Questioning the Anti-Globalization Claims and Policies of NGOs, Highlighting the World Development MovementFalse statements, selective use of information, poor logic, and questionable motivation: anti-globalization, NGOs, and the World Development Movement.By examining the validity of claims made by the World Development Movement, an anti-globalization Non Governmental Organization, I hope to provide information for - anyone with a general interest, those who are undecided about whether to join or donate toward an NGO, and those who are already activists and campaigning against globalization. I will be looking closely at the 'facts,' claims, and use of language in their material - I intend to demonstrate that this material (as well as that produced by others on the anti-liberal, pro-isolationist, pro-government, pro-autarky side of the globalization debate) should be treated with extreme caution. This essay is mainly addressed to the activists - as a spur to study and understand economics. It is also intended as further counterbalance to the media - which has largely supported the claims of the NGOs, and thereby influenced the opinion of millions. The World Development Movement employ approximately 20 people and obtain a revenue of approximately $3.2 million p.a. The director receives a salary of approximately $80,000 p.a. This is mostly paid for by the donations of their 14,000 members, the rest from a charitable trust - members are also asked to engage in voluntary work for the World Development Movement. The work of their paid employees involves - lobbying politicians (in a recent statement the World Development Movement revealed an intention to move toward public protest, presumably using substantial involvement of their volunteers) - public protest - and producing leaflets, essays and the like to promote their claims, and recruit paying members into their organization. This last appears to form the substantial part of their work. The World Development Movement claim that in exchange for donations: The World Development Movement tackles the underlying causes of poverty. We lobby decision makers to change the policies that keep people poor. We research and promote positive alternatives. We work alongside people in the developing world who are standing up to injustice. 60 Do they lobby against policies which "keep people poor"? Would their "alternatives" help the "poor"? I would like to make it clear that I use WDM to provide the material to illuminate the subject, and by concentrating on a large proportion of output from a single organization rather than selectively picking from many I believe the case made against anti-globalization in general is more convincing. I do not consider this organization to be among the worst examples from the anti-globalization movement, which is another plus point for my aim to encourage a healthy skepticism. Nor am I particularly concerned about such organizations eliciting donations from philanthropic persons - in principle - I value freedom and personal responsibility, and to some extent, that no fool should remain unparted from their money. What I am concerned about is that these organizations, through their effect on public opinion and direct lobbying, do affect the policies of governments toward under-developed nations, and even the internal policies of such nations in a manner which I consider to be deeply detrimental to the welfare of citizens. All quotations in red were taken from the WDM website http://www.wdm.org.uk/ on 21/01/04. Quotations in yellow are taken from elsewhere. WDM criticize the right of the poor to purchase cheaper imported goods. The WTO also sets out rules affecting a country's internal economy, many of which look remarkably like the rules under SAPs. For example, developing countries cannot protect their infant industries from fierce competition from well-developed multinationals. Attempts by the Indian Government to protect jobs in its car industry are under threat from WTO rules. 61 Both Hindustan Motors of India and Toyota of Japan began production around the same time, and faced similar challenges as they sought to grow as companies. 1 Hindustan Motors Toyota 'Protectionism' means Indian citizens were forced to pay excessively and for inferior products. Limiting competition limits incentive to improve quality and productivity. Low productivity (of wealth) results, such as 11,000 workers creating only 18,000 cars per year. Meanwhile those workers are not available to produce other goods. Protecting "infant industries" resulted in poverty. Indian protectionism meant lower living standards for millions of ordinary people. Too poor to pay income taxes, they were hit hard by indirect taxes passed along in the form of high prices charged by domestic suppliers. During the 1960s, Gujarat University's B. R. Shenoy compared the prices of domestically produced goods with banned imports. He found that border restrictions added substantially to prices of consumer goods -- for in-stance, 250 percent more for refrigerators and 328 percent more for sugar. Import barriers made life more difficult for peasants, who had to pay 153 percent more for fertilizer, 204 percent more for pumps, and 222 percent more for pesticides. Furthermore, restrictions were a threat to public health. Domestically produced penicillin, for instance, cost 1,250 percent more than what could be obtained easily on the world market. 2 But WDM state: Government economic policy undermined ... India: Government not allowed to restrict imports 62 Thanks to protectionism, Indians in need of a car were stuck with two domestically produced models: a Padmini, which was a knockoff of a 1960s Fiat, or an Ambassador, a knockoff of a 1950s Morris Oxford. With a captive market, producers had little reason to invest in research and development that could improve those unreliable, uncomfortable, gas-guzzling cars. Consumers could wait as long as seven years for delivery of a car they ordered. And adding insult to injury, taxes accounted for half of the high sticker price. 2 Another example, this time from Argentina: In the name of protecting "strategically important" domestic industries, the Argentine government prevented its citizens from gaining access to state-of-the-art electronics available from suppliers abroad. Manuel J. Tanoira, Secretary of Growth Promotion during the 1980s, reported: The local electronics industry is protected by surcharges on all imported equipment. As a result of this regulation, local users must pay 3 to 4 times the international price for foreign- made computers, video cassette recorders, and other modern electronic equipment. The alleged purpose of these surcharges is to protect a $100 million industry (built mostly with tax money), which manufactures obsolete equipment in limited production runs. Only the very rich could buy a $1,200 video cassette recorder or pay $400 for a computer which sold for less than $100 in New York City. 2 WDM criticize the right of the poor to purchase cheaper domestic-produced goods. Foreign investment tends to be more beneficial if it meets the following criteria: Does not undermine local business; in this respect industries which intend to export their product may be better than ones which want to produce for the domestic market 63 It is not "more beneficial" when a business producing better quality and cheaper products does not sell them to poor citizens. It is not "more beneficial" when a limitation on production results in lower wages - due to lower competition between owners of capital for labor, lower investment, and lower productivity. WDM criticize the right of the poor to purchase cheaper services. Preventing a government from limiting the number of service suppliers operating in its country is one of the most problematic aspects of the market access rules. A government may wish to restrict new developments in a sector if the supply of services already meets local demand and further supply would threaten the viability of existing businesses. 64 Thereby preventing a "new development" from offering better value for money, which indeed would "threaten the viability of existing businesses." Preventing competition is the single most effective way of creating poverty. WDM criticize the right of the poor to sell the products of their labor at the highest price obtainable. Mozambique is the World Bank nuts? In 1995, the Mozambique Government decided to support the cashew processing industry, which was getting back on its feet after the 16-year civil war. To ensure a ready supply of raw cashews for the industry, the Government imposed an export tax on raw nuts, and left processed nuts untaxed. The World Bank demanded that export duties be removed and the free market left to reign. They claimed rural producers could earn more money by selling raw cashews to India than to local processing plants. 61 WDM state: But the World Bank failed to recognise the potential of the industry for creating jobs in the future and in providing a guaranteed market for producers in the long term. 61 There is no more a "guaranteed market" for "processed nuts" than for "unprocessed nuts" or any other type of good. WDM claim: In the subsequent struggle the industry was decimated ' - 9,000 potential jobs were lost.' 61 WDM do not say how many existing jobs were lost, nor do they describe how or from where they obtained a figure of "9000 potential jobs", nor detail the real economic harm to incomes and employment caused by export taxation. In one document criticizing free-trade, WDM write forced to keep markets open to expensive imports 61 Merchant: "And I would like to sell you this bag of rice for $8. But your government and WDM declared it is too expensive for you." Whilst in another document it is written invasion of the domestic market by cheap and subsidised imports 65 Merchant: "And I would like to sell you this bag of rice for $8. But your government and WDM declared it is too cheap for you." WDM state: However, the real triumph seems to have been convincing people that the industrialised world really did develop and grow wealthy through free markets and 'free trade'. The reality is quite the opposite. 66 Reality is not the opposite. Economic conditions are not either free or unfree just as temperatures are not either hot or cold, but are characterized by varying degrees of freedom which themselves only have meaning in comparison. liberalisation is better seen as an outcome of development, not a cause. 