CALL FOR NEW DEVELOPMENT AGENDA BASED ON SOCIAL JUSTICE
Date : 24 Jun 2002
Location : New Delhi
Delivering the keynote address at the World Bank’s Annual Conference on Development Economics at Oslo, Norway, today, Shri Murasoli Maran, Union Minister of Commerce & Industry, has called for a new agenda for development based on social justice, recognising the strengths and weaknesses of the state, market and the people. The principles of democracy which make governments politically accountable to the people must be an integral part of the development paradigm, the Minister said while pointing out that if any impression was created by international multilateral institutions that they were taking over the role of Parliaments of sovereign countries and becoming a global government, it could be counter productive and lead to political backlash. Articulating some of the apprehensions and concerns in the developing countries about globalisation and its impact, Shri Maran said: "The global economic order will not work for the North unless it also works for South". Instead of reshaping the world order on the terms set by the North it would be better to have a world order on the basis of social justice and voluntary standards, the Minister said.
Stating that the developing countries needed more time for preparation and more resources for adjustment, the Minister said that while the role of the steel workers or any group of workers in elections was understandable, the fact remained that democracy also exists across the developing world and their voters also had equal concerns about the jobs that would vanish as a result of liberalisation. "International institutions show little sympathy for such political concerns in the developing world. Therefore, the inescapable question that is asked from all quarters: Why the double standards?… International community also does not seem to be sensitive to the issue of deteriorating terms of trade for developing countries. While giving special consideration to the steel sector, we tend to forget the falling commodity prices, which affect the household economies of millions of poor people in the developing countries. The large masses of rural communities, who have never heard of WTO, are gravely affected by the changes in the prices of their inputs and products. These are genuine concerns, which underscore restructuring liberalisation, so that a large share of population benefit from the process", the Minister said. The Minister also said the North was consciously raising non-tariff barriers which cost developing countries US $ 100 billion a year – twice as much as received in aid. Expressing concern over the adoption of the Farm Bill by the United States, Shri Maran noted that subsidies were proposed to be increased over and above the already huge subsidies. This was on top of the one billion US dollars a day subsidy given by the OECD countries, which enabled them to export at prices less than two-thirds of the cost of production. The developing countries were disappointed that these measures had been imposed soon after the Doha Declaration. "Just because the word ‘development’ figures in more than 70 places in the Doha Declaration, this by itself cannot transform it into what is widely acclaimed as Doha Development Agenda. What is important is to enable countries to build up the wherewithal to take decisions based on merits and respective national interests and to be able to implement commitments. Capacity building and technical assistance will become meaningful only if they are backed by sufficient and necessary resources for implementation", the Minister stressed.
The following is the full text of the Minister’s address:
"Mr. Chairman, Ladies & Gentlemen,
It is a great privilege and honour for me to participate in this prestigious Conference which in the course of the next few days, will deliberate upon some of the serious and sensitive problems faced by the global community in the new millennium. I must compliment the organisers of the Conference for making common cause with a large number of global poor and for devising suitable policy options to address the formidable concerns of our times.
2. A reading of the series of World Development Reports indicates the evolution of the understanding of development within the World Bank and in the academic citadels of the North. Until the mid-1950s, the Bank did not turn its focus to the developing countries and thereafter did so only gradually. In the fifties and sixties, the emphasis was on physical capital accumulation; in the seventies it was on human capital and in the eighties it was on market forces and economic infrastructure. Critics point out that the latest reports contain a mixed bag of economics, sociology, social anthropology and political science.
3. Since no single magic formula is available on economic development, it may be interesting to start with a brief note about the experience of India - which has 1/6th of the humanity but has 1/3rd of world’s poor, half of them are yet to have access to the written word.
4. Long before the concepts such as "Basic Needs" and "Poverty alleviation" emerged and gained currency, Jawaharlal Nehru’s advisor in the Planning Commission, Pitamber Pant, made "minimum needs" as a basic objective of planning. He drew up a 15-year development plan for 1961-76 with a two-pronged strategy for providing a ‘minimum level of living’ for the entire population: aggregate income growth at 7.5 per cent per year for those 15 years and increased expenditure on health, education and nutrition directed to the poor. This Strategy may be put in a concise manner as 3 Es to combat poverty: Employment, Entitlement and Empowerment.
