Delivering the insufficient?

G20 finance ministers issue another bland statement

Bretton Woods Project, 10 September 2009

Despite spin doctoring that called it a triumph for cracking down on banking bonuses, the G20 finance ministers’ statement in early September produced an accounting for how the G20 met or did not meet existing promises and little new agreement. Once again the UK government excluded critical civil society from the discussions.

The summit, held in London in order to prepare the ground for the G20 leaders meeting scheduled for 24-5 September in Pittsburgh USA, was billed as a battle over bank bonuses, but the final communiqué was mostly a bland repetition of existing statements with plenty of escape clauses and pushing issues to other forums. On the fiscal stimulus and loose monetary policy that have been the mainstay of rich country responses to the financial crisis, it committed countries to continue “necessary financial support measures” but also “agreed the need for a transparent and credible process for withdrawing our extraordinary … support.”

The communiqué was short, with only seven paragraphs. It final two points served to report on the commitments made to strengthen the IMF and World Bank. The G20 hailed the “significant progress in strengthening the IFIs” but also said “more needs to be done”. For the pedantic, the change in language on IMF governance may look like a positive step forward. In April the G20 said “emerging and developing economies, including the poorest, should have greater voice and representation”, whereas in September it read “the voice and representation of emerging and developing economies, including the poorest, must be significantly increased.” A searching look at the accompanying “progress report on the actions of the London and Washington G20 summits” highlights the areas left vague.

SDRs go ahead at the IMF

The report confirms that the $500 billion promised to the IMF has yet to be delivered as it references only the “commitments of more than $250 billion”. Actually delivery has only come from Japan, Norway, France, Canada, China and the United Kingdom, totalling about $195 billion. The US commitment of $100 billion has been agreed through the New Arrangements to Borrow, which requires additional measures to activate. The IMF has committed about $173 billion overall (including loans made before the crisis), but it had about $250 billion in available capital before the agreement to boost its resources. Thus, the boost in resources has not yet been used to support any developing countries.

And while the London Summit called for a “doubling of the IMF’s concessional lending capacity for low-income countries”, this has been reinterpreted to be a simple doubling of concessional lending year-on-year rather than the overall pot of resources available for such lending. The Fund announced in late July an increase in expected concessional lending to $4 billion a year in 2009 and 2010 from about $1.2 billion on 2008.

The commitments on issuing special drawing rights (SDRs, see Update 65), the IMF-created reserve asset, were the most tangible and successful, with full allocation of SDRs as per the G20 communiqué. This included the final ratification of the fourth amendment to the IMF Articles of Agreement, which provides for an extraordinary allocation of SDRs to countries that joined the IMF between 1981 and 2009. Still most of the new SDRs go to rich countries and no progress was made on a method of re-allocation.

Some World Bank changes left vague

While the Bank did raise lending from about $30 billion to $60 billion in the last fiscal year, there was no quantitative reporting on the take up of programmes oriented at social protection and low-income countries. The communiqué indicates that the Rapid Social Response Fund (see Update 65) was agreed, but fails to say how much was provided, likely due to very low take up of the facility.

A paper on increasing the financial capacity of the Bank through a capital increase is promised for the annual meetings, while the Bank is still “developing an approach” to let some low-income IDA-eligible countries borrow more money on IBRD terms usually reserved for middle-income countries. The progress report said that the IMF and World Bank boards were both reviewing the debt sustainability framework, though the IMF board had actually met on 31 August, prior to the G20 meeting. The IMF’s agreed changes were announced on 9 September.

On the promise of increasing trade finance by $250 billion, the G20 produces an unreferenced figure of $65 billion having been taken up, though the only actual programme cited is the one by the World Bank’s International Finance Corporation (IFC), which received commitments of just $7.75 billion (see Update 66).

The promised G20-chair review of the IFI’s role and responsibilities, which was supposed to be personally handled by British prime minister Gordon Brown, is reported to be in “consultation with the G20, external academics and LICs.” There was little to no discussion on the matter with civil society, despite repeated questioning of the prime minsters’ office by NGOs about how a consultation would be run. In the end the exercise was contracted out to London-based think-tank the Overseas Development Institute, which placed a limited discussion note on its website and failed to alert more than its database of researchers about the online discussion forum.

Financial and tax regulation still pending

Despite the hype on bonuses, the communiqué merely asked for “global standards on pay structure” and called on the Financial Stability Board (FSB) “to report to the Pittsburgh summit with detailed specific proposals for developing this framework.” FSB standards are not legally binding and there is no mention in the communiqué of the idea that there should be a cap on the total bonus pool. As the FSB in basically a forum for discussion among the G20 and other governments, countries that have opposed strong regulation on financial sector remuneration such as the UK, will work hard to water down any proposals.

On the fight against tax evasion, there was recognition of the need for “developing countries [to] benefit from the new tax transparency, possibly including through a multilateral instrument.” However the use of the word “multilateral” was left vague. The OECD which has been the lead analytical body on tax matters often uses ‘multilateral’ to mean merely a series of bilateral agreements.

