
    prevent and to cure, to distribute medicines and follow patients: without such
    systems, there is no stopping an epidemic.

    I am currently working, inside the Trade and Poverty Forum, on a strong
    proposition: a world public fund to ensure basic universal health. In the
    meantime, western countries must accept their responsibilities and provide the
    necessary funds, most notably the severely underfinanced world fund against
    aids.

    c) we must think of a sanitary right of interference

       Such a right would lead the international community to not feel as
       unconcerned about epidemics. It is a moral duty as well as an elementary
       precaution. This proposition does indeed raise the issue of national sovereignty
       and its limitations, but it is a possible proposition I would like to see n our
       debate.

   -   human rights

   As Amartya Sen has demonstrated, there has never been a famine in a democratic
   regime that recognizes freedom of the press. In a nutshell: freedom of the press is
   a direct instrument to fight against extreme hunger.

   But until now, we have made a mistake. We have encouraged democracy:
   representative institutions and free elections. Such things are important, but they
   come only second. The first priority must be to insist at least as much on the
   consolidation of fundamental rights. Having an election requires, for the election
   to make any sense at all, the presence of a state and social administration that can
   enforce the law, as well as an independent justice system, a police that is
   controlled by the judiciary, an efficient system to protect minority rights,
   intermediate institutions, and so on.

   This political discourse can’t do without a very concrete support– both financial
   and technical– to this democratic space-forming process. Freedom of the press
   and an organized civil society can’t exist without the possibility to print paper and
   distribute it, and a well-controlled police can’t exist without a decent pay for the
   civil servants that compose it. This policy of supporting all the democratic
   processes, which as of now is insufficiently developed, must be able to take
   different channels: foundations, decentralized and institutional cooperation, and so
   on. In the states where national cohesion seems fragile, especially when ethnic
   diversity makes a reasonable sharing of the central power difficult, promoting
   devolution can also lead to a better political representation of minorities, and to a
   less centralized accumulation of resources. For me, supporting the
   decentralization process Africa is undergoing is a way to counter the innumerable
   conflicts born from the haphazard definition f borders during the dreaded colonial
   era.

Developing countries are absent from global governance

"The real debate associated with globalization is, ultimately, not about the efficiency
of markets, nor about the importance of modern technology. The debate, rather, is
about inequality of power.” (Amartya Sen)

The place poor countries have in international organizations, especially the World
Bank and IMF, is very inferior to their importance within the world population. But
such is also the case in the UN, here they have no seat in the permanent members of
the security council. It is hardly surprising, therefore, that the results of international
negotiations remain extremely unequal and biased in favour f richer countries. Voting
rights should evolve inside the Bretton Woods institutions, so as to give more space to
countries that are supposedly the main beneficiaries of the policies decided by these
organisations. Redefining the composition of the security council is also something
that must be done, and I agree with the propositions recently made by Kemal Dervis,
who suggested we create a voting rights system in the security council of the UN so
as to take into account the population as well as more original criteria such as the
weight of each country in the funding of world public goods.

Conversely, the way in which the balance of power inside WTO is evolving is an
encouraging sign. With a majority of 121 countries out of 147, in an institution based
on a “one country, one vote” basis, developing countries take the power. They are
starting to realise this. They have shown it by blocking the Seattle and Cancun
summits in 1999 and 2003. This power over the institution– even if they must use it in
a measured way– is the key to re-orienting WTO negotiations towards an “agenda for
development”

Conclusion


Although the planet is getting richer and richer faster than ever, poor countries,
especially in Africa, have a more contrasted situation. The emergence of China and
India partly cover up dramatic global inequalities that the international community
has never managed to curb. I fear that the indifference of Northern countries towards
Africa will continue to grow along with their concern for the competition with Asian
countries.

 We do, however, have the means to do something. By giving development aid a new
dynamic. By promoting a development model based on asymmetrical trade and the
emancipation of people. By integrating more fairly the developing countries to global
governance.

Yes, Africa can awake. Yes, there is no fatality in being poor

				
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