Our Word is Our Weapon

I’d like this blog to eventually be a bit of a portal to other online development resources, so here’s a beginning: a bunch of good mailing lists for development news:

• The World Bank Press Review, a big daily digest of news from media around the world. Very informative, if a little slanted towards the usual free trade agenda.
  
• Global Network News, an excellent weekly bulletin with links to news stories from NGOs or mainstream press, plus notable publications. Brought to you by the Scotland branch of the World Development Movement
  
• BRIDGES Weekly Trade News Digest, which is good if you don’t mind dry, WTO-centric trade minutiae.
  
• CEPR updates: the Center for Economic and Policy Research is an independent and vaguely left-leaning American think-tank mostly driven by Mark Weisbrot and Dean Baker. They’ve written some excellent stuff, and these updates consist of Baker’s regular critique of mainstream economic journalism (Baker repeats himself a lot here, but that’s cos the journalists keep making the same mistakes), columns from Mark Weisbrot and Baker’s analysis of major economic data. Read the reports and articles on their main site first to see if you like their stuff.
  
• CorpWatch.org news updates, quite similar to Global Network News, but useful.
  

Right, that’s enough to be getting on with I think. If you’ve got any suggestions, send them in and I will pay £3750 for the best ones.

Hurray, the new issue of the IMF’s Finance and Development is out! And it’s really boring.

Actually, some past issues have had some alright stuff. The June 2002 issue had a good article on odious debt, for example. Print copies are free, so even if you’re not interested in reading them you could wedge them between misaligned roofbeams or something.

In late January 2003 the United Kingdom Treasury and Department for International Development released their proposals for an International Finance Facility (IFF). Here�s the idea in a nutshell:

The Facility is designed to provide additional financing to help meet the internationally agreed Millennium Development Goals [MDGs] so that by 2015 every child is in education, infant mortality is reduced by two thirds and maternal mortality by three quarters, and poverty is halved. The founding principle of the IFF is long-term, but conditional, funding guaranteed to the poorest countries by the richest countries. On the basis of these long-term donor commitments, comprising a series of pledges for a flow of annual payments to the IFF, the Facility would leverage in additional money from the international capital markets. It would seek to raise the amount of development aid from just over $50 billion a year today to $100 billion per year in the years to 2015. The Facility would be in existence for around fifteen years, with the period for repaying its borrowing lasting around thirty years.

The full document outlining the plan in detail is available here (pdf)

This could well be a quite significant scheme, so it bears close analysis. Looking over this article, I think I�ve gone off the deep end, so if you like just read this paragraph and the last one. The good points of the IFF plan are that predictability of aid is a good thing, as is early investment of large sums rather than piecemeal efforts over long periods. Money for education today is worth more than money for education tomorrow, so it�s probably worth taking $50bn for free primary education in 2004 and losing the same amount spread over many more years after 2014.

Now for some questions and criticisms.

First of all, will it be a commitment to aid at current levels, or at 0.7% of GNI, which is the level the G7 repeatedly declares as its goal? The Treasury plan says that the IFF will �[enable] the 0.7 per cent target to be met sooner�, but this really just an accounting trick: the 0.7% target is only met if it is met every year, not if you borrow next year�s money to meet it this year. As the World Development Movement says, “If the argument for more money is not won there is nothing to stop countries drastically cutting aid budgets to pay off the bonds when the bills come in”. At the moment, the IFF scheme implies a redirection of aid flows to pay off the IFF bonds after 2015. But if the AIDS epidemic has not been turned around by then, many countries in Sub-Saharan Africa may be even more in need of help than they are now.

Another possibility is that aid donors will make their pledges for paying back the bonds after 2015, then promptly cut back on their aid budgets for the years before 2015. Of course, there�s nothing to prevent them doing that right now anyway, but the IFF could end up producing $50bn that makes up the bulk of aid spending every year, rather than $50bn on top of another $50bn of traditional aid. This seems an outside risk, as the IFF plan seems to envisage fairly strict pledges to keep up current aid levels.

Ultimately the developing countries will be the ones paying this back, indirectly at least. And that’s one reason this sounds nothing like the Marshall Plan that transformed Europe after the second World War, despite the comparisons drawn by the IFF plan.