66 This is simply wrong, and has been proven to be so on countless occasions - either by making comparisons of growth rates between nations with similar internal starting conditions (resource, capital, and technique levels) under similar global economic conditions (time-period,) but practicing different degrees of protectionism, or by observing the growth rate within one nation following an increase or decrease in liberalization. I will start by using the former method. Studies comparing multiple developing nation economies indicate that those with higher liberalization are growing and have grown faster (blowing a hole in the claim that "liberalisation is better seen as an outcome of development, not a cause.") Note that open = strongly liberal and closed = strongly unliberal. A classic study by Jeffrey Sachs and Andrew Warner of 117 countries in the 1970s and 1980s showed that open-developing countries experienced an annual growth rate of 4.5 percent, compared with 0.7 per cent in closed-developing countries. 5 Another study found that developing nations which liberalized during the 1980s experienced an average per capita income growth of 5% p.a. during the 1990s, whilst in those that did not the 1990s average per capita income growth was only 1.4% p.a. 38 The two main sources of economic-freedom data are the "Index of Economic Freedom" by the Heritage Foundation and the "Economic Freedom of the World" survey by the Fraser Institute. Both of these show that nations with economies that have significantly improved liberalization, subsequently experience greater economic growth in comparison to those that do not liberalize by as much (as well as those which do not liberalize at all or become increasingly anti-liberal.) From the 2004 Economic Freedom of the World survey... Some have expressed concern that the observed correlation between the EFW [Economic Freedom] variables and growth may, at least partially, reflect reverse causality. The proponents of this view suggest that rather than economic freedom causing growth, the relationship may reflect a tendency of rapidly growing economies to liberalize. In order to investigate the validity of this view, we analyzed (a) the impact of changes in economic freedom on growth during the following decade and (b) the impact of growth on changes in economic freedom during the subsequent decade. As expected, we found that changes in economic freedom during the 1980s were associated with higher rates of economic growth during the 1990s. The evidence offered by the Index of Economic Freedom on the impact of trade policy on economic growth supports the theory that trade liberalization is indeed a factor in generating greater economic growth. Focusing exclusively on changes in Index scores for trade policy, countries that adopted freer trade policy from 1997 to 2005 experienced an average compound growth of 2.6 percent in GDP per capita. Countries whose trade policy remained unchanged experienced an average compound growth of 2.0 percent in GDP per capita. Meanwhile, average growth in countries whose trade policies became more restrictive was only 1.5 percent on average. The international Economic Freedom of the World project shows a clear correlation between economic freedom and growth. The latest study shows that the quintile of the countries that has the freest economy had a per capita growth of 2.34 per cent 1992-2001, the second freest 1.88, the third freest 1.76, the fourth freest 1.51, and the least free quintile had negative growth of 0.57 per cent. 6 It can also be instructive to compare similar nations on a smaller scale. Compare South and North Korea following the end of the Korean war in 1953. South Koreans pursued a relatively liberal economy which doubled in size within 10 years, going from subsistence-farming to Western standards of wealth within 30 years. The North Korean economy stagnated - North Koreans still rely on food aid, it is unclear whether hundreds of thousands, or millions are currently (2003) starving - because the government prevent information from being gathered. Links between economic and political freedom will be explored further on in this essay. Or compare South Korea with India: In 1950, India's per capita annual income was about $150, and life expectancy was 40 years. This compared with about $350 and 50 years in South Korea. India had a substantially greater portion of savings -- 12 percent of the gross national product, compared with 8 percent for South Korea. All bets for prosperity were on the Indian Subcontinent, not on peninsular Korea. Or compare Hong Kong, Singaporean, Taiwanese and South Korean pursuit of relatively liberal economies since the 1950s, with Vietnam, China, North Korea, Burma and Cambodia. The more liberal economies went "from typical Third World poverty in the 1950s, each has achieved a standard of living today equivalent to that of industrialized nations, with per-capita incomes in Hong Kong and Singapore rivaling those of the wealthiest Western nations." 3 Or compare Chile after liberalization in the 1970s and Mexico in the 1990s with less liberal American nations. Or compare East and West Germany between 1945 and reunification. East Germany stagnated. West Germans produced Europe's leading economy. Or compare growth in Uganda after liberalizing in 1987 with neighbouring Kenya - both contain similar resources. Ugandans liberalized and are surging ahead, Kenyans are falling behind even though Uganda contains a low-level civil war. Or compare Botswana since independence in 1966, with neighbouring Namibia, Zimbabwe and Zambia. Botswanans consistently pursued a relatively liberal economy which sustained one of the world's highest rates of growth. Botswana GDP per capita in 2002 was $8,500, Namibia - $6900, Zimbabwe - $2100, Zambia - $800. 4 Zambia nationalized "everything from the copper mines to hair salons and dry cleaners". Currency controls and tariffs stopped imports. Officials directed the economy. Its economy withered. Foreign aid helped the government to avoid essential reforms, which kept the country poor. Conversely, Botswana allowed private business to flourish, followed the path of economic freedom, and in the last 35 years has experienced the world's highest economic growth. 86 In Vietnam, following liberalization in 1990, GDP per capita growth rate increased from 2.9% p.a. during 1982-1992 to 5.8% p.a. during 1992-2002 (2.9% p.a. compound over 10 years produces a 33% increase, 5.8% p.a. compound over 10 years produces a 75% increase,) manufacturing growth rate increased from an average of 1.9% p.a. during 1982-1992 to 11.3% p.a. during 1992-2002 8 - "Since 1990, when the Vietnamese communists began to liberalize the economy, exports of coffee, rice, clothes and footwear have surged, the economy has doubled, and poverty has been halved."... "In ten years 2.2 million children have gone from child labour to education." 9 The Chinese started liberalizing in 1978, producing the world's fastest growing economy (9.7% p.a. during 1982-1992 according to official government figures, which should be viewed with a hefty skepticism although there is no doubt that growth was substantial.) 8 GDP per capita grew by 2.3% p.a. during 1968-1978 and 6.6% p.a. during 1978-1988. 10 Following the introduction of modest reforms in 1991, Indian GDP per capita growth rate averaging 3.4% p.a. during 1982-1992 increased to 4.3% p.a. during 1992-2002. 8 In Uganda liberalization took place between 1987 and 1991, average GDP per capita growth increased from 0.9% p.a. during 1982-1992 to 3.6% p.a. during 1992-2002. To recall the comparison with Kenya - GDP per capita growth in Kenya fell from 1.0% p.a. during 1982-1992 to contraction at -0.4% p.a. during 1992-2002. 8 In Ghana the experiment with government control of industry led to heavy borrowing, hyper-inflation, and economic collapse. Following liberalization in 1982, Ghana sustained an average economic growth rate of over 4% p.a. for twenty years - a total economic growth of over 119%. 8 Liberalization in Bangladesh in 1990 produced large increases in productivity in both domestic-market (competing with import) industries and export industries. Manufacturing output growth increased from 3.0% p.a. during 1980-1990 to 6.6% p.a. during 1990-2000. 11 Agricultural output growth increased from 2.2% p.a. during 1982-1992 to 3.4% p.a. during 1992-2002. GDP per capita growth increased from 1.3% p.a. during 1982-1992 to 3.2% p.a. during 1992-2002. GDP growth increased from 3.8% p.a. during 1982-1992 to 5.0% p.a. during 1992-2002. 8 Per capita growth rates in Poland increased dramatically following liberalization, from 18 years of 0% p.a. GDP per capita growth until 1993 then 5% p.a. during 1993-2000. 10 Mexican GDP per capita growth increased from 0.8% p.a. during 1990-1995 to 4.1% p.a. during 1995-2000 following the introduction of the North American Free Trade Agreement and substantial privatization in 1994. 10 Bolivian GDP per capita contracted at a rate of -0.6% p.a. during 1982-1992 8, following the introduction of significant reforms from 1993 onwards which "included the signing of a free trade agreement with Mexico and becoming an associate member of the Southern Cone Common Market (Mercosur), as well as the privatization of the state airline, telephone company, railroad, electric power company, and oil company" 4 GDP per capita then grew by 1.1% p.a. during 1992-2002. 8 Liberalization increases the wealth of the poorest. A study of 80 nations spanning four decades revealed the income of the poorest fifth increased on a 1:1 ratio with average GDP per capita. 7 A separate study of growth in 26 developing nations since 1960 came to the same conclusion. 12 The study made by Jeffrey Sachs and Andrew Warner of 117 nations, determined a 2.3% p.a. growth rate amongst wealthy economies. Given that open-developing economies grew at 4.5% p.a. whilst closed-developing economies grew at only 0.7% p.a. it is clear that liberalization decreased inequality, whilst protectionism increased inequality between poorer and wealthier nations. 5 Despite a mass of evidence to the contrary (of which the above is only skimming the surface,) WDM claim the countries which have liberalised less are doing much better. In Mauritius, from 1975-99 annual per capita growth averaged 4.2 per cent and income inequality fell. During the 1990s, the IMF ranked Mauritius as one of the most protected economies in the world. Similarly, the Wall Street Journal classed four of the top five fastest growing developing countries from 1996-2000 (Equatorial Guinea, China, Mozambique, and the Dominican Republic) as having "trade restrictive"policies 67 Poor economies where production is mainly agricultural and which maintain highly anti-market policies tend to grow very slowly (if at all.) But looking at economic data from the nations WDM quote, it contradicts WDM's theory that anti-liberal policies induce higher rates of economic growth (which it only takes half an hour of research to discover.) Indeed the data supports the converse! In "China" high growth was produced after liberalization in 1978, GDP per capita growth increased from 2.4% p.a. during 1969-1978 to 6.6% p.a. during 1979-1988 10, and was sustained by continuing liberalization over the next two decades. The Chinese were rated as conducting the 6th largest net increase in trade openness worldwide during 1980-1997. 