The G20 had previously agreed that all systemically important financial institutions should be regulated, but had left the definition of systemically important to the IMF, Bank for International Settlements (BIS) and the FSB. They promised to do it “by the next meeting of finance ministers and central bank governors.” However they failed to produce the guidelines on the definition by this early September finance ministers’ meeting. They have now promised to do it by November when the G20 finance ministers meet again.

Civil society exclusion

UK-based NGOs, the Jubilee Debt Campaign and Bretton Woods Project, had their accreditation for the G20 finance ministers’ meeting revoked by the UK Treasury just days before the summit. Representatives of both organisations had received notification of accreditation on Friday, 28 August. Both received emails late on 2 September saying “Unfortunately your accreditation has been withdrawn by HM Treasury. Please be aware that you will not be permitted access to the meeting venue or any of the press facilities.” No further information or reason was given for the withdrawal of accreditation for the NGOs.

The UK government also barred NGOs War on Want and the World Development Movement from attending the G20 London Summit in April. Nick Dearden, director of Jubilee Debt Campaign, said “It is outrageous that NGOs such as ours have again been banned again from attending G20 summits. The UK seems to be setting a precedent that it is acceptable to silence voices of dissent and prevent debate from being aired.” Both Bretton Woods Project and Jubilee Debt Campaign had been involved in a 4 September London action calling on the G20 to stop letting money rule the world on the day the summit commenced. UK NGOs Oxfam and ONE, which had not been listed as organisers of the action, were accredited and allowed into the summit venue.

G20: Moving Up BRIC by BRIC

Analysis by Sanjay Suri, Inter Press Service, 4 September 2009

LONDON, Sep 4 (IPS) – Every one of these ‘G’ meetings becomes now an occasion for the developing countries – say the emerging economies – to turn that extra energy into a louder voice in the business of global decision-taking.

A day before the leaders of the wealthiest developed nations met at the last G8 summit in L’Aquila, Italy in July, the G5 met with announcements of consolidated positions. They held together jointly, and therefore that much more firmly, against a particularly European push for some binding commitments on actions towards curbing climate change.

And now on the eve of the substantive part of the G20 finance ministers meeting in London Saturday, the BRIC nations came together to make a collective announcement that would both inform the formal meeting in advance of common positions, and pre-empt increased pressure from the developed – the G8 part of the G20.

For the record, the G8 are the U.S., Canada, Britain, France, Germany, Italy, Japan and Russia; the G5 are Brazil, India, China, South Africa and Mexico; and BRIC are Brazil, Russia, India and China. The remaining members of the G20 are Argentina, Australia, Indonesia, Saudi Arabia, South Korea, Turkey and the EU represented by its rotating presidency (currently Sweden).

Russia belongs to both the G8 and outside, China some say should really belong to a G2 alongside the U.S., to sit above the G8. These numbers are not that serious; certainly they are not formal. That one or two may move this side or that is just a fallout of what everyone calls these days ‘the changing world order.’

Change has come outside of the U.S. too, and U.S. President Barack Obama is not the only one looking for change, even if that sort of push coming from others makes for smaller headlines. But the push is unmistakable – and change inevitable.

So the BRIC finance ministers did not just call for reform of the international financial institutions when they met in London Friday ahead of the finance ministers meeting proper. “The main governance problem, which severely undermines their legitimacy, is the unfair distribution of quotas, shares and voting power,” the BRIC ministers said in a statement following their meeting. That they have said before, but on Friday they went further.

“We propose the setting of a target for that shift of the order of seven percent in the IMF and six percent in the World Bank Group so as to reach an equitable distribution of voting power between advanced and developing countries. This would lead the overall share of emerging market and developing countries in the IMF and World Bank to correspond roughly to their share in world GDP.”

Six or seven percent may not sound like a lot. But the last time, three percent of votes shifted from rich to developing countries. Now they want the next shift to be twice as big. Push has not yet come to shove – the emerging economies are looking for change, not upheaval, for steps that will in time add up to a change that is certain to be revolutionary, but not looking for a dramatic revolution in the old ways.

The G8 governments have been dragging their feet since agreeing to reform of these institutions. At this G20 gathering, the pressure will be on for reform. U.S. Treasury Secretary Tim Geithner dropped in at the end of the BRIC ministers meeting to hear what the ministers had to say, and to reassure them the U.S. will back change. Brazilian Finance Minister Guido Mantega reported at the end of the meeting that Geithner agreed action to reform the international financial institutions, and to do so quickly.

And he agreed too, as the BRIC ministers demanded, that the next managing director of the IMF and the next president of the World Bank should be elected “irrespective of nationality or any geographical preference.” And that the executive boards of these institutions give more representation to developing countries.

This was always a good argument, but now strength speaks. As Indian Finance Minister Pranab Mukherji said after the meeting, BRIC nations between them have a higher gross national income (GNI) now than does the U.S. Sure, that is still four big countries that just about surpass the U.S. standing alone – but the U.S. giant stands less tall above others now than it did before, and looks more fragile than the smaller economies.