The Marshall Plan was composed almost entirely of grants, not loans, and was on a far larger scale - for several years, the United States funded the plan to the value of between 1 and 2 percent of its GNP. Plus, Germany was able to restructure its (pre-war) debts (after getting two-thirds of them cancelled) so that it didn’t have to pay debt service over the value of 5% of its exports. Today, the G7 and IMF believe that a debt-service-to-exports ratio of 20%-25% is ’sustainable’ for highly indebted poor countries.

Secondly, there�s the question of conditionality. The plan says that ‘No country genuinely pursuing stability and reform’ will be excluded. Meaning what, exactly? Well, amongst other things it means “committing to the Doha development agenda - a sequenced opening up of markets to global trade”.

Now, this is extremely dangerous stuff. For a start, liberalising trade has not been shown to benefit the poorest countries, and sometimes it does exactly the opposite. Rich countries are not pressurising poor countries into liberalisation out of altruism: they do it because it will benefit their own multinationals by carving out new markets, creating new opportunities for financial speculation, and enabling quick profit-making through privatised public services.

Still, the IFF plan proclaims that “Full trade liberalisation globally and trade-related reforms could lift at least three hundred million people out of poverty by 2015″. Which is just bollocks. This is derived from a highly idealistic computer simulation of what would happen if all trade barriers disappeared. It’s based on all sorts of bogus assumptions, and has no bearing on real life whatsoever. What is real are the power inequalities which enable rich countries to maintain their own barriers and subsidies (European agricultural subsidies are rightly criticised in the IFF plan) while their corporations use their massive economic weight to crush local firms in the developing world. The IFF plan says nothing whatsoever about addressing these power inequalities.

Such strong �conditionality� will also undermine the ability of developing countries to negotiate in the WTO. Since WTO negotiations tend to require reciprocal commitments to liberalise, countries that have already liberalised due to the IFF will have a significantly weaker bargaining position. Meanwhile, the IMF and World Bank are still pressuring the same countries to liberalise, deregulate and privatise in exchange for new loans. In fact, IMF approval will probably be required (in the form of an �agreed� Poverty Reduction Strategy Paper) before a country can qualify for the IFF - at the moment, all sorts of flows to the South depend on positive reports from the IMF of a country’s efforts towards ‘reform’.

Thirdly, the UK is unusual in having ‘untied’ its aid from requirements to buy British goods or similar conditions. But will other rich countries be as keen to give up this privelege? The US is famously keen on using food aid to further its own export interests, a recent example being the attempt to force African countries to accept emergency food aid in the form of unmilled genetically modified grain, which could have resulted in the �accidental� introduction of GM crops (and associated profit-making opportunities). The IFF plan states that �The capital raised would be disbursed to the poorest countries with each donor using its chosen mechanism�, so while it won�t be as open to manipulation as food aid, it looks like there will still be some element of �tied-ness�. Why not let the United Nations administer the disbursements? After all, it is the most democratic international institution, based on one-country-one-vote rather than one-dollar-one-vote. Oh wait, that�s why. Ah.

Nor does all aid presently go to those most in need, as the plan makes clear: �In 1998, aid per poor person was $950 in the Middle East and North Africa, compared with only $9 per capita for low-income countries as a whole. The European Commission spent only 38 per cent of its Official Development Assistance in low-income countries in 2000�. This will have to change if the IFF is to be fully effective.

Fourthly, It will not have as big an impact on poverty and reaching the MDGs as debt cancellation would. Joseph Hanlon estimates that more than $600bn of third world debts must be cancelled if the MDGs are to be met, as several dozen highly indebted countries cannot meet their present debt service obligations and spend enough on development at the same time.

The IFF plan doesn�t really address this, but says that �The IFF could also be used to help fund further debt relief for existing debts, which for some poor and indebted countries is a valuable instrument to help achieve the Millennium Development Goals�. While it�s good that they recognise that debt relief would be �valuable� (a vast understatement), this again opens up a potential �moral hazard�: the rich countries might scale down their own efforts at debt cancellation and rely on the IFF to do the work for them. However, the definition of development aid does not include debt relief, so any attempt to include debt relief in the IFF will be nothing more than another accounting trick, and a hypocritical and destructive one at that. If this comes to pass, the poor countries will not get their increased aid, and the whole exercise will have been a sham.

To sum up: I can see where the Treasury & DFID are coming from on this, and I admire the general principle. But I�m worried that the plan leaves too many assumptions unquestioned, and may even backfire, giving rich country donors a backdoor towards reducing (or at least avoiding increasing) their aid funding.

