As the Queen opens the G8 with a banquet tomorrow night the eyes of the world will be on the leaders of the eight nations (and Jose Manuel Barroso the ‘leader’ of the European Union) who will attempt to address the brief championed by host Tony Blair. Blair’s brief is a personal one; desperate not to see his premiership defined by Iraq, and obsessed with leaving a lasting legacy, he has taken up two challenges that could redefine the world:
Global poverty and climate change.
A collective policy on Climate Change will require a significant economic contribution, and will undoubtedly threaten growth and prosperity. However the evidence supporting the principle of Climate Change and its significant environmental impact is compelling. With America refusing to fully accept the scientific consensus, and countries already signed up to the preposterously enforced Kyoto protocol heading for complete failure as they approach impossible commitments, it seems Blair is unlikely to make any headway on this subject, beyond a meaningless communiqué of collective concern.
Africa: Global public pressure has been mounting on the leading economic nations to find a solution to the mass starvation and social deterioration in Africa. A continent blessed with immense natural resources, but ravaged by depravity, famine, war, and now AIDS. The Make Poverty History campaign has emerged as the pre-eminent movement that defines this fight. MPH has used modern media to spread its message and has exploited the charity wristband phenomenon to raise its profile and penetrate the public consciousness.
MPH is a collective of global and national UK charities that have pooled their collective resources under a common banner to send a clear and concise message to the world leaders, but is the Make Poverty History’s message clear and concise and how effective will it be?
The outlining push from MPH was to eradicate debt for countries unable to meet repayments. This makes some economic sense as un-payable debts can cripple economies, and punishment measures – usually economic – are counterproductive. Many leaders have signed up in principle to cancelling this debt but recent reports suggest that the posturing and bravado of the worlds leading politicians hides a less comprehensive package of relief. Richard Bennett the organisations chairmen stated: –
“What is being discussed is emphatically not 100% debt cancellation for the world’s poorest countries, but government spokespeople continue to state or imply that it is.”
But should Bennett be surprised? The G8 are leaders of democratically elected countries and are ultimately accountable to their prospective electorates. Pampered societies naturally look to help abroad only when life at home is sweet. While Britain has enjoyed a healthy economic recent past, fellow leaders at the table have faced more testing times…
Japan the second largest economy has experienced a stuttering decade as many of its larger multinationals face up to the new borderless world (see SONY), and its banking system faces up to its past imprudent financial management. Japan continues its slow recovery.
Germany, once the economic backbone of Europe has suffered a significant economic slump. Ever responsible it continues to tackle the expensive unification problems while contributing the EU’s largest net payment. Chancellor Schroeder faces an uncertain future, as unemployment and dissatisfaction threaten to ruin any chance of his government returning to power in the coming election. An election facilitated by Schroeder’s call for a vote of no confidence in his own government, something akin to political Hari-kari. As Christian Democrat Angela Merkel attempts to stick in the knife at home, Blair attempts to squeeze more blood from Germany.
France is in the middle of a national crisis as the public roundly rejected the European Constitution. Lead by the disingenuous Chirac and his wounded government, France would like nothing more than to see Blair return from Gleneagles empty handed. The British prime ministers decisions to hold a referendum put Chirac into a political corner, the French president had to give the French people a voice. The French economy – while never white-hot – has not performed too badly, however restrictive labour laws mean that hiring workers is the choice of last resort; high unemployment has created mass resentment towards the floundering government. Chirac is in no mood for charity.
One wonders of the credibility of an organisation that recognises Italy above the emerging super-economies of India and China. Italy remains alongside Portugal and Greece, Europe’s financial basket cases. Constant EU reprimands mar Berlusconi’s tenure as budget after budget is rejected. Berlusconi has no right to be at the table, and represents no economic clout.
The US is steadily recalibrating its economy to better integrate with the increased propensity of its corporations to outsource labour. While the US economy is enjoying a moderate flush, its manufacturing industry is failing to compete with low-cost international competitors. American aid is often tied in with US economic goals, as it tentatively opens its markets to other countries, which promise to adhere to its strict conditions.
Conditions in the African Growth and Opportunity Act argue that fledgling economies agree to : –
“a market-based economy that protects private property rights”, “the elimination of barriers to United States trade and investment” and a conducive environment for US “foreign policy interests”. In return they will be allowed “preferential treatment” for some of their products in US markets.