“Emerging market economies have shown resilience and helped the world economy absorb the impact of the deterioration of trade, credit flows and demand,” the BRIC ministers pointed out in their statement. “In many of them, growth is already back on track after a few quarters of recession or slowdown.”

And with 80 billion dollars of their money now going into the international financial institutions, it does not seem likely they will be able to resist change for long along the lines that the emerging economies are pushing insistently for.

The BRIC ministers held on to earlier positions on the principle of common but differentiated responsibilities in taking action on climate change. But they acknowledged too that there is much that needs to be reformed beyond voting rights and the lot within financial institutions.

“Permanent, stable reforms must still be implemented on multiple fronts,” they acknowledged. The need, they said, is to “change international practices, rules and governance structures to make the global economy more resilient to future crises.” They have an interest in this, suffering as they did from a crisis not of their making.

Few expect the developing nations to secure all the reforms they want in a hurry. But few doubt, either, that the developing world has taken at least some steps towards that end as never before. (END/2009)

Democratising agriculture to end pauperisation of peasantry

By Tanim Ahmed*, NewAge, Anniversary Special, 8 September 2009

ONE of the sure signs of Bangladesh’s progress has been the increasing share of industries in the GDP and a steady decline of agriculture. From over 80 per cent, the share of agriculture has come down to about a fifth of the gross domestic product and is likely to decrease even further. But that is only part of the picture. In terms of employment agriculture is still the largest employer in the country and the driving force behind the rural economy. It employs about the half the labour force directly while almost two-thirds of the population, if not more, depend on agriculture for their livelihoods.

According to projections, and despite increased migration from rural areas and agricultural vocation, the farm sector directly provides for the livelihoods of at least three crore people. A little more detail would clarify things even further. About 85 per cent of the farmers have holdings smaller than 2.5 acres (250 decimals) while it is said that 10 per cent of the people are landless, most whom find work in the farms. Again, and not surprisingly at all, concentration of agricultural land holdings is in the rural areas where almost three-fourths of the population live. Thus, in case of Bangladesh, but not at all unlike many other developing and least developed countries, agriculture could very well be the one sector that could bring benefits to the most deprived, downtrodden and poorest. If reforms and changes in the agricultural system beginning with the inputs to selling the produce generates benefits, then it could very well be presumed that those benefits are being accrued mostly to people who deserve them more than others.

To further make the case for agriculture, one need only look into the development paths of almost any developed or advanced developing country to see that the role that small-scale agriculture has played in those economies. It would also hold true for those economies that agriculture’s contribution decreased gradually as industrialisation took hold there. And even after they have become industrialised, agriculture continues to play a significant part of those economies, which is evident from the importance of trade negotiations in agricultural products under the World Trade Organisation, where developing countries like and India and Brazil as well as European Union and the United States are prepared to walk away risking blame when they don’t see any benefits for their farmers, or at least so they claim. Nonetheless, what becomes quite clear is that agriculture remains a very crucial part of the economy regardless of how matured it is. It remains a very sensitive part both politically and strategically for countries, because this sector provides the primary means towards food security without which everything else would amount to little.

There should be little debate that Bangladesh’s rules, regulations, policies or the administrative system related to agriculture needs substantial improvement, if not a complete overhaul. That there needs to be radical changes in the state’s policies governing the farm sector, should become obvious from the single fact that the 30 million people directly engaged in this sector are not even recognised as labour! The country’s labour laws concern themselves with industrial labour only. Consequently, there is no mechanism through which farm labourers or farmers themselves may expect some support from the government to ensure that their livelihoods are protected, except for some subsidies in fertilisers and sometimes in diesel.

That there should be changes, because the current system is not nearly good enough, should be quite evident. These changes, however, should have one overriding principle if the small and marginal farmers are to derive tangible benefits from agriculture. While some changes require sincere government efforts, other changes would best be articulated by the stakeholders, or farmers themselves. In order for this to happen, the problems faced mostly by the small and marginal farmers must be discussed. But even before that, the graver problems of increasing landlessness and unrelenting spread of corporate-style agriculture must be grappled with.

There is a strong contention that small-scale agriculture will never be able to compete with the economies of a scale that corporate agriculture could achieve. There are also counterarguments and debates regarding this. However, the reality is that Bangladesh’s agriculture is gradually, but surely, hurtling towards corporatisation. Already there are large patches of land in northern Bangladesh concentrated in a few hands, owing to the pervading poverty there. There are also increasing instances of companies or corporations leasing large tracts from the farmers and cultivating what they please, virtually turning small farmers into farm labourers. Sharecroppers find that the owners are turning their lands into fruit orchards because that means less hassle. Small-scale agriculture is gradually being threatened and that trend will all the more increase in future.

While this may be an inevitable fallout of industrialisation and a proliferation of food processing companies, it does seem that quite like other matters, the government is much late in reacting to trends triggered by private enterprise. Any casual observer would realise that agriculture is going through a transformation from the number of companies and brands selling such things as packed spices to fruit candies, from branded, packed and milled flour to locally produced and packed mustard oil. Urban consumers nowadays, and will increasingly in future, ponder over which brand of mustard oil is most fragrant and competition among spice brands are already evident in the television commercials. Increasingly less people will worry over where to get their mustard crushed or wheat milled. These trends only suggest that the entire agriculture sector is gradually becoming streamlined into a corporate system where farmers will have less and less option to sell their produce.

