Download 1 Dynamics of the Global Economy

Putting Dignity & Rights at the Heart of the Global Economy
1
Dynamics of the Global Economy
The global economy constantly generates innovations and opportunities. At the same
time, millions of people are thrown into peril through agricultural dislocation, layoffs,
plant closings and environmental destruction. Billions of people struggle to survive on too
little food, healthcare and other necessities. One out of five people lacks access to safe
water. While wages have risen in some countries, adjusted for inflation, they have fallen in
many others, among them the United States and Mexico. Too often, opportunities for
some mean hazards for others.
Current economic policies, as well as violent conflict, are fueling rapid urbanization,
pushing and drawing people from the countryside to unprepared cities, where “slums,”
with overcrowding, substandard housing, inadequate access to safe water, sanitation and
other infrastructure are growing fast. The United Nations Human Settlements
Programme (UN-HABITAT) reports that 75 percent of Latin America’s population now
lives in urban areas, as does 36 percent of Asia’s. Projections show that by 2030 more than
half of Africa’s population will be in cities and towns.3 UN-HABITAT observes, “A case
can be made that the primary direction of both national and international interventions
during the last 20 years has actually increased urban poverty and slums” and the explosive
growth of the informal sector. “Instead of being a focus for growth and prosperity, the
cities have become a dumping ground for a surplus population working in unskilled,
unprotected and low-wage informal service industries and trade.”4
The challenge before us is to steward the global economy so that it assures basic needs
and other economic rights amid continual transformation, sustains the environment, and
reinforces people’s dignity.
Over the past four decades, many developing countries have significantly improved
development indicators such as life expectancy, child mortality and literacy. In 1980,
UNICEF estimated that 40,000 children died from preventable causes, about half related
to hunger; by 2003, the estimate had been reduced to 27,400 per day, thanks in part to
UNICEF’s four-fold program of growth monitoring, oral rehydration therapy,
breastfeeding and immunization.5
For developing countries as a group, life expectancy increased from 46 to 63 years
between 1960 and 2000 and mortality rates for children under five were more than halved.
To take some notable examples:
• In South Korea, life expectancy at birth rose from an estimated 62.6 years in 197075 to 75.4 years in 2002. The child mortality rate (under age 5) dropped from 127
per 1,000 live births in 1960 to 54 in 1970 to 5 in 2002.
• In Costa Rica, life expectancy rose from 67.8 years in 1970-75 to 78 years in 2002.
The child mortality rate dropped from 123 in 1960 to 83 in 1970 to 11 in 2002.
• In China, the world’s most populous country, life expectancy rose from 63.2 in
1970-75 to 70.9 years in 2002. The child mortality rate dropped from 225 in 1960 to
120 in 1970 to 39 in 2002 (tied with El Salvador, Peru and Vietnam).
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• In India, the world’s second most populous country, life expectancy rose from 50.3
years in 1970-75 to 63.7 years in 2002. The child mortality rate dropped from 242 in
1960 to 123 in 1990 to 93 in 2002.
• By 2002, the adult literacy rate was 98 percent in South Korea, 96 percent in Costa
Rica, 91 percent in China and 61 percent in India (literacy data are not directly
comparable among countries because of methodological differences).
• On the overall 2004 Human Development Index, South Korea ranks a high 28 out
of 177 countries, Costa Rica ranks 45, China 94 and India 127.6
The Human Development Index (HDI) is a composite index that measures
achievement with three indicators: longevity as measured by life expectancy at birth;
knowledge as measured by the adult literacy rate and combined gross enrollment ratio for
primary, secondary and tertiary schools; and decent standard of living as measured by per
capita Gross Domestic Product (GDP), adjusted for purchasing power parity. (See Human
Development Index Trends table in Appendix.)
The index standard of living measure does not reflect economic inequality, but the
HDI does capture some of the difference between national income and human well-being.
For example, Costa Rica has a higher life expectancy than the United States and ranks
ahead of many countries on the HDI that have higher per capita GDP such as the
Bahamas and Saudi Arabia. The world’s wealthiest nation, the United States, is ranked
number eight on the 2004 HDI behind Norway, Sweden, Australia, Canada, Netherlands,
Belgium and Iceland. On child mortality, which UNICEF uses as the single most
important indicator of the state of a nation’s children, the United States lags behind 33
other countries and ties with Malaysia and Croatia.7
The last decade has seen some significant human development reversals. According to
the 2004 Human Development Report, “An unprecedented number of countries saw
development slide backward in the 1990s. In 46 countries people are poorer today than in
1990. In 25 countries more people go hungry today than a decade ago.” Between 1990 and
2002, 20 countries suffered a reversal in their Human Development Index. The report
observes, “In previous decades, virtually no countries experienced a decline in the HDI.”
The 20 countries whose HDI worsened—13 of them in Sub-Saharan Africa—are
Bahamas, Belize, Kazakhstan, Moldova, Russian Federation, Tajikistan, Ukraine,
Botswana, Cameroon, Central African Republic, Congo, Democratic Republic of Congo,
Cote d’Ivoire, Kenya, Lesotho, South Africa, Swaziland, Tanzania, Zambia and
Zimbabwe. In the Russian Federation, for example, life expectancy at birth was lower in
2002 at 66.7 years than it was in 1970, when it was 70 years.
The HIV/AIDS epidemic, with its terrible impact on life expectancy in Sub-Saharan
Africa, has both been catalyzed by economic inequality and further devastated
possibilities for development. While the yearly cost of imported HIV/AIDS medications
can run much higher than the yearly incomes of many Africans, the prices of many of
Africa’s commodity exports have plummeted.
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“Africa’s economic performance in the past two decades has been marked by slow and erratic
growth. On average, real per capita GDP growth was negative during the 1990s, despite a marginal
increase for West and North Africa...
High commodity price volatility, along with a decline in real prices and associated terms of trade
losses, has exacted a heavy toll in terms of low incomes and investment and high levels of indebtedness
and poverty. From the late 1980s to mid-1999, the ratio of external debt stock to exports deteriorated
significantly, reaching more than 300% before dipping to below 200% in 2000. These figures are far
above the ratios for the 1970s. Official development assistance flows to the continent have declined
steadily since the mid-1990s, while foreign direct investment inflows have remained miniscule and are
concentrated in a few countries’ extractive industries.”
United Nations Conference on Trade and Development (UNCTAD),
2004 Development and Globalization.
The prices of primary commodities, e.g., cotton, rice, sugar, aluminum, copper, that
represent the bulk of many developing country exports have dropped dramatically over
many decades. A study of commodity prices over the 20th century finds that between
1900 and 2000:
• Raw materials lost between 50 percent and 60 percent of their value relative to
manufactures.
• The decline was 50 percent for food products, 15 percent for non-food products
and 7 percent for metals.8 (See Commodity Prices table in Appendix.)
The Prebisch-Singer thesis, that in the long-term prices for primary commodity
exports fall in relation to prices of manufactured imports, “is more valid than ever,”
reports the United Nations Conference on Trade and Development (UNCTAD).
“Despite an upswing since 2003, the long-term real decline in commodity prices has led to
severe deterioration in terms of trade for many commodity-dependent developing
countries. This in turn has influenced balance-of-payments sustainability, impeded
development and affected social welfare, while increasing impoverishment and
environmental degradation. For example, between 1999 and 2002, coffee-producing
countries and West African cotton-producing countries suffered opportunity costs of $19
billion and $1 billion respectively compared to the situation that would have prevailed
had prices remained at 1998 levels.”9
More than one billion of the world’s people struggle to survive on the equivalent of
less than $1 per person a day—the widely cited threshold for measuring extreme poverty
calculated by the World Bank.10 Put another way, more than one billion people struggle
to survive on less than $365 a year. Nearly three billion people—half the world’s
population—live on the equivalent of less than just $2 per day. Many researchers have
shown that these official poverty estimates have methodological problems, causing them
to greatly understate the scale of the problem.11 The bottom-line reality is this: even $2 a
day—the threshold for nearly half the world’s people—cannot sustain basic physical needs
much less reinforce equality and dignity.
The Food and Agriculture Organization (FAO) estimates that 842 million people
were chronically undernourished in 1999-2001 (latest available data), including 10 million
in the industrialized countries; 34 million in the “countries in transition” in Eastern
Europe, the Baltic States and the former Soviet Union; and 798 million in developing
countries. These estimates “signal a setback in the war against hunger,” the FAO reports.
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While the hunger count continued to fall in the early 1990s, “From 1995-1997 to 1999
2001 the number of undernourished actually increased by 18 million” in developing
million from the 1993-1995 baseline period to 1999-2001.12
Number and Percentage of People Hungry in Developing
Countries
1969-71 through 1999-2001
millions
Number of People
35
800
30
25
600
20
400
15
10
200
5
0
0
1969-71
1979-81
1990-92 1995-19971999-2001
Percentage of People in
Developing Countries
40
1000
Number
Percent
Source: UN Food and Agriculture Organization.
“Undernourishment means consuming too little food to maintain normal levels of
activity,” observes the World Bank’s World Development Indicators. “The world produces
enough food to feed everyone, but hunger remains a persistent problem. Although
droughts and famines cause terrible short-term crises and grab most of the headlines, the
root cause of hunger is poverty.... Countries that have succeeded in reducing hunger had
higher economic growth, especially in their agricultural sector and rural regions. They
have also had lower population growth and lower rates of HIV infection.” Hunger is a
major contributor to preventable deaths. “Malnutrition is an underlying factor in more
than half the deaths of children under age five.”13
Like hunger, “child mortality is closely linked to poverty. In 2002, the average underfive mortality rate was 122 deaths per 1,000 live births in low-income countries, 42 in
lower-middle-income countries, and 21 in upper-middle-income countries. In high-income
countries, the rate was less than seven. For 70 percent of the deaths the cause is a disease
or a combination of diseases and malnutrition that would be preventable in a high-income
country: acute respiratory infections, diarrhea, measles, and malaria.”14 Surviving is just
the first step to overcoming layers of deprivation. One out of five children—60 percent of
them girls—do not complete primary school, for example.
The rate of maternal death in pregnancy or childbirth is also closely linked to poverty
and here the gaps between haves and have-nots are even more shocking than those for
child mortality. The lifetime risk of maternal death is:
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•
•
•
•
•
1 in 16 in Sub-Saharan Africa
1 in 46 in South-Central Asia
1 in 210 in North Africa
1 in 840 in Eastern Asia
1 in 2,800 in developed countries.15
During the 1990s the number of people trying to survive on less than $1 a day
increased in Latin America and the Caribbean, the Middle East and North Africa, SubSaharan Africa and Central and Eastern Europe. Extreme poverty was reduced in South
and East Asia, particularly in India and China. There is still a long way to go. As of 2001,
by World Bank count, in India, more than three-fourths of the population was below $2
and more than a third below $1 a day. In China, nearly half the population was below $2
a day and a sixth below $1.
The latest poverty figures from China show a reversal in the poverty improvement
trend. The Chinese economy continued its rapid growth, up 9 percent in 2003, while the
number of people in “abject poverty”—with annual incomes of less than $77—went up by
800,000 people.16 The Chinese Academy of Social Sciences reported in 2004 on the
widening urban-rural gap, with average urban incomes three times higher than rural.
“Taking into account the cost of education and health, it branded the gap in the standard
of living between city folk and peasants as the worst in the world.”17
India has one of the fastest growing developing economies and has made large gains in
literacy, life expectancy and other areas. While China is a manufacturing powerhouse,
India is booming in information-technology (IT) related services. “By some estimates,”
says Business Week, “there are more IT engineers in Bangalore (150,000) than in Silicon
Valley (120,000).”18 But inequality is growing, most Indians are extremely poor and India
ranks just 127 out of 177 countries in the Human Development Index. Gross national
income per capita was just $480 in 2002. Nearly half of India’s children under age three
suffer from malnutrition.19 After declining in the early 1990s, hunger in India increased
between 1998 and 2001, according to FAO’s latest estimates.20
“Economists cheering from the pages of corporate newspapers inform us that the GDP growth rate is
phenomenal, unprecedented. Shops are overflowing with consumer goods. Government storehouses are
overflowing with grain. Outside this circle of light, the past five years have seen the most violent increase
in rural-urban income inequalities since independence. Farmers steeped in debt are committing suicide in
hundreds; 40% of the rural population in India has the same foodgrain absorption level as sub-Saharan
Africa, and 47% of Indian children under three suffer from malnutrition.”
Arundhati Roy, author of The God of Small Things,
writing in the Guardian/UK, May 14, 2004.
In 2004, India’s poor majority used their right to vote to oust the Hindu nationalistled government that had been in power since 1998. As the New York Times reported,
“Though the economy is growing rapidly, for struggling farmers and the legions of
unemployed, the [incumbents’] message that an ascendant India was banishing poverty
was a mockery.”21 While many stories in the U.S. press about India focus on booming
Bangalore and the outsourcing of high-tech jobs from the United States, the gap between
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India’s high-tech, prosperous image and reality is wide: “While some 350 million Indians
still live on less than $1 a day, only an estimated 659,000 households have computers.”
