I. Free trade and the fight against poverty: A negative assessment overall
“Several hundred billion dollars for the poorest countries and an undeniable decline in poverty in those regions…” This refrain has been proclaimed every year since the late 1980s by the champions of globalization and total trade liberalization, running counter to the leaders of developing countries.
And yet, if we compare the current situation to that of the past, the reality is quite the opposite; far from decreasing, the number of individuals living below the poverty line1 has increased sharply. In 2006, over 40 percent of the world’s population was poor, an increase of over 36 percent from 1981. The most shocking failure has been in Africa, where the number of individuals living below the extreme poverty line doubled from 1981 to 2001.
We are therefore far from having achieved the first goal of the 2000 Millennium Round, i.e., reducing by half, from 1990 to 2015, the number of individuals suffering from extreme poverty and hunger. Even worse, the situation has actually deteriorated in most of the poorest countries. This is what has inspired an increasing number of international thinkers of conscience, such as Joseph E. Stiglitz, Nobel Laureate in Economics,2 to maintain that “if the world is in a race between economic growth and population growth, population growth has up to now been in the lead.”
And yet historically, globalization has never been stronger since the late 1980s, and Africa was one of the regions most involved in the process.
We therefore find ourselves in an apparently paradoxical situation wherein globalization and the progressive liberalization of international trade have not given rise to the expected outcomes in terms of poverty reduction, contrary to what everyone thought. Although it continues to be difficult to assess the consequences of a development and poverty reduction policy in the short term – since adjustment policies roll out over a fairly long period of time – we now have the distance needed to make an objective assessment.
One could advance three explanatory factors:
> The benefits of globalization and the liberalization of international trade have in reality fallen short of the forecasts. The frequent revisions established by international experts bear witness to this fact: in 2004, the World Bank forecast 850 billion dollars in gains for the international community; in 2005, that amount was revised down to 350 billion dollars, with two thirds going to the LDCs; in 2006, the figure was lowered once again, to 25 billion dollars in gains for the LDCs.
> These earnings were very unevenly distributed among the world’s countries and the countries most in need, the developing countries, gained absolutely no benefit. This can be seen in the examples of China, where annual economic growth has surpassed 10 percent for several years now, and the African continent, which on the contrary has struggled to develop.
> Finally, earnings remain highly insufficient to reach the Millennium goals for poverty reduction. The most recent World Bank figures point to overall gains of 25 billion dollars for the LDCs, equivalent to less than one dollar per capita per year over a period of ten years. Can these communities hope to rise out of poverty with such a paltry sum?
Achieving the first goal of the Millennium Round by 2015 may seem utopian, but as Henri Laborit3 used to say, “it is not utopia that is dangerous, for it is necessary for change, but the dogmatism that some use to maintain their power, prerogatives and dominance.” Three approaches for reconciling the Millennium and Doha goals thus merit consideration.
II. Three proposals for aligning the Doha and Millennium Round goals
> Regulate free trade to maximize its benefits.
The fall of the Berlin Wall and the collapse of the communist bloc in the late 1980s and early 1990s crowned supreme the capitalist and liberal ideology, which was established as the sole development model for all countries in the world.
Nonetheless, while the benefits of competition and free trade are undeniable, developing international trade in no way means that everyone who participates gains from it, nor that they do so in equal proportions. There can thus be both winners and losers in international trade, the consequences of which, in terms of development and poverty, are immediate.
This idea of free trade as the solution to all problems, poverty in particular, was not challenged until 2005, as seen in the name given to the Doha Round – the Development Round – in order to show the International Community that developing the poorest countries was the number one priority and that liberalizing international trade was the means of achieving that end.
A wave of anti-establishment thinking has recently emerged and today is becoming increasingly widespread in most international decision-making circles. The thesis behind this thinking could be summarized as follows: “yes” to the market economy, “no” to the ultraliberal, absolutist dogma that overestimates the virtues of free trade in terms of development and the fight against poverty. Evidence of this can be seen in the positions taken by an increasing number of American economists from academia and the government alike, and the recent audits performed within international – and yet free-market – institutions such as the World Bank and the FAO, which are upending the sacred doctrine of free trade as the driver of poverty reduction.
“There is a limit beyond which you cannot say that aspects of research support something, when you only have weak or contradictory conclusions. This has been the case with regard to the impact of economic growth on poverty, with the World Bank asserting in its studies that economic growth is beneficial to the poor!” (Angus Deaton, member of the World Bank audit panel, December 2006).