The existing system is such that the marginal or small farmers will invariably fail to secure a decent living from agriculture only. As a result, people who have been farmers for generations are compelled to change their vocations, or in the least have an alternative means of support besides agriculture. Needless to say, those who cannot are gradually reduced from small to marginal and from marginal to landless farmers. Factoring in corporate ventures in agriculture only suggests a faster rate of pauperisation of the peasantry.

But the millions of small farmers are not going to be transformed into agriculture labourers overnight. This process will take years, if not decades, to fully take hold of the sector. In the meantime small and marginal farmers are faced with myriad different obstacles to their livelihoods.

The first requirement for agriculture is land. But as of yet there are no land use policies that govern the future of arable land and its redistribution. There is a perceptible concentration of arable land with increasing investment in agribusiness. One study finds that if all government khas land is distributed among all the landless people in Bangladesh, it would ensure ownership of up to 100 decimals of land per head.

Although land reforms in the neighbouring West Bengal has seen marked improvement in agricultural productivity, this is a topic that would be frowned upon here since the very concept goes against a social fabric rooted on medieval feudalism. Ruling establishments, being an extension of that very feudal class, would instead turn to the second best option. But even on that front there has been little progress. In an open market, especially the predatory type that the governments generally practise in Bangladesh, the authorities are unlikely to initiate land reform or redistribution of government lands among the landless.

Moving on to agricultural inputs, mainly seed, fertiliser and pesticide, there is a constant shortage at the farmers’ end, especially in case of fertilisers. One thing to note here is that the country’s agricultural system has gradually become seriously dependent on chemical inputs and it appears that even in case of seeds, farmers will very quickly shift from traditional or high-yielding varieties to terminator seeds and then on to genetically modified seeds. Whether it was by design or default, whether it is a matter of conscious policy choice or not, the fact is that although the agricultural system is moving away from its traditional and natural roots to one dependent on artificial inputs, the government is losing its ability of effective intervention. Private quarters are gradually taking up the market of seeds and pesticides, often with little quality control or assessment of environmental impacts of pesticides.

In fact, the government machinery is increasingly being used in favour of private companies selling certain brands of products. Although there is substantial debate about unquestioned acceptance of terminator technology the policymakers have not engaged in consultation with the experts, scientists or farmers’ representatives to hear their opinion. On the other hand, the government has not scaled up its activities and initiatives appropriately to ensure that input supply matches with that of the rising demand.

It is widely recognised that chemical pesticides and herbicides destroy soil fertility severely and runoff from these lands ending up in nearby rivers and canals often kill off entire fish populations. Use of chemical pesticides has also severely limited fish production, which is part of the traditional rice farming system growing in the stagnant waters of paddy fields. Yet, there are no bars on sales of chemical pesticides, nor effective stress on use of natural and integrated pest management system.

That the farmers do not have access to sufficient finances is only evident from their desperation at the end of every harvest season when farmers are compelled to sell their produce, often at rock bottom prices only to be able to repay the local moneylenders charging exorbitant interest. In fact, there are no genuine agricultural loan packages from the government and the criteria applied by even the state-owned nationalised banks for agricultural loans automatically exclude the marginal farmers. The only mechanism meant for providing small farmers with some funds is the small loans of Tk 5,000 riddled with irregularity and corruption but even that is hardly an agricultural loan.

Compared to the loan packages, for instance ‘marriage loan’, ‘education loan’, ‘housing loan’ or ‘holiday loan’, meant for the urban consumers, of private banks the so-called agricultural loans do not take into consideration the crop cycle, its profitability, it growth cycle or its vulnerability. On the other hand, the urban consumer’s education loan factors in all those considerations. Besides this small loans programme there are no other policies or regulations that stipulate lending to the small farmers from any other financial institution or bank, private or public.

With increasing instances of extreme weather events such as floods and cyclones and droughts, apparently fallout of climate change, the small farmers’ vulnerability is also increasing. In this regard, there has been much talk about crop insurance but no effective initiative has followed.

It is a general complaint that the local agricultural extension office is not active enough and cannot really be relied upon. There is quite understandably a serious constraint of resources in the extension services but at the same time agricultural services could be strengthened and activated. Apparently, there are over 20 different services at the upazila level from the government including agricultural marketing, information, extension and veterinary services besides a host of others. Only a handful of these services are actually active so as to benefit the farmers.

The farmers might benefit substantially from increased services and information through the agriculture department. Before that concrete and meaningful roles of each different department must be ascertained and duly assigned in consideration of farmers’ demands, needs and consultations with them. The agricultural services set a classic instance of gradual withdrawal of the state from providing services. Its revival will require substantial mobilisation of resources and sincere effort from quarters concerned.