That’s much less than 1 percent with computers in a country of 180 million households
with 1 billion people.22
China is on track to become the world’s next economic superpower.23 It is a nation of
growing contrasts—highly educated biotech and computer engineers and highly underpaid
factory workers, cities transformed by new buildings and cars, and farm families with
malnourished children. Income, education, health and other disparities have grown so
much that China has the world’s greatest gap between urban and rural areas. UNICEF
reports, for example, that the rate of severe malnutrition of children in poor rural areas is
about three times that in urban areas. The labor force is tightly controlled with no right
to organize independent unions. China is the world’s most favored location by
corporations seeking cheap labor and production, tax advantages and a rapidly growing
market.
About 70 percent of the foreign affiliates of transnational corporations (TNCs)
located in developing countries are in China. The China option—the “China price”—is
being used by global corporations to drive down already low wages around the world
much as the Mexico option has been used for decades to drive down wages in the United
States. China is not the absolute bottom for wages, but the most influential. In the words
of the New York Times Magazine, “Even at 25 cents an hour, Chinese workers cost more
than laborers in the poorer countries of Southeast Asia or Africa... China is the world’s
workshop because it sits in a relatively stable region and offers manufacturers a reliable,
pliant and capable industrial workforce, groomed by generations of government-enforced
discipline.”24
China, Wal-Mart and the Race to the Bottom
“As capital scours the globe for cheaper and more malleable workers, and as poor countries seek
multinational companies to provide jobs, lift production and open export markets, Wal-Mart [the world’s
largest retailer] and China have forged themselves into the ultimate joint venture, their symbiosis
influencing the terms of labor and consumption the world over.
...The Communist Party government has become perhaps the world’s greatest facilitator of capitalist
production, beckoning multinational giants with tax-free zones and harsh punishment for anyone with
designs on organizing a labor movement.
More than 80 percent of the 6,000 factories in Wal-Mart’s worldwide database of suppliers are in
China. Wal-Mart estimates it spent $15 billion on Chinese-made products last year, accounting for nearly
one-eighth of all Chinese exports to the United States. If [Wal-Mart] were itself a separate nation, it would
rank as China’s fifth-largest export market, ahead of Germany and Britain...
For Wal-Mart and other multinational companies doing business in China, a stable currency, political
peace and a compliant workforce are nearly as important as low costs...
[Labor activists in China] argue that as Wal-Mart pits suppliers against one another and squeezes
them for the lowest price, the workers suffer.
‘Wal-Mart pressures the factory to cut its price, and the factory responds with longer hours or lower
pay,’ said a Chinese labor official, who declined to be named for fear of punishment. ‘And the workers
have no options.’”
Peter S. Goodman and Philip P. Pan, “Chinese workers pay for Wal-Mart’s low prices,”
Washington Post, February 8, 2004.
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Globally, the vast wealth and income gaps between rich and poor are increasing:
• In 1960, the richest 20 percent of the world’s population had 30 times as much
income as the poorest 20 percent, the United Nations Development Program
reported. By 1997, they had 74 times as much.
• Looking at the rich-poor gap another way, in 1960-62 the 20 richest countries had
54 times the GDP per capita of the 20 poorest countries. In 2000-02 the richest
countries had 121 times as much.25
These gaps between countries are mirrored by widening income and wealth gaps
within many countries.
Large areas of the world, including much of Africa, have seen few, if any, benefits
from today’s global economy. A tremendous gap separates richer from poorer countries.
And yet development is not just an issue for so-called developing countries, but also for
rich countries such as the United States, where average real wages were lower in 2004 than
1973, and millions are unemployed, impoverished and lack health insurance.
Ratio of Per Capita GDP of Richest 20 Countries to
Poorest 20 Countries, 1960-62 and 2000-02
121
54
1960-1962
2000-2002
Globalization Before and After 1980
People have traded across great distances since the beginning of recorded history and
companies have operated across the oceans for hundreds of years. Beginning in the 1600s,
“the Dutch and English sailed the oceans of the world as agents for commercial concerns,
the great East India Companies. For these companies the profit motive was preeminent;
they did not encourage exploration for its own sake or for reasons of glory or religion.”26
The Dutch and British East India Companies, and the favored companies from other
colonial powers, were central to the interconnected spread of colonial rule and global
trade. Too often when economists write about the origins of today’s globalization,
observes Oxfam, “the previous five centuries, during which today’s industrialized
countries extended their domination over the global economy, disappear from history.”
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“During that period, developing countries were integrated into the global trading
system on terms designed to benefit the nations which constitute today’s
industrialized world. Trade was a vehicle for transferring wealth and power from
poor to rich. Traffic in precious metals from the New World was an early example of
globalization. In the seventeenth century, the imposition of forced cultivation
systems by Dutch colonists in the East Indies laid the foundations for a huge transfer
of income through the spice trade. Slavery and colonialism were decisive stages in the
creation of genuinely global markets, all of which were operated in order to
concentrate wealth and advantage. Political power, as much as economic exchange,
shaped the distribution of the benefits from trade. And in this, as in other respects,
there are strong elements of continuity between past and present forms of
globalization.”27
Colonialism went hand in hand with racism. And racism continues to echo in today’s
dominance of the global North over the global South, and of white people over people of
color.
Global economic integration accelerated in the 19th century and that is where many
economists start the discussion of today’s globalization. “In answering the question ‘when
did globalization begin?’ recent scholarship points to the mid-nineteenth century,” says a
key study. The study observes, “From circa 1800 to 1914, the level of world trade had
increased by a factor of about twenty in volume terms, and by a factor of ten relative to
world output. The big surge in international economic integration came late in the
century, as the pace of integration in all markets accelerated after 1870.” The trade boom
from 1870 to 1913 was followed by a trade bust from 1913 to 1939.28
International economic institutions have regulated global trade and finance since the
end of World War II. Over the last half century, quantum leaps in communications,
transportation and computer technology have contributed to an increasingly
interconnected global economy. In the 1960s, George Ball, a leading investment banker
and former U.S. government official, applauded the growing number of “cosmocorps,”
which are “engaged in taking the raw materials produced in one group of countries,
transforming these into manufacturing goods with the labor and plant facilities of another
group, and selling the products in still a third group...[all] with the benefit of instant
communications, quick transport, computers, and modern management techniques.”
Such corporations, Ball asserted, are “the best means yet devised for utilizing world
resources according to the criterion of profit: an objective standard of efficiency.”29 Claims
to the greater good and efficiency of the profit motive echo today in the drive for
privatization, deregulation, trade liberalization and market fundamentalist globalization
discussed below.
Ball’s cosmocorps are now typically known as transnational corporations (TNCs). As
of this writing, reports UNCTAD, there were “about 64,000 TNCs engaged in
international production, with about 866,000 affiliates located abroad.” About 77 percent
of the TNCs are based in developed countries. “The number of employees in foreign
affiliates worldwide...has grown dramatically: it reached 53 million in 2002, up from 19
million two decades ago.” About 60 percent of the foreign affiliates of TNCs are in
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developing countries, 28 percent in Central and Eastern Europe and 12 percent in
developed countries.
Of the foreign affiliates of TNCs in developing countries:
• 70.3 percent are in China
• 19.5 percent are in the rest of Asia
• 8.8 percent are in Latin America and the Caribbean
• 1.4 percent in Africa.30
Trade and foreign direct investment (FDI) “have become more closely intertwined as
the global production system increasingly shapes patterns of trade, especially through the
rapid growth of intra-firm trade in components.” TNCs are “estimated to account for
two-thirds of world trade while intra-firm trade between [TNCs] and affiliates accounts
for about one-third of world exports.”31
In the 1990s, 75 percent of FDI inflows to developing countries went to just 12
countries or territories, with the lion’s share going to China:
• China, 23.7 percent
• Brazil, 8.3 percent
• Mexico, 8.1 percent
• Hong Kong, 7.5 percent
• Singapore, 6 percent
• Argentina, 5.6 percent
• Malaysia, 4 percent
• Bermuda, 2.7 percent
• Chile, 2.7 percent
• Thailand, 2.2 percent
• South Korea, 2.1 percent
• Venezuela, 1.7 percent.
The remaining 176 developing countries and territories shared the remaining 25.3
percent.32
UNCTAD observes, “Recent FDI flows to developing countries, notably to China,
appear to aim at relocating production from other developing countries, including those
in Central America, thereby diverting rather than creating North-South trade. Such
inflows are also motivated by the opportunities of rapidly growing Chinese domestic
consumption.”33
States throughout the world have ceded more power to the private sector, especially
big corporations, through deregulation and privatization. Global institutions such as the
International Monetary Fund (IMF) and the World Bank have major influence over
national economies, widening the distance between economic decision-makers and the
people affected by their decisions.
While barriers to trade and foreign investment have been greatly reduced, barriers to
the movement of people have not been reduced in many countries—and in many cases,
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they have been strengthened. In the words of the World Commission on the Social
Dimension of Globalization, “Unlike earlier episodes of globalization that were
characterized by massive cross-border movements of people, the current process largely
excludes this. While goods, firms and money are largely free to criss-cross borders, people
are not.”34 Yet workers have been on the move, sometimes at great peril, in search of
jobs—within countries and across borders.
Looking at contemporary globalization, it is useful to distinguish between
globalization as a trend—with both positive and negative aspects—and as a deliberate
project. The term “globalization” is often used to refer to the increased flow of goods,
services, capital, information and ideas across national borders, and the deeper integration
of the global economy. As a trend, globalization is broad. It embraces, for example,
expanded diversity and openness, as in the growth of world music and the Internet, and
shrinking diversity, as transnational corporations dominate more production and
distribution of goods and services.
“I do not want my house to be walled in on all sides and my windows to be stuffed. I want the cultures
of all lands to be blown about my house as freely as possible. But I refuse to be blown off my feet by any.”
Mahatma Gandhi
But globalization can also refer to a deliberate project led by powerful institutions,
people and countries (particularly the United States) to apply a single template of
economic strategy and policy to all countries and all situations. This dogmatic logic of
globalization is often referred to as “market fundamentalism.”
Under market fundamentalism, public policies maximize freedom for private
enterprise and private profits; maximize support and protection of the private sector,
particularly large corporations; and minimize the role of government in regulating private
businesses, providing social services, and protecting the environment and other common
goods. The insistence that there is no alternative to market fundamentalism intensified in
the 1990s as the collapse of the Soviet bloc brought numerous new countries more fully
into the global market economy.
It is important to distinguish between market economies and market fundamentalism.
Market economies come in many varieties, with government playing a weaker or stronger
role in the economy. There is no simple dividing line between a market economy and a
mixed economy, but a changing spectrum of nations—the United States and the United
Kingdom, Sweden and Singapore, Chile and the Czech Republic, South Africa and South
Korea, Japan and India, and so on. The role of government (local, state and national) in
the U.S. economy has undergone numerous transformations, but in the words of a U.S.
State Department publication on the U.S. economy by two former Wall Street Journal
reporters, “government involvement in the economy has been a consistent theme.”
Indeed, “the American economy is perhaps better described as a ‘mixed’ economy, with
government playing an important role along with private enterprise.” The State
Department publication observes, “As debates over regulation, government spending, and
welfare reform all demonstrate, the proper role of government in the nation’s economy
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remains a hot topic for debate more than 200 years after the United States became an
independent nation.”35
The market fundamentalist approach is intolerant of debate: government is the
problem, free markets the solution. While advocates of the market fundamentalist
approach assert that it will lead to greater affluence and eventual improvement for all, we
observe that this strategy of globalization has led to slower economic growth for many
countries and more inequality, deprivation and environmental devastation. This type of
globalization undermines dignity and fosters neither socially responsible business nor
sustainable development.
The 20 years from 1980-2000, during which the market fundamentalist view and a
more specific variant, the “Washington consensus”—consensus led by the Washingtonbased IMF, World Bank and U.S. Treasury—became entrenched, witnessed less growth in
world trade than the 20 years before that. Overall world trade was especially vigorous in
the 1970s, with an average annual growth in world merchandise exports of 20.5 percent.
Average annual growth in merchandise exports fell from 15.3 percent in 1960-1980 to 6.8
percent in 1980-2002.36
World GDP grew much faster before 1980 than after. Between 1950 and 2002, the
highest annual growth rates in overall world GDP occurred in 1951 (7.9%), 1964 (7.2%),
1953 (7.1%) and 1973 (6.9%). After 1973, growth rates didn’t surpass a high of 5.1 percent
reached in 1976. GDP growth rates in 1980-2002 ranged from a low of 0.8 percent (in 1982
and 1991) to a high of 4.6 percent in 1984. Between 1985 and 2002, growth rates surpassed
4 percent only twice (1988 and 2000).37
For low- and middle-income countries, the 1980-2000 period saw less than half the
rate of per capita income growth than the 1960-1980 period. While some countries,
notably China (whose “reform and opening up” policies began in 1978), experienced faster
growth in the latter period than during 1960-1980, most did not, and some countries
experienced dramatic declines. For example:
• In Latin America, per capita income grew 75 percent during 1960-1980, but only
about 7 percent during 1980-2000.
• In Africa, per capita income grew 36 percent during 1960-1980, but declined by
about 15 percent during 1980-2000.
