Our Word is Our Weapon

“America preaches free markets”, writes Joseph Stiglitz in yesterday’s Guardian, “but at home it’s a different story”. Best bit:

Those in Mexico, Brazil, India and other emerging markets should be told … do not strive for a mythical free-market economy, which has never existed. Do not follow the encomiums of US special interests because, although they preach free markets, back home they rely on the government to advance their aims.

Instead, developing economies should look carefully, not at what the US says, but at what it did in the years when it emerged as an industrial power, and what it does today. There is a remarkable similarity between those policies and the activist measures pursued by the highly successful east Asian economies over the past two decades.

You don’t have to look too far to find a poor, war-ravaged country where corruption is a big problem. It’s got all the classic signs:
-lack of transparency in accounting means billions of dollars unaccounted for;
-fortunes wasted on weapons while people go without food, clean water and electricity;
-leadership cronies rewarded with fat contracts, and
-Investment doesn’t benefit locals because the profits are all sent overseas.

I don’t blame the ordinary people who live there. They say they want to get rid of the present regime as fast as possible and set up a truly democratic government. I only hope they get what they want soon.

At the recent IMF / World Bank conference in Dubai (have you noticed how every time the people organising the globalisation project meet up these days, it’s usually in a police state or some similarly inaccessible spot? I wonder why?), African countries asked if they could have a bit more of a say in how the organisations are run. A bit more than nothing, that is. Since they are the ones most affected by the decisions taken, after all. The rich countries who run the IMF and World Bank thought about it for all of a millisecond and declined.

Global warming is already responsible for about 160,000 deaths each year from disease and starvation, a British professor of public health told the World Climate Change Conference now underway in Moscow …

The warming climate will increase the range and incidence of tropical diseases such as malaria, tick-borne encephalitis, and tropical diseases, Professor Andy Haines said. He warned that malnutrition and starvation will follow extreme weather conditions such as droughts and floods brought on by global warming. Most of the climate related deaths will occur in developing countries of Asia, Africa and Latin America, he warned, and the youngest sector of the population is most at risk. “These diseases mainly affect younger age groups, so that the total burden of disease due to climate change appears to be borne mainly by children in developing countries,” Haines said.

The article goes on to describe criticisms of Russia for delaying its ratification of the Kyoto Treaty. Full text here.

Ha-Joon Chang has an article in August’s Le Monde Diplomatique in which he re-states the argument that Britain and the US embarked on their greatest growth spurts while fiercely protecting their own infant industries (and crowbarring open the economies of competitors and colonies). He includes in full a rather excellent quote from Friedrich List which is still so relevant I’m tempted to call it List’s Law of Trade Hyprocrisy or similar:

Any nation which by protective duties and restrictions on navigation has raised her manufacturing power and her navigation to such a degree of development that no other nation can sustain free competition with her, can do nothing wiser than to throw away these ladders of her greatness, to preach to other nations the benefits of free trade, and to declare in penitent tones that she has hitherto wandered in the paths of error, and has now for the first time succeeded in discovering the truth.

Friedrich List, The National System of Political Economy, Longmans, Green, and Co, London, 1885.

It’s a very good article, actually. Chang argues (along similar lines to Adam Smith, I believe) that free trade agreements can work when they are between countries at similar levels of development and productivity, but that free trade between vastly different economies will lock the poor into low-value activities.

If there’s anyone actually reading any of this, sorry for not posting recently: I’ve moved to a new house sadly lacking in internet access. Now I’ve taken the desperate step of staying in work late to post, so the next few posts will probably be of the rushed variety.

Jubilee Research has published two reports sharply critical of the performance of the IMF (and the World Bank) in tackling debt crisis and assisting in meeting the Millennium Development Goals.

The first, published in associationg with CAFOD, ChristianAid, Oxfam and EURODAD, is ‘The Real Progress Report on HIPC‘ [Highly Indebted Poor Countries debt relief project]. It shows that HIPC countries - generally those with highest combined levels of poverty and ‘unsustainable’ debt - have after several years received only around $26bn of debt relief, more than half of which was organised through traditional debt relief channels and which would thus have probably been delivered anyway. The report goes on to scrutinise the situation of every HIPC country and make a series of criticisms and recommendations.

The most important of these, it seems to me, are firstly that “Debt sustainability under the HIPC initiative should be assessed not in relation to arbitrary debt-to-export criteria, but to the resources needed by each country to meet the Millennium Development Goals (MDGs)”, and secondly that the IMF and World Bank face up to reality, take their share of responsibilty for the present crisis, and bear their share of the costs for resolving it.

The two points are closely related. The IMF and World Bank have opposed linking the HIPC programme to the world development goals because to do so would be to expose how woefully inadequate the HIPC and by extension their own performance have been so far. The simple truth is that even if all debt relief envisioned under HIPC were to be delivered - and even that is not likely to happen any time soon - many of the poorest countries would come nowhere close to meeting the MDGs.

This is because the under HIPC saddling even the poorest countries in the world
with debt service levels of up to 10% of their annual exports is considered perfectly ’sustainable’, even though historically this level of repayment was considered far too high for both post-WWII Germany and Suharto’s Indonesia. Secondly, the design of the HIPC programme insures that even countries who have reached ‘completion point’ and received as much debt cancellation out of it as they can might well find themselves immediately paying more debt service than they did before, since resuming these payments - which many countries had simply given up on, allowing arrears to increase significantly - is a precondition of entry.

The longer this process drags on without appropriate debt relief being deliverd, the more you wonder whether HIPC was acually set up to give relief not to the poorest and most indebted countries, but to the IMF and World Bank. These, after all, are the organisations which helped create the present debt crisis and have been complicit in perpetuating and deepening it ever since. They are the ones who have refused to face up to past mistakes and have made things worse by simply rolling over old unpayable debt by issuing new, larger, even more unpayable debt. And they are the ones who will be cancelling the least HIPC debt as a proportion of the total owed to them. Despite being the most guilty and ungenerous participants involved, they are still allowed to define the rules of the game.

This is simply unacceptable. It is time to loosen the grip on the debt relief project of self-interested bankers and bureacrats, and to treat it as an issue of fundamental human rights based on the Millennium Development Goals.

As the only comprehensive, clear and costed global framework available, the MDGs must be made the determinants of development policy in every country. There is no realistic alternative - anyone who does not base policy on the MDGs is either not committed to development (in which case their stated position is a sham) or is not facing up to reality. Jubilee et al propose that after the costs for each country of meeting the MDGs are established, policies must be designed accordingly. In the case of debt relief, a country’s income and expenditure (including debt service) are compared to establish how much debt service they will be able to afford to pay and / or how much extra financing they will need assuming that they are to meet the MDGs. If extracting the usual level of debt service from a country means they miss the MDGs, we must extract less. If they need more aid to meet the MDGs, we must find ways of supplying that aid.

The second Jubilee Research report is ‘Can the IMF and World Bank cancel 100% of poor country debts?‘. Briefly, the answer is ‘yes’: despite their protestations to the contrary, the IMF and World Bank are sitting on a massive goldmine (almost literally - they control hundreds of billions of dollars in effective capital, much of which consists of gold reserves).

Both reports are well worth reading, as they each contain a huge amount of info on international debt, finance and politics, all quite detailed but clearly explained.