Finally, all efforts would come to nought if the small farmers’ ability to effectively participate in the market spurred by the ‘invisible hand’ is not ensured, as long as the uncontrolled free market prevails. The small and marginal farmers can hardly participate effectively in the market selling their produce to the highest bidder. It is a commonplace scenario that marginal farmers are compelled to sell their produce to a certain party without any negotiations, which turns it into a buyers’ market at the periphery and a sellers’ market at the centre, where the urban consumer is almost hostage to the suppliers and the prices they fix. Farmers’ access to the urban market, or even the local market, and providing them with the opportunity to sell their produce could benefit the farmers as well as the urban consumers.

There might be initiatives from the government to set up a high-powered committee with experts and bureaucrats deciding upon the nature solutions. If precedents are any indications, the committee would not involve small and marginal farmers or their representatives and there would be a set of solutions, presumably vetted by the self-styled ‘development partners’. However, this would become much simpler if there were countrywide farmers’ associations in every district and also at the central level. The few farmers’ organisations there are are only wings of different political parties. But there are no farmers’ trade unions as such, which would effectively be able to articulate farmers’ demands and put forward their suggestions to solve the kind of problems that they face.

Formation of such organisations would have also solved the problem of deciding upon a minimum wage and compensation packages for agricultural labour, which would surely see an increasing need in the future as agribusiness corporations begin to expand their operations and employees. But the potential of such an organisation would be huge and this would give rise to the hitherto latent political significance of the peasantry simply because they are unorganised and scattered. But if farmers can be organised, without partisan inclination or motives that is, then these people could very well become empowered. Hand in hand with that empowerment would come negotiating leverage not only with the governments but also with the corporations, which would most likely lead to a more sustainable evolution of agriculture in a market economy.

*Tanim Ahmed writes for the NewAge, a leading daily newspaper in Bangladesh. Contact: tanimahmed@gmail.com

The Virtues of Deglobalization

By Walden Bello, Foreign Policy in Focus, 3 September 2009

The current global downturn, the worst since the Great Depression 70 years ago, pounded the last nail into the coffin of globalization. Already beleaguered by evidence that showed global poverty and inequality increasing, even as most poor countries experienced little or no economic growth, globalization has been terminally discredited in the last two years. As the much-heralded process of financial and trade interdependence went into reverse, it became the transmission belt not of prosperity but of economic crisis and collapse.

End of an Era

In their responses to the current economic crisis, governments paid lip service to global coordination but propelled separate stimulus programs meant to rev up national markets. In so doing, governments quietly shelved export-oriented growth, long the driver of many economies, though paid the usual nostrums to advancing trade liberalization as a means of countering the global downturn by completing the Doha Round of trade negotiations under the World Trade Organization. There is increasing acknowledgment that there will be no returning to a world centrally dependent on free-spending American consumers, since many are bankrupt and nobody has taken their place.

Moreover, whether agreed on internationally or unilaterally set up by national governments, a whole raft of restrictions will almost certainly be imposed on finance capital, the untrammeled mobility of which has been the cutting edge of the current crisis.

Intellectual discourse, however, hasn’t yet shown many signs of this break with orthodoxy. Neoliberalism, with its emphasis on free trade, the primacy of private enterprise, and a minimalist role for the state, continues to be the default language among policymakers. Establishment critics of market fundamentalism, including Joseph Stiglitz and Paul Krugman, have become entangled in endless debates over how large stimulus programs should be, and whether or not the state should retain an interventionist presence or, once stabilized, return the companies and banks to the private sector. Moreover some, such as Stiglitz, continue to believe in what they perceive to be the economic benefits of globalization while bemoaning its social costs.

But trends are fast outpacing both ideologues and critics of neoliberal globalization, and developments thought impossible a few years ago are gaining steam. “The integration of the world economy is in retreat on almost every front,” writes the Economist. While the magazine says that corporations continue to believe in the efficiency of global supply chains, “like any chain, these are only as strong as their weakest link. A danger point will come if firms decide that this way of organizing production has had its day.”

“Deglobalization,” a term that the Economist attributes to me, is a development that the magazine, the world’s prime avatar of free market ideology, views as negative. I believe, however, that deglobalization is an opportunity. Indeed, my colleagues and I at Focus on the Global South first forwarded deglobalization as a comprehensive paradigm to replace neoliberal globalization almost a decade ago, when the stresses, strains, and contradictions brought about by the latter had become painfully evident. Elaborated as an alternative mainly for developing countries, the deglobalization paradigm is not without relevance to the central capitalist economies.