• Global progress in life expectancy, infant and child mortality, and education and
literacy was also generally greater during 1960-1980 than 1980-2000.38
Many countries that achieved high growth during the last two decades, such as China,
India, South Korea, Singapore and Taiwan, pursued national policies that differed
substantially from the “one size fits all” economic template advocated by market
fundamentalists. As Joseph Stiglitz, the 2002 Nobel Laureate in Economics and former
World Bank official explains, “China and other East Asian countries have not followed
the Washington consensus. They were slow to remove tariff barriers, and China still has
not fully liberalized its capital account. Though the countries of East Asia ‘globalized,’
they used industrial and trade policies to promote exports and global technology transfers,
against the advice of the international economic institutions.” Stiglitz also highlights
Chile, “which during its high-growth days of the early 1990s effectively imposed a tax on
short-term capital inflows.”39
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Higher growth countries pursued a variety of development strategies, but tended to
have “relatively favorable initial conditions in terms of prior industrialization, the level of
human resource development, transport and communications infrastructure, and the
quality of economic and social institutions.”40 Rather than the fiscal austerity advocated
by market fundamentalism, Chile, China, Malaysia and South Korea, for example,
maintained a stable or rising share of public investment. In general, the higher growth
countries tended to have strong government intervention in the economy, as noted above
by Stiglitz. The range of policies followed in the more successful East Asian economies
includes: “policies designed to reduce dependence on foreign capital (as well as to improve
its use), encourage technological progress, increase the extent to which profits are
reinvested, discourage luxury consumption and speculation, and improve public
investment in key areas of human and physical infrastructure.”41
One of the major determinants of East Asia’s success is attributed to their investment
in human capital, i.e., education. Not only did investment in education promote high
growth, but studies have also shown that it led to a decrease in inequality, which in turn
also contributed to healthy growth rates in the East Asian countries. Other government
policies and programs, in addition to economic policies, which have been cited as
contributing to the East Asian success, include land reform (Korea and Taiwan), public
housing (Hong Kong and Singapore) and investment in rural infrastructure (Malaysia and
Thailand).42
Asia has become the locus of an increasingly greater share of world production and
services in large part because key countries there exercised more policy experimentation
and autonomy while many other countries around the world did not or could not.
“The world appears to have entered a new era of laissez-faire globalization, with everything that this
implies...
The long global economic growth period that occurred from 1945 to 1973 was typified by declining
inequality and improving equity. The situation then reversed: income inequality and poverty increased
without respite during the recession years from 1978 to 1993, and real incomes actually fell for the bottom
income groups in most countries and the world as a whole—with resulting increases in poverty....
The rapid growth of inequality, poverty and of slums has not been due to vast impersonal forces
inherent in globalization, but rather to specific decisions by governments following economic policies that
are guaranteed to have these results. Many national governments have abdicated their responsibilities to
their citizens to promote fairness, redistribution, social justice and stability, all in favor of a chimera of
competitiveness and wealth for the few...
If a boom decade like the 1990s leaves the world with a gnawing feeling of insecurity and a lack of
social justice, then a bust decade will be many times worse.”
United Nations Human Settlements Programme (UN-HABITAT), “Globalization and the Poor:
Poverty Amid Affluence,” Feature/Backgrounder for The Challenge of Slums:
Global Report on Human Settlements 2003, October 2003.
Market fundamentalists would have us believe that choice and innovation make sense
for consumer products, but not for economic policies. Yet there is not only far more
variety of productive economic systems and policies than the market fundamentalist
doctrine conceives—market fundamentalism has done a terrible job by a wide range of
measures, as seen above. Compared to the post-World War II decades before, it has
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delivered slower economic growth, slower development, more inequality and more
instability. Market fundamentalism is a development failure of historic proportions.
The United States
The strongest economic and military power in the world, the United States deeply
influences the global economy and is deeply affected by the global economy. The United
States has played the lead role in shaping contemporary globalization and has more say in
international financial institutions than any other country. U.S. government agencies,
banks and corporations as well as stock, bond and commodities markets have a
disproportionate amount of control over the international flow of capital, goods and
services. The George W. Bush administration has demonstrated unusually open hostility
toward multilateral institutions and frameworks that are not subordinate to U.S. control.
The United States itself is being reshaped in the image of the market fundamentalist
approach. The United States has undergone large-scale deregulation in such areas as
transportation, communications and energy. The privatization of such services as
healthcare, education and prisons has accelerated, as has privatization of military
functions. Across the country, at all levels of government, social services have been
dramatically reduced. For example, federal funding for low-income housing is about 50
percent lower than it was in 1976, adjusting for inflation. States and localities have been
laying off teachers, police and firefighters, closing libraries, schools and health clinics, and
cutting back on everything from restaurant inspections to road repair.
The widening gap between rich and poor at a global level mirrors a similar
polarization within the United States. The top 1 percent of households has more wealth
than the bottom 90 percent of households. The very rich have been the chief beneficiaries
of economic growth in recent decades. Income inequality in the United States has reached
levels not seen since 1929.
• In 1979, the richest 1 percent of Americans had 23 times as much after-tax income
as the bottom 20 percent.
• By the year 2000, the top 1 percent had 63 times as much after-tax income as the
bottom 20 percent.43
In part, this polarization is the result of workers not getting their fair share of the
benefits of rising worker productivity. Between 1947 and 1973, worker productivity rose
104 percent while the minimum wage rose 101 percent, adjusting for inflation. Between
1973 and 2003, however, worker productivity rose 72 percent, but the minimum wage fell
22 percent and average hourly wages fell 10.5 percent, adjusted for inflation.44
Contrast these falling real (inflation-adjusted) worker wages with skyrocketing pay
for corporate executives. The average CEOs of major corporations in Business Week’s
Executive Pay Scoreboard were paid 44 times as much as average workers in 1980 and 254
times as much in 2003.
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Percentage Change in Productivity and Real
Minimum Wage, 1947-2003
110
100
90
80
70
60
50
40
30
20
10
0
-10
-20
1947-1973
Change in Productivity
1973-2000
2000-2003
Change in Real Minimum Wage
The longtime race to the bottom in manufacturing wages has spread to areas that
were held up as the good jobs of the future. Computer engineering and software
programming, to take two prominent examples, are increasingly outsourced to India,
China and Eastern Europe. As Business Week put it a decade ago, “What makes Third
World brainpower so attractive is price...In India or China, you can get top-level
[computer engineering] talent, probably with a PhD, for less than $10,000” a year.45
A major reason for the decline in the value of wages has been the undermining of the
right of workers to organize and bargain collectively. In the words of Business Week (May
23, 1994), “Few American managers have ever accepted the right of unions to exist, even
though that’s guaranteed by the 1935 Wagner Act. Over the past dozen years, in fact, U.S.
industry has conducted one of the most successful antiunion wars ever, illegally firing
thousands of workers for exercising their rights to organize.” Many more were
intimidated from organizing or joining unions.
One out of three workers was a union member in 1955. Only 13 percent of workers
are union members today, including nearly 4 in 10 government workers but just 1 in 12
private sector workers. The U.S. Bureau of Labor Statistics reported that full-time
workers who were union members had median 2003 weekly earnings of $760 compared
with just $599 for workers not represented by unions. And they are much more likely to
have health insurance and pensions.
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Unions have historically been strong supporters of progressive legislation such as
Social Security, Medicare, minimum wage and health and safety protections. Shrinking
union membership has left those programs and policies more vulnerable.
“While labor unions were largely responsible for creating the broad middle class after World War II,
bringing decent wages and benefits to even low-skilled employees such as hotel and garment workers,
that’s not the case today. Most U.S. employers fiercely resist unionization, which, along with other factors,
has helped slash union membership.”
“Working and Poor,” Business Week, May 31, 2004.
Tax legislation since 2001, providing huge tax cuts for the wealthiest Americans, is
further exacerbating wealth and income inequality. “The Bush tax cuts, which included a
reduction in the top tax rate, as well as reductions in taxes on estates, capital gains and
dividends,” the Wall Street Journal reported, “helped bolster the fortunes of the
fortunate.”46
The share of national income going to the middle class in 2003 was nearly the lowest
on record, with data back to 1967. The share going to the bottom fifth of households was
the lowest on record.
In 2004, households with incomes above $1 million will receive tax cuts averaging
about $123,600. That will cause their after-tax income to jump by 6.4 percent—further
widening the gap with those below.47
Rising inequality can be seen in rising poverty rates. Poverty rates are higher now
than they were in the 1970s. By official U.S. Census Bureau count, 12.5 percent of
Americans were below the poverty line in 2003; compared with a low of 11.1 percent in
1973. As of 2003, 36 million people were under the official poverty line. This includes 1
out of 12 non-Hispanic whites, 1 out of 8 Asians, 1 out of 5 Latinos and 1 out of 4 blacks,
and more than 1 out of 4 households headed by women. None of these people appears in
the World Bank global poverty count. The official poverty line is set well below the
actual cost of minimally adequate housing, healthcare, food and other necessities such as
childcare for employed parents.48
As Business Week observes in a cover story on the growing numbers of working poor,
“Today more than 28 million people, about a quarter of the workforce between the ages
of 18 and 64, earn less than $9.04 an hour, which translates into a full-time salary of
$18,800 a year—the income that marks the federal poverty line for a family of four.”49
That’s not much more than the minimum wage peak of $8.69 in 1968, adjusting for
inflation in 2004 dollars. The minimum wage has been stuck at $5.15 an hour since 1997—
that’s lower than the real minimum wage of 1950 ($5.88 in 2004 dollars).
The United States is the only major industrialized nation without universal
healthcare. The number of Americans without health insurance (public or private)
reached 45 million in 2003—nearly one out of six people. Lack of health insurance is
generally associated with a 25 percent higher risk of death (adjusting for physical,
economic and behavioral factors).50 The Institute of Medicine of the National Academies
has documented the consequences of lack of health insurance in a series of detailed
reports. Among the findings:
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• Uninsured Americans get about half the medical care of those with health
insurance. They receive too little care and receive it too late. As a result, they tend
to be sicker and to die sooner.
• About 18,000 unnecessary deaths occur each year among people younger than 65
because of lack of health insurance. This mortality figure is similar to the 17,500
deaths from diabetes and 19,000 deaths from stroke within the same age group in
2001.51
The United States continues to be plagued by race and gender discrimination and
structural inequality. Women working full time earned just 76 cents for every dollar men
earned in 2003. The gender wage gap has closed just 12 cents since 1955, when women
earned 64 cents for every dollar earned by men. There’s still another 24 cents to go. If
women earned as much as similarly qualified men, poverty in single-mother households
would be cut in half.
Study after study documents discrimination against people of color in criminal
justice, education, employment, banking, insurance, housing and healthcare.52 For
example, as summed up in the first annual National Healthcare Disparities Report, “racial,
ethnic, and socioeconomic disparities are national problems that affect healthcare at all
points in the process, at all sites of care, and for all medical conditions—in fact, disparities
are pervasive in our healthcare system.”53
The black infant mortality rate is more than double that of whites and black life
expectancy is nearly six years less. The black unemployment rate is twice that of whites,
and the black poverty rate is triple that of whites. As the Bush administration secretary of
education acknowledged, many children of color are being subjected to educational
“apartheid” and “those who are unprepared will [confront] poverty, dead-end jobs and
hopelessness.”
It is a great indictment of the United States and its leadership in the global economy
that so many Americans work at jobs paying poverty wages—or can’t find jobs at all.
Regulations to protect people and the environment are being weakened, and the Social
Contract codified in the New Deal and the Great Society is being rolled back. In recent
years, the United States has gone backwards rather than forwards in realizing the
commitments embodied in the Universal Declaration of Human Rights. Moreover,
United States obstruction of international progress on environmental remediation is a
major threat to people and the biosphere.
We will now discuss in more detail several facets of the global economy: trade,
finance, migration, militarism and the environment.
Trade
Trade liberalization has created both opportunities and problems for development
and poverty reduction in many countries. As the United Nations Development Program
(UNDP) put it, “internal and external institutional and social conditions play a significant
role in determining whether and to what extent a country or group of people reaps the
benefits of trade.”
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World trade has grown greatly since the end of World War II. Some regions, like East
Asia, have experienced rapid growth and improvements in standards of living for many
by pursuing development strategies based on expansion of manufacturing trade. South
Korea and Taiwan, for instance, followed this strategy, with active government policies to
encourage manufacturing exports and protect local industries. The result was very high
growth rates, with the benefits more widely shared across the economy. Yet, even in these
successful cases, growth at the national level hides differential burdens carried by some
within a country.
In other parts of the world, notably in Africa, trade has grown but exports have
mostly been limited to agricultural commodities and minerals, with few linkages to the
rest of the economy and generating little or no gain for the majority of the populace. As
emphasized by the UNCTAD Least Developed Countries Report cited in the box below,
the problem is not the level of integration in the global economy but the form of
integration. Rapid increases in trade flows can overwhelm domestic producers and
devastate communities. The burden of adjustment is often inequitably borne by the poor.
“The least developed countries (LDCs) are a group of 49 countries that have been identified by the
UN as ‘least developed’ in terms of their low GDP per capita and high degree of economic vulnerability. It
is false to assume that the key policy problem for LDCs is that they are not sufficiently integrated into the
global economy.... The average level of trade integration for the LDCs is around the same as the world
average... The average level of trade integration is actually higher than that of high-income OECD
[Organization for Economic Cooperation and Development] countries... The problem for the LDCs is not
the level of integration with the world economy but rather the form of integration...