5. If the same yardstick of poverty line is applied now, around a third of India’s population is still poor. The reason by hindsight is obvious: we were following a State-led model, which was the development consensus at the time among many post-colonial countries. It produced average annual growth of 3-3.5 per cent, often referred to as the ‘Hindu growth rate’. While there was an acceleration of growth during 1980s with liberalisation in bits and pieces, it was fiscally unsustainable and exerted pressure on our budget and balance of payments. This created a macroeconomic crisis in 1991. By then the Soviet Union, on whose model we leaned heavily, had collapsed and China was marching ahead on the path of economic reforms and liberalisation and there was a paradigm shift. This also had a profound influence on our own thinking about economic policy.
6. In that year we started the process of Economic Reform, opening our economy and dismantling the ‘Permit / Licence / Quota Raj.’
7. Ten years of reforms so far have helped India to attain about 6 per cent annual growth. Notwithstanding the measurement issues, overall poverty levels have declined by nearly 10 percentage points from around 36 per cent in 1993-94 to about 26 per cent at present.
8. As T. N. Srinivasan puts it: "The Indian experience vindicated the theory that sustainable reduction in poverty is possible only through rapid and sustained growth. And achieving such growth is possible only in an economy in which competition prevails, supported by free markets at home and integration with world markets".
9. While it is true that "no developing economy can develop within its protected wall", it is also true that no country has developed simply by opening up to foreign trade and capital flows. Equally, economic reforms modelled on the so-called ‘Washington consensus’ alone cannot be a cure-all for the problems facing the developing countries. These prescriptions are now subject to question and the questions have not come from the critics alone.
10. The mandate of Bretton Woods twins and later WTO is all a thing of beauty – World Bank taking care of world’s development finance, IMF playing the role of the lender of last resort, and WTO promising free trade ‘to raise standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand’.
11. -- But the promise of a better life for millions has not yet been realised. On the other hand, it is causing wrenching social and economic changes which are still uncharted.
12. In this new era of development paradigm, a trinity of Liberalisation, Privatisation and Globalisation (LPG) is perceived as the main development strategy. But this strategy is pursued as an end in itself without any regard to its impact on poverty and inequality. Structural adjustment is conceived as an inevitable corollary of this LPG strategy, even though it is contrary to the development finance approach of the World Bank. This is the case of Bretton Woods twins operating in opposite directions. The enormous economic and social cost has made this structural adjustment as a ‘detestable phrase’ amongst anti-poverty activists. In a lighter vein it is said that in many countries Governments have been changed not by their people but by IMF.
13. "Full globalisation, if there were ever to be such a thing, would make the world economy as integrated as the economy of the single country. We have not yet reached full globalisation in this sense – we may never - and we consequently must speak of partial globalisation" (Helliwell). Ultimately, the problem for the future is not whether to have full or partial globalisation but how to manage the same. It may be possible, only if we understand the full ramifications and cross cutting dimensions of this process.
14. In the meanwhile, the slogan of globalisation has become a religious mantra, which is used in two ways. It is used in the positive sense to describe a process of increasing integration with global economy. But when it is used in a normative sense to prescribe a set of strategies in the name of development with "one size fits all" formula, as if it were preordained by fate, then it causes confusion and worry.
15. The single greatest phenomenon against the normative view of globalisation is the lack of public support because among many other things, it gives an impression of encroaching upon the sovereignty of nations and produces losers without any immediate alternative in sight. Perhaps the losers and the losses may outnumber the gainers and the gains.
16. If the outcome of globalisation results in many losers, people who have nothing more to lose may take up violence as the last-ditch effort. Few of us would prefer a world where the rude strain of social Darwinism reigns supreme.
17. We may recall that in Europe during the 16th century, poor relief was shifted from a charitable to government- organised activity. The creation of social insurance schemes and the subsequent expansion of the welfare state cannot be explained as public acts of charity; these factors have been the key elements in the survival strategy of capitalism.
18. Today, almost three-fourths of the world’s people live in a democratic system. Even authoritarian regimes need more legitimacy from people. How can they extend wholehearted support to this mantra, while their very foundation is rocked?
19. Larry Summers, while addressing this forum in 1999, had emphasised that national sovereignty is one of the important imperatives for global integration.