14 The economic reform process in China began with the Communist Party Plenum of December 1978. This called for an immediate and comprehensive liberalization of the agricultural sector. Agricultural communes were disbanded and replaced by privately run household farms. Although households were not allowed to own land, they were granted 15-year leases that were freely tradeable. (In 1995, these leases were extended to 30 years.) This provided some incentive to maintain, and even improve, the value of the land. Household farms also remained responsible for delivering a quota of output to the state at below-market prices. However, the size of this quota as a share of total output has steadily diminished, so that by the mid-1990s less than 5% of agricultural output was being siphoned off by the state. Currently, state planning in agriculture amounts to a small non-distorting tax. That is, on the margin Chinese farmers now base their decisions on world market prices. The economic situation in the early 1980s was ripe for reform. In 1983, prior to the adoption of trade reform, the unemployment rate was at an all-time high (20.2 percent), foreign exchange reserves were running low (barely covering one month's worth of imports), the budget deficit amounted to a record 6.4 percent of GDP, and the economy was showing clear signs of stagnation with an average GDP growth of 0.3 percent over the period 1979-83. 13 In 1984 the government conducted the complete removal of all non-tariff trade barriers. 13 GDP per capita then grew by 6.1% p.a. during 1985-1989. 10 Growth fell to 4.0% p.a. during 1990-1994. 10 In 1994 tariff barriers were lowered to 29% (compared with 86.2% in 1980.) 13 GDP per capita then grew by 4.3% p.a. during 1994-1999. 10 Mauritius also contained one of the (if not the) most liberal investment policies of any African nation, resulting in substantial foreign investment. In the 1990 "Economic Freedom of the World" survey, Mauritius was ranked 47th out of 116 nations for economic freedom, the highest placed African nation. In 1999 Mauritius was ranked 37th out of 123, and only just behind Western European nations (in fact one place ahead of Greece.) 14 The "Index of Economic Freedom" gives Mauritius a rating of 2.99 or "mostly free". 15 Unfortunately WDM do not provide a reference for the strange statement "During the 1990s, the I.M.F. ranked Mauritius as one of the most protected economies in the world" - that some person working for the IMF at some point between 1990-1999 ranked Mauritius as "one of the most protected economies" - assuming WDM are correct, and this is not a safe assumption as will be shown further below. Next; "Mozambique." The ruling party formally abandoned Marxism in 1989, and a new constitution the following year provided for multiparty elections and a free market economy. 4 Next; "the Dominican Republic." The Dominican Republic's economy experienced dramatic growth over the last decade, even though the economy was hit hard by Hurricane Georges in 1998. Although the country has long been viewed primarily as an exporter of sugar, coffee, and tobacco, in recent years the service sector has overtaken agriculture as the economy's largest employer, due to growth in tourism and free trade zones. 4 Finally; "Equatorial Guinea." Equatorial Guinea is under the control of a dictatorship. Subsistence farming predominates. 4 So, in their document titled "Busting the Myths" where WDM make the claim "liberalisation is better seen as an outcome of development, not a cause" what evidence do they cite? They do not cite any before-after growth comparisons within nations undergoing liberalization. They do not compare how nations with similar economic conditions and different economic liberalization fared. They do not cite statistical evidence. All they cite is a quote from one left-wing Harvard Professor which simply repeats the WDM false claim "There is no convincing evidence that trade liberalization is predictably associated with subsequent economic growth. The only systematic relationship is that countries dismantle trade restrictions as they get richer." 91 This is in a report marred by the same type of logical fallacies, sheer economic nonsense, a whole load of meaningless babble, and assertions devoid of any attempt at empirical justification. For example it is stated with regard to studies which prove liberalization produces growth... Upon closer look, however, these studies turn out to be flawed. The classification of countries as "open" or "closed" in the Sachs-Warner (1995) study, for example, is not based on actual trade policies but largely on indicators related to exchange rate policy and location in Sub-Saharan Africa. The Sachs-Warner classification of countries in effect conflates macroeconomics, geography, and institutions with trade policy. 91 Exchange-rates directly affect the prices and volumes of imports and exports, therefore "exchange-rate policy" is a "trade policy." Equally astonishing is the way the "Professor" tries to avoid the reality that growth rates in India increased following liberalization in 1991, by claiming the trend started before trade reform... serious trade reform did not start until 1991-93. The tariff averages displayed in the chart show that tariffs were actually higher in the rising growth period of the 1980s than in the low-growth 1970s. 91 As shall be shown further below, WDM continually cite propagandist essays masquerading as 'economic analysis,' to avoid providing empirical validation for their statements.
WDM appear to support a 'right' of governments to force businesses into buying expensive inputs. the GATS agreement potentially rules out governments' ability to ensure that local people benefit from foreign investment... The results: Production costs increase, productivity is adversely affected. WDM state For well over a decade, industrialised countries, mainly through the international financial institutions (the IMF and World Bank) and the WTO, have been pushing investment liberalization. In other words the elimination of what they see as regulatory 'barriers' to investment, such as limits on how much foreign investors can own in particular sectors in an economy. 69 On average, multinationals in the least developed countries pay twice as much as domestic companies in the same line of business. If you get to work for an American multinational in a low-income country, you get eight times the average income. 17 Foreign investment is an important factor in increasing wealth within people-plenty but capital-poor nations. Citizens in poor nations cannot afford 'developed nation' standards of environmental protection. But WDM state the level of natural resource extraction, pollution and impact on diversity must be within the limits that the environment can sustain. Mud oozed between the village woman's toes, as she made her way between the shanty houses. Not plain mud, but mud containing rotting garbage, human and animal faeces, urine, and years of decaying vegetation. She milked an emaciated cow. 19 The hundreds of NGOs and environmental groups assembled at the World Summit on Sustainable Development would like us to believe that they are the best spokesmen for the world's needy. it is political will that is now needed to follow through on these ideas and make good the new commitment to international regulation made at the Johannesburg World Summit on Sustainable Development. 69 This briefing already establishes that unregulated FDI may be more likely to exacerbate poverty than to improve it 69 WDM claim There can be intense competition between countries to attract FDI allowing companies to play countries off against each other, lowering or keeping low labour, health and safety and environmental standards and costs everywhere. 69 The implication is false anyway. FDI has not resulted in lower standards. Foreign investors attract employment by offering higher wages and better working conditions than domestic employers. FDI increases productivity, the creation of wealth with which people then afford improved health and safety and environmental standards. This is why within the wealthiest nations such standards are the highest. Contrary to the implication made, the wealthiest nations also attract the highest amount of FDI! Estimates vary, but multiple studies suggest that when GDP per capita reaches between $5,000 and $10,000, environmental standards start to improve. Research by Alan Krueger and Gene Grossman indicates that the turning point occurs at about $ 5,000 per capita: "We find no evidence that environmental quality deteriorates steadily with economic growth. Rather, for most indicators, economic growth brings an initial phase of deterioration followed by a subsequent phase of improvement." By $ 8,000 per-capita income, the authors found, almost all the pollutant categories had begun to improve. 21 A study of steel production in 50 nations found that production in those with relatively open economies was on average 17% less pollution intensive than in closed economies. 23 A study of 25 Latin American nations spanning 1960-1988 found that pollution intensity grew less in open economies than in closed economies across all income levels. 24 Most multinational companies adopt near-uniform standards globally, often well above the local government-set standards. 25 A study of manufacturing in Indonesia found that over 60% of domestic-owned plants did not comply with domestic environmental regulations, whilst 80% of multinational-owned plants either complied or exceeded the required standards. 27 A study measuring air quality in industrial heart lands of Brazil, China, and Mexico, found that massive increases in FDI produced no measurable deterioration. 28 Average air quality in China has stabilized or improved since the mid-1980s in monitored cities, especially large ones - the same period during which China has experienced both rapid economic growth and increased openness to trade and investment. 25 There is evidence that policy makers are very sensitive to the presence of foreign investors so they might not weaken environmental standards but they do not enforce or increase them either. Increased corporate globalisation has inhibited a race to the top 69 in places with firmly established property rights and uncorrupt legal systems, companies have been actively engaged in pollution-reduction and recycling for more than a century without any government intervention at all. the positive examples of expansion being matched by many other examples of rationalisation and job losses after acquisition by a foreign multinational. 