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