11 Pillars of the Alternative

There are 11 key prongs of the deglobalization paradigm:

1. Production for the domestic market must again become the center of gravity of the economy rather than production for export markets.
2. The principle of subsidiarity should be enshrined in economic life by encouraging production of goods at the level of the community and at the national level if this can be done at reasonable cost in order to preserve community.
3. Trade policy — that is, quotas and tariffs — should be used to protect the local economy from destruction by corporate-subsidized commodities with artificially low prices.
4. Industrial policy — including subsidies, tariffs, and trade — should be used to revitalize and strengthen the manufacturing sector.
5. Long-postponed measures of equitable income redistribution and land redistribution (including urban land reform) can create a vibrant internal market that would serve as the anchor of the economy and produce local financial resources for investment.
6. Deemphasizing growth, emphasizing upgrading the quality of life, and maximizing equity will reduce environmental disequilibrium.
7. The development and diffusion of environmentally congenial technology in both agriculture and industry should be encouraged.
8. Strategic economic decisions cannot be left to the market or to technocrats. Instead, the scope of democratic decision-making in the economy should be expanded so that all vital questions — such as which industries to develop or phase out, what proportion of the government budget to devote to agriculture, etc. — become subject to democratic discussion and choice.
9. Civil society must constantly monitor and supervise the private sector and the state, a process that should be institutionalized.
10. The property complex should be transformed into a “mixed economy” that includes community cooperatives, private enterprises, and state enterprises, and excludes transnational corporations.
11. Centralized global institutions like the IMF and the World Bank should be replaced with regional institutions built not on free trade and capital mobility but on principles of cooperation that, to use the words of Hugo Chavez in describing the Bolivarian Alternative for the Americas (ALBA), “transcend the logic of capitalism.”

From the Cult of Efficiency to Effective Economics

The aim of the deglobalization paradigm is to move beyond the economics of narrow efficiency, in which the key criterion is the reduction of unit cost, never mind the social and ecological destabilization this process brings about. It is to move beyond a system of economic calculation that, in the words of John Maynard Keynes, made “the whole conduct of life…into a paradox of an accountant’s nightmare.” An effective economics, rather, strengthens social solidarity by subordinating the operations of the market to the values of equity, justice, and community by enlarging the sphere of democratic decision making. To use the language of the great Hungarian thinker Karl Polanyi in his book The Great Transformation, deglobalization is about “re-embedding” the economy in society, instead of having society driven by the economy.

The deglobalization paradigm also asserts that a “one size fits all” model like neoliberalism or centralized bureaucratic socialism is dysfunctional and destabilizing. Instead, diversity should be expected and encouraged, as it is in nature. Shared principles of alternative economics do exist, and they have already substantially emerged in the struggle against and critical reflection over the failure of centralized socialism and capitalism. However, how these principles — the most important of which have been sketched out above — are concretely articulated will depend on the values, rhythms, and strategic choices of each society.

Deglobalization’s Pedigree

Though it may sound radical, deglobalization isn’t really new. Its pedigree includes the writings of the towering British economist Keynes who, at the height of the Depression, bluntly stated: “We do not wish…to be at the mercy of world forces working out, or trying to work out, some uniform equilibrium, according to the principles of laissez faire capitalism.”

Indeed, he continued, over “an increasingly wide range of industrial products, and perhaps agricultural products also, I become doubtful whether the economic cost of self-sufficiency is great enough to outweigh the other advantages of gradually bringing the producer and the consumer within the ambit of the same national, economic and financial organization. Experience accumulates to prove that most modern mass-production processes can be performed in most countries and climates with almost equal efficiency.”

And with words that have a very contemporary ring, Keynes concluded, “I sympathize…with those who would minimize rather than with those who would maximize economic entanglement between nations. Ideas, knowledge, art, hospitality, travel — these are the things which should of their nature be international. But let goods be homespun whenever it is reasonably and conveniently possible; and, above all, let finance be primarily national.”

Foreign Policy in Focus columnist Walden Bello is a member of the House of Representatives of the Philippines and senior analyst at the Bangkok-based research and advocacy institute Focus on the Global South.

Prosecuting Israel for war crimes

The Real News, 4 September 2009

Deputy Prosecutor of Int’l Criminal Court discusses the Palestinian Authority appeal to join the court.

Key indicators, key questions and key conclusions

Tanim Ahmed, NewAge, 3 September 2009

It is not that the state of increasing radical disparity and inequity was entirely unknown, or that the proportion of poor people was thought to be far lower than what the ADB indicators show. But these data once again point out that the system is failing the poorest. Together these data show that the path to development and economic prosperity that successive governments have pursued and perpetuated fails to improve the lot of the masses

RECENTLY, the Asian Development Bank published its Key Indicators for Asia and the Pacific of 2009. Like every year and like almost every other such publication laden with statistics that the international financial institutions bring out annually, there are a host of issues that warrant strong reservations as far as the quickest path to wholesome development and economic prosperity is concerned. For instance this year’s key indicators devote special attention to small and medium enterprises titled ‘Enterprises in Asia: Fostering Dynamism in SMEs’.

Whether it was small and medium enterprises or large scale heavy industries that had far stronger role in brining about the rapid industrialisation of powerhouses like Japan, Singapore, Malaysia, Korea and more recently China and India could be discussed in detail to illustrate that this stress on small and medium enterprises should be interpreted as an agenda of specific interest groups. Unduly heavy stress on this sector would eventually mean less attention for large industries which should in fact be prioritised over smaller enterprises. There could be a number of other reservations regarding this publication. But these publications also bring out certain facts in the open.

