Policy made on the road to perdition Larry Elliott Monday October 13, 2003 The Guardian
There was a wonderful moment at the recent Cancun meeting where the government wheeled out ministers from Britain's former colonies at a press conference. The hope was that Barbados, Ghana and Malawi would show gratitude for what the old mother country was doing on their behalf to tear down global trade barriers. It was patronising and embarrassing, or at least it would have been without the intervention of Sam Mpasu, Malawi's commerce and industry minister. Asked for his comments about the benefits of trade liberalisation, Mpasu replied drily: "We have opened our economy. That's why we are flat on our back". Mpasu's comments encapsulated the gulf in perception and understanding between those who call the shots in globalisation and those who are powerless. The process is shot through with paradoxes: why is it that in a world where human capital is supposed to be the new wealth of nations labour is treated with such contempt? How is it that the G7 can export neo-liberal economic policies to Africa yet the United States would not dream of accepting "structural adjustment" for its own malfunctioning economy? Isn't it strange that if a country like Zambia deviates from its IMF-imposed programme it gets punished, but if France thumbs its nose at the stability and growth pact, nothing happens? The language of globalisation is all about democracy, free trade and sharing the benefits of technological advance. The reality is about rule by elites, mercantilism and selfishness. As one Guardian reader said last week, perpetuation of the status quo means "the rich nations, and those within rich nations, gaining control over a greater and greater proportion of the world's wealth and becoming increasingly ruthless to retain that control, particularly as resources become stretched, pollution mounts and the number of hungry mouths multiplies". There are signs this is already happening. Rich countries are already starting to feel threatened by middle income nations snapping at their heels, and the anxiety is likely to grow. A paper by Goldman Sachs last week predicted that by 2050, four developing countries, China, India, Brazil and Russia, could be larger than the six biggest economies today, the US, Japan, Germany, the UK, France and Italy. Assuming Sachs's projections are correct - admittedly a big assumption over so long a period - the US would no longer be the biggest economy measured by total gross domestic product, although it would still be the richest by GDP per head. One response would be for the G6 to welcome poor countries getting richer, even if it means them dropping down the GDP table. After all, Britain is immeasurably better off as the world's fourth or fifth biggest nation today than it was when it was top dog 150 years ago. Yet with the US running an annual trade deficit with China of more than $100bn and Europe's manufacturers squeezed by the cheapness of China's currency, the west could respond in an altogether more aggressive fashion. If the haggling that caused the Cancun debacle is anything to go by, the second course of action seems more probable. A second group of countries has already found out what it is like to be on the receiving end of the west's determination to shape globalisation to its own ends. These are the small nations which, unlike Brazil, China, India and Russia, are too weak to resist policies foisted on them from outside. This week, the World Development Movement produces a report on Senegal, in west Africa. It tells a depressingly familiar tale of a debt-stricken country forced to adopt the full range of stabilisation measures prescribed by the IMF and the World Bank: cuts in public spending, tight monetary and fiscal policies, export-led growth, trade and investment liberalisation, deregulation of internal prices, dismantling of the private sector, privatisation of state-owned enterprises, the rolling back of the state and the abrogation of the right to control its own economic destiny. According to the neo-liberal textbook, of course, countries like Senegal should be doing wonderfully well. In fact, liberalisation of the agriculture sector has seen peasants deprived of their livelihoods, the percentage of the population that is malnourished rose from 23% to 25% during the 1990s and 80% of people live on less than $2 a day. Senegal was an obvious candidate for debt relief, but help has come with strings attached, and no prizes for guessing what they are. Debt relief is contingent on the completion of a poverty reduction strategy paper, which is supposed to be owned by the indebted country but in reality has to be acceptable to the policy prejudices of the IMF and the World Bank. In other words, more privatisation, liberalisation, deregulation. "In particular," says the WDM report, "it [the Senegalese poverty reduction strategy paper] insists on 'private sector development', which, if past experience is anything to go by, means selling off the country's public assets and natural resources to multinational corporations from the industrialised world." Senegal is not an isolated example. In Malawi, the ideologues from Washington decided the government should reduce subsidies for small farmers, remove price controls and regulations and privatise the state-run body that ensured food was available across the country. Instead, it was assumed market forces would work their magic. The result? Prices up by 400%, widespread hoarding, and famine. Or take the impact of trade liberalisation on Zambia. The idea was that removing tariffs, subsidised credit and import quotas while at the same time devaluing the currency would deliver leaner, fitter industry and export-led growth. Not in Zambia it didn't. Exports as a percentage of GDP fell from 36% in 1991 to 27% in 2001. The problem is one of capacity. African countries lack supply potential, so liberalisation tends to mean imports grow much faster than exports, leading to chronic balance of payments deficit. And the cure? That's right. Unless you live in the US, where more liberal rules apply, the "cure" is even more austerity. Those responsible for Africa's shock therapy have an answer to all this. Either governments are failing to pursue the policies with sufficient zeal or they are riddled with corruption - and it is usually both. Yet there is, of course, a limit to how much pain a government, however constrained by its role as supplicant, can inflict on its people. And while there is no doubt that many African countries, including Malawi and Zambia, have been riddled with corruption, government malfeasance is not the root cause of the problem. Indeed, as the piece below illustrates, Africa is proving to be rather quicker at tackling corruption than the IMF and the Bank are at admitting their policies have failed. It goes without saying that Africa should be encouraged to improve governance and that wasteful economic policies should be shunned. But poverty cements corruption, while the evidence of the west is that rising living standards prompt demands for cleaner government. It's time to try a different remedy. First, if growth-based strategies are seen as the cure for the US, Japan and Europe, they might work in poor countries as well. Politicians in the west seem to have been completely hoodwinked at how poverty reduction strategy papers are simply old wine in new bottles. Second, it should be recognised that debt relief remains unfinished business, because debt service continues to grow year on year. Third, there is an assymetry in trade liberalisation with poor countries forced to tear down their barriers while rich countries are not. This should be reversed. Fourth, capitalism in Africa will require capital and lots of it. Gordon Brown's plan for a doubling of aid to $100bn by floating government bonds on the global money markets is being promoted by the Treasury as a way of meeting the UN's 2015 development targets. But without support from US, Germany and Japan, the money will come far too late. Finally, HIV-Aids could be to Africa's development what the Black Death was to Europe's in the 14th century. Africa does not have the resources to cope. Urgent action is required. Without that, the conclusion has to be that politicians in the west fall, with a few notable exceptions, into two categories. Those who care but are wrong. And those who really couldn't give a damn. · Debt and Destruction in Senegal; World Development Movement. 020 7737 6215. www.wdm.org.uk [EMAIL PROTECTED]