69 Examples include eliminating the ability of:... In country X a company with 1,000 workers can build a dam in 100 days, using shovels. I am an investor, the business I invest in competes with other businesses for the contract. By supplying mechanical diggers the dam can be built by 50 workers in 100 days. By losing 950 workers I can charge the citizens less, pay the employed workers more, and make a profit. Those 950 then gain employment by building irrigation to nearby farms, afforded by the savings the citizens (who are also workers) have made from the cheaper dam and by the better wages of the remaining dam workers (who are also citizens.) Imagine that the same force applies to all citizens - everyone continually increasing productivity, finding new products to produce and new ways to produce them. If, however, I am forced to create jobs then I would have to employ more than 1,000 workers. I cannot recover the cost of the investment, cannot charge the citizens less and cannot pay the workers more. There are now no workers available to build irrigation as they are all (slowly) building the dam. Citizens would not be able to afford irrigation anyway (or whatever else they may choose) because they are paying so much for the dam to be built. Everyone is poorer. Job losses resulting from foreign investment are good - they result from the increases in productivity brought about by the investment. The wealth of citizens depends entirely upon the amount of wealth which each individual can produce - their productivity. It is only by increasing productivity - the output resulting from a unit of labor, that wealth can be increased. Given there is a finite demand for any particular product, it is inevitable that increasing productivity reduces the employment needed. But the unemployed then find other goods and services to produce - and this is how economies grow, it is why the most productive nations have the widest range of goods whilst the poorest are limited to producing the bare essentials for life (because they cannot produce much with their labor.) Unemployment caused by increases in productivity is both temporary and inevitable. To reinforce this point: the wealth of people depends entirely upon 'how easily they can produce stuff' - how much wealth they can produce from a unit of their labor. Their wealth increases when they become better at 'producing stuff' - when fewer people are needed to produce a given amount of 'stuff' over a given amount of time. It is impossible for economies to grow without generating unemployment. Gross unemployment is not net unemployment. The fact that there are unemployed - people willing and able to work, and the fact that there is demand for new products and services - people willing and able to pay for new 'stuff,' means that new employment will be generated. Between 1993 and 2002 there was a gross loss of 309.9 million jobs in the US. Over the same period there was a gross creation of 327.7 million jobs - a net gain in employment of 17.8 million. This vast cycle of job losses and job creation is the reason why Americans are amongst the wealthiest peoples. 'Society' does not owe anyone permanent employment. It is noble and just that people should obtain wages - that is, consume a share of production produced by their fellow citizens - by producing 'stuff' which their fellow citizens want and value, not by stealing wealth through using the force of government - which resides ultimately upon the use or threat of violence. If when upon their road to development, 'developed nation' governments had banned every investment in agriculture that would have resulted in unemployment, then most of their working population from 12 years of age upwards would still be working on a farm during 90 hours every week - they would not today be very 'developed.' Industrialization first appeared in Britain with the 'the mills' taking over the traditional role of village and town craftsmen and women, there were riots and vandalism against buildings and machinery by the people whose jobs were threatened by the huge increases in productivity these brought. If government had banned such investments, then Britain today would still be a subsistence society, with starvation, rampant disease, and an average life expectancy of 40 years or less. If carpenter employment had been "protected" from factory production, those who are called poor in Europe would still be sleeping upon floors. If tailor employment had been "protected," very few would be able to afford even one change of clothing, let alone warm clothing for winter. If shoe-maker employment had been protected, it would be a normal sight to see children running barefoot around the streets of Europe. The same comparison can be applied with regard to any employment. The sole aim of production is consumption. Government "protection" of jobs hurts everyone beyond a moderate time-period (10 years maximum) and hurts the poor the most. Only an agricultural subsistence economy with enough utilizable land has permanent full employment - the trade-off is frequent starvation. The first example I quoted was adapted from the real-life example given below... Jordan described a U.S. businessman visiting China a few years ago. The American came upon a team of 100 workers building a dam with shovels. Shovels. -------------------------------------------------------------------------------- WDM publish a document on Senegal as part of the World Development Movement's (WDM) ongoing campaign to cancel the unpayable debts of the world's poorest countries and remove the inappropriate and damaging policy conditions attached to debt relief. 70 From the early years of Senegal's Independence up to the late 1980s the State played a major role in economic and social development, due to the dearth of an indigenous private sector and the necessity to meet some of the most pressing needs of the population. The legitimacy and stability of the post-Independence political system depended in large measure on its ability to satisfy those needs. During the 1960s and 1970s, Senegal achieved some significant results, thanks to the performance of the agricultural sector and the strength of its exports. However, by the mid-1970s, a succession of droughts, combined with a series of external shocks, led to an economic downturn. 70 There was no initial "dearth of an indigenous private sector." Senegalese government action hindered the development of the existing private sector, and in particular the development of non-agricultural industry, by providing large subsidies taken from the private (and thus productive) parts of the economy to support a bloated, inefficient, state-controlled groundnut agricultural industry way into overproduction, as well as other unproductive forms of agriculture and agricultural processing. Groundnut production is dependent upon rainfall - annual rainfall is highly variable within Senegal. When droughts hit in the 1970s and 1980s the groundnut crops failed. Because groundnut production had been promoted at the expense of other (particularly non-agricultural) parts of the economy, the Senegalese had fewer alternative goods to trade for food. As a result, more people died. Workers in unproductive state-controlled industry are entirely dependent upon continued government gifts of (stolen) wealth for their employment, which ensures their political support. It is bribery. Over long-ish time-periods even the 'protected' workers end up worse-off, because their wages in their 'protected' employment can buy very little in an economy where productivity has been stunted through government intervention. It is ultimately only government members who benefit. When such bribery occurs to a larger extent, it is usually also the case that government ministers are more corrupt, funnelling more wealth into private bank accounts. Demba Moussa Dembele was an employee of the Senegalese Government Ministry of Economy and Finance. Demba Moussa Dembele continues A recent example of the failure of IMF and World Bank policies is the forced liberalisation of the groundnut sector, with the dissolution of SONAGRAINES (a parastatal) in 2002, which provoked a near state of famine in rural areas. 70 The near starvation of millions of people led to a Government Emergency Relief Plan 71 President Abdoulaye Wade has sacked his communications adviser and apologised to donors over an unnecessary appeal for food aid. 31 Demba Moussa Dembele admits As a result of the 'reform', less than 30 per cent of the groundnut crop was collected 70 The sole aim of employment is to produce wealth, but the Senegalese government were effectively paying people to destroy wealth - and this is why the Senegalese are still very poor today. Demba Moussa Dembele claims the past twenty years of IMF and World Bank policies in Senegal have been unsuccessful in significantly reducing poverty. Low or stagnant economic growth, a deterioration in some social indicators and only modest improvements in others has characterised the period of 'structural adjustment'. 70 Sweeping trade liberalisation and deregulation combined with the dismantling of the Senegalese public sector, from the mid-1980s to the late 1990s, led to the collapse of both the agricultural and industrial sectors. 70 Industrial production grew by 81% during 1992-2002.8 Real GDP grew by 58% during 1992-2002, averaging a remarkable 4.7% p.a. 8 Industrial production growth rate in 2002: 6.4% p.a. 8 Agricultural production growth rate in 2002: 6.9% p.a. 8 Although Demba Moussa Dembele writes that "with the deepening crisis of the agricultural sector" GDP growth has fallen to only 2.6% p.a. (equivalent with most 'developed nations') in 2002, 2003 growth is predicted to be back in the 5% p.a. region again. 4 Investment had risen from 13.8% of GDP in 1993 to 16.5% of a much larger GDP in 1997. 4 Update on 09/02/04 - I have encountered a summary of the Senegal document, produced by WDM, and including the following: From Independence to the 1980s the Senegalese state played a major role in the country 's economic and social development. During this period available information suggests real economic growth was good, school enrolment increased and access to health care improved. 71 It is time rich country leaders, including the UK Government, stopped colluding with the IMF and World Bank to use debt as a lever against poor countries. Instead they should cancel all poor country debt without attaching unjust economic conditions that benefit big business but harm the poor. 71 Senegalese citizens - having been forced to provide finance for loss-making agricultural exports - having been forced to consume expensive domestic agricultural production - now service Senegalese government domestic and international debt, again paying for government corruption and stupidity which WDM support. When the International Monetary Fund (IMF) and the World Bank came to Africa, they promised to introduce 'sound macroeconomic policies' to create 'sustainable economic growth'. Instead they have ridden roughshod over democracy 71 After 20 years of IMF and World Bank direction in Senegal,there is no evidence of any success in significantly reducing poverty. In 1994 60 per cent of those surveyed were deemed poor. Poverty is now so widespread that nearly 80% of the population live on less than £1.60 a day. 71 leaving a trail of economic stagnation 71 Industrial production grew by 81% 8 Looking at the actual Human Development Index value for Senegal (higher means more developed,) it has increased by 31% from 0.330 in 1980 to 0.431 in 2000. 