It is not that these facts were entirely unknown, or that no one had any clue regarding the state of a certain indicator. But since there are no periodic surveys or estimates of crucial indicators like unemployment and labour, poverty and state of nutrition, people must resort to using data that are often several years old. And when trying to conduct analysis they can at best posit an educated guess about the state of the economy without updated data on certain key indicators of the economy, which makes it almost impossible to assess the situation on the ground and consequently the government’s performance.

The latest publication of the Asian Development Bank is helpful in that aspect. And those statistics do not speak well of the state of governance in Bangladesh. The one that is of crucial interest, which was naturally among the main highlights of newspaper reports, is poverty. According to this publication, about half the people of Bangladesh live in poverty currently. It used to be 66.8 in 1992. The reason that this data does not conform to the ones that have been published before is because the benchmark for poverty has been reviewed and increased to one dollar and a quarter instead of the previous ‘dollar a day’ mark. And again, this ‘dollar’ is not the one exchanged at around Tk 70 on the market. They are called purchasing power parity dollars, which is more indicative of buying power than the monetary value of the currency.

So according to the reviewed benchmark, half the population of Bangladesh live on less than $1.25 (PPP) per day and are therefore poor. That, however, means little in real terms and provides no idea about the nature of poverty except that this only confirms what has been projected by other research organisations including the Centre for Policy Dialogue and Unnayan Shamunnay. But this publication has the good sense to also calculate how much $1 PPP was in terms of the local currency. According to those figures, the reviewed poverty threshold means that an individual living on less than about Tk 35 per day would be considered poor. Whether that is an acceptable benchmark for poverty, and there is no reason to accept this benchmark as one that encapsulates all the different aspects of poverty, is another matter. What the numbers do indicate is that even according to simplistic and watered-down benchmarks, half the people in this country are poor.

This also confirms a point that had been earlier made by different agencies during the reign of the interim government. It is that the country’s gains in terms income poverty reduction since 2000 came all undone during the two years of emergency when food prices increased phenomenally pushing up food inflation well beyond the double-digit mark while unemployment peaked. The proportion of people in poverty had improved to 40 per cent in 2005.

But there is an even more damning statistic relating to the deprivation of the poor. According to the Asian Development Bank, Bangladesh had 79.5 per cent of its population living on less than Tk 51 ($2 PPP per day is considered an upper poverty line of sorts by the international agencies and organisations) per day in 1995. This proportion of population increased to 80.3 in 2005. This implies a steady worsening of disparity. According to another statistic, the poorest 20 per cent of the population accounted for a little over 9 per cent of the total consumption. When compared against the fact that the average GDP per capita in PPP terms is $1501, and percentage of population living on less the $2 PPP is 80 per cent, the radical disparity becomes somewhat clearer. The high average is, therefore, due to the radically higher income of the remaining 20 per cent.

It is not that the state of increasing radical disparity and inequity was entirely unknown, or that the proportion of poor people was thought to be far lower than what the ADB indicators show. But these data once again point out that the system is failing the poorest. Together these data show that the path to development and economic prosperity that successive governments have pursued and perpetuated fails to improve the lot of the masses. There is no reason to accept the recommendations that the Asian Development Bank, or for that matter other international financial organisations, lenders and so-called development partners give out, should be followed. But it would undeniable that these data, once again, make a very strong case for an overhaul of the system.

It becomes quite clear from the few indicators discussed here that successive governments have done little to genuinely improve the lot of the poorer sections. The trend of rising disparity shows that the current system fails to benefit the poor or contribute to their welfare. People who were poor ten years have by and large become poorer. Those marginally over the poverty line remain precariously perched on it with perhaps a higher vulnerability of falling below. A single bout of sickness thwarts a poor family’s possibility of graduating to the next rung for years if not an entire generation. The poorest sections still cannot afford to seek education because they are poor, but the education is not being revamped in such manner that access to it should matter on the level of poverty of the students. Lack of provision for the basic needs, together breed more poverty. It would perhaps only suffice if realignment of the country’s development path were in an equally radical direction as the existing disparity. Unfortunately, despite the rhetoric of successive governments, that seems very unlikely.

Michael Moore’s ‘Capitalism: A Love Story’

‘CAPITALISM: A LOVE STORY‘ – In Theaters October 2nd

“It’s a crime story. But it’s also a war story about class warfare. And a vampire movie, with the upper 1 percent feeding off the rest of us. And, of course, it’s also a love story. Only it’s about an abusive relationship.

“It’s not about an individual, like Roger Smith, or a corporation, or even an issue, like health care. This is the big enchilada. This is about the thing that dominates all our lives — the economy. I made this movie as if it was going to be the last movie I was allowed to make.

“It’s a comedy.” — Michael Moore

Rich Countries’ Carbon Debt: $23 trillion

Developed countries would need to reduce their emissions by 213% by 2050, for developing countries to maintain their current per capita emission level

By Martin Khor, Malaysian Star, August 3, 2009

High-polluting developed countries have already used up much of the world’s “carbon space,” and should pay up their carbon debt to facilitate in fair global deal on climate change.