Have a read of ‘For Richer’, by Paul Krugman. This is a lengthy article, first published in the New York Times in October 2002, about rising inequality in the United States. Krugman argues that levels of inequality are returning to those of the ‘Gilded Age’ of the 1920s and 1930s, characterised by vast gulfs in wealth and economic security between plutocrats and the very poor.

The argument takes in the vast increases in salaries for the top corporate CEOs and the accompanying changes in principles of corporate culture and responsibility, comparisons with Europe (smaller GDP per capita, higher all-round quality of life), and the corruption of politics and the media.

It’s a good read, but I think there’s a bit too much left out. Krugman is too soft on the Democrats: they’re only marginally less corrupted by wealth than the Republicans, and the Clinton presidency did little to prevent growth in inequality or slippage in corporate standards while at the same time forcing the neoliberal reform package (results: privatisation, rising inequality) down the throats of the developing world.

Yet Krugman contends that “You don’t need a political scientist to tell you that modern American politics is bitterly polarized”. The problem is that it is not. Mainstream Democrats are too afraid of being tagged ‘class warriors’ to get at the crux of the issue - huge sections of American society are sliding into conditions equivalent to or below those in many ‘Third World’ countries, and the political system is paralytically unable to address this because it is funded by big business and allergic to the slightest whiff of socialist reform.

The Jubilee Research site reproduces a very interesting article by Lawrence Solomon on the topic of Iraq’s odious debts (ie debts incurred by Saddam Hussein’s dictatorial regime which should not be required to be honoured by successor governments). Solomon suggests that since Russia and France are Iraq’s biggest debtors and hold lucrative oil contracts that will trigger once sanctions are removed, they have no interest in seeing Hussein’s dictatorship fall. This may well be the case, but it assumes that whoever controls post-war Iraq will be interested or able to invoke the doctrine of odious debt.

Some background on odious debt is available in Joe Hanlon’s Dictators and Debt, which argues that around one-fifth of developing country debt consists of odious debt that must not be honoured if potential creditors are to be dissuaded from propping up repressive dictatorships in future. The first use of the doctrine of odious debt in the international arena was, ironically, by the USA in relation to Cuba. As Solomon writes, “the United States repudiated Cuba’s Spanish debts, saying they were “imposed upon the people of Cuba without their consent and by force of arms.” Furthermore, the Americans argued successfully, much of the borrowing was designed to crush attempts by the Cuban population to revolt against their domination, and was spent in a manner contrary to their interest”. This has not stopped the US and others pumping violent dictators with loans ever since, often in the knowledge that the funds never went to the ordinary people of those countries but instead either straight into the accounts of dictators and their cronies or to buy weapons to oppress the very people who are to this day required to pay the loans back, interest and all. The vast majority of the massive debts of Brazil, Argentina, Indonesia and Nigeria consist of odious debts. If the debts sustained by Saddam are to be repudiated, then it is imperative that those incurred by Suharto, Marcos et al can be repudiated by their successors too.

All this, as I said, assumes that the new leaders of Iraq will really want to renounce the debt. This report features a fairly incomplete breakdown of Iraq’s debt as at 1990 (see bottom of page), which shows debt to Russia at $5bn, debt to France at $4.7bn, to the US at $4bn, to Britain at $1.7bn, and debt to Italy at a whopping $10.8bn. It’s hard to say what the situation is now - Solomon doesn’t say where he gets his figures, but estimates of Iraq’s current debt seem to indicate a level of about $140bn. A bit more detail from the BBC: on top of reparations claims from Kuwait and Saudi Arabia, “Iraq also owes Western governments and banks around $90bn, and has another $57bn in contractual obligations to foreign firms, especially Russian and French companies involved in oil exploration”. At the moment, I’d say that unless a post-Saddam Iraq only gets to cancel the debts owed to countries who opposed a war, the argument seems somewhat spurious.

The latest Bridges trade digest reports that the recent World Trade Organisation meeting in Tokyo saw very little movement towards progress in the so-called ‘Doha Development Round’ multilateral trade talks. Director General Supachai Panitchpakdi said that “failure to make real progress on [these issues] has deepened suspicions among developing countries that the ‘Development’ part of the Doha Development Agenda may be little more than a slogan”. Main stumbling blocks seem to be agriculture and the continuing failure to reach agreement on how the poorest countries can use compulsory licensing to buy cheap generic drugs to treat the most common diseases like AIDS, tuberculosis and malaria.