34 The MDGs call for mortality in infants under five to be reduced by two-thirds. In 2001, the infant mortality rate in Senegal was 79 per thousand, little changed from 87 per thousand in 1982. At the current rate, it will be 2110 before under five mortality is reduced by two thirds. 71 "Under five mortality" had fallen by 63% from 218 per thousand in 1980 to 138 per thousand in 2000. "Infant mortality" was 73 per thousand in 2002. 32 In March 1999 the Senegalese government sold 34% of SENELEC, the state electricity company, to Elyo of France and Hydro-Quebec of Canada (forming EHQ.) SENELEC was heavily indebted, using old and worn-out equipment to provide a highly intermittent supply to only approximately 30% of the population. WDM claim EHQ delivered neither new investments nor reinvestment of profits 71 Canada's Hydro Quebec International has supplied a 37 MW turbine to SENELEC. This U.S.$16 million turbine will help deal with the country's energy deficit. 35 Please act now to keep up the pressure for change. There is a common perception that the food crisis in Malawi has been caused by the floods that ruined the planting season in 2001, or by widespread government corruption and mismanagement. These undoubtedly have contributed to the crisis. But there is another cause, which has been even more significant inappropriate policies of donor agencies, led by the International Monetary Fund (IMF). In reality: the intelligent action of grain traders prevented a famine. Increasing supply price is the most effective way to ensure supplies last longer. Value is not money. A hungry individual values a certain amount of grain more than an individual with a full stomach, regardless of the money prices offered for the purchase. The same amount of grain in times of shortage is more valuable than in times of plenty. Conserving grain for times of shortage increases wealth within the economy. There are two relevant time-periods in question; 1) The period before shortages, where grain traders decide whether to conserve grain, and by what amount; 2) The period during shortages where conserved grain is sold at a higher price. Let us consider grain-trader, consumer, and government actions in these two periods. Period 1) If all purchasers had predicted shortages and were also willing and able to buy a store of grain supplies, then the demand for grain and therefore the price would have increased to equal demand and price under conditions of shortage, as in Period 2) which WDM are complaining about (actually the price would be slightly less due to time-preference linked to the rate of interest.) All grain would be sold as there would be no profit incentive to withhold grain. That grain traders conserved grain shows that purchasers were not willing or able to invest for a supply to cover shortages. If all grain had been sold it would have likely been consumed before shortages - and there would have been a famine. Period 2) If grain traders sold conserved grain at the Period 1) price - an artificially low price below actual demand - this grain would be sold rapidly in bulk and then resold at the higher price representing demand. If the government intervened and forced grain to be sold at lower prices (which is effectively theft) - the incentive to conserve grain and predict conditions would be lost, and in future no grain would be conserved, thereby inviting famine. It is ethical that reward goes to those who anticipate future conditions, and that those who invest their wealth to supply others in a food crisis rather than upon their immediate personal consumption, should receive interest upon their investment. It is a valuable and noble economic activity. An option always open to the government is to buy food from grain traders on behalf of the poor, or on the world market where it may be cheaper. Blaming grain traders for a food crisis caused by floods is absurd. However, over the past twenty years the agriculture sector has been restructured by the IMF and World Bank, under their structural adjustment policies. In agriculture, these policies are supposedly aimed at improving efficiency and productivity. Here is an excerpt from a speech made by Barry Coates whilst in capacity as director of WDM. "In considering the need for change, I think most of you will understand some of the issues relating to trade justice and poverty. I am not going to repeat to you many of the statistics that you already know, but suffice to say that 1.2 billion people live below the poverty line and almost half the world's population lives on an income less than $2 a day." 39 The underlying problem must be the tragic plight of over one billion people who lack the basic essentials for life: over 1.2 billion people who live on less than $1 per day 73 In another document WDM claim Most regions of the world are suffering from increasing poverty. Not only are the numbers of people living on less than $1 per day rising in South Asia, Latin America and Sub-Saharan Africa ... 74 It is instructive also to look at the HDI (Human Development Index,) a measure for quality of life produced by the UN and which WDM themselves have quoted. The HDI for sub-Saharan Africa increased by 9% between 1990 and 2001, whilst "countries of low development" - the poorest category - have improved by 10% overall. Between 1980 and 2001, sub-Saharan Africa improved by 12%, and "countries of low development" by 22%. ...but the numbers of people living on less than $2 per day has risen from 2.55 billion to 2.8 billion since 1990. Increasing poverty on this scale does not result from a few countries failing to follow IMF programmes, as is sometimes claimed - it results from inequities in the structure of the global economy. 74 In relation to an alleged Analysis of IMF data 74 there is increasing evidence that points to a dramatic slowdown of growth and poverty reduction in the period that the IMF policies of liberalisation have dominated decision-making in most developing countries. Returning to the WDM claim about "developing countries": A study of GDP per-capita incomes in "developing countries" using national accounts data found that, taken as a whole, average GDP per capita growth rate increased from 2.1% p.a. during 1960-1980 to 3.6% p.a. during 1980-2000. The study also found that GDP per capita growth in 'developed' nations fell from 3.3% p.a. during 1960-1980 to 2.0% p.a. during 1980-2000. 36 A separate study of 24 developing nations containing (at present) 3 billion people found that GDP per capita growth increased from 1% p.a. during the 1960s to 5% p.a. during the 1990s. 38 Another study found that the poorest fifth of all countries (approximately 20 developing nations) had an economic growth rate per capita of 1.8% p.a. during 1960-1980, whilst in the richest fifth per capita wealth increased by 3.3% p.a. During 1980-1997 the situation was more than reversed, the poorest fifth grew by 4% p.a. p.c. and the richest fifth by 1.7% p.a. p.c. 88 ..."for which there was consistent data, 77 countries experienced a fall in growth rates" ... 74 This is one of the reasons that there has been an increasingly difficult search for "success stories". Even the latest country quoted as an example, Uganda, still has per capita income 30% lower than it was in 1983. 74 WDM state WTO rules hurt poor communities and the environment WDM criticise even future WTO agreements. At the big picture level a WTO agreement would probably serve to perpetuate the pattern of rich industrialised countries consuming more than their fair share of land, water, wood, minerals and resources. This is because current investment has a high component of northern based TNCs "investing" in the South often concentrated in the extractive industries which export these resources to northern markets. 69 WDM state the 'free market' simply transfers resources from the South to the North 61 WDM claim there is an extensive literature stretching back over several years which indicates that 'a WTO investment agreement will not lead to increased FDI flows to the poorest countries.' 69 WDM claim in relation to GATS Decisions are binding far into the future. Citizens will no longer have the democratic right to decide how services are regulated. 68 WDM criticize privatization of services: For example, water privatisation in Puerto Rico has meant that poor communities have gone without water while U.S. military bases and tourist resorts enjoy an unlimited supply. 68 WDM claim in relation to GATS Central to the demands was the opening up of essential services, such as water distribution where there is no evidence that liberalisation benefits the poor. 75 In the 1990s the Argentinian government privatized water supply in approximately 30% of municipalities - linked to a 5% to 7% drop in infant mortality in areas which privatized, and a 24% drop in the poorest of those municipalities. 40 5 years before water and electricity privatization, 64.8% of the poorest decile (tenth) of households received both commodities, 5 years after this had increased to 82.5%. 41 In the capital city, Buenos Aires, ten years after privatization reforms the average water tariff had dropped by 27%. Only three years after privatization, water supply had increased from 70% to 81% of households, and 58% to 62% for sewerage. Privatization resulted in a net gain (over state supply) of $150 (1996 dollars) per capita. 42 In Bolivia: 2 years before water privatization 64.5% of the poorest decile received access, 2 years after privatization this had increased to 89.1%. 41 With regards to Conakry, the capital city of Guinea In Conakry, the ten-year gains from the reform are higher than in Lima at $12 per capita in 1996 dollars, despite the problems of the reformed utility. The average annual gains equal 112% of sales in the last pre-reform year. The percentage gain is enormous because the moribund state enterprise that preceded the reform was incapable of reaching most consumers or supplying reliable, safe water to the few it did reach. Under private operation, capacity more than doubled, water quality and service improved dramatically, the population served almost doubled, and coverage expanded from 38 to 45 percent. 