Globalization—the increasing flows of goods and resources across national borders and the
emergence of a complementary set of organization structures to manage these flows—is tightening the
international poverty trap of commodity-dependent LDCs and intensifying the vulnerabilities of LDCs
which have managed to diversify out of primary commodity exports into exports of manufactures and/or
services.”
UNCTAD, The Least Developed Countries Report 2002: Escaping the Poverty Trap.
Trade is not gender neutral anymore than economics generally is gender neutral, but
too often trade policies ignore effects on women. Trade liberalization can intensify gender
inequalities. The World Commission on the Social Dimension of Globalization,
established by the International Labor Organization (ILO), observes in A Fair
Globalization:
“Trade liberalization has often allowed the import of subsidized agricultural
products and consumer goods that have wiped out the livelihoods of women
producers. The increased entry of foreign firms has often had a similar effect through,
for example, displacing farming women from their land or out-competing them for
raw materials essential to their productive activities. At the same time, women
producers face formidable barriers to entry into new economic activities generated by
globalization. This is often because of biases, either against women directly or against
the micro-and small enterprise sector in which they predominate, in the policy and
regulatory environment. The extent of the handicaps faced by women producers is
seen in the fact that women own less than 2 percent of land worldwide and receive
less than 10 percent of the credit.”54
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In export processing zones, women are the majority of workers because with
continued gender bias corporations can pay them less than men, and employers freely
acknowledge they consider women more “docile.” Women’s employment in export
processing zones brings a mix of negative and positive consequences. As women’s paid
employment increases, women can benefit by increased status and bargaining power in
households and communities. Yet their employment “advantage” is based on low wages
and poor working conditions, often including forced unpaid overtime, sexual harassment
and health and safety risks such as exposure to toxic chemicals. Women who try to
organize for better pay and working conditions are often fired, as are men. Their
increased hours of paid employment typically come on top of their continued
responsibilities in the care economy (primarily in unpaid household work). Thus women
end up with more responsibilities and little or no leisure time.
The point is that understanding women and men’s roles in society is important in
order to develop trade policy that will promote equitable development. Existing gender
inequalities constrain positive outcomes of trade liberalization. Proponents of unregulated
trade liberalization claim that relying on low-wage labor, which is women’s in many
cases, will promote growth and ultimately development. “While gender-based wage
differences can create a competitive advantage in some semi-industrialized countries, if this
strategy is adopted by all of these countries, it may result in a slow but steady
deterioration in their terms of trade vis-à-vis industrialized countries.”55 Women’s groups
have long argued for inclusion in the process to determine what trade policies are best for
their individual countries and inclusion in the international trade rules negotiating process
so that they can bring their realities, knowledge and wisdom to the table.
Women at Work
Worldwide, women on average earn two-thirds of what men earn.
Millions of women work in the informal economy: agricultural workers, home workers, domestic
employees, the self-employed, unpaid family workers and workers in unregistered enterprises.
Women spend twice as much or more time as men on unpaid work.
Seventy percent of the world’s people in extreme poverty, with incomes less than $1 a day, are
women.
The higher the position in an organization or company, the more glaring the gender gap—women hold
only around a mere 1% to 3% of top executive jobs in the largest corporations.
Of the 192 countries in the world, only 12 have a female head of state.
From International Labour Organization, “Facts on Women at Work.”
Trade policy alone is not sufficient and cannot be looked at in isolation from the total
package of policies that countries need to achieve equitable development. Trade policies
must be embedded in a policy framework that mitigates the burdens of adjustment and
ensures that the benefits are realized and shared equitably. Governments must have the
freedom to develop innovative policy interventions in order to harness the potential of
their opening economies. Yet recent trade agreements have limited government’s ability
to do just that.
In 1995, the World Trade Organization (WTO) succeeded the General Agreement on
Tariffs and Trade (GATT) in managing the current rules-based world trading system. “A
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key change was the broadening of the agenda of trade negotiations well beyond the
GATT remit of reducing tariffs and other direct barriers to trade. Subjects that were
hitherto not considered to be trade issues such as services, intellectual property rights
(IPRs), investment measures and competition policy (the ‘behind-the-border’ issues) were
now argued to be within the scope of trade negotiations.”56
The WTO provides the forum where countries meet to set policy and for managing
mechanisms for settling trade disputes. On paper the WTO has a one-nation-one-vote
method of setting rules for global commerce. However, countries do not participate in the
trading system on an equal footing. Decision making in the WTO negotiation process
primarily takes place in small caucuses dominated by the major powers. These countries
have designed a system that continues to privilege themselves above others and larger
private actors over smaller ones, and fuels a race to the bottom in wages, labor conditions
and environmental standards.
The United States and the European Union, for example, have lectured developing
countries on the imperative of eliminating all subsidies and tariffs, while pouring massive
subsidies into their agricultural sectors. The result is that major rich countries subsidize
their own farm sectors and flood markets in developing countries with agricultural
exports that seriously undercut indigenous agriculture. These trading practices have
compounded long-term declining trends in many agricultural commodity prices, further
damaging agriculture, especially small farmers and farm workers, in developing countries.
Since most of the poor in developing countries live in rural areas and depend on
agriculture, directly or indirectly, for their livelihoods, trade policies that strengthen the
rural sector are an essential part of any anti-poverty development strategy. Policies
undermining the rural sector have widespread consequences, including the rapid
urbanization and impoverishment mentioned earlier.
“In 2002, direct support to farmers added up to US$235 billion, almost 30 times the amount provided
as aid for agricultural development in developing countries. Much of that sum subsidized the production of
surpluses in commodities that many developing countries depend upon.
The United States, for example, handed out US$3.9 billion in subsidies to 25,000 cotton farmers in
2001-2002, an amount higher than the entire GDP of Burkina Faso, where more than 2 million people
depend on cotton for their livelihood... Similarly, the European Union (EU) subsidized sugar production by
US$2.3 billion in 2002. The EU has become the world’s second largest sugar exporter, even though its
production costs are more than double those in many developing countries.”
FAO, The State of Food Insecurity in the World 2003.
In addition, trade policies in the developed countries have included “tariff escalation”
protection for their domestic processing industries—imposing higher tariffs on the more
processed products. For example, escalating tariffs on the processing of cocoa from beans
to cocoa butter to chocolate bars have prevented developing countries from exporting the
more profitable processed goods into rich-country markets. Tariff escalation is another
way the existing system is tilted against the poor countries.
The WTO has much broader scope than the old GATT. For example, the Agreement
on Trade-Related Aspects of Intellectual Property Rights (TRIPS) covers patents and
other forms of “intellectual property.” In general, for traded items involving the country
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where these items are patented, this agreement obliges WTO members to honor each
other’s patents. A narrow exception permits developing nations to protect traditional
plant varieties, and encourages them to develop their own rules for patenting seeds and
plant varieties. However, firms in developed nations are patenting seeds derived from
traditional varieties with very minor changes, which undercuts or threatens indigenous
farmers who save their own seeds from year to year and, by selection, continue to adapt
varieties better adapted to local conditions.
“Indigenous people have a rich resource of traditional knowledge—about plants with medicinal value,
food varieties that consumers demand and other valuable knowledge. Entrepreneurs were quick to see
the market potential if they could patent and sell this knowledge. So traditional knowledge is increasingly
misappropriated, with many ‘inventions’ falsely awarded patents. Examples include the medicinal
properties of the sacred Ayahuasca plant in the Amazon basin (processed by indigenous communities for
centuries); the Maca plant in Peru, which enhances fertility (known by Andean Indians when the Spanish
arrived in the 16th century); and a pesticidal extract from the neem tree used in India for antiseptic
properties (common knowledge since ancient times).
Developing countries seldom have the resources to challenge false patents in foreign jurisdictions—
indigenous people even less so. A March 2000 study concluded that 7,000 patents have been granted for
the unauthorized use of traditional knowledge or the misappropriation of medicinal plants.”
Human Development Report 2004.
Rich nations, and seed companies based in these nations, would like to extend their
own rules to all nations, without exception, and have proposed such changes in WTO
negotiations and in the World Intellectual Property Organization. Provisions in the trade
agreements that the United States has negotiated with Central American countries
(CAFTA) and Morocco would narrow or eliminate the present exceptions. Poor nations,
and their allies around the world, must work hard to preserve or expand the exceptions
that now exist and develop intellectual property rules more suited to their own needs, and
more suited to food security and biodiversity.
Access to medicine is another crucial issue. High prices for patented drugs leave them
beyond the reach of poor nations beset by HIV/AIDS as well as other epidemic diseases
such as malaria and tuberculosis. Access to medicines to treat HIV/AIDS is a particularly
hot button issue in trade policy. Globally, 42 million people are infected with HIV. The
Wall Street Journal reports that “less than 10 percent currently have access to drugs that
can transform the infection from a death sentence to a chronic condition—and most of
them are in Western countries.”57
“Since the HIV/AIDS epidemic began, 25 million people have died of the disease. Another 42 million
are now infected with HIV. During this decade, AIDS is expected to claim more lives than all the wars and
disasters of the past 50 years...
By the year 2020, the epidemic will have claimed one-fifth or more of the agricultural labor force in
most southern African countries.”
FAO, The State of Food Insecurity in the World 2003.
In their briefing paper, “Patents: trade and health,” the Quaker United Nations
Office in Geneva and Quaker International Affairs Program in Ottawa explain that at the
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WTO meeting at Doha, Qatar, in 2001, developing countries achieved a declaration “to
clarify that public health takes priority over patent rules in the TRIPS agreement.” The
Doha Declaration on the TRIPS Agreement and Public Health recognizes that TRIPS
“does not and should not prevent [WTO] members from taking measures to protect
public health” and rules on patents and trade should “promote access to medicines for all.”
As the briefing paper explains, the Declaration “clarifies that governments have the right
to over-ride patents using a ‘compulsory license’ to produce lower cost drugs” during
medical emergencies and the right to import cheaper medicines. However, the WTO
Decision on Implementation of the Doha Declaration in August 2003 “loaded the draft
agreement with bureaucratic conditions” and concessions to the pharmaceutical industry.
Meanwhile, the United States has inserted provisions in several bilateral and regional
trade agreements that are intended to reduce or negate the flexibility called for in these
declarations. The drug industry’s main trade group, the Pharmaceutical Research and
Manufacturers of America (PhRMA) each year presents its recommendations to the U.S.
trade office and the two have consistently presented a united front in trade negotiations.
Trade agreements such as the ones the United States has negotiated with Jordan, Chile,
Singapore, Australia, Morocco and the Central American countries, all include a rule that
forbids the approval of generic-drug applications for five years if the test data used is the
same as that of the patented drug. According to a report on the potential impacts of the
U.S.-Central American Free Trade Agreement (CAFTA) done by an economist at the
University of El Salvador, a study in Costa Rica showed that these measures would
increase the cost of some medicines by as much as 800 percent.58
The agenda for trade negotiations has widened to include many elements of domestic
policy. For example, proposed new trade agreements on services, investment and
government contracts, particularly those advanced by the United States, would subject
domestic regulations to international trade laws and limit a government’s ability to make
policies that would assure the provision of essential services such as water, health and
education to all citizens, or that would rectify gender, race and ethnic inequality. For
example, under “national treatment” of foreign corporations rules, under some
agreements, governments can only make purchasing decisions based on price and quality
thus undermining longstanding government procurement policies that mandate
preferences for domestic businesses, women-owned or minority-owned businesses, or that
mandate that government contractors pay a living wage.
Governments are facing intensified pressure to outsource provisions of basic services
(water, health, education) to foreign firms. In fact, proposed language buried in trade
agreements currently under negotiation would essentially force the privatization of these
basic services. Privatization of hitherto publicly provided services, whether or not it
involves foreign businesses, is a contentious issue best decided on by the communities
affected by the decision, not by a trade negotiator. There are many cases where basic
services were privatized and poor communities faced rate hikes. In the case of water, when
clean water becomes unaffordable and unsafe water is used instead, the consequences can
be disease and death from outbreaks of cholera and other waterborne diseases.59
“[The free trade] agreement, negotiated with Australia by the Bush administration,
would allow pharmaceutical companies to prevent imports of drugs to the United States
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and also to challenge decisions by Australia about what drugs should be covered by the
country’s health plan, the prices paid for them and how they can be used.
“[The free trade] agreement, negotiated with Australia by the Bush administration, would allow
pharmaceutical companies to prevent imports of drugs to the United States and also to challenge
decisions by Australia about what drugs should be covered by the country’s health plan, the prices paid
for them and how they can be used.
It represents the administration’s model for strengthening the protection of expensive brand-name
drugs in wealthy countries, where the biggest profits can be made.
In negotiating the pact, the United States, for the first time, challenged how a foreign industrialized
country operates its national health program to provide inexpensive drugs to its own citizens. Americans
without insurance pay some of the world’s highest prices for brand-name prescription drugs, in part
because the United States does not have such a plan.”
Elizabeth Becker and Robert Pear, “Trade agreement may undercut importing of inexpensive drugs,”
New York Times, July12, 2004.