> Broaden the notion of poverty to include the underdevelopment trap.
The World Bank defines poverty as living on less than two dollars a day, and extreme poverty as living on less than a dollar a day.
The official definition of poverty is therefore static, shortsighted and dominated by economic and financial considerations that do not place poverty within a strategic development context.
By reducing poverty to a lack of money, the international institutions reach the idea that food aid and the implementation of an open system of trade based on low worldwide prices is the best solution. This neglects, however, the fact that food aid can be harsh competition for local producers in LDCs and, furthermore, that low food prices are directly harmful to agricultural producers, which account for over 70 percent of the work force in those countries.
Furthermore, viewing poverty as static, rather than as a dynamic, complex and endogenous phenomenon, is dangerous. We must not forget that poverty lies at the root of a vicious circle, in which poverty leads to more poverty, but also exclusion, violence, a deterioration of health conditions and, more generally, “underdevelopment traps” that undermine growth in the LDCs. As Professor Marc Gentilini, former President of the French Red Cross, points out, “caring for, educating and feeding are the three “legs” essential to development.”
Much as we must no longer reduce the issues surrounding international agriculture to the commercial sphere, it is essential that we once again look at poverty within a dynamic context having a variety of origins and consequences. The intergenerational issues and underdevelopment traps in particular that are caused and self-maintained by poverty, lack of education, insufficient investment and poor health conditions all need to be identified and understood to be effective in fighting poverty in the most affected regions.
> Build analysis tools to improve the efficacy of development policies.
Being effective in fighting poverty presupposes that decision makers have reliable assessment tools and relevant indicators for implementing the most suitable policy.
The economic simulation models used by the international organizations were built with this goal in mind. However, they for the most part synthesize this biased view of reality:
> They are built in such a way that the more liberalized an economy is, the greater the gains will be, no matter the region of the world.
> They assume that international trade guarantees the mutual accumulation of wealth.
> They assume that the benefits of free trade are distributed evenly among all of a country’s inhabitants.
> They reduce the issues surrounding poverty to trade considerations.
These four points highlight the aberrations that led the world into the current situation:
> The fundamental discrepancy that exists between the diagnosis (the poorest individuals are concentrated in the LDCs, in which agriculture is the dominant economic sector) and the policy implemented (liberalizing agricultural markets without safeguards).
> The confusion between the goals pursued (improved worldwide well-being and poverty reduction) and the means implemented (the dismantling of regulatory tools).
This is why there is a need for suitable assessment and guidance tools. For, to paraphrase Henri Laborit, it would be utopian to continue along the current path knowing that this path leads only to the dead-end at which we find ourselves today.
Early warning signs have started to emerge in the various international decision-making circles, underlining the need to “change course” in order to make globalization more humane. This call for change, arguing for a new strategy to fight poverty effectively, focuses on four main areas:
The means to be implemented: it is increasingly accepted at the international level that regulating and liberalizing trade constitute a winning combination.
The economic sectors to prioritize: agriculture must be the driver of development and the fight against poverty in the LDCs. This is evident in the World Bank’s 2008 World Development Report, which points out that the failure of development policies can be largely attributed to having underestimated the importance of agriculture in LDC economies: “agriculture is a highly effective source of growth for the LDCs.”
The need to reorganize international development and poverty reduction strategies. The recent audit performed by the FAO is a perfect example: the current system of international development is characterized by “the absence of an overall governance of the system, a lack of overall coherence and clarity in the roles and mandates of the various international organizations and agencies, and the imbalance between the funding needs of LDCs and those related to the supply of new global public goods…” The FAO cannot respond to this given the current state of the organization and its strategy: “the FAO must urgently make strategic choices.”
The importance of cooperation and partnering with civil society organizations to launch a global governance for agriculture, as underlined in the recommendations for the FAO, which “must broaden its vision if it is to have any weight in the agricultural governance of the 21st century, thus the importance of building partnerships and alliances based on comparative advantages and the search for greater efficacy and efficiency.”
WOAgri is delighted at this positive development, which highlights the increased importance placed on cooperation in the fight against poverty, namely cooperation with civil society organizations, and reveals the importance of agriculture as a mainstay of development strategies. This is in fact the strategy that WOAgri has been advocating from its very outset, one that it considers to be the only strategy capable of effectively reconciling the Millennium and Doha goals.
Bastien Gibert, Advisor to WOAgri
|