42 Privatisation accounted for 12% of FDI inflows to developing countries (excluding China) in 1990-97, and higher in many countries (e.g. 80% of FDI in Argentina for 1990-95).(7) These are one-off inflows which make a questionable contribution to development. 69 In 1982, more than 1,200 state enterprises in almost every sector of the Mexican economy received subsidies and other transfers equaling almost 13 percent of the Gross Domestic Product. These state enterprises, however, produced only 14 percent of the national output, employed around four percent of Mexico's labor force, and accounted for 38 percent of fixed capital investment. 43 A review of structural adjustment related privatisation case studies concluded that privatisation of public utilities often resulted in increased charges - adversely affecting the poor 69 The "review" (again, propaganda not economics) WDM use contains no detailed statistical analyses, instead it offers a selective look at data from three nations, in two of which were conducted bungled and half-completed privatizations, from which the "review" authors make rather generalized and sweeping claims. For example it is mentioned in regard to electricity privatization (1996) in El Salvador "Users with low levels of consumption, particularly the poor, who constitute the majority of the population, saw their rates increase by 47%, while high-end users experienced an average of 24% rate hikes" 44, but this incredibly sloppy "review" does not indicate the time-scale, or mention the fact that during the four years prior to privatization, electricity tariffs were increased by a whopping 96%. 45 WDM frequently criticize increases in the price of water supply following privatization (whilst ignoring price rises under public ownership.) Water in many nations is in a very limited supply compared to demand. Low point-of-sale charges subsidized by tax results in water being wasted until there is no water at all. A price rise does not necessarily result that consumers, including the poor, pay any more in absolute terms, as it often results in people making more effort to conserve water usage. A lack of competition and profit-motive has resulted in government run water 'services' in water-poor nations wasting as much as 50% of water supply through leakage. Clean water is a precious resource, it is right that prices reflect this. WDM claim there is evidence that the privatisation of profitable utilities often leads to a loss of public revenues. A 1998 WB study on privatisation, which reported nearly 2,700 transactions in sub-Saharan Africa by the end of 1996, found that many of the companies that had been privatised had not been a financial drain on government resources. 76 WDM state For example, between 1991 and 1998 the Brazilian Government made some $85 billion through the sale of state run enterprises, but spent $87 billion 'preparing' the companies for privatisation. 77 One of the primary pillars of Brazil's growth since 1991 has been its ambitious privatization program, which has overseen the transfer of over U.S.$18 billion in debt accumulated by inefficient state and federally run enterprises, liberating vital government resources for needed social programs 46 -------------------------------------------------------------------------------- WDM and coffee prices - WDM criticize allowing poor farmers from poor nations to move into profitable agriculture The World Bank and IMF have been requiring coffee producing countries to liberalise. This has involved dropping controls on supply and exports, disbanding state trading boards and encouraging increased production and exports. For example, production in Vietnam grew from less than 50 000 tons in 1989 to over 400,000 tons by the late 1990s. During the same period, the World Bank and IMF required nations like Uganda, Ethiopia and Kenya to liberalise their agricultural sectors and increase coffee exports. Ironically,the kind of policies that now help coffee producing countries qualify for debt relief under HIPC (i.e. reducing state intervention in coffee markets) have driven increased coffee production, causing oversupply in the market resulting in a price crash which has rendered the debt relief they eventually receive less effective. Any standard economic textbook will tell you that an increase in supply, without an increase in demand, will lower prices.Yet incredibly, the IMF and World Bank economic experts forgot the basics as they encouraged increased production and exports across the globe. 67 For most years between 1962 to 1989, coffee prices were supported by export quotas administered under the International Coffee Agreement. Participants in the agreement included not only major producing countries but also the leading consuming nations 47 In 1990 Vietnamese coffee amounted to 1.4% of world production, by 2000 this had grown to 11.8% and the Vietnamese had become the world's third largest coffee producers - because the poor of "Vietnam" were allowed to produce and compete in a free market. 48 Liberalization hurt previously protected producers in relative terms, but it benefited the poor in absolute terms. Nor were previously protected producers harmed much - contrary to "without an increase in demand," demand for coffee was actually increasing at a rate of about 1% p.a. during 1998-2002, and many previously protected producers moved into producing high quality "gourmet" coffee. 0.5 million jobs were lost in Central America, 4.5 million jobs were created in Vietnam alone. 47 It is true there was a moderate surplus in the late 1990s, but this was due to a peak in coffee prices in the mid 1990s caused by poor weather conditions producing crop failures in Brazil, raising prices and encouraging production (prices during 1994-1998 exceeded the price before liberalization in 1989) - and the inherent slow nature of the coffee market to adapt to changing demand when prices fell back, due to fixed costs being much higher than variable costs. A coffee plant requires 2-3 years to grow before it produces usable beans. Coffee farmers are reluctant to cut down coffee plants and grow an alternate crop immediately after a drop in price, but may wait 2, 3, maybe even 5 years to see if coffee prices pickup again, meanwhile the beans may as well be harvested and sold - although the sale may not cover costs of keeping plants alive, it will usually exceed the costs of harvesting. This does not matter much as droughts tend to come around - in fact it is due to a dry season in Vietnam and Brazil as well as increasing demand that large shortages are again predicted for 2005. Production in "Uganda" increased by 1% p.a. during 1989-2002, in "Ethiopia" increased by 2% p.a. during 1993-2002 (the FAO website has no data for before 1993) and in "Kenya" decreased by 7% p.a. during 1989-2002. 48 Lower coffee prices have been passed onto consumers (as is the norm for free market competition,) US retail prices have been on a continual downward trend - not Starbucks coffers as is commonly presumed, coffee grounds typically amount to only 5-7% of total variable costs. 47
Humanitarian aid to African nations: a sad example of good intentions gone awry. Aid to some African nations helped to support corrupt, oppressive, murdering regimes. Aid protected disastrous economic policies from forces for change - the type of anti-free market economic policies which produce massive debt and inflation, prevent increases in productivity, limit investment, prevent the poor from buying cheap goods, prevent the poor from selling their labor, reduce trade and have resulted in poverty in every instance where they have been practiced. Governments have refused foreign investment and demanded instead foreign aid, much of which goes directly into the pockets of government ministers - giving rise to the term 'Swiss bank account socialism.' Aid was often poorly targeted. Aid workers rarely get involved in the type of project which would really help the poorest - building roads and market-places and other commercial infrastructure, or campaigning for economic and political freedom. Aid instead destroyed agriculture. Aid fueled wars. And when aid has been consumed - what then? What has been achieved? Economic growth eradicates poverty whilst aid only temporarily alleviates poverty and obscures the root causes. Aid is not a long-term solution to poverty, and is often counter-productive even in the short-term. Poverty is a problem of production. George Ayittey, President of the Free Africa Foundation writes: Western aid helped destroy Somalia 49 The solutions to world poverty are well known: massive increases in aid 78
WDM wants to go beyond this to look at the developmental aspects of investment considering how investment can actually be harnessed to make a positive contribution to developmental goals like equity Secondly, there is no such thing as an equitable distribution of wealth. We all have different ideas about what an equitable amount is - which changes with time - in the end achieving a "political goal" of "equity" means selecting one of those and imposing it on everyone else, by force. This is not "equitable," it is simply the preference of people in power who then steal other people's wealth to obtain it (usually as bribery to obtain support to maintain their power.) An equitable distribution is different from providing minimum standards (food, clothing, shelter, health care, education) - because these apply to everyone. An equitable distribution means specific individuals or groups of individuals 'should' obtain a specific amount - and this is the road to totalitarianism. Equity is commonly taken to mean equality - an equal distribution of wealth. Not only is an equal distribution of wealth impossible to achieve even with the most totalitarian regime, it is unethical. If I work less than you and/or produce less value to society, why 'should' I receive the same reward as you? Why 'should' your wealth be stolen by force from you to be given to me? And achieving an equitable distribution always means that in the end, regardless of how convoluted the method, taking wealth by force - including by using "market" "restriction" and "investment" "restriction" measures, in the end it is the men with the guns telling people what they can and cannot do. It is better to leave individuals to create wealth from their own efforts, and allow them to keep what wealth they earn. Redistribution removes incentive to produce from the people whose wealth is stolen and from the recipients of this stolen wealth. The more redistribution occurs, the lower the amount of wealth that is created. This can easily be observed by comparing the results of the multitude of socialist and communist economies last century with liberal capitalist economies - it is simply undeniable. The poor become wealthier when redistribution is decreased. Between 1870-1970, Swedish growth was the biggest in the world, next to Japan´s. In 1970 Sweden was the fourth richest among the OECD-members, after USA, Luxembourg and Switzerland. 50 Equity is the politics of envy.