While expansion of trade agreements to include elements of domestic policy can in
some cases be beneficial to developing countries (e.g., putting limits on domestic
agricultural subsidies in the rich countries), these countries need additional policy
flexibility under the principle of special and differential treatment to pursue legitimate
development goals. For example, in order to assure that the gains of trade are equitably
shared among people, developing countries should have the right to require technology
transfer or the local purchase of a certain percentage of inputs to production so that small
businesses can share the gains.
The 2001 Doha meeting of the WTO launched a new series of negotiations that were
supposed to be focused on trade and development, and which were supposed to include
the phase-out of agribusiness subsidies by the wealthy countries. Developing countries
came to the 2003 WTO meeting in Cancun determined to get the wealthy countries to
live up to their Doha pledges, and for the first time formed a cohesive coalition of 21
countries to reinforce their position. Led by Brazil and India, but also including other
large countries such as Mexico, Argentina, China, the Philippines, Egypt and South
Africa, the G-21 brought its own proposals to the table, and stood its ground against
substantial pressure. Holding that “no deal is better than a bad deal,” the G-21 considered
the collapse of the Cancun talks a success, as did civil society protesters in the streets of
Cancun. WTO watchers held a higher level of hope that the organization could become
more responsive to the interests of poor countries.
Since Cancun, there have been important milestones. In June 2004, the WTO ruled in
favor of Brazil in its case against U.S. cotton subsidies. This was the first time a developing
country had challenged a superpower over agricultural dumping and won—at least before
appeals are concluded.60 In August 2004, the WTO ruled against EU sugar export tariffs in
a case that was brought forward by Thailand, Australia and Brazil.
Meeting in Geneva in July 2004, the WTO produced a framework document, which
was initially hailed as saving the multilateral trade regime, in the wake of Cancun, and as a
real breakthrough for developing countries. However, as with much trade policy, the
details and fine print are cause for real concern. As has happened at all prior WTO
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meetings, the decision-making process was again lacking in transparency and democratic
participation. The process was once again controlled by the developed countries and
included the use of “green rooms”—informal meetings by invitation only; rushed
deadlines that left developing country representatives without adequate staff to consider
drafts; a lack of participation by civil society groups; and most notably, an absence of a
large number of developing country ministers who were told it was not necessary for
them to attend.
It seemed that the major gains at this meeting were a commitment by developed
countries to scale back and eventually eliminate export subsidies and an agreement to
drop from further negotiation in this round three of the “Singapore issues” of concern to
developing countries—on investment, competition and transparency in government
procurement. Regarding developed country export subsidies, however, large loopholes
were left that actually allow domestic subsidies to be expanded.
Moreover, the agreement includes a framework governing global trade in industrial
goods that would set up a strict and inflexible approach to tariff reduction, threatening
many local firms and industries in developing countries. The framework was a
contentious one that had been proposed earlier and rejected by most developing countries.
It was subsequently inserted into the July 2004 agreement without modification and left
developing countries pressured to accept it, both in order to get other concessions and for
fear of being blamed for the collapse of the talks.61 Walden Bello and Aileen Kwa of the
Bangkok-based Focus on the Global South analyze the July WTO meeting as a triumph
for the United States and other trading powers, not for developing countries.62
“The rhetoric of global trade is filled with promise...
Sadly, the reality of the international trading system today does not match the rhetoric.
Instead of open markets, there are too many barriers that stunt, stifle and starve.
Instead of fair competition, there are subsidies by rich countries that tilt the playing field against the
poor.
And instead of global rules negotiated by all, in the interest of all, and adhered to by all, there is
closed-door decision-making, too much protection of special interests, and too many broken promises.
The issues are often technical, and do not usually lend themselves to dramatic television coverage,
like war or extreme weather. But let there be no doubt: the damage is profound, and the victims can be
counted in the billions.”
UN Conference on Trade and Development (UNCTAD) Secretary General Rubens Ricupero,
Message to the Fifth Ministerial Conference of the World Trade Organization,
Cancun, September 10, 2003.
Regional trade agreements in which countries agree on a regional basis to lower trade
barriers have been touted as a way for developing countries to improve their export
industries and raise their standards of living. There are considerable differences among
such agreements. In the European Union, for instance, the lowering of trade barriers took
place within a deeper process of political and economic integration, with explicit
programs to shift resources from relatively developed to relatively underdeveloped
regions. The EU poured hundreds of billions of dollars into regional development funds
designed to raise standards of living in the poorer areas, strengthening the EU as a whole.
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In addition, the EU adopted a Social Charter, and harmonized strong worker rights,
employment practices and environmental standards. The EU has consciously structured
itself to be not only a free trade area and monetary union, but also a region in which
prosperity is shared.
In contrast, the North American Free Trade Agreement (NAFTA) has nothing
comparable to the EU regional development institutions for providing investment funds
to improve infrastructure and raise living standards in Mexico. Mexico was left to cope on
its own with the major dislocations and adjustments resulting from increased trade under
NAFTA. The real value of the Mexican minimum wage is 60 percent less than two
decades ago. In recent years a growing number of companies in the export-processing
sector have been leaving Mexico for China, where wages are even lower. It is in the
interests of all the NAFTA countries to have Mexico succeed economically, and to have
development be equitable and environmentally sustainable. In the Free Trade Area of the
Americas (FTAA) and the Central America Free Trade Agreement (CAFTA), U.S.
negotiators have rejected any attempt to explicitly link trade policy with the provision of
investment funds to support infrastructure for equitable and sustainable development.
“A person comes to a place and there’s water. The person complains that the water is dirty and smells
bad and isn’t drinkable. Someone else says, ‘Be happy you have water.’ That’s the situation we have
here in the maquila industry. Yes, they brought in an economy but at what cost? There are jobs, but at
what cost? There has to be a balance.
We are left here to organize with the women who are booted out of the maquila for organizing, for
trying to better their work situations. We are left here working with their squatter camps that have
developed. Last spring, we were cleaning the canals near the squatter camp because of the rat
infestation in the houses. People couldn’t walk by without being bitten. These were mutant rats, like small
dogs. All we have is our heart, our faith and our volunteerism. The Berlin Wall may have gone down, but
we have another wall right here. There are many families that have been divided because of that border.”
Helga Garza, Tlacalpuli, Women and Indigenous Issues,
presentation to AFSC Working Party on Global Economics, January 30, 2003, Brownsville, TX.
While a rules-based system of trade is important for leveling the playing field for all
countries, the current trading system is biased in favor of the developed countries and
leaves developing countries extremely vulnerable, with few mechanisms for protecting
their own population and resources. Trade rules need to go even further to reflect a
preferential treatment for the poor in order to achieve equitable development.
The WTO recognizes the principle of “special and differential treatment,” whereby
developing countries can be exempted from some WTO rules or granted preferential
treatment in the application of WTO rules. There are six basic categories of special and
differential treatment: to enhance trade opportunities, safeguard the interests of
developing countries, allow flexibility of commitments, extend transition periods, provide
technical assistance and provide special assistance to least developed countries. However,
in practice even extended transition periods are often unrealistic, so-called preferences
don’t reverse imbalances, exemptions are often inadequate and limited to only the least
developed countries, and underlying inequities remain intact.
For example, the Agreement on Agriculture allows for different rates of tariff
reductions and levels of domestic support and export subsidies. As the UNDP report,
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Making Global Trade Work for People, points out, “at the same time the design of the
agreement negated this concession. Subsidies most relevant to developing countries were
prohibited, while those relevant to industrial countries were allowed—reflecting an
inherent imbalance in the agreement in complete contradiction to the special and
differential treatment principle and promoting reverse special and differential treatment in
favor of industrial countries.”63
A stronger principle of special and differential treatment should be respected in all
trade negotiations and actively applied throughout the agreements. Developing countries
should have the right to safeguard food sovereignty and protect small farmers from unfair
competition. They should have the right to protect their institutions and development
priorities in line with the Universal Declaration of Human Rights. No country should
ever have to compromise standards that protect human rights in order to strike a deal.
Trade rules should help rectify race, ethnic and gender inequalities, not further
entrench them. For example, trade rules on intellectual property rights, in some cases,
may allow corporations to copy traditional artistic design and threaten the livelihoods of
local craftspeople. In Latin America, 70 percent of craft workers are women.64 Women
must be adequately represented at the trade negotiating table, and policies must be
designed that work for women. Moreover, development practitioners have long known
that giving women a central role in development projects increases the projects’ chance of
success. The inclusion of racial and ethnic minorities’ voices, as well as women’s voices, in
the development of trade policy is absolutely essential if we want trade policy to bring
economic opportunities to all regardless of race, ethnicity or gender.
Trade agreements lead to changes in the structure of production and employment.
These changes affect workers, and under the existing system in most countries, workers
bear an unfair share of the burden of adjustment. As part of trade negotiations, countries
need to consider how they are going to make sure that the gains and burdens from
increased trade are shared equitably. A good starting point is to develop mechanisms to
enforce the International Labor Organization’s core labor standards, either as part of or
associated with trade agreements. These core labor standards cover:
• freedom of association
• the right to collective bargaining
• elimination of discrimination with respect to employment and occupation
• elimination of all forms of forced or compulsory labor
• abolition of child labor.
The weakening of core labor standards in order to attract investors or increase
exports should be considered a trade-distorting exporting incentive not permissible under
trade agreements. Labor standards are fundamental human rights and should not be
labeled or treated as protectionist measures.
A similar case can be made for incorporating environmental standards into trade
agreements, either directly or as side agreements. One problem with incorporating both
labor and environment issues into trade agreements is that trade sanctions and the WTO
dispute resolution mechanisms may not provide the best way to enforce such agreements.
Governments and the WTO need to establish a formal structure to address the
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relationships between trade, core labor standards and environmental standards. One
approach would be to develop concrete proposals to protect labor rights and the
environment from being undermined by trade rules, and to establish international
mechanisms for enforcing such standards.
In sum, trade policies should be evaluated not just on how much they may contribute
to economic growth, but whether such growth assures basic needs and other economic
rights, sustains the environment and reinforces dignity.
Finance
International finance has long been a major element of control by the Western
powers over the rest of the world. In the 19th century, London banks dominated the flow
of finance, and pressured many developing country governments to accept very stringent
fiscal rules at whatever cost to the local population in order to ensure debt repayments.
Now the IMF is the instrument of the wealthy nations who dominate international
finance, while the major financial centers of the world (principally New York and
London) continue to exercise great power over the direction of economies worldwide
through decisions about loans, investments, currency movements and so on.
“As traders pump up their supercomputers and merge physics, math, and money to create ever-morecomplex instruments and techniques, capital markets will turn more cruelly efficient and risky than ever.
Financial volatility will become ‘a fact of life,’ says World Bank Managing Director Ernest Stern, who
believes that the once-staid global market for government debt has already turned into a...casino that
behaves more and more like the rough-and-tumble market for stocks.
In this new battleground for savings, market players will become a new class of stateless legislators.
With the power of the purse, they will check governments’ ability to tax, spend, borrow, or depreciate their
debts through inflation. To be sure, money mavens sitting at computer screens already vote their
portfolios on issues as diverse as the value of the Mexican peso, U.S. trade imbalances with Japan, and
Sweden’s struggle to maintain the archetype of the European welfare state. But that’s only the starting
point.
As more countries and companies hook themselves up to the global financial network, this shifting
and stateless corps of fund managers and traders will not only be passing judgment. To preserve the
value of their investments, they will become more and more directly involved in day-to-day affairs of state,
meting out guidance, encouragement, and discipline on a daily basis. ‘The very sovereignty of nationstates,’ says London-based economist David C. Roche, ‘is being defeated.’”
“Borderless Finance: Fuel for Growth,” Business Week/21st Century Capitalism,
Special 1994 Bonus Issue.
The World Bank and International Monetary Fund were created out of the embers of
World War II and the Great Depression to avoid a repeat of the economic instability and
devastation of the 1930s. The World Bank and the IMF, headquartered near each other in
Washington, DC, are close partners but have different functions. The World Bank was
created to assist in the reconstruction of Europe and its role later shifted to assist
development in the Global South. The IMF was established to foster international
economic stability and provide temporary financial assistance to countries with balance of
payments problems (more money flowing out of the country in payments for imports,
investment, interest and other transactions than flowing in from receipts for exports,
investment and other transactions).
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As economist Joseph Stiglitz explains, in its original conception, “The IMF was based
on a recognition that markets often did not work well—that they could result in massive
unemployment and might fail to make needed funds available to countries to help them
restore their economies. The IMF was founded on the belief that there was a need for
collective action at the global level for economic stability, just as the United Nations had
been founded on the belief that there was a need for collective action at the global level
for political stability.” Over the years, “the IMF has changed markedly. Founded on the
belief that markets often worked badly, it now champions market supremacy with
ideological fervor.” A result is that “crises around the world have become more frequent
and (with the exception of the Great Depression) deeper.”65
A key IMF role is surveillance, “the regular dialogue and policy advice that the IMF
offers to each of its members [currently 184 countries]. Generally once a year, the Fund
conducts in-depth appraisals of each member country’s economic situation.”66 Developed
countries like the United States can ignore the IMF’s concern over its massive debt, for
example, while most developing countries can’t realistically choose to take or leave the
IMF advice.