20. Therefore, any move that would dismantle or weaken the welfare state concept without providing sufficient and necessary alternative, needs to be approached cautiously after considering the dangerous consequences that they are likely to create.
21. Since 1980s and 90s, ‘civil society’ has attained special attention and focus. Perhaps it was then needed in countries of totalitarian regimes with a single-party system to incubate free societies. But in today’s multi-party democratic system, to bypass the institutions of government, political parties, parliaments, etc. can undermine the very representative democratic process that development assistance seeks to improve. I am not against the values of voluntary and neighbourhood action, which have historically positioned themselves in some of our cultures and traditions. However, whether the mushroom growth of NGOs – some poorer and some receiving enormous funding - can articulate the aspirations of the people and act as effective intermediaries to fulfil them in a democratic set-up without structured accountability needs a re-look by the international agencies and donor communities who have adopted them as their favoured children.
22. Liberalisation is today adopted by almost all countries. But they should be in a position to confidently carry the message to their citizens that such integration will not cause misery to them and any harmful effects arising out of such integration can be dealt with through available policy measures.
23. In Salman Rushdie’s novel "Haroun and the Sea of Stories", Mr. Butt, an indefatigable bus driver, has to reach the place in high mountains before sunset. Mr. Butt’s response to any obstacle that appears on the road ahead is always the same: "Full Speed Ahead". If the same response and approach of Mr. Butt is followed and developing countries are asked to go at break-neck speed ahead to globalisation, it may create only negative effects.
24. When USA dropped the "steel curtain", Robert Zoellick, the USTR, had stated: "The President believes that free trade benefits American consumers and families and spurs economic growth but he also recognises that some industries, workers and communities cannot respond as quickly as one might wish to the changes of a fast-moving global economy."
25. That is what the developing countries are also pleading for – more time for preparation and more resources for adjustment.
26. We understand the role of the steelworkers or any group of workers in the elections; but the fact that democracies also exist across the developing world and their voters have also equal concerns about the jobs that would vanish as a result of liberalisation is forgotten. The international institutions show little sympathy for such political concerns in the developing world. Therefore, the inescapable question that is asked from all quarters: Why the double standard? After all, the developing countries insist on a level playing field so that it may fill up the democratic deficit existing in international organisations, more so with WTO.
27. International community also does not seem to be sensitive to the issue of deteriorating terms of trade for developing countries. While giving special consideration to the steel sector, we tend to forget the falling commodity prices, which affect the household economies of millions of poor people in the developing countries. The large masses of rural communities, who have never heard of WTO, are gravely affected by the changes in the prices of their inputs and products. These are genuine concerns, which underscore restructuring liberalisation, so that a large share of population benefit from the process.
28. Many in the South generally subscribe to ‘malign – neglect’ and even ‘malign-intent’ views of trade and investment with the world economy. President Cardoso of Brazil formulated his radical theory of ‘neo-colonialism’ in this framework.
29. While the South is slowly coming out of these notions realising the benefits, we now see the reversal of roles and the North is entering into the shell of protectionism for one reason or other - more notably for their self-centred reasons.
30. The North is raising the banner of core labour standards and other social issues as if they have the interests of Third World workers at heart. They want to prevent the South from making use of the only competitive advantage they have: abundant labour. This is nothing but protectionism in the guise of humanitarian concern.
31. Because some MNCs shifted their production facilities to the South in search of low wages, ‘slicing up their value chain’, the North is now fearful that it would affect them. This concern is misplaced. As Paul Krugman says: "A back-of-the envelope calculation suggests that capital flows to the Third World since 1990 (and bear in mind that there was essentially no capital flow during the 1980s) have reduced real wages in the advanced world by about 0.15% - hardly the devastation that Schwab, Delors or the Economic Policy Institute presume." And he further mentions, "Economic growth in the Third World is an opportunity, not a threat; it is our fear of Third World success, not that success itself, that is the real danger to the world economy."
32. The North is consciously raising the non-tariff barriers which costs developing countries US $ 100 Billion a year – twice as much as they receive in aid.
33. Trade-development linkage is not a new recipe. According to an Oxfam study, "one per cent increase in world-export share for each developing region could reduce poverty by 12 per cent. The decline would be greater in sub-Saharan Africa and South Asia, the two regions with the highest concentration of poverty".