Story in the Guardian about Clare Short warning of boycotts and so on if oil companies don’t start publicising the payments they make to developing world governments. This has been the subject of a campaign called ‘Publish What You Pay’ by Global Witness and CAFOD, amongst others, the logic being that if the corporations publish how much they pay out in rights and royalties, it’ll be easier to tell how much if any people in the government are pocketing for their own use. Countries rich in ‘extractive’ resources such as oil and diamonds are more susceptible to corruption and civil strife, because the resources - in the absence of transparency - can bring instant wealth and power to whichever elite controls them.

Short version:
Bob Sutcliffe says this better than I can:
“The idea of human development logically requires popular participation, democracy, equity and justice both as part of the destination and part of the journey”.
(from Sutcliffe, ‘Development after ecology’, in Roberts and Hite (eds.) ‘From Modernization to Globalization’)

Long version: The current conception of development is one of poor countries pursuing economic growth in order to catch up with rich countries. As it stands, this is an inadequate framework, for three reasons:

1. The destination - what is the end-point of development? For some, it’s economic growth. For others, it’s growth with opportunity and / or equity. I argue that this is not only narrow-minded but counter-productive. A focus on economic growth as the primary goal undermines progress towards sustainable human development. Sustainable development is a state or process which is harmonised with the environment, with available resources and with future needs. Human development involves basic needs like health and education, but also a life lived in conditions of democracy and justice, with the freedom to participate in the decisions that affect your life.

The present condition of the ‘North’ (ie rich world) is not necessarily one that everyone should be emulating - our consumption and production patterns are not sustainable, and our democratic structures, where they exist, are becoming detached from everyday life. Meanwhile, social arrangments that have sustained people for centuries are being undermined and destroyed. It’s true that some have been found to be inconsistent with values of freedom and democracy, but it’s crucial that people be allowed to preserve their cultures and lifestyles if they wish while enjoying the fruits of genuine progress in health, education and communications. Urbanisation is not in itself a sign of development.

2. The vehicle - Who is it that develops? According to the mainstream theory, countries develop. My point is that they do not. For one thing, no country is a homogenous whole - large inequality exists in every country in the world, and is increasing in most. Whether a nation is ‘developed’ or ‘developing’ is actually of little interest, because a country in which GDP per capita grows while sectors of the population sink further into poverty is not developing even in the conventional sense, while one in which GDP grows while inequality increases is not developing in the wider sense I employ here, because socioeconomic inequality usually leads to inequality of political participation and power. I would argue that the right approach focuses on (i) the level of human development of individuals and communities, and (ii) the level of human development of the world as a whole, of (if you like) the global system.

3. The journey - In the North, we see ourselves as developed, and everyone else as undeveloped. While blaming them for their own state, we simultaneously impose the power structures that help keep them undeveloped. As long as we are agents of underdevelopment - as long as we use our power to deny others choice - we cannot ourselves develop. Human development is fundamentally about the distribution of power.

Hello and welcome to my blog. I’m going to use this page to talk about development, ie what’s commonly called ‘Third world development’ or something similar.

I’ll start off by rejecting that term - ‘development’ isn’t something the ‘Third World’ can do on its own, nor is it something only the ‘Third World’ has to do. My basic premise on this page will be that development - real human development - is still something to aspire to for everyone on the planet and something that few if any of us enjoy at the moment.

But I’m getting a bit ahead of myself there. Before getting into the substance of the arguments about development, I should just say what this blog will consist of. The idea is to use it to comment on the relevant news of the day, to to support or attack the various arguments floating about, and to put forward my own perspective on development. It’s usually going to be my own opinions (hopefully backed up with helpful facts), or my own endorsements of the opinions of others. Please send me your own opinions, arguments and factoids, especially if you disagree with mine. But be nice, because it’s a learning process for me too.

I’m going to work on the design of this thing a bit more, hopefully with the help of the Monkeybomb high command. The plan is to fill the left column with lots of nice links to useful sites, publications etc. Ideally I’d like to have a right-hand column which organises some of the content of this blog into themes or topic areas, but we’ll have to see if that’s possible.

Anyway, let’s kick things off …