Finally, a Break Through in Third World Poverty
June 16, 1999
On Friday, President Bill Clinton makes [made] an historic visit to the Geneva headquarters of the International Labour Organisation, one of the oldest UN bodies, established to bring unions, employers and government into a closer working relationship. His speech in favour of a convention aimed at eliminating the most intolerable forms of child labour is, by any measure, an important milestone.
On Saturday, the Group of 8, the world's leading industrial nations together with Russia, open their heads of government meeting in Cologne and debt relief for the poorest nations is, after Kosovo, the most significant item on the agenda.
There is no particular reason, other than good fortune, why these two issues should have surfaced to the top of the international agenda at the same time. If praise be given it should probably go to the diligent, long-term activism of numerous non-governmental, religious and union groups who have been working on these issues for decades. Of course, one should add in the change of government in Germany, which has now dropped its country's long-standing hostility to debt relief and, to finance it, the sale of surplus gold held by the International Monetary Fund (IMF). Also Mr Clinton knows that if he is to make progress on the new trade bill so dear to his heart he has to dilute the formidable opposition from those concerned with labour and environmental standards.
Two intellectual somersaults had to be turned to bring these major reforms up to the starting line.
First, it was necessary to repulse a long-standing defense of Third World governments--that they possess the sovereign right to do with government expenditure as they see fit. It has taken a long time for opinion to change. But now it is no longer tolerated that governments, if they want aid or debt relief, can get away with saying, "We have a sound macro-economic plan; economic growth will lift all boats. Give us the money."Debt relief, it is now accepted all round, must be tied directly to poverty reduction schemes. In short, no financial liberation to spend more on tanks, hotel development, cement subsidies or stadiums. The relief that comes from debts being written off must be channeled explicitly and precisely into such things as girls' education, supplies of clean drinking water and village health services.
The second bit of mental gymnastics has been to do away with trade sanctions as a means of bludgeoning developing countries to raise their labour standards. Now western governments are pushing for an incentive-based approach, instead of a punitive one. In May, European Union trade ministers decided to offer tariff cuts to those developing countries that agree to sign up to international standards on child labour and environmental protection. Before, poor families in the Third World has been "twice damned"--once for being poor and again for finding that the route to earning themselves out of poverty was being blocked by high-principled souls in the western world who lobbied for sanctions.
The EU in deciding to reverse this long-time logic has, in effect, "twice saved" them. Poor countries gain a trade preference and, moreover, they have an incentive to make sure the benefit is passed down the line so that the conditions of, say, child labourers are improved. Success on that front will bring more preferences. More preferences mean larger export markets and greater demand. That should raise wages and working conditions.
Straight, unconvoluted, thinking looks as if it might surmount the obstacles of past policies. Instead of Third World ministers being consumed by the painstaking task of negociating new deals to stay one step ahead of default they can put their energies into poverty alleviation. Even the poorest countries have enough resources, if carefully deployed, to make a mark on the living conditions of those in society's bottom layers.
The World Bank and the IMF instead of, as Harvard economist Jeffrey Sachs says, spending their staff time on "a perpetual motion machine" of sending out one mission after another, number crunching debt relief, can hire hands-on, locally-based, labour to make sure development schemes are well run.
The only trouble with the decisions likely to be made in Cologne this week-end is not that they don't point in the right direction--they certainly do, at last--but they will be, relative to the magnitude of the problem at hand, on the modest side.
Instead of the IMF selling off 10% of its gold reserves to fund debt relief it should be as much as one third. This would give the $8 billion necessary to write off the debt in its entirety. Similarly, the scale of trade preferences needs to be increased by a similar magnitude, at least three fold, if developing countries are to feel any quid for their quo of alleviating the worst working conditions of child labourers or improving the local environment.
This is not the beginning of the end. Just the end of the beginning.
Copyright © 1999 By JONATHAN POWER
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