Over the years, the IMF has become the dominant player in the finance of the
developing world. If the IMF doesn’t give a country its “good housekeeping seal” or the
country doesn’t agree to follow IMF recommended adjustment programs, then it is
generally shunned by the World Bank, regional development banks, bilateral lenders and
private lenders. Cloaked in the language of supposedly objective economics, the IMF is a
key instrument of intervention by Western powers, principally the United States—from
Brazil and India in the 1960s to Chile and Jamaica in the 1970s to Nicaragua in the 1980s
and Russia and Argentina in the 1990s.67
In managing the global economy, the international financial institutions have applied
a one-size-fits-all template of conditions on a country needing loans regardless of its
particular economic circumstances. When the IMF and World Bank agree to lend money
to a country in macroeconomic crisis, they insist on structural adjustment programs that
often include the reduction of government spending, including cutbacks in nutrition,
health and education programs, privatization, deregulation, devaluation and the raising of
interest rates to make it more expensive to borrow money.
The IMF, says economist Jeffrey Sachs, has “asked the poorest of the poor for
unconscionable belt-tightening and debt servicing” and helped the rich countries continue
their inadequate debt relief and development assistance by “dressing up fiscal austerity as a
macroeconomic necessity.”68
IMF conditions for reshaping government budgets in the developing world have led
to reductions in social programs that have had devastating impacts on the lives of millions
of people. Women are disproportionately hurt by structural adjustment programs.
Reduced public services and programs and higher prices for staples and utilities intensify
the pressure on women to stretch their paid and unpaid labor even further so that families
and communities can survive. The U.S. Agency for International Development (AID)
acknowledged in the early 1990s: “Women have been forced to act as ‘shock absorbers’ for
structural adjustment.” They have disproportionately experienced public sector layoffs
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and cutbacks in healthcare, education and so on. “Many women now work 60 to 90 hours
per week just to maintain the marginal standard of living they possessed a decade ago.”69
It is unrealistic to expect loans to be made entirely free of conditions; rather it is more
a question of what conditions, and in what way they are enforced. Conditions that
require loans and grants to be used only for development and other legitimate purposes
are acceptable, as are conditions relating to accounting and auditing requirements,
providing the poorest countries be offered professional assistance where necessary.
Conditions that force privatization of public utilities, reduce public services and
undermine equitable development, human rights and democratic accountability are not
acceptable.
As the 1997-99 Asian financial crisis (which spread to Latin America and Russia)
demonstrates, volatility, instability and “contagion” still characterize the international
economy. Economic problems arising from shifting global economic conditions, poor
policy decisions, speculation and so forth can spread quickly to other nations, and throw
the global economy into crisis. In instances of weakening national currencies,
accompanied by speculation or a rush of capital outflows, the IMF favored a response that
involved raising interest rates in capital markets. Some countries (e.g., Malaysia, Chile and
South Korea) responded, with much better results, by using quantity controls over capital
flows.
With growing integration of financial markets worldwide and the instant movement
of enormous financial flows, the problem of volatility and boom-bust cycles is great. A
consensus is growing about the need for change in the status quo. Interest has increased,
for example, in the proposed Tobin Tax (a small tax that would be placed on all foreign
currency exchange transactions), which would provide a mechanism for reducing
speculation and volatility. In the longer run, a fair, democratic, transparent multilateral
system is needed to protect national sovereignty and increase economic stability.
Debt
Debt has become an increasingly severe obstacle to reducing poverty, improving
health and education, and saving lives in developing countries. Unconscionable debt
service payments have drained resources and hope. A major share of the debt is odious
debt, accumulated by corrupt and undemocratic regimes with the encouragement of
Western powers, such as the Somoza, Marcos and Abacha regimes in Nicaragua, the
Philippines and Nigeria.
Many development advocates, among them AFSC and other members of the Jubilee
Network, argue that many countries have repaid their debt many times over. Severely
indebted low-income countries paid out $14.4 billion more in interest and principal in
2000 than they received in new loans. For all developing countries taken together, the net
outflow amounted to $127.5 billion that same year, according to the World Bank.
According to UNCTAD, “Africa received some $540 billion in loans between 1970 and
2002. Despite paying back close to $550 billion in principal and interest, it still had a debt
stock of $295 billion at the end of 2002.”70
Making matters worse, because many poor countries are dependent on the export of
primary commodities, they have faced deteriorating terms of trade as many commodity
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prices have fallen over the last four decades. For example, primary commodities make up
an average 84 percent share of export earnings in countries under the Heavily Indebted
Poor Countries Initiative discussed below. Dependence on declining and often volatile
commodity market prices for foreign exchange, makes debt repayment that much harder.
An international consensus was reached in the mid-1990s on the need to transfer
resources from debt service into poverty reduction and development. This consensus led
the World Bank and IMF to adopt the Heavily Indebted Poor Countries Initiative (HIPC)
in 1996, “a framework for all creditors, including multilateral creditors, to provide debt
relief to the world’s poorest and most heavily indebted countries, and thereby reduce the
constraint on economic growth and poverty reduction imposed by the debt build-up of
these countries.” It was modified in 1999 to provide broader relief and make a stronger
link between debt relief and poverty reduction through Poverty Reduction Strategy
Papers. As of September 2004, 38 countries were identified as potentially qualifying for
HIPC assistance and, of those, 27 are receiving assistance.71
These were positive steps. However, they are now widely acknowledged as
inadequate. In the words of the New York Times:
“One of the biggest reasons that very poor countries can’t provide decent
education and healthcare is that they are stuck in a cycle of debt owed to the
International Monetary Fund, the World Bank and regional development banks,
much of it dating to the 1970s. Most have paid back in interest more than they
originally borrowed but haven’t been able to touch the principal, and the cycle
continues... Current efforts to reduce these debts are failing. The Heavily Indebted
Poor Countries Initiative began in 1996, and was expanded in 1999... But it has been
too slow and limited. It has not reduced debts to manageable levels.”72
Poverty Reduction Strategy Papers (PRSPs), required as a condition for debt relief
under HIPC, call for the involvement of government, the private sector and civil society
in designing their nation’s poverty reduction strategy. Civil society participation,
however, has been thin and often cosmetic. Local elites dominate the interactions with the
multilateral financial institutions that remain in charge of the process. Misguided
structural adjustment policies remain despite nicer-sounding rhetoric.
As UNCTAD observes, PRSPs will not help countries “stuck in an international
poverty trap” if they are based on structural adjustment-oriented strategies. Among other
things, UNCTAD emphasizes the need for development-oriented strategies that build
domestic productive capacity and strategic integration into the global economy, encourage
policy autonomy and reduce the risk of particular social groups and regions within the
country from being excluded from the benefits of economic growth.73
And just as in many other policy initiatives, the PRSPs are gender neutral at the
macropolicy level meaning macroeconomic policies such as trade liberalization are viewed
as having the same impact on both women and men. Part of this problem stems from a
lack of gender disaggregated data needed to show how certain policies impact women and
men differently. Policies ignoring or minimizing gender disparities not only hurt women,
they undermine overall poverty reduction and development strategy. As a UNDP report
observes, “Norms about child marriage of girls, gender biases against girls’ education,
women’s limited mobility, women’s lack of control over fertility decisions, gender gaps in
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wages all contribute to difficulties escaping poverty intergenerationally through vicious
cycles between poverty and gender inequality.”74
One major method of addressing global inequities is through debt cancellation. Since
1998, the AFSC, working with other members of the Jubilee USA Network, has
supported the definitive cancellation of all multilateral and bilateral debt for highly
indebted poor countries within a participatory, accountable framework that assures
poverty-reducing development and meets the needs of the affected populations. Countries
can then apply resources otherwise used for servicing the debt to critical public services,
infrastructure development and poverty alleviation. Debt cancellation should not impede
the countries that have had their debts canceled from gaining access to capital under
favorable terms in the future.
Jubilee 2000/USA Platform, February 1998
1. definitive cancellation of the crushing international debt in situations where countries burdened with
high levels of human need and environmental distress are unable to meet basic needs of their people or
achieve a level of sustainable development that ensures a decent quality of life;
2. definitive cancellation that benefits ordinary people and facilitates their participation in the process
of determining the scope, timing and conditions of debt relief, as well as the future direction and priorities
of their national and local economies;
3. definitive debt cancellation that is not conditioned on policy reforms that perpetuate or deepen
poverty or environmental degradation;
4. acknowledgement of responsibility by both lenders and borrowers, and action to recover resources
that were diverted to corrupt regimes, institutions, and individuals;
5. establishment of a transparent and participatory process to develop mechanisms to monitor
international monetary flows and prevent recurring destructive cycles of indebtedness.
AFSC is a member of Jubilee USA.
Support for canceling the debt of the world’s most highly indebted poor countries has
increased significantly in recent years. Proposals for 100 percent debt cancellation moved
to center stage during the October 2004 meetings of the World Bank, IMF and Group of
Seven (the United States, Britain, Germany, France, Japan, Italy and Canada) finance
ministers. While no action was taken, “There’s a growing consensus that the next step is
[to give poor countries] up to 100 percent debt relief,” said Britain’s Chancellor of the
Exchequer Gordon Brown.75 In an effort to win support for canceling Iraq’s debt, the
Bush administration has acknowledged the doctrine of “odious debt” and supports
canceling the multilateral debt of the world’s 30 poorest countries.
A proposal has been advanced to use IMF gold reserves to finance debt cancellation.
Editorializing in favor of debt cancellation, the New York Times explained, “The IMF
owns more than 103 million ounces of gold, a holdover from the gold standard days that
it values at about 10 percent of the market price. By selling a small part of that gold at
market rates or by simply revaluing it, the IMF could finance debt cancellation
painlessly.”76
Looking beyond debt cancellation, an international bankruptcy mechanism is needed
to address future insolvency. In 2002, IMF management considered a proposal for a
“Sovereign Debt Restructuring Mechanism” (SDRM). As Jeffrey Sachs explains, “This
plan would have finally brought to cases of sovereign debt some of the worthy principles
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of bankruptcy settlements—including easing the collective action problems that arise
when multiple creditors confront an insolvent debtor. When U.S. financial interests
balked, however, the U.S. Treasury pulled the plug on the IMF’s draft proposals.”77
Jubilee USA also opposed the SDRM. While welcoming the IMF acknowledgement
“that there is a need for a new international legal framework for sovereign debtors
designed to replicate the useful features of domestic bankruptcy proceedings,” the Jubilee
USA Network shared “the concerns of many of our Jubilee South partners that the IMF’s
proposed SDRM is both inadequate and potentially harmful to the people of indebted
nations.” Among other problems, it applied only to private sector debt and put the IMF
in charge of determining whether a country legitimately needed the assistance provided,
and in designing and monitoring the restructuring policies to which debtor countries
committed. Jubilee USA advocated an alternative “fair and transparent international
arbitration process.”78 Exploration of a mechanism for an independently arbitrated
sovereign bankruptcy must move forward.
The United States, once the world’s largest creditor nation, has become the world’s
largest debtor. The United States owes a large and rapidly growing debt to the rest of the
world through its current account deficit, “which encompasses the imbalance in the
trading of goods and services as well as the shortfall in all other cross-border payments,
from interest income and rents to dividends and profits on direct investments...
Foreigners own more than 40 percent of all [U.S.] Treasury securities, up from less than
15 percent a decade ago.” China and Japan are the two largest foreign holders of U.S.
Treasuries, with $1.3 trillion in Treasuries as of June 2004.79 They are propping up the
U.S. dollar relative to other currencies to keep the prices of their own exports as low as
possible.
Unlike other countries, which have lost their policy autonomy when they have
incurred huge debts, the United States is not only still in charge of its own destiny but
also in charge of that of many other nations as well. According to the IMF, the U.S.
deficit is now taking up around 7.5 percent of the world’s savings. This is money that
could be used to finance investment in the developing world. “The net inflow of foreign
capital to the United States represents a staggering 75 percent of the net outflows from the
rest of the world, according to economist Jane D’arista of the Financial Markets Center...
Nearly one-fourth of this lending comes from emerging-market nations, led by China,
whose trade surplus with America has surpassed Japan’s.”80
The Bush tax cuts have made things much worse by creating a growing structural
public deficit. As former U.S. Treasury Secretary Robert Rubin and others have warned,
U.S. budget deficits are unsustainably high and risk economic crisis. Foreign and domestic
investors and creditors may lose confidence in the stability of the U.S. economy, and shift
assets away from the United States and the U.S. dollar. Rising interest rates, a plummeting
dollar and deepening economic crisis would hurt not just the United States but global
investment and the global economy.81
Aid
Development assistance is a primary mechanism for reversing the net outflow of
resources from poorer countries to richer countries and instead shifting resources from
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rich countries to poor. Aid is more than charity. It is a matter of rectifying past and
present injustices and assuring that human rights apply to everyone. It can also be seen as
international public investment for common needs by those who have been able to take
best advantage of the present system, or have benefited most from past and present
inequities.