This section discusses an issue of greater importance than wealth, to which wealth is inextricably linked - individual freedom. WDM defend the 'rights' of government, that is, they support government power against the rights of individuals, usually whilst hiding under the banner of 'democracy.' A 'democratically' elected government can act in just as tyrannical a manner as any dictatorship - viz the 20th century and Hitler's Germany, Allende's Chile, and Milosevic's Serbia. And in doing so is just as unjustified. If the majority want the persecution of a minority (e.g. ethnic,) then the majority is wrong - and so is an elected government that supports such action. An elected government and majority are also wrong when they introduce or support economic unfreedom. Individual rights are far more valuable than elected governments, and they override the desires of a 'majority.' Essential rights are to life, liberty, and the pursuit of happiness. The only valid reason for democracy being considered better than other systems of government, is that democratic governments tend to show better respect to individual rights and liberties. When GATS defenders contend that the agreement protects the right of governments to regulate, they tend to understand 'regulation' to mean regulation of the market to ensure that it operates smoothly. In practice, this narrow understanding refers to those regulations that tackle the market's imperfections and abuses and create a stable business environment, for example, when competition policy is designed to protect the build-up of monopolies.17 This is very different from regulation that restricts the market to ensure that political, social or environmental goals are met. 79 The year was 1998 - one of the darkest years in recent history for small cotton farmers in India. 51 Genetically Modified grain could spell the end for food insecurity, starvation in Third-World nations: Worst still, there is nothing to stop farmers from planting this grain in their fields. WDM support a government "right" to restrict "small farmers" from making choices, apparently on the basis that "small farmers" are stupid. GM crops seriously threaten the ability of small farmers in some of the world's poorest countries to make informed choices about their farming practices. Therefore, governments should be permitted to take full account of socio-economic impacts within their country and its environment when deciding whether or not to allow the import of GMOs. 80 If citizens do not want GM products then profit-incentive expands the non-GM market to satisfy demand. The size of such a market indicates the level of satisfaction with GM. What WDM mean is allowing government to impose a trading ban on citizens who are willing to trade, a production ban on citizens who are willing to produce, and a purchasing ban on citizens who are willing to purchase. If one citizen is willing to produce and/or sell a product to another who is willing to buy: then what business do politicians and WDM employees have sticking their noses in? This has nothing to do with the "right of citizens." The World Development Movement (WDM) has reason to believe that AstraZeneca is researching new 'junkie' seeds dependent on a chemical trigger to 'switch them on' (make them flourish). WDM is concerned about the potential effect this could have on Third World farmers by making them dependent on agricultural chemicals. 82 WDM claim GM technology is not the answer... 83 ...to world hunger and multinationals stand accused of cynically manipulating people's extreme poverty for their own commercial ends. Hunger is caused by poverty and access to land and resources 83 A 1999 study published in the journal Nature Biotechnology found that 96.2 percent of genetically modified plants could survive freezing experiments, versus just 9.5 percent of unaltered plants. When subjected to drought conditions three-fourths of the GM plants survived, compared with just two percent of the traditional plants. 52 Across Asia, I have worked in tightly packed villages surrounded by rice paddies where rice provided the calories (sometimes as much as 70 percent or more), with a few fruit trees and maybe a kitchen garden next to the house to provide vital nutrients and a modicum of dietary variety. In some of these countries, vitamin deficiency, particularly vitamin A deficiency, causes children to go blind and/or makes them more likely to die from diseases such as diarrhea or measles. Yet the NGOs vigorously oppose the development of a transgenic Vitamin A enhanced rice. But the constant, massive NGO anti-genetic modification campaign had effectively intimidated those scientists. And that happened even though senior government officials with whom I discussed the matter made it clear that there was no government policy against genetic modification. The NGO scare campaign had brought about a paralysis. Meanwhile, the poor peasant families were suffering a critical loss in the basic nutrition to maintain their meager existence. 58 The 'free market' approach can also have a damaging impact on struggling democracies. For instance, in official pronouncements about 'good governance' in Africa or rather its lack weak state capacity is often identified as the major stumbling block. 64 Governments that avoided "the 'free market' approach," protected citizens from "cheap"/ "expensive" imports, and provided substantial "regulation that restricts the market to ensure that political, social or environmental goals are met.": The MPLA in Angola FRELIMO in Mozambique UPRONA in Burundi Mobutu Sesse Seko in Zaire (now DRC) Idi Amin in Uganda Five different Marxist dictatorships in The Republic of Congo Samuel Doe in Liberia Siad Barre in Somalia Muammar Qadhafi in Libya George Ayittey, President of the Free Africa Foundation, writes Africa's crises have little to do with artificial colonial borders, American imperialism, racism or the alleged inferiority of the African people. They stem from bad leadership and the enabling role played by the West. The centralisation of power and absence of mechanisms for its peaceful transfer lead to a struggle which degenerates into civil war. 53 I continue my search for explanations why my continent is still poor though people are hard working, teach their children the value of hard work, and we are greatly endowed with resources that don't seem to profit us much. I recently embarked on a journey through Africa to see for myself what is going on around the continent, and what other young people think of the ironic realities. 54 Moreover, there is little evidence that it is the best way to achieve social goals 64 Some commentators... 84 ...are concerned about a disconnection between people and their government, as governments increasingly divest themselves of any role in the economy, beyond regulation. 84 WHY ARE REGULATIONS NEEDED? 23. We demand legal warfare on deliberate political mendacity and its dissemination in the press. To facilitate the creation of a German national press we demand:... 33 In education, a country may wish to restrict the total number of students to be taught in a particular discipline or occupational category or to limit the total number of institutions permitted to offer certain qualifications. All these regulations could fall foul of this rule. 64 It is not "a country" which acts but members of a government - and they limit the numbers of e.g. qualified doctors (demanding that all doctors must have a government certificate) to maintain excessive wages within an "occupational category" as a bribe to obtain political support from the 'protected' 'workers.' Parents, despite having paid (through taxes or otherwise) for the education of their offspring, now have no say as to what field their offspring are to be educated, and the desires of their offspring are likewise ignored. Their offspring are then prevented from competing and thereby forced into a lower paying job. Everyone is now charged excessively for any medical services they may need, and the services they receive will be inadequate. This is the end reality of what WDM and most other NGOs promote - it is poverty and unfreedom. Here is a quotation from a document written by John J. Ray, referring to Mussolini His policies were basically protectionist. He controlled the exchange-rate of the Italian currency and promoted that old favourite of the economically illiterate -- autarky -- meaning that he tried to get Italy to become wholly self-sufficient rather than rely on foreign trade. He wanted to protect Italian products from competing foreign products. The Leftist anti-globalizers of today would approve. 56 The government will also protect the national economy with various tariffs and trade barriers, so that we can become self-sufficient and end our dependence upon foreign trade for our prosperity. 57 Those who want to assist in the reduction of poverty and oppression, may better achieve their aims by supporting the WTO, and by donating to non governmental organizations that are fighting for economic (and political) freedoms, like those run by George Ayittey (Free Africa Foundation), James Shikwati (Inter Region Economic Network) and Hernando de Soto (Institute for Liberty and Democracy) and others who are fighting for the economic rights of individuals over their fellow citizens and governments. Anti-globalization NGOs are fighting for a government 'right' to economic repression to promote their silly, failed socialist dreams - failures which have rarely harmed their protagonists, but always brought misery to the victims of government intrusion. Economic freedom is vital, economic activity forms by far the greater portion of our lives whether we are producing or consuming, and economic repression has caused so much physical harm to so many. To understand the political implications of restricting the market "to achieve social goals," "achieving equality," "equitable income distribution" and "promotion of public interests," where these may (and did) lead to, it is essential to read "The Road to Serfdom" by F.A. Hayek. As a general rule, the citizens of nations that are more open economically tend to enjoy other liberties as well. The relationship can be confirmed by comparing cross-country data measuring economic openness and political/civil liberties. For the political and civil data, I have used recent ratings from Freedom House, which classifies the nations of the world as free, partly free, or not free.17 Then I compared the Freedom House scores with international economic freedom as measured in the study Economic Freedom of the World: 1998/1999 Interim Report, written by James Gwartney and Robert Lawson. The authors rated nations according to their