34. More worrisome of all is the prospect of protectionism taking even cruder forms. Already persons like Robert Kuttner of ‘Business Week’ have put forward an idea that all world trade should be run along the lines of the Multi-Fibre Agreement. Such views even among a few is likely to increase the doubts and fears of the South and Cordoso’s theory may get revived and find support, undermining the multilateral system.
35. Another area of concern is the adoption of the Farm Bill by United States. Subsidies are proposed to be increased over and above the already available huge subsidies. This comes on the top of one billion US dollar a day subsidy by the OECD countries, which enables them to export at prices less than two thirds of their cost of production. The developing countries are disappointed that these measures have been imposed soon after the Doha Declaration. Very rightly in a joint statement, the Director General of WTO, the President of the World Bank and the Executive Director of IMF have aptly asked: "How can leaders in developing countries or in any capital argue for more open economies if leadership in this area is not forthcoming from wealthy nations?"
36. Just because the word "development" figures in more than 70 places in the Doha Declaration, this by itself cannot transform it into what is widely acclaimed as Doha Development Agenda. What is important is to enable countries to build up the wherewithal to take decisions based on merits and respective national interests and to be able to implement commitments. Capacity building and technical assistance will become meaningful only if they are backed by sufficient and necessary resources for implementation.
37. To sign on the dotted lines regarding commitments is very easy; but every commitment needs additional costs for the developing countries. An analysis of Uruguay Round agreements led Michael Finger to conclude that implementation of just three of these agreements involving restructuring domestic regulations could total US $ 150 million for some of the more advanced developing countries. This sum is more than the annual development budget for 8 of the 12 Least Developed Countries for which he could find a figure for that part of the budget.
38. Another aspect, which we observe, is that the faith of the developed countries in the instrument of Development Finance Assistance is flagging. I would like to remind this august body that the recently concluded Monterry Consensus for Financing for Development has rightly emphasised the need for honouring the commitments of 0.7 per cent of GNP as resource transfer from developed to developing countries – a commitment which originated in the 1960s. According to one estimate, it is believed that fulfilment of these targets would provide US $ 100 billion of additional resources, which could be used for Development Finance aimed at realising the millennium goals of poverty reduction.
39. Arthur Lewis, as far back as in 1974, had said that immediate prospects for raising the standards of living of millions of people in Africa and Asia depend upon a major break-through in dry farming techniques because, "the secret of food is water". As Jeffrey Sachs has also indicated: "the kinds of problems that the poorest countries are facing require major investments in science to find solutions and understand them. There’s very little research in malaria, on tropical drought, on how to handle climate change or soil degradation that is causing the collapse of economies."
40. Instead of reshaping the world order on the terms set by the North, it is better to have a world order on the basis of social justice and on the basis of voluntary standards, which are bound to evolve into national and international rules. Recently, the Supreme Court of India ordered the Delhi State-level Government to clean up or close down 90,000 small factories on the ground that they are polluting the Yamuna River by pumping in their untreated waste. It was carried out after some initial resistance by affected workers. If only such an order had come out of IMF or WTO, the result could have been a blood bath, shaking the very foundations of our democracy. This underscores the importance of both sovereignty in decision-making and, equally, the idea of justice and democracy in that process.
41. What is needed is a new agenda for development based on social justice, recognising the strengths and weaknesses of the state, market and the people. The principles of democracy which make governments politically accountable to people must be an integral part of this development paradigm. "Income growth depends heavily on the legal, administrative, and political capabilities of public actors in sovereign states. That is why, in the end, external economic advice and aid must go beyond formal models and conform to each country’s unique political and social context" (Bruce R. Scott). If any impression is created by International Multilateral Institutions that they are taking over the role of parliaments of sovereign countries and becoming Global Government, it may be counter-productive and may lead to political backlash. The ethos of "do as we say, not as we do" is not a constructive basis. The global economic order will not work for the North unless it also works for the South. "A system that seems rigged to aid the wealthiest and most competitive countries will be undermined by the poorest and least competitive" (David E. Sauger).
42. Mr. Chairman, I am not here to give lessons in development economics. All of you in this gathering understand the issues better than me. I have articulated some of the apprehensions and feelings prevailing in the developing countries. It is for you, the experts to address these issues consistent with our aspirations.