The amount of development aid is scandalously small. In 2002, Official Development
Assistance (ODA) from major donors totaled $58.3 billion. Major donor ODA increased
to $68.5 billion in 2003, including $2 billion in reconstruction aid for Iraq according to
preliminary data. Even with the increase, major donors gave just 0.25 percent of their
combined gross national income for official development assistance in 2003. That’s an
improvement over 2002’s 0.23 percent and 2001’s 0.22 percent, but still way down from a
level of 0.5 percent in 1960. At $15.8 billion in 2003, United States ODA was just 0.14
percent of gross national income—the lowest percentage among 22 major donors. The
highest percentage donor was Norway at 0.92 percent. Only Norway, Denmark,
Luxembourg, the Netherlands and Sweden met or surpassed the longstanding ODA target
of 0.7 percent.82
Incredibly, Official Development Assistance amounts to far less than the amount of
remittances being sent from migrants to their home countries. UNCTAD reports, “In the
past two decades workers’ remittances from developed countries, but also from
developing countries with higher levels of per-capita income, have become an increasingly
important source of external development finance, both in absolute terms and relative to
other sources of external finance... During the 1990s, they were the most stable source of
external finance.”83 (See Financial Flows table in Appendix.)
Remittances through official bank and money transfer channels topped $93 billion in
2003. If unofficial transfers (via private couriers and relatives, for example) “are also
counted, the volume could be double this amount... In many developing countries
remittances represent the most important source of foreign exchange, outstripping
investment, lending and commodity and manufacturing exports.”84
“Subsidies to U.S. cotton growers equal more than triple the amount of U.S. government aid to subSaharan Africa. In the European Union, the cash subsidy to every dairy cow exceeds total per capita EU
aid to sub-Saharan Africa.”
Human Development Report 2003.
The problem with development assistance is not just the paltry amount, but how it is
parceled out. Aid is often tied to purchases from companies in the donor country. Aid can
undercut or fail to support critical manufacturing and agricultural capacities within the
recipient country. The U.S. government in particular uses aid as a reward for countries
serving U.S. economic and foreign policy objectives. Allocating aid as a foreign policy
tool has become even more explicit under the Bush administration’s Millennium
Challenge Account program that increases development assistance for favored countries.
Development assistance should be based on need. It should be crafted to the particular
situation of a country, must not undercut indigenous factory or farm production, and
should take into account the human development criteria of the United Nations
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Development Program. The public sector plays an important role in any development
plan, and investments should flow toward healthcare, education, infrastructure such as
roads and communication, and the strengthening of institutions such as the legal, banking
and credit systems. Capacity building—investments in people through education and
training programs—is an important part of development assistance.
At the United Nations Millennium Summit in 2000, world leaders unanimously
adopted the Millennium Development Goals (MDGs), a set of goals and targets for
reducing hunger, poverty and gender discrimination, most to be achieved by 2015. (See
Millennium Development Goals in Appendix.) At the 2003 International Conference on
Financing for Development, the developed countries committed additional resources
toward meeting these goals. It is important to hold governments and multilateral
organizations to their pledges, and to press for additional resources, since achieving even
these interim goals will require more resources than have been committed.
The World Bank has estimated that achieving the MDGs would require an additional
$50 billion per year in development assistance. To put this sum in perspective, the Iraq
war and occupation cost the United States $120 billion as of September 2004, with
another $85 billion already budgeted or projected for FY 2005.85 While the MDGs are a
positive step, AFSC has the goal of complete and rapid eradication of poverty and we are
working to create the political will to use resources that we know exist to accomplish this
goal.
“There are enough skills and resources worldwide to free us all from hunger and poverty, and to
promote sustainable economic development with social justice.
The greatest scandal is not that hunger exists, but that it persists even when we have the means to
eliminate it. It is time to take action.”
Meeting of World Leaders for Action Against Hunger and Poverty, “Final Declaration,” New York, September 20,
2004, adopted by more than 100 countries and organized by the governments of Brazil, France, Chile and Spain.
Migration
Migration and labor mobility are critical issues of human rights that have largely
remained in the shadows of contemporary debates on global economic integration and
trade liberalization. There is broad agreement that existing frameworks for global
economic policy have brought about a marked increase in migration, including
undocumented migration, and especially the movement of people from the developing
world to industrial countries. The AFSC has a long tradition of work with migrant and
immigrant communities, defending their human and labor rights, and supporting
leadership within these communities.
Issues of migration and mobility are excluded from regional free trade agreements,
such as the North American Free Trade Agreement and the proposed Free Trade Area of
the Americas, and from global trade negotiations under the WTO. By contrast, Europe’s
much more sophisticated process of economic and political integration has explicitly
incorporated migration issues, but with contradictory effects captured in the vivid term,
“Fortress Europe.” On the one hand, the European Union (EU) approach provides for
rights of mobility for all those holding citizenship or residing legally in any of the
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member states. They have also undertaken major investment programs to provide
employment opportunities in the poorer regions of Europe, effectively raising the floor
for labor income in the EU as a whole. On the other hand, the EU framework provides
for the virtual exclusion of new immigration from outside of the EU, with the exception
of those found to be entitled to asylum or refugee status (under increasingly restrictive
criteria), or those participating in new guest-worker programs on a limited basis. Overall,
the most notable trend within the EU is toward more exclusionary policies.
Current immigration policies in most countries leave undocumented migrants, who
make up a significant percentage of the growing transnational labor force, highly
vulnerable. With no legal status, undocumented workers are generally afraid to report or
otherwise resist abusive and illegal treatment by employers in well-grounded fear of
deportation or firing. In the United States, there is a long history of immigration raids
called in retaliation for attempts by undocumented workers to unionize or attempt to
improve their wages and working conditions in other ways. Undocumented immigrants
also face severe restrictions on their freedom of movement as well as their ability to
participate in community life through educational, healthcare, and social service programs
and institutions, among others.
The growth of undocumented migration is a worldwide phenomenon. Although
people are propelled into migration for political and other reasons, labor migration clearly
accounts for the lion’s share of the migrant stream. In this sense, the growth of a
transnational labor force is a structural feature of increasing global economic integration.
Throughout the world, policies that are intended to deter undocumented migration have
failed to achieve this objective—while increasing the violation of human rights and
aggravating anti-immigrant prejudice and hate violence. One stark indication of this
failure is that hundreds of migrants die each year trying to cross the Mexican-US border in
increasingly dangerous circumstances.
Governmental policies regulating immigration fail to acknowledge the structural
pressures for international migration, are contradictory and enforced in an arbitrary
fashion, and treat migrants as disposable. Many economic sectors in the advanced
industrial world tacitly depend on an undocumented migrant labor force composed of
people who are unable to exercise their full rights either as workers or as equal members
of the communities where they (and, often, their families) live, entitled to rights of civic
and social participation regardless of their citizenship or immigration status.
Undocumented immigrants are denied these rights in spite of contributing to state
revenue through sales, payroll, and income taxes.
The result is that immigrant communities (particularly those who are undocumented)
are subjected to entrenched structures and patterns of economic, social, cultural, and civic
exclusion and marginalization. Such patterns of social inequity are enforced in no small
part through the growing criminalization of migration, with the worldwide growth of
ever-larger and more heavily militarized systems of border control, detention
(incarceration), and deportation. Economic inequality is thus maintained and reproduced
through the administration of state violence.
In the United States, legalization and other policies codifying immigrant rights have
sometimes been opposed by advocates for the rights of U.S.-born workers, on the basis
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that desperate undocumented workers tend to depress wage levels and working conditions
for the U.S.-born or legally documented workforce. AFSC believes that calls to reduce
immigration in the name of strengthening labor rights are not only unjust, but also
unworkable—a position that has increasingly been adopted by more and more of the U.S.
labor movement and, since the year 2000, has been the official policy of the AFL-CIO.
The desperation of undocumented workers is a real problem for immigrants as well as
non-immigrants. Rather than attempting to remove the workers, however, the answer is
to remove the desperation so that all workers can seek to expand and defend their rights
without fear of state authorities.
The AFSC supports legalization, but has emphasized, “Legalization does not
represent a comprehensive solution to many problems faced by immigrants. Ultimately, it
must be coupled with economic policies that encourage and fund sustainable development
and permit working people to earn a living wage in their home countries,” so that people
are not forced to make the often painful decision to migrate.
In the international arena, the most significant policy initiative on immigrant rights is
the UN’s International Convention on the Protection of the Rights of All Migrant
Workers and Members of Their Families, which officially entered into force in July 2003,
after the threshold of 20 ratifying states was reached in March 2003. The United States has
so far declined to ratify this convention, which at this writing has been ratified by 24
countries. In broad terms, this convention affirms the applicability of all existing human
rights instruments to migrants, regardless of their legal status. It does not, however,
address questions of legalization or offer other proposals for regulating migrant flows in
ways that are based in respect for human rights and dignity.
A visionary proposal to recognize a new human right of mobility has been advanced
by AFSC programs over a period of years and supported by a broad range of other
immigrant rights organizations. The right of mobility, which is not included in any
existing human rights instrument, is a proposal that specifically addresses the realities of
global economic integration. Global economic policies increasingly facilitate the
international movement of capital as well as managerial and professional personnel, while
simultaneously restricting and criminalizing the movement of low-wage workers.
Recognizing the human right of mobility would be a key step toward equalizing the
treatment of labor and capital in the development of frameworks for global economic
policy that are based on respect for human rights and human dignity.
Recognizing a human right of mobility does not imply the elimination of national
borders or complete deregulation of international flows of capital and labor. An earlier
AFSC working group publication, “Borders and Quaker Values,” stated:
The central question is not whether or not borders should exist, but how they
should function so as to serve human beings. … In the management of international
borders, we would urge support for … respect for human rights and international law,
equal protection for citizens and non-citizens, priority consideration for those under
duress or fleeing natural disaster, family unity, nondiscriminatory application of
immigration laws, the right to preservation of language and culture, and uniform
enforcement.
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In a world of nation states, the challenge is to craft immigration policies that support
human rights and dignity of both migrants and citizens. Immigration policy must be
linked to efforts to eliminate the economic and social conditions that drive people to
migrate.86
Economics, Peace and Militarism
Given its pacifist orientation, it is fitting that the AFSC look at economic issues
through the lens of peace. Military action is often taken to gain and maintain dominance
over resources and other economic advantage. The Western powers have intervened
repeatedly in the Middle East over oil—overthrowing the democratic government of
Mossadeqh in Iran, propping up autocracies like Saudi Arabia, U.S. and British
intervention in Iraq. The United States has intervened repeatedly to preserve its
dominance over Latin America and the Caribbean.
As New York Times columnist Thomas Friedman, a longtime backer of Washingtonled globalization, has argued, globalization has succeeded on U.S. terms because of U.S.
military power: “The hidden hand of the market will never work without the hidden
fist.”87
General Smedley Butler is a Marine Corps legend. He earned two Congressional Medals of Honor,
the nation’s highest military award for bravery. “As a soldier,” said Butler, “I long suspected that war was a
racket; not until I retired to civil life did I fully realize it.”
“It may seem odd for me, a military man, to adopt such a comparison.” Butler wrote in 1935.
“Truthfulness compels me to. I spent 33 years and 4 months in active service as a member of our
country’s most agile military force—the Marine Corps...And during that period I spent most of my time
being a high-class muscle man for Big Business, for Wall Street and for the bankers. In short, I was a
racketeer for capitalism...
“Thus I helped make Mexico...safe for American oil interests in 1914. I helped make Haiti and Cuba a
decent place for the National City Bank boys to collect revenues in. I helped in the raping of half a dozen
Central American republics for the benefit of Wall Street. The record of racketeering is long. I helped
purify Nicaragua for the international banking house of Brown Brothers in 1909-12. I brought light to the
Dominican Republic for American sugar interests in 1916. I helped make Honduras ‘right’ for American
fruit companies in 1903. In China in 1927 I helped see to it that Standard Oil went its way unmolested.
“During those years, I had, as the boys in the back room would say, a swell racket. I was rewarded
with honors, medals, promotion. Looking back on it, I feel I might have given Al Capone a few hints. The
best he could do was to operate his racket in three city districts. We Marines operated on three
continents.” (Italics in original.)
Major General Smedley D. Butler, “America’s Armed Forces,” Parts 1 and 2, Common Sense, 1935.
One of the longest sections in the Bush administration’s National Security Strategy
document is devoted to what it calls “a new era of global economic growth through free
markets and free trade.” The President writes, in the first line of his introduction, “The
great struggles of the twentieth century between liberty and totalitarianism ended with a
decisive victory for the forces of freedom—and a single sustainable model for national
success: freedom, democracy, and free enterprise.” The President also writes, “We will
actively work to bring the hope of democracy, development, free markets, and free trade
to every corner of the world.”
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Reading the lines—and between the lines—of this central document of the “Bush
Doctrine” makes clear that the Administration sees divergence from its own economic
vision as a threat to national security, akin to terrorism. The economic elements of the
Iraq occupation, including the removal of barriers to U.S. investment and promotion of
privatization, are only the most recent illustration of the use of military power to impose
an economic model on a weaker country.
We do not believe that the United States and other countries should use military
force to impose economic and social models on other sovereign states. We recognize that
many of the economic alternatives of the past failed not so much from internal flaws as
from outside intervention, often by the United States and often by military means. A
central tenant of our analysis is that people should participate in the decisions affecting
their future and be free of external interference.
The link between poverty and war is both obvious and complicated. War certainly
leads to poverty and misery, as the Yugoslav conflicts tragically demonstrated. While
many poor countries are not at war, research and the work of the Quaker United Nations
Office, among others, indicates that grave inequity is associated with conflict. There is
also an element of violence contained within poverty, the violence done to a person’s wellbeing by living with hunger, poor health and demeaning work. Poverty also kills, as
evident in the nearly 11 million children who die yearly of preventable causes.