level of taxation on trade, the size of the trade sector, exchange rate controls, and restraints on capital mobility, with a rating of 10 representing maximum openness.18 1 "The Ambassador: A Story of Protectionism Gone Awry" by Salil Singh, http://www.aworldconnected.org/ 2 "Protectionist Paradise?" by Jim Powell, http://www.freetrade.org/ 3 "The Blessings and Challenges of Globalization" by Daniel T. Griswold, http://www.freetrade.org/ 4 "CIA World Factbook" http://www.cia.gov/ 5 "How Globalization Conquers Poverty" by Johan Norberg, http://www.johannorberg.net/, with reference to "Economic Reform and the Process of Global Integration" by Jeffrey Sachs and Andrew Warner, Brookings Papers on Economic Activity (1995) 6 "Norberg vs. Kuttner" by Johan Norberg, http://www.freetrade.org/ 7 "Growth Is Good for the Poor" by David Dollar and Aart Kraay, http://www.worldbank.org/ 8 "World Bank Data & Statistics", http://www.worldbank.org/ 9 "The Noble Feat of Nike" by Johan Norberg, http://www.johannorberg.net/ 10 "Penn World Table" http://www.pwt.econ.upenn.edu/ 11 "Evaluating the Success of Trade Liberalization in Bangladesh" by John Williamson, http://www.iie.com/ 12 "Does Economic Growth Reduce Poverty?" by Michael Roemer and Mary Kay Gugerty, http://www.harvard.edu/ 13 "Trade Policy, Trade Liberalization and Industrialization in Mauritius: Lessons for Sub-Saharan Africa" by Vinaye Dey Ancharaz, http://www.worldbank.org/ 14 "Economic Freedom of the World: 2001 Annual Report" http://www.fraserinstitute.ca/ 15 "Index of Economic Freedom" http://www.heritage.org/ 16 "International Finance Centre" http://sg.biz.yahoo.com/ 17 "The Noble Feat of Nike" by Johan Norberg, http://www.johannorberg.net/, with reference to "Special Report no. 12" by Edward M. Graham, Institute for International Economics, September 1998, p. 158 18 "WTO Report Card III Globalization and Developing Countries" by Aaron Lukas, http://www.freetrade.org/ 19 "Poverty Today Is Truly Miraculous" by Leon Louw, http://www.aworldconnected.org/ 20 "I Do Not Need White NGOs To Speak For Me" by James Shikwati, http://www.aworldconnected.org/ 21 "The Blessings and Challenges of Globalization" by Daniel T. Griswold, http://www.freetrade.org/, with reference to "Economic Growth and the Environment" by Gene Grossman and Alan Krueger, National Bureau of Economic Research Working Paper No. W4634, Feb. 1994 22 "Industrial Pollution in Economic Development: Kuznets Revisited" by Hemamala Hettige, Muthukumara Mani and David Wheeler, http://www.worldbank.org/ 23 "Process Change, Economic Policy and Industrial Pollution: Cross Country Evidence from the Wood Pulp and Steel Industries" by Mainul Huq, Paul Martin and David Wheeler, http://www.worldbank.org/ 24 "Trade Policy and Industrial Pollution in Latin America: Where Are the Pollution Havens?" by Nancy Birdsall and David Wheeler 25 "Assessing Globalization", http://www.worldbank.org/ 26 "Do Corporate Global Environmental Standards Create or Destroy Market Value?" by Glen Dowell, Stuart Hart and Bernard Yeung, http://www.stern.nyu.edu/ 27 "Putting Pressure on Polluters: Indonesia's PROPER Program" by S. Afsah and J. Vincent, http://www.worldbank.org/ 28 "Racing to the Bottom? Foreign Investment and Air Pollution in Developing Countries" by David Wheeler http://www.worldbank.org/ 29 "Saving the Planet with Capitalism" by Joseph Sternberg, http://www.aworldconnected.org/ 30 "The Blessings of Free Trade" by James K. Glassman, http://www.freetrade.org/ 31 Report by Chris Simpson, BBC Dakar, http://www.bbc.co.uk/ 32 Statistics with regard to Senegal and "Millenium Development Goals" http://www.worldbank.org/ 33 From several documents by John J. Ray, http://constitutionalistnc.tripod.com/hitler-leftist/ 34 UN Human Development Index http://hdr.undp.org/ 35 Country report on Senegal, http://www.mbendi.co.za/ 36 "Imagine there´s no country" by Surjit Bhalla, http://www.iie.com/ 37 "The Emperor Has No Growth" by Mark Weisbrot, Robert Naiman and Joyce Kim, http://www.cepr.net/ 38 "Globalization, Growth and Poverty: Building an Inclusive World Economy" by Paul Collier and David Dollar, http://www.worldbank.org/ 39 http://www.belfastdec.org/ 40 "Water for Life: The Impact of the Privatization of Water Services on Child Mortality" by Sebastian Galiani, Paul Gertler and Ernesto Schargrodsky, http://www.worldbank.org/ 41 "Distributive Impact Of Privatization In Latin America: An Overview Of Evidence From Four Countries" by David McKenzie and Dilip Mookherjee, http://www.worldbank.org/ 42 "Reforming Urban Water Systems In Developing Countries" by Roger Noll, Mary M. Shirley and Simon Cowan, http://www.worldbank.org/ 43 "The Benefits of Privatization - The View from Mexico" by Florencio López de Silanes, http://www.harvard.edu/ 44 "The Policy Roots of Economic Crisis and Poverty, A Multi-Country Participatory Assessment of Structural Adjustment", http://www.saprin.org/ 45 "The Power Sector in: El Salvador" Inter-American Development Bank, http://www.iadb.org/ 46 "Privatization and Public Concessions in Brazil" http://www.brasilemb.org/ 47 "Grounds for Complaint? Understanding the Coffee Crisis" by Brink Lindsey, http://www.freetrade.org/ 48 Using statistics from the "Food and Agriculture Organization" http:www.fao.org and 47 49 "How Western Aid Helped Destroy Somalia" by George Ayittey, http://www.aworldconnected.org/ 50 "Swede and Sour" by Johan Norberg, http://www.johannorberg.net/ 51 "The Bollworm, Suicidal Farmers... And the Government that Got in the Way" by Salil Singh, http://www.aworldconnected.org/ 52 "Genetically Modified Food: An Environmental Risk, or Millions" Best Hope for Survival?" by Radley Balko, http://www.aworldconnected.org/ 53 "Africa's Shady Politicians Are at Root of Continent"s Destitution" by George Ayittey, http://www.aworldconnected.org/ 54 "Legal Robbery and Murder: Someone Help!" by J. Akinyi Arunga, http://www.aworldconnected.org/ 55 "Cinema Stupido" by Ron Gluckman, http://www.gluckman.com/ 56 "Modern Leftism As Recycled Fascism" by John J. Ray, http://www.geocities.com/jonjayray/homepage.html 57 From http://www.bnp.org.uk/ 58 "When 'Green' Policies Harm Humans" by Thomas R. DeGregori, http://www.freetrade.org/ 59 "Globalisation is Good" a film by Johan Norberg, http://www.johannorberg.net/ 60 "About WDM," http://www.wdm.org.uk/about/index.htm 61 "The Missing Link - Debt and Trade," February 01, http://www.wdm.org.uk/campaigns/cambriefs/debt/debtandtrade.htm 62 "Trade: WTO Campaign - Multinationals and the World Trade Organisation," September 99, appears to have been removed but still available here http://www.redem.buap.mx/rm47.htm 63 "Briefing on regulating TNCs - Making investment work for people: An international framework for regulating corporations," February 99, http://www.wdm.org.uk/campaigns/cambriefs/wto/TNCs.htm 64 "GATS: A Disservice to the Poor" by Jessica Woodroffe, January 02, http://www.wdm.org.uk/campaigns/cambriefs/gatsdiss.pdf 65 "Debt and destruction in Senegal - A study of twenty years of IMF and World Bank policies" by Demba Moussa Dembele, November 03, http://www.wdm.org.uk/campaigns/cambriefs/debt/senegal/senegal.pdf 66 "From GATS to New WTO Investment Rules - Undermining Pro-Poor Investment Regulation" by Peter Hardstaff, May 22 03, http://www.wdm.org.uk/campaigns/cambriefs/gats/GATS-investment_05.03.pdf 67 "Treacherous Conditions," October 03, http://www.wdm.org.uk/campaigns/cambriefs/debt/treachcond/treach1.htm 68 "The Tricks of the Trade," September 01, http://www.wdm.org.uk/campaigns/cambriefs/wto/tricks.pdf 69 "Investment and the WTO - Busting the Myths," June 03, http://www.wdm.org.uk/campaigns/cambriefs/wto/mythbusting.pdf 70 "Debt and destruction in Senegal - A study of twenty years of IMF and World Bank policies" by Demba Moussa Dembele, November 03, http://www.wdm.org.uk/campaigns/cambriefs/debt/senegal/senegal.pdf 71 "Colludo - Whodunit to the World's Poor? - Debt and Destruction in Senegal," October 03, http://www.wdm.org.uk/campaigns/cambriefs/debt/senegal/senegalcolludo.pdf 72 "Structural damage - The causes and consequences of Malawiճ food crisis" by Kwesi Owusu and Francis Ng'ambi, October 02, http://www.wdm.org.uk/campaigns/cambriefs/debt/MalawiFinal.pdf 73 "Parliamentary Submission - Making globalisation work for people," May 00, http://www.wdm.org.uk/resources/parlsubs/dfid0500.pdf 74 "Parliamentary Submissions - International Development Committee Inquiry On the Government White Paper," January 01, http://www.wdm.org.uk/campaigns/cambriefs/parliamentary/IDC_on_Glob_White_Paper_01.01.pdf 75 "Press Release - Leaked documents expose EU grab for control of water and electricity services worldwide," 17 April 02 76 "Press release - Water and WSSD - Privatisation is not the answer," 28 August 02 77 "Treacherous conditions - How IMF and World Bank policies tied to debt relief are undermining development" by Peter Hardstaff and Tim Jones, May 2003, www.wdm.org.uk/campaigns/cambriefs/debt/treachcond/treach1.htm 78 "Press release - World Summit on Sustainable Development in Johannesburg," 3 September 02, http://www.wdm.org.uk/news/presrel/current/wssd_deprivation.htm 79 "Out of service - The development dangers of the General Agreement on Trade in Services" by Jessica Woodroffe and Clare Joy, March 02, http://www.wdm.org.uk/campaigns/cambriefs/outofsev.pdf 80 "Briefing on GMOs - The Battle for International Rules on GMOs: The biotech industry versus the world's poor," December 99, http://www.wdm.org.uk/campaigns/cambriefs/gmos/battle.htm 81 "Briefing on GMOs - GMOs and the WTO: Overruling the right to say no," November 99, http://www.wdm.org.uk/campaigns/cambriefs/gmos/GMOs_WTO.htm 82 "Press release - AstraZeneca challenged: Don't foist GM technology on Third World farmers," 19 May 99, http://www.wdm.org.uk/news/presrel/archive/pbp19599.htm 83 "Previous campaigns - GMOs," http://www.wdm.org.uk/campaigns/GMOs.htm 84 "Policies to Roll-back the State and Privatise?," April 01, http://www.wdm.org.uk/campaigns/cambriefs/debt/rollback.pdf 85 "Support WDM," www.wdm.org.uk/support/ 86 "Review of: The Shackled Continent" by Alex Singleton, http://www.globalizationinstitute.org/blog/2005/02/the_shackled_co.php 87 "Globalization, Investment Climate and Growth" by David Dollar, http://econdev.forumone.com/view.php?type=5&id=31182 88 "Globalization, Poverty, and Inequality since 1980" by David Dollar 89 "Index of Economic Freedom 2005" by John C. Hulsman, Ph.D., Brett D. Schaefer, and Anthony B. Kim, http://www.heritage.org/research/features/index/chapters/Chapter_3.cfm 90 "Economic Freedom of the World: 2004 Annual Report" http://www.fraserinstitute.ca/ 91 "The Global Governance Of Trade As If Development Really Mattered" by Dani Rodrik, http://www.servicesforall.org/ 92 "Could Russia Have Learned from China?" by Kenneth Kasa, http://www.frbsf.org/ |
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