Next week, climate negotiations resume in Bonn in an attempt to reach a global deal in Copenhagen in December. There are intense pressures to get developing nations like China, India, Brazil and Asean countries to commit to reduce greenhouse gas emissions.

But the promised financial and technology transfers to help them move are still nowhere in sight.

The western media seems to blame developing countries for holding up a deal.

“India rejects green agenda with refusal to cut emissions for decade,” is the headline of a front-page article in the Financial Times on Aug 1.

But it is unfair to expect developing countries to commit to emission reduction before they are assured of the funds and technology they need to change from one production system to another.

Developed countries have a historical responsibility to help developing countries because they have already taken up most of the “atmospheric space” available.

The atmosphere can only absorb so much carbon dioxide and other climate-dangerous gases. Above the danger level, the average global temperature will rise by more than 2° Celsius, with disastrous consequences.

Greenhouse gas (GHG) concentrations in the atmosphere have to be limited to 450 parts per million (ppm) or even 350ppm, and global emissions must be cut by 50% to 85% by 2050 compared to 1990 levels.

The key question for the Copenhagen “global deal” is how to assign the emission-reduction task fairly between developed and developing countries.

Developed countries are proposing a 50% global GHG emission cut by 2050 (from 38 billion in 1990 to 19.3 billion tonnes in 2050). They are willing to take a 80% cut from 18.3 billion to 3.6 billion tonnes which implies that developing countries would have to accept a 20% cut from 20 billion to 15.7 billion tones.

As the population of developing countries is expected to double during that period, they will end up with a 60% cut per capita. And since population size is projected to remain the same in developed countries, their per capita reduction will be the same as their overall reduction at 80%.

It is unfair to ask developing countries to undertake a per capita emission cut just slightly below the cut that developed countries are prepared to make.

If developed countries were to make a 100% cut, developing countries would still be required to make a 52% cut per capita.

Developed countries would need to reduce their emissions by 213% by 2050, for developing countries to maintain their current per capita emission level.

Developed countries would, in other words, need to cut emissions to 0% and create sinks to absorb greenhouse gases equivalent to another 113% of their 1990 emissions.

To both developed and developing countries, this may seem impossible. For developing countries it may seem impossible to achieve economic development while maintaining (instead of increasing) their current, low per-capita level of emissions.

For developed countries it may seem impossible to go beyond a 100% emission cut. But it may need two impossibles to make a possible deal.

In order not to exceed the danger level, the world has around 600 billion tonnes of emission of carbon (equivalent to around 2,200 billion tonnes of carbon dioxide) to budget between 1800 and 2050.

Given their ratio of world population, the equitable share of the carbon budget for developed countries is 125 billion tonnes while developing countries would be 475 billion tonnes.

The developed countries, however, have already emitted 240 billion tonnes of carbon between 1800 and 2008. This is far above their “fair share” of 81 billion tonnes in that period.

And, given the scenario of a 50% global cut and an 85% developed country cut by 2050, they will emit another 85 billion tonnes of carbon between 2009 and 2050.

Thus, their total emission would be 325 billion tonnes of carbon from 1800 to 2050.

Since their fair share is 125 billion tonnes, they have a “carbon debt” of 200 billion tonnes, which they owe to developing countries.

On the other hand, if carbon space were allocated fairly, developing countries would have a share of 475 billion tonnes of carbon emissions between 1800 and 2050.

However, the situation till now, plus the scenarios for now to 2050, would mean that developing countries in actual fact would only emit 275 billion tonnes of carbon which is 200 billion tonnes less than their fair share.

In a fair climate deal, developed countries would compensate developing countries the equivalent of 200 billion tonnes of carbon. This is equivalent to 733 billion tonnes of carbon dioxide.

Economist Nicholas Stern in his book The Global Deal gives a value of carbon dioxide of US$40 (RM141) per tonne in the carbon trade. From 1800 to 2008, developed countries have a carbon debt of 159 billion tonnes, or 583 billion tonnes of carbon dioxide.

At US$40 (RM141) per tonne, the value of this carbon debt would be US$23 trillion (RM81 trillion). The carbon debt can be put in a global climate fund to help developing countries take action to cut their emissions.

Although US$23 trillion (RM81 trillion) may seem like a lot, it is only a little more than the US$18 trillion (RM63.4 trillion) that developed countries have reportedly set aside for bailouts and provisions of banks and companies in trouble during the present financial crisis.

Though saving the banks may be important, saving the world from climate catastrophe is even more important and necessary.

If this approach and the fund can be agreed to, we would be well on the road to a global deal in Copenhagen.

G-20 or G-192: Fear of the South

The Real News, July 13, 2009

Western governments shutting UN out of global crisis response, as Southern governments question pillars of the world economy.

Developing nations’ appeals unheard at UN Summit on Global Economic Crisis

AlJazeera, June 26, 2009

More than 140 countries have agreed on a blueprint to respond to the global economic crisis.

The paper calls for the inclusion of developing countries in finding solutions to the financial meltdown.

But some say the 15-page document is short on specifics, and has been undercut by indifference from the world’s largest economies.

Al Jazeera’s Cath Turner reports from the United Nations.