“By far, the greatest potential source of instability on our planet today is poverty, and the
hopelessness and despair that it brings to so many in the world...
Recent research suggests that a lack of economic opportunities, and the resulting competition for
resources, lies at the root of most conflicts over the last 30 years, more than ethnic, political and
ideological issues. This research supports the intuitive idea that if people have jobs, and if they have
hope, they are less likely to turn to violence...
Stronger support globally for the fight against poverty is the best investment that can be made in
building a more peaceful world and a safer future for our children.”
James D. Wolfensohn, president of the World Bank, “Ending poverty is the key to stability,”
International Herald Tribune, September 30, 2004.
The link between military might and economic advantage may also play out within
states. Governments, often undemocratic, or rebel parties may work out questionable or
illegal deals for oil or diamonds as a way to gain or stay in power. The winners often
continue to misuse the income from these resources after the war while poverty remains
rampant among the majority of the population. Wealthy minorities and corporations can
buy the allegiance of military forces—or create their own security forces—to defend their
economic interests and stifle democracy. Stifled democracy, coupled with inequality, can
then lead to further violence.
When conflicts end, countries are often awash in small arms. Young people who have
grown up in war-torn countries and who have no other way to make a living may resort
to thuggery to feed themselves and their families, perpetuating violence within their own
communities. War also destroys infrastructure such as schools and hospitals, and
undermines the basis for a functioning economy that can benefit all citizens. This cyclical
relationship of war and inequality locks countries and communities in chronic poverty.
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Developed and developing countries pour critical resources into their arms industry,
subsidizing both domestic armies and arms exports. The profits to be made from war—by
governments, rebel groups, and businesses—undercut peace initiatives. The huge amount
of money spent on war siphons off funds that could be spent on development.
“During the decade of debt buildup, dictatorships outnumbered democracies in the Third World five to
one, arms expenditures amounted to 40 percent of the debt increase, and Third World arms sales more
than doubled. In the mid-1980s, the Stockholm International Peace Research Institute (SIPRI) attributed
15 percent of the non-oil-exporting Third World’s accumulated debt directly to arms purchases. The
German Institute for Peace Research attributed 20 percent of the Third World’s accumulated debt to
weapons imports. And in 1989, World Bank President Barber Conable put the figure at one-third for some
Third World countries.”
Patricia Adams, Odious Debts.
We also believe that it is crucial to sever the connection between private profit and
national security by ending the arms trade and drastically reducing the money spent on
the military industrial complex. After a decade of decline, world military expenditures
began to increase again in 1998 led by the United States. Worldwide military spending
rose by 11 percent in 2003, reaching $956 billion. As the Stockholm International Peace
Research Institute (SIPRI) reports, “The main reason for the increase in world military
spending is the massive increase in the United States, which accounts for almost half of
the world total.” U.S. military expenditures totaled $446 billion in 2003, up from $357
billion in 2002.
SIPRI puts the costs in sharp perspective:
“High-income countries account for about 75 percent of world military spending
but only 16 percent of world population. The combined military spending of these
countries was slightly higher than the aggregate foreign debt of all low-income
countries and 10 times higher than their combined levels of official development
assistance in 2001. While it is not possible, because of a lack of data, to make the same
comparison for 2003, it is clear that these gaps have widened owing to the stark rise in
world military expenditures since 2001. Thus, there is a large gap between what
countries are prepared to allocate for military means to provide security and maintain
their global and regional power status, on the one hand, and to alleviate poverty and
promote economic development, on the other.”88
The United States accounted for 47 percent of world military expenditures in 2003,
according to SIPRI, followed by Japan with 5 percent and the UK, France and China,
each with 4 percent, and Germany with 3 percent. Italy, Iran, Saudi Arabia and South
Korea accounted for 2 percent each of world military expenditures. Russia, India, Israel,
Turkey and Brazil accounted for 1 percent each.
The United States and Russia were the major arms suppliers in 2003. The main
recipients of U.S. arms were Taiwan, Egypt, the UK, Greece, Turkey and Japan. The
main recipients of Russian arms were China and India. Looking forward, SIPRI observes,
“A continued increase in U.S. arms transfers will influence the global trend. However,
domestic factors indicate that the level of Russian arms transfers is unlikely to remain
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high for very much longer.”89 Any attempt to reduce the profitability of militarism must
begin with the United States.
A significant share of arms exports go to the Global South. The Quaker United
Nations Office is working with other organizations to encourage adoption of
international agreements to track and limit the sales of small arms that fuel internal
struggles in many countries. All of these weapons sales represent resources taken away
from meeting human needs and provide the means for continuing violent conflict.
Unlike those for agriculture or manufacturing, subsidies for military production and
export are explicitly exempted from free trade restrictions under the “national security
exceptions” that are part of every major international and regional trade agreement. This
builds in a perverse incentive for states to rely on arms production to stimulate their
domestic economies.
U .S . M ilita r y E x p e n d itu r e s a n d O ffic ia l D e v e lo p m e n t
A s s is ta n c e , 2 0 0 2 -2 0 0 3
in b illio n s
$ 4 4 6 .3
$ 3 5 6 .7
$ 1 3 .3
$ 1 5 .8
O f f ic ia l D e v e lo p m e n t A s s is ta n c e
2002
M ilita ry E x p e n d itu re s
2003
While we acknowledge that the relationship between war and the global economy is
complex, we recognize the clear need to reduce violence to create the context for
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development and to shift the human and physical resources spent on militarism to the
task of making the global economy more just. Throughout the world, enlistment in the
military is often seen as a way to achieve personal and professional success. This mindset
is especially prevalent when the civilian employment marketplace has little to offer a
young person seeking to enter the workforce, or when financial aid for post-secondary
education is hard to come by.
Peaceful, non-militaristic alternatives to acquire an education or to earn a living wage
should be the priority for a truly civil society. Redirecting economic priorities toward
employment, education and economic security for young people would make it possible
for them to have real choices instead of choosing a military option as the
employer/financial aid package of last resort.
“Through its work in the United States and abroad, the AFSC has come to recognize that one of the
most pervasive forms of violence in the world today is the violence of economic exploitation. We see the
lives and futures of families, communities, and whole countries blighted when an unbridled search for
profits overrides consideration of the social good.”
Rachael Kamel, The Global Factory, AFSC, 1990.
Peace is a pillar of sustainable development. Economic justice is a peace issue. Because
peace is not simply the absence of war, and because it is clear that economic factors have a
significant relationship to violence, we support broadening the Quaker peace testimony to
include issues of economic violence. Moreover, given the Quaker pacifist tradition and
AFSC’s long history of working against militarism and for nonviolent conflict resolution,
we recommend that AFSC strengthen its analysis and ability to articulate the intersection
between economic justice and peace work. AFSC program work should more clearly
reflect that analysis.
Environment
Today’s global economy is not a sustainable economy. It generates enormous costs
borne by present and future generations such as air pollution, erosion, depletion of
natural resources, illness-causing toxins, endangerment and extinction of a long list of
species, global warming and climate change. Nonrenewable fossil fuels would be much
more expensive if the price included the short- and long-term environmental and health
costs, as well as the cost of military operations in oil-producing countries.
While water is essential to human health and survival, access to potable water is one
of the most serious problems now facing people in many parts of the world. Major
waterways have been polluted and made unusable, or are shrinking drastically (e.g., the
Aral Sea in central Asia and other waterways in parts of China and Africa).
Time is running out to turn back from the brink of catastrophic climate change
generated by global warming—greenhouse gases such as carbon dioxide act in the
atmosphere like the roof of a greenhouse, trapping warmth from the sun that would have
previously radiated back out to space, warming the earth. CERES, a coalition of investor,
environmental, labor and public interest groups working to increase corporate
environmental responsibility, sums up some of the effects scientists expect from global
warming:
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• Sea levels to rise by as much as 35 inches by 2100, making coastal groundwater
saltier, endangering wetlands and inundating land and coastal communities;
• Precipitation patterns to change, especially in already water-scarce regions that are
likely to suffer from further decreasing rainfall;
• The ranges and abundance of plants and animals to shift dramatically, with some
unable to adapt or migrate to new locations;
• Forests, ecosystems and agriculture to experience severe stress;
• Serious human health impacts, such as increasing heat stress, worsening air
pollution, declining water quality and the spread of infectious diseases into regions
previously free from them.90
Global warming is evident in the rapid melting of glaciers around the world, the
melting of permafrost in Alaska, and a rise in droughts and other weather-related disasters.
Scientists warn of the possibility of abrupt climate change as a tipping point is reached.
Take the ocean currents circulating heating and cold. “If this so-called conveyor shuts
down, the Gulf Stream stops bringing heat to Europe and the U.S. Northeast,” reports
Business Week in a special report on global warming. “There are already worrisome signs.
The global conveyor is driven by cold, salty water in the Arctic, which sinks to the
bottom and flows South. If the water isn’t salty enough—thus heavy enough—to sink, the
conveyor shuts down. Now, scientists are discovering that Arctic and North Atlantic
waters are becoming fresher because of increased precipitation and melting.”
Business Week observes, “A recent Pentagon report tells of a ‘plausible...though not
the most likely’ scenario, in which the conveyor shuts off. ‘Such abrupt climate
change...could potentially destabilize the geopolitical environment, leading to skirmishes,
battles, and even war,’ it warns.”91
A growing number of governments and businesses are acknowledging the seriousness
of the threat and the need for solutions long spotlighted by environmental researchers and
innovators. In Business Week’s words, “Consensus is growing among scientists,
governments and business that they must act fast to combat climate change.” The
European Union is imposing mandatory caps on carbon dioxide and other greenhouse
gasses, “Russia may ratify the Kyoto Protocol, which makes CO2 reductions mandatory
among the 124 countries that have already accepted the accord. Some countries are leaping
even further ahead. Britain has vowed to slash emissions by 60% by 2050... There are
naysayers. The Bush administration flatly rejects Kyoto and mandatory curbs.”92
Today, with just 4 percent of world population, the United States uses 25 percent of
world energy—more energy per capita than other industrialized nations. The United
States can and must play a leading role in positive environmental transformation. A
growing number of companies are discovering that environmental action is good for
business as well as the environment. As Business Week reports,
“Many companies that have cut emissions have discovered, often to their
surprise, that it saves money and spurs development of innovative technologies. ‘It’s
impossible to find a company that has acted and has not found benefits,’ says Michael
Northrop, co-creator of the Climate Group, a coalition of companies and
governments set up to share such success stories... ‘The ones who have been at it for a
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while are finding they can do more than is asked for in Kyoto, and are achieving all
kinds of benefits,’ says Northrop.”93
Groups like the Apollo Alliance—a labor, environmental, business coalition based in
Washington—know that environmental sustainability is not only necessary for long-term
survival; it can be a major engine of equitable economic development and security. In New
Energy For America, the Apollo Alliance calls for achieving “energy independence in one
generation” and creating “millions of good jobs building the sustainable energy system of
the next century.”
“Mobilizing public and private investment in clean energy technologies such as solar
and wind power, hydrogen fuel cells and highly efficient American made cars,” the report
says, “will create a new generation of high wage manufacturing and construction jobs,
capture growing markets of the future, reduce our dependence on foreign oil imports,
create a resilient energy system, strengthen our cities and rural communities, bolster
national security, and clean up our environment.”94
The Perryman Group, a Texas-based economic analysis firm with major corporate
and governmental clients, says the Apollo Project would add more than 3 million jobs;
save $284 billion in energy costs; and generate $1.4 trillion in new Gross Domestic
Product, $953 billion in personal income and $324 billion in retail sales.
Seemingly small steps can have big impacts. For example, environmental lawyer
Robert Kennedy Jr. told Larry King on CNN in 2003, “If we raised fuel efficiency by one
mile per gallon, we’d get twice the oil that’s in the Arctic National Wildlife Refuge. If we
raised it by seven miles per gallon, we’d get more oil than is now coming from the
Mideast... It makes economic sense. It makes national security sense.”
Developing countries need economic growth with equity if poverty is to be eliminated.
But economic growth cannot continue to have lasting destructive effects on the
environment, with the burden of pollution and depletion of resources falling
disproportionately on the global South and on poor people and people of color in the
North—in the form of toxic waste dumping and higher rates of industrial pollution, lead
poisoning and asthma, for example, associated with environmental racism. Any strategy of
development with dignity must balance equitable growth and environmental sustainability.
As the 1992 United Nations Conference on Environment and Development put it in
the Rio Declaration on Environment and Development, elaborated in the Earth Summit
Agenda 21, “The right to development must be fulfilled so as to equitably meet
developmental and environmental needs of present and future generations... In order to
achieve sustainable development, environmental protection shall constitute an integral
part of the development process and cannot be considered in isolation from it.”
Friends have taken the view that we are stewards, with individual and collective
responsibility not to leave the world worse off for the next generation. This approach
must mean taking care not to use more than we need, not seeing the earth’s resources as
infinite and seeing the environment as a common good, belonging to everyone. The
National Environmental Policy Act of 1969 committed the United States to “promote
efforts which will prevent or eliminate damage to the environment and biosphere” and
“fulfill the responsibilities of each generation as trustee of the environment for succeeding
generations.”
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