Of course these markets are strictly defined and products must meet rigorous conditions such as clothing being made with “fabrics wholly formed and cut in the USâ€. This does not allow the African manufacturers to enjoy competitive sourcing and therefore they remain uncompetitive and unsuccessful.
Canada’s economy is so intertwined with its powerful neighbour it is unlikely to break with tradition and support Blair. And Russia? They have their own problems.
So what hope does Blair have of satisfying the unrealistic demands of the protest movement? Well we must give some respect to the influence of the MPH and the Live8 concerts in applying some influence on the politicians. The movement is international and no politician wants to be seen as the main spoiler. An ineffective compromise will undoubtedly be reached.
So what of the MPH movement? What is their message?
Well a quick read of the manifesto reveals a muddled demand of ‘better’ aid, ‘fair trade’ not free trade, and debt relief. Well we have seen the recently criticised debt relief plan, and the US shows little interest in changing its policy on aid, so that leaves ‘fair trade’.
So what is fair trade, and is it fair? The manifesto totally abdicates its responsibility to define a clear and concise plan. While no doubt the counterproductive US policy above should be condemned, we must realise the macroeconomic impact of a fair trade initiative.
As a test case lets consider Brazil, which in 1998 was at the precipice of collapse taking the rest of South America with it. Brazil had a budget deficit of 7% of GDP and had experienced hyperinflation of 3,000%.
World economic institutions predicted the complete disintegration of the economy within time, and prescribed massive economic reforms tied to substantial economic support. The incoming leader Luiz Inacio da Silva (‘Lula’
) quickly implemented the reforms, and by 2004 had turned around the huge economy. Lula’s presidency should not be brushed over, economic reforms are difficult to implement and often many eggs have to be broken.
Brazil experienced a growth of 5.2% of GDP in 2004 (3.2% economic growth), and turned the huge budget deficit into a 2% surplus. This miraculous turnaround was experienced dealing with a protectionist markets of the EU and US, and while facing stiff competition from Indo-China. US treasury secretary John Snow stated that Brazil had “harnessed the opportunities of trade and strong global growth to increase exports by 32 percent.â€
So the question is, are the IMF’s and World Bank’s prescribed medicines so dangerous? Well its horses for courses but the MPH movement must look elsewhere across the globe for solutions.
And should we punish reformed healthy economies such as the Brazilian one, to facilitate African growth? If Brazil is now competitive and efficient maybe it is economically prudent to allow those who can efficiently produce to do so, and help less efficient producers with aid. This is the foundation of economics…. how most efficiently can we utilise our resources?
It is countries like Brazil that so frighten the MPH movement with their efficient agricultural industries. Any relaxation in subsidies or trade barriers would allow the Brazilians to flood the markets. Africa would be no better.
But should we punish Brazil for it efficiency and progressive market liberalisation?
Of course the collapse of globalisation is just the agenda of the more insidious section of the anti-capitalist movement. Transient groups such, as Black Bloc and Dissident.org would very much like to see a total collapse of the current system. They would like to see a reversing of globalisation to allow local markets to re-emerge, and they are prepared to tint their protest with violence to achieve their goal. They demand devolution of centralised power and influence.
The anti-capitalists much like the MPH movement fail to provide a lucid alternative to globalisation, as the inefficiencies and instabilities of localised supply would mean a return to the mass famine and starvation so endemic of human history to date. Do they understand the size of the global population? So they understand the efficient resource management benefits that modern agricultural techniques have brought? No of course not, their violence is more about challenging the global leadership than solving the inequalities of the world.
I guess I must join the rest in that I have no solutions beyond the scaling back of protectionist trade barriers, and inefficient subsidies, and the increased aid and support of fledgling democracies.
The real change of course must come from Africa. Many African governments have failed to live up to their responsibilities. Where is the condemnation of Mugabe’s regressive policies? Why is the continent defined by corruption? Where is the responsible leadership on AIDS? And is there any end in sight to the many civil wars that plague the continent?
Western government must apply pressure to governments to foster reform, starting with a cessation of arms sales to Africa and governmental controls on global businesses that facilitate corruption there. But to achieve this we need a new generation of African leaders that put their people first and their personal gain second.
Blair must be honest with the world and concede that the ills of the world will not be addressed by this weeks G8 meeting. The G8 communiqué has no binding powers and recent promises to end poverty by 2015 will not be met. The G8 has no headquarters and no secretariat, and is for all intensive purposes a talking shop.
Just a warning: Expect to see a